Businessday 14 may 2018 by BusinessDay

Commercial Paper issuance hits N1trn on FMDQ reforms LOLADE AKINMURELE

ollowing an extended period marked by a dearth of activity, significantly weakened issuer interest and diminished investor confidence, the Nigerian Commercial Paper (CP) market is cranking back to life, as registered CP Programmes on the FMDQ OTC

Securities Exchange platform have crossed N1 trillion. That’s up from zero levels four years ago in 2013 when CP activity came to a screeching halt, prior to the release of the Central Bank of Nigeria (CBN) Guidelines on the Issuance and Treatment of Bankers’ Acceptances and Commercial Paper (2009), and when opacity and

news you can trust I **monDAY 114 may 2018 I vol. 15, no 53 I N300

market irregularities clouded the market. The CP rally is good news for businesses looking to tap the debt market for short-term capital and investors looking to diversify their portfolios. “The FMDQ- championed CP market reform since 2014, which was predicated on the back of the CBN Guidelines, has con-

tributed, in no small measure, to the revival of the activities in the CP market, providing issuers a renewed opportunity to grow their businesses and meet shortterm funding obligations as well as restoring the much-needed confidence required by investors to actively participate in the market,” some market players told Business Day.

FMDQ, in collaboration with the CBN and other relevant market stakeholders, embarked on key initiatives and strategies for the restoration of the Nigerian CP market back in 2014. And that is paying off. FMDQ released the “FMDQ Commercial Paper Quotation Continues on page 4

BusinessDay valuation shows MTN Nigeria IPO to boost NSE by $10bn

BD INVESTIGATIVE SERIES

Inside story of how Nigeria pulled out of AfCTA

… may price between N159 – N195 per share

ODINAKA ANUDU & HARRISON EDEH

ABISINUOLA DAVID-OLUSA, ESOWE ISAAC & AFOLABI ESTHER

here are forces in the Nigerian Presidency who do not want the country to be part of the African Continental Free Trade Area (AfCFTA) due to their morbid fear that the

he proposed listing of MTN Nigeria shares on The Nigerian Stock Exchange (NSE) is set to lift the market capitalisation of the bourse by close to $10billion. According to a valuation carContinues on page 4

Continues on page 46

Atiku confirms intent to run in 2019 presidential election

Nigeria shows early resilience as investors pull funds from emerging markets F S

... to privatise NNPC if elected ... wants small govt, private sector-led growth DIPO OLADEHINDE

LOLADE AKINMURELE

ome $5.6 billion has been peeled off emerging market equity and bond markets in the last two weeks of April, according to data from the Institute of International Finance,

Portfolio flows hit highest since 2014 Election jitters may lead to reversals

confirming fears that the rise in the 10-year U.S. bond yield to 3

percent and a resurgent dollar would trigger a sharp downturn

in portfolio flows to emerging Continues on page 4

A full list of INEC voters registration locations in Lagos – page 13

ormer Nigerian Vice President Atiku Abubakar will privatize parts of the Nigerian National Petroleum Corporation (NNPC) and allow the private sector to be the engine of growth if elected as head of state, Continues on page 46

Kwesé partners Nigeria Info for 2018 FIFA P. 47 World Cup

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businessday market monitor Commodities

NSE

Brent Oil

Biggest Gainer

$77.48

Okomuoil N85.05

Cocoa

US $2,805.00

Biggest Loser

5.00pc

Everdon Bureau De Change

Bitcoin Seplat N725

40,914.94

-3.33pc

3,228,154.19

-4.21pc

BusinessDay valuation shows MTN Nigeria IPO to... Continued from page 1

ried out by BusinessDay Research & Intelligence Unit (BRIU), MTN Nigeria is forecast to have values ranging from $8.56 billion to $10.88 billion. BRIU, a strategic business unit within the BusinessDay Group, used various valuation methodologies including the discounted cash flow valuation (DCF) and relative valuation to estimate the Value of MTN Nigeria. This is the first major pre-IPO valuation attempted by a research firm using publicly available data. BRIU used telecommunication companies from various emerging markets as peers in order to obtain a multiple for MTN Nigeria, which is on the verge of listing on Africa’s 3rd largest stock market. Comparing telecommunication companies in various emerging market including Vodacom in South Africa, Safaricom in Kenya, Bharti Airtel in India, PLDT Inc., in the Philippines and Total Access Management in Thailand, BRIU obtained an industry average using price to cash flow (P/CF) of 9.9x,

price to sales (P/S) of 2.9x, price to earnings of 47.6x, price to book (P/B) of 5.2x, and EV/EBITDA of 9x. Our findings reveal a range between N1.4trn and N7.2trn. We arrived at an average value of N3.2trn (equivalent US$8.9bn). “MTN Nigeria has around 402 million shares in issue, the same amount in preference shares, which it sold at $0.99 in 2007.As part of the IPO it would split one share into 50 units, to create 20 billion shares, which would be listed on the bourse and set the IPO price via book building,” Reuters said earlier after viewing a pre-IPO presentation by MTN. Going by this estimate, BRIU arrived at a share price of N159.42 per share. Also, using the free cash flow to firm valuation methodology, we arriveatavalueofN3.9trn,orUS$10.9bn ($1/N360). Going by the number of shares estimate of 20 billion, the share price is given as N195.90. Last year, MTN group announced that its Nigerian unit will be listed on the Nigerian stock

Buy

Sell

$-N 360.00 363.00 £-N 491.00 501.00 €-N 421.00 431.00

exchange following a compulsory fine of $1.7 billion that was slammed on telecom giant. The MTN group said they have made good progress on the IPO processes in Nigeria, and they aim to conclude it during 2018. The company would use the proceeds of the share sale to redeem preference shares issued to existing investors who bought the shares 11-years ago and also cut its dollar exposure. MTN wants to achieve a “retail friendly” offer price for the IPO, it said in the pre-IPO document, of around N80 naira per share, the average price for shares listed on Nigeria’s bourse. And it would split its nominal value to 2 kobo from one naira. South Africa’s MTN owns more than 70 percent of MTN Nigeria, which has under 300 existing shareholders. Analyst have said the share sale will go a long way in deepening the Nigerian financial market especially since the market has not recorded any initial public offers for two years since the January 2015 listing that saw the birth of Transcorp.

• See full report on pages 42 & 43

FMDQ Close Foreign Exchange Market

Spot $/N

I&E FX Window 361.36 CBN Official Rate 305.75

5 Years

10 Years

20 Years

1.09 12.77

0.25 12.41

0.18% 13.43%

-0.09% 13.25%

0.08% 13.10%

Commercial Paper issuance hits N1trn on FMDQ... Continued from page 1

Rules & Process” in 2014, following the receipt of the CBN’s “No Objection” on same, and focused efforts and the requisite resources to organise and resuscitate the market. Issuers and market participants told Business Day that the Bola Onadele- led FMDQ has provided a reliable and efficient platform for registering, quoting and trading CPs, amongst other debt securities. They say FMDQ has taken the most crucial steps towards promoting transparency, governance, integrity and efficiency, thereby regaining the lost interest and confidence in the Nigerian CP market. Onadele says that has been achieved by adopting initiatives specifically targeted at reviving the market. “Transparency, price discovery, liquidity, rollover governance

Nigeria shows early resilience as investors pull funds... Continued from page 1

markets. As markets like Argentina counted loses Friday, Nigeria seemed shielded from the storm, as data released on the same day by the National Bureau of Statistics (NBS) showed that foreign portfolio flows hit $4.56 billion in the three months through January to March 2018, the highest since the third quarter of 2014, before global oil prices halved amid a supply glut. Foreign investor sentiment towards Nigeria is running high on the back of the oil price rally, which has improved dollar liquidity, boosted external reserves and helped take the economy of Africa’s largest oil producer out of its first recession in 25 years. While the first quarter capital importation data showed that foreign portfolio investors are lapping up Nigerian assets less than a year to the elections, it fell short in giving a clear picture of whether the same investors are growing cold feet towards Nigeria due to the rally in US bond yields. “We could also see Foreign Portfolio Investors (FPI) participation decline in the near term given the significant reduction in yields in the money market, with one year treasury yields falling as low as 13 percent so far in Q2 2018,”

analysts at Lagos-based research firm, Investment One said Friday. “This combined with the rising yields in the US economy and increasing geopolitical tensions could see foreign investors flee emerging and frontier markets like Nigeria,” Investment one said in a note to clients. The Nigerian Stock Exchange (NSE) is yet to publish the foreign investment report for April, which would have provided clues into any exits by foreign portfolio investors in response to the US bond rally and stronger dollar. In March, the NSE report showed net foreign inflows of N7.2 billion ($USD 23 million). That was a 9.7 percent increase from net flows of N6.56 billion in February, but a 57.9 percent decline compared to net flows of N17.11 billion only in January of 2018. Any reversal in foreign capital importation could be a negative for turnover at the Investors and Exporters (I&E) foreign exchange window, given that FPI inflows accounted for close to 56 percent of total inflows in Q1 2018. The naira weakened 0.1 percent to N361.05 on the I & E fx window Friday, according to FMDQ data. Sam Ocheho, head of global markets at Stanbic IBTC, says demand pressure is building on the I & E window as portfolio investors repatriate dividends

fgn bonds

Treasury Bills

(i.e. matured CPs are approved for rollover only with the consent of investors), efficient quotation processes are some of the transformation elements now evident in the Nigerian CP market today,” Onadele said. “Issuers and investors alike are now able to effectively and sustainably contribute to the development of the nation’s debt markets,” Onadele, fondly called “Koko”, said. Access Bank, Nigerian Breweries (N100 billion), Lafarge (N60 billion) and Flour Mills of Nigeria (N100 billion) are among Nigerian corporates that currently have CP programmes. It is broadly expected that more corporates will issue commercial papers as yields further decline in the fixed income market, having already tumbled to an average of 10 percent from as high as 18 percent a year ago Continues on page 46 L-R: Olusegun Adeniyi, member, Africa Initiative for Governance (AIG) Panel of Advisors; Ajoritsedere Awosika, member, AIG Panel of Advisors; Ernest Ebi, member, AIG Panel of Advisors; Enase Okonedo, member, AIG Panel of Advisors; Aigboje Aig-Imoukhuede, founder/chairman, AIG; Yemisi Ayeni, member, AIG Panel of Advisors, and Chienye Ogwo, CEO, AIG, at the Africa Initiative for Governance (AIG) Panel of Advisors’ meeting in Lagos on Friday.

from the stock market and capital gains from fixed income where yields have crashed and prices have rallied. “Some portfolio investors with maturities at the end of the year are likely to exit, to leverage the decline in government Treasury bill yields,” Ochecho said. The yield on One-year government Treasury bills is currently a short crawl away from 10 percent, from as high as 22 percent last year, as yields tumble on the back of a supply cut back by the federal government to manage its rising debt service costs and free up credit to the private sector. Portfolio exits could cause no

more than an 8 percent depreciation in the naira exchange rate on the I & E window, according to Bismarck Rewane, who shared his views at a recent Standard and Poor’s conference Thursday in Lagos. “The significant accretion to reserves should support the stability of the local currency at a ceiling of N390 at the I &E FX window and the parallel market,” Rewane said. External reserves have shot up by about 85 percent since October 2016 to US$47billion at May 2018, according to central bank data. While the bond rally could trigger an exit and cause the naira to weaken marginally, the oil rally throws some confusion

into the mind of investors, as they are torn between exiting and staying back amid an oil rally that is net positive for Nigerian assets. “The oil rally is throwing up a hell of confusion in the mind of foreign investors,” said Wale Okunrinboye, a fixed income expert. “Investors may now prefer to ride out the election cycle by rotating from equities to safer fixed income assets, as exiting when oil prices are close to $80 per barrel could be interpreted as a weak hand strategy,” Okunrinboye said. Brent crude traded at $77 per barrel Friday, almost double the price compared to 2016.

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Dangote outlines $20bn planned investments in Nigeria ...sees group revenues of $30bn by 2022 IPELE OLALEKAN & MICHEAL ANI

frica’s richest man and Nigerian business magnate, Aliko Dangote has outlined a five year investment plan that that will spur industrial and economic growth in the country. Dangote who disclosed this at a presentation to business leaders/CEO’s at the Lagos business school last week, said the group has planned over $20 billion investment for Nigeria that will help drive key infrastructural growth and improve economic activities. “Dangote Group has an investment pipeline of over $23bn for Nigeria. Refinery, gas pipeline (EWOGGS), fertilizers, upstream oil and gas, rice production, sugar backward integration, cement projects and power are expected to gulp certain percentages of the investments,” Dangote, Chairman Dangote group said. “Of the $23 billion investments in the works, $11 billion will go to refinery, $3 billion to the gas pipeline (EWOGGS),

$2.2 billion to fertilizers, $2 dollars to power, and $1.8 billion to upstream oil, $1.3 billion to cement projects, $1 billion to rice production and $1 billion to sugar backward integration.” “The EWOGGS pipeline project will significantly improve gas supply security for use by power plants, fertilizer production and other industrial factories as current national supply is put 1,000 mscfd.” With a capacity of 3,000mscfd of gas and covering a distance 550 km from Bonny in the Niger Delta to the Lekki Free Trade Zone in Lagos, the EWOGGS pipeline project will supply Nigeria enough gas to generate 12,000 MW of power. The project’s feasibility and concept selection study is now completed and currently at the detailed engineering phase. Geophysical (route) survey and geotechnical survey are equally in progress, Dangote said. However, access to Foreign Exchange (FX) to fund equipment purchases, payment for offshore services and securing reliable, long-term gas supply

to the pipeline which often requires high investments and long lead times on the Exploration and Production Company’s side has been identified as major challenges confronting the project. The project will complement existing gas supply system in Nigeria like the Escravos-Lagos Gas Pipeline System (ELPS), West African Gas Pipeline (WAGP) and stimulate investments by International Oil Companies (IOC) and other gas asset holders to develop their fields; increasing supply and reducing flaring. According to Dangote “the groupisgrowingrapidlywithrevenues expected to grow by more than 7 times in the next 5 years from $4 billion to $30 billion.” “The group is also driving 6 major projects which will provide FX earnings and savings of $15.5billion. The projects include refinery and petrochemical, fertiliser, sub-sea gas pipeline, local rice production, local sugar production and cement capacity expansion and are expected to create over 290 thousand jobs in Nigeria.”

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The Dr. J.K. Randle colloquium BASHORUN J.K RANDLE Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

e were rather modest regarding our expectation when planning the Colloquium to mark the 90th Anniversary of my grandfather late Dr. J.K. Randle who died on 27th February, 1928. It would have fallen right in the midst of Lent. Hence, we moved the date to 29th March, 2018 and tagged the colloquium “Resurrection, Triumph and Hope” with Health and Education (the areas of special interest to the man whose life we were celebrating) as the subtheme. The venue was none other than the Chief J.K. Randle Memorial Hall, next door to the Island Club, at Onikan, Lagos. Since 24th September, 2017 the government has been trying to demolish it but it is still standing – Strong, Upright and indestructible! It has become a tourism destination for all those who are fascinated and beguiled by the victory of faith over wickedness and vindictiveness. The spontaneous deluge of interest from near and far, well beyond the shores of Nigeria was so overwhelming that we had to extend the Colloquium for an extra day – Good Friday, 30th March, 2018 with the solemn undertak-

ing to put the Good back into Good Friday ahead of April Fool’s Day(1st April). It was most unfortunate that our Guest of Honour, Professor Stephen Hawking could not join us. He died on 14th March, 2018. Professor Hawking was an internationally regarded theoretical physicist who made vast contributions to general relativity — our current description of gravity. In 1963, Hawking contracted Amyotrophic Lateral Sclerosis (Lou Gehrig’s disease) and was given two years to live. Yet he went on to the University of Cambridge to become a brilliant researcher and Professor. Despite having such an affliction that many experts expected to have killed him decades ago, he went on to become a vital and one of the most influential voices in the scientific community till date. The late Hawking is regarded as one of the most brilliant theoretical physicists since Albert Einstein; the German-born theoretical physicist who developed the theory of relativity, one of the two pillars of modern physics. His work is also known for its influence on the philosophy of science. Unknown to the public, Professor Hawking had surpassed himself – far beyond his mega best-selling book: “A Brief History of Time” and his “Black Hole Theory”. Only a few trusted colleagues at Cambridge University were privy to his most profound discovery – “TRANSAUG” {Transpordation and Augmentation). His theoretical concept was that if you could collapse both time and space which are the two elements which act as “re-agents” to distinguish and separate one individual

This ethnic cleansing must stop in Taraba, and it must stop in Nigeria. These killers have been protected by the military, they cover them and you must be watchful to guide and protect yourselves because you have no any other place to go from another, automatically there would be two indistinguishable versions of each individual. Hence, for us to be in two different places millions of miles apart would be as easy as a walk in the park!! As previously agreed with Professor Hawking the Colloquium provided an excellent opportunity to test the efficacy of TRANSAUG. Mrs.Jane Hawking, who is anauthor and teacher, suggested that it would simplify matters to call it “FIZZING” which is more likely to resonate with the generality of the public, rather than the somewhat insular Cambridge academic community. Although, we had invited both Muhammadu Buhari GCFR, President of Nigeria and Vice-President Professor Yemi Osinbajo SAN, there was no confirmation that they would honour our invitation. To our utter surprise, both of them turned up but apologised that they were actually on their way to another Colloquium at Eko Hotels & Suites, Victoria Island. In his opening remarks, President Muhammadu Buhari declared for

the umpteenth time: “I belong to everybody; and I belong to nobody.” Then he dropped a bombshell which took all of us by surprise: “My second term bid is based on clamour by Nigerians” In response, I thanked him for his generosity of spirit which he demonstrated by sending me a goodwill message, which has gone viral on the internet, on my 74th birthday on 13th January, 2018. Unknown to most people, President Buhari values friendship and he is loyal to his friends. Ironically, one of his closest friends was neither Fulani nor Hausa. It was late Adebayo Belo (our mutual friend) who was from Lagos but died in London on 5th December, 2015 after a protracted illness. Till the very end and during the funeral ceremonies General Buhari displayed exceptional caring and concern. May Bayo’s soul rest in peace. Perhaps we should add that General Buhari and late MajorGeneral Shehu Yar’Adua were course mates and when Yar’Adua acquired a substantial piece of land in Kaduna, he gave part of it to his beloved Buhari as a token of friendship. How Buhari who was also very close to late General Sani Abacha was able to manage the tension between his two friends is a subject for another day. In March 1995, when Abacha was the military Head of State, he arrested both General Olusegun Obasanjo and Major-General Shehu Yar’Adua for treason. They were tried by a military tribunal headed by Gen. P.N. Aziza and were both sentenced to death. General Olusegun Obasanjo’s sentence was later commuted to 30 years impris-

onment and that of Major-General Shehu Yar’Adua was commuted to life imprisonment. Yar’Adua died on 8 December 1997 under suspicious circumstances in Abakaliki prison. It was not until after Abacha died on 8 June, 1998 that General Obasanjo was released. On 29 May, 1999 Obasanjo became the President of Nigeria. It is instructive that regardless of their differences, both President Buhari and former President Obasanjo have retained the friendship of the Yar’Adua family. Another huge surprise was the presence of Lt-General T.Y. Danjuma GCON who would neither subtract from nor add to what he said at Taraba State University, Jalingo: “The armed forces are not neutral. They collude with the armed bandits that are killing people You must rise to protect yourselves from these people, if you depend on the Armed Forces to protect you, you will all die If you are depending on the armed forces to stop the killings, you will die one by one. This ethnic cleansing must stop in Taraba, and it must stop in Nigeria. These killers have been protected by the military, they cover them and you must be watchful to guide and protect yourselves because you have no any other place to go The ethnic cleansing must stop now otherwise Somalia will be a child’s play I ask all of you to be on your alert and defend your country, defend your state”

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Priming accountability in public office: The personal financial statements paradigm

FRANCIS IYOHA Professor Iyoha is of the Department of Accounting, Covenant University and Research Fellow, the Institute of Chartered Accountants of Nigeria (ICAN). He wrote viafoiyoha@ican.org.ng

veryone in public office is expected to be answerable and accountable for his her actions or inactions. Unfortunately, people by nature could be very selfish and to that extent, not many, if any public office holder in Nigeria cares much about accountability. The actions and inactions of public office holders provide evidence that they are allergic to discipline, responsibility, and accountability. In almost every transaction, it is a case of ‘what’s in it for me.’Thus, accountability has become a road less traveled and with impunity of unimaginable dimension. There is no normative ground whereby the level of malfeasances experienced in public office could be justified. I believe Nigeria is about the only

country in which accounting numbers (whether in the public or private sectors) don’t speak for themselves. The time has, therefore, become auspicious to introduce a counter-practice to the endemic regime of notorious fiscal and other irresponsibilities. I am optimistic and believe that the current and future public office holders could be primed to be accountable while in office through the mechanism of the declaration of Personal Financial Statements (PFSs). This is not to discount some of the extant but castrated mechanisms such as the declaration of assets by public office holders. Declaration of assets by all public officers in Nigeria in entrenched in the Code of Conduct for Public officers in Part 1 of the Fifth Schedule to the 1999 Nigerian Constitution (as amended). Every statement contained in asset declarations is expected to be ‘garnished’ with integrity and patriotism. The essence is to ensure that those in office do not ‘balance their personal budgets’ at the expense of the already traumatized masses in Nigeria. Evidence has shown, however, that the provisions are lame as hardly do public office holders comply with them either

in the letteror in the spirit. When once in a while they comply, the information supplied is ‘virused.’ It would have been a thing of joy if the provisions were obeyed with the required discipline. The provisions have been utterly disregarded and no one is chagrined to note that the pain inflicted by the situation has reached a crescendo. It is easy to disregard the provisions relating to asset declaration not because they are ambiguous and complex but because the process lacks structure. There should be a structure that builds up the required information on properties, assets, and liabilities and provides a trail over a period of time such that manipulations would be easy to detect.I guess we should learn from the snail that leaves a trail of slime behind anywhere it goes. Instead of asking for declaration of properties, assets and liabilities, what should be required is declaration of ‘Personal Financial Statements(PFSs)’ThePFSs will provide an opportunity and trail to ascertain what resources an officer has had or is having access to and how the resources were or are being expended and the assets and liabilities built or being built up over a given period. The profiling of one’s net worth

should not be based on the spur of the movement. The first of these statements is the ‘statement of cash flow’which takes account of inflows and outflows of cash, say on monthly basis. The net cash flow at the end of the month will either be positive or negative. The second statement isthe ‘personal statement of financial position’. This statement provides a glimpse of the wealth of the individual.The two statements are not mutually exclusive but work together. They jointly provide a trail and proof of the resources available to an individual over a defined time period. Whatever item of transaction that does not go through the personal statement of cash flow should not suddenly appear as an item or reflects an item in the personal statement of financial position. Today is the day we should commence the use of PFSs to secure accountability in Nigeria, especially among public office holders. It is important to ascertain the net worth of public office holders regularly. As a means of securing that, all public officers should be directed henceforth to submit their PFSs duly certified by qualified auditors. Guess what? There would be pandemonium, headache, suicide, high blood

pressure, divorce and all such vices. Why? The sources of most of the inflows and outflows would defy tenable explanations. You would find many cases of more outflows than legitimate inflows. What would such a situation imply? Fraud I guess!How would a local government chairman who is just one year in office, for instance, explain the multimillion Naira edifice in his village; when on assumption of office, he had no house? As in everything in our context, the possibility of collusion between some ethically insane auditors and some unscrupulous public officers cannot be ruled out. The relationship between the auditors and the public officers should be such that should hold liable the auditor(s) for any or all misstatements in any audited PFSs. When the locus of pain arising from fraudulent PFSs is at the doorstep of the auditor, he will observe diligence, integrity and other relevant virtues in the discharge of his responsibilities. Let’s empower public office holders to be accountable. But then, who bells the cat?

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Views from Dubai: Trusted news platform still sell

ast week in Dubai, editors from across Africa gathered to discuss the changing media landscape. In many newsrooms this has become the major issue as publishers struggle with finding the best business model that will help them survive in a fast changing world where technology has made it easy for innovators to disrupt and in some cases wipe out whole businesses. But there is some good news for media practitioners, says Yolisa Phahle, the CEO Video Entertainment at Multichoice. There is a strong thirst for trusted news on trusted platforms despite the proliferation of platforms that people can access news on, she said in a presentation at the digital dialogue. The rise of social media means that more people are consuming news than they have ever consumed in the history of the world. But this has also opened room for producers of fake news to thrive. However, fake news is like gold platted metal. It looks attractive but offers no value. Actually, fake news can be toxic. It misleads and misinforms the consumer and it is often detrimental to the information health of the consumer.

The toxic nature of fake news and its proliferation means that trusted news platforms have become important and most people are turning to them for their news needs. Phahle says this is why trusted news platforms will continue to excel despite the proliferation of news platforms. She explains that the fundamental problem facing the world today and also the media, is the battle between News and Noise. This battle is easily seen on a platform like Twitter, where there is so much sharing of information from so many individual sources with each source claiming to be an authority. This also applies on most social media platforms. The consumers on these platforms are often left to try and decode what is noise and what is news, news being defined as verified information in this case. So while the internet has become a good source of information, it is also now the biggest source of misinformation or disinformation. Yolisa explained that content or news will continue to be the lifeblood of any media organisation. What a newspaper or a TV station sells is its content or news. In the face of so much noise in the digital space, the battle for media organisations now becomes what to do to build trusted platforms. But there is also the bigger challenge of how to distribute the trusted news content on the available platforms in a way that they overcome the noise and get to the consumer. Media organisations must as a matter of necessity, leverage technology to ensure that the content or news generated climbs above the noise in the digital space to reach their desired audience. Yolisa explains that people, con-

However, in the long run, no media can survive by generating content and giving it out for free online. This is why most media houses are building pay walls or asking for donations to cover their cost of generating news or content tent or news and technology are critical in the new media age and media producers will have to learn to manage all three to survive. Paul Papadimitriou, Founder of Intelligencr who spoke immediately after Yolisa, noted that technology is all around and is growing superfast. To show how disruptive technology can be, he gave the example of how WhatsApp wiped out the lucrative SMS business of telecom producers. Now, almost everyone uses WhatsApp to communicate, where they would have sent an SMS. Skype has dome a similar thing to international calls with 50 percent of all international calls now taking place on Skype. Paul notes that technology is reaching more and more people, faster and faster. The spread of technology is being facilitated by declining cost of technology products, diverse platforms and the networks created on these platforms. One line of code, Paul notes, can impact billions of people. Paul also rightly notes that news or content has become like any other

commodity. But he says with data, the media can offer content or news with a ‘magic’ touch. The magic touch comes in knowing what the consumers want even better than the consumers know about themselves and then offering it to them. Acquiring data, especially first party data, is how companies are able to scale their operations, he explained. The biggest companies, currently, Amazon, Google, Facebook, have all been able to scale up their operations because of their ability to use their access to first party data to scale up their operations. But Paul offered a very important insight at the end of his presentation and that is the fact that people are not necessarily in love with technology but with how technology makes them feel. This, for the media, means that the acquisition of technology should be aimed at using technology to help tell better stories, stories that create an emotional connection with readers or viewers. We are in an ‘attention economy’ Anthony Lilley, Professor of Creative Industries at Ulster University and Director, Magic Lantern Productions explained in his own presentation. The proliferation of content means that viewers and readers are bombarded with content from all sides and at a very fast pace. The biggest challenge for content or news producers therefore is how to get the attention of readers. He said what is now scarce is not content but people’s attention. So, for a content producer, the bigger challenge is how to attract and retain people’s attention in the current media space. Broadcasters have found out entertainment works but for news publishers, perhaps well written investigative stories will work. Unique impactful stories also make a

difference. This is because what gives any product value in an economy is scarcity says Anthony. But in the current media industry, content is no longer scarce, therefore it has no value per se, which explains why content is given freely online at zero cost to the reader or viewer and at a loss to the producer of the content. However, in the long run, no media can survive by generating content and giving it out for free online. This is why most media houses are building pay walls or asking for donations to cover their cost of generating news or content. But for those seeking to put in place pay walls, the challenge now becomes generating what is worth paying for and putting it on a platform or brand that is trusted. This is where investigative stories make a difference. Also, unique and impactful content and financial economic intelligence. With unique content, Anthony says, you build a fan base, not just readers or viewers. A fan is someone who has a connection, he said. The one who wants to identify with something, in this case a media platform, because the platform enables them to connect with other fans and then it becomes the basis of a relationship with another person. In this case, a fan base that confidently says, we all read BusinessDay. The idea, he says, is to create brand affinity and this is driven by quality and the building of trust. He concludes by saying that ‘Good brands know that in the long run, what you are looking for is sustainability. It is not just about revenues. This will require building a brand that can be trusted.

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Quick thoughts on criminalisation and stereotyping of the Fulani ethnicity

MOHAMMED DAHIRU AMINU M. D. Aminu (mohd.aminu@gmail. com), wrote from Cranfield, United Kingdom.

onsidering the herdsmenfarmer clashes and killings in Nigeria recently, some concerned citizens have cautioned the national news media on the need to stop giving an ethnic tinge in their description of killer herdsmen by referring to them as Fulani herdsmen; a description that dangerously criminalises the entire ethnic group. It is true that other ethnicities in Nigeria too have within them people who could be criminals, yet the Nigerian news media do not refer to such criminals from an ethnic viewpoint. Several reasons may exist on why the herdsmen are described by an ethnic moniker, but I think a bit differently from the dominant narratives already presented. By describing the herdsmen as Fulani herdsmen, I believe that the Nigerian news media is not engaging in a deliberately unfair campaign against the Fulani ethnic group; but their description is rather

a subconscious one that is influenced by the Fulani’s own highly distinctive sociocultural and socioeconomic monomorphism. Unlike other ethnic groups in Nigeria, the Fulani cattle herders do not have the advantage of ‘colour polymorphism’ to allow them dissolve unrecognisably into the larger Nigerian population to enhance their preservation instinct. Ecologists believe, for example, that colour polymorphism of organisms within an ecological system can protect such organisms from predation (read: ethnic colouration). We are raised to believe (and perhaps rightly so) that only the Fulani are custodians of cattle in Nigeria. Beyond their cows the Fulani seem to have distinctive features of morphology, speech, culture, transhumance, etc., that readily and almost instantly gives them away for who they are. Other ethnic groups in Nigeria are not easily identified by their own sociocultural and socioeconomic distinctiveness unless they deliberately flaunt it. The Masai of Kenya and Tanzania, for example, herd cattle, and I believe that when they engage in criminal activities, the Kenyan and the Tanzanian news media will subconsciously involve their ethnicity in describing them. The ‘colour monomorphism’ of the Fulani is so distinct that when Fulani people engage in armed robberies on Nigerian highways, travellers who were robbed by them come back home to say they were robbed by the

Fulani people. But when other people who are non-Fulani steal from travellers on the highway, the passengers can hardly describe the ethnicity of the robbers for there could be no easy giveaway cues. Most importantly, it is human nature, globally, to describe an event or process from a perspective that represents that event or process at its lowest definitional order especially if there is a clue that leads you to arrive at that lowest order. If the Fulani are the only ethnic group in Nigeria that herd cattle in large numbers, and in a transhumance fashion, if any one farmer in Nigeria comes to his farm in the morning to see it vandalised by cattle, he doesn’t need to have seen the cattle (that did the vandalism) or the person (who led the cattle into his farm) to conclude that his farm was vandalised by Fulani people who herd cattle. The same farmer will not have been able to use the word Fulani to qualify the herdsman if there were several or many other ethnic groups in Nigeria who herd cattle in the manner the Fulani people currently do. This is just how human beings all over the world function: by spotting the difference that you embody to either value or devalue you. In the study of classification of things across all fields of knowledge where classification is conducted, human beings categorise things based on shared and/or distinctive features. So, the Fulani as the herdsman will continue to remain in the subconsciousness of Nigerians until a day comes when

several other ethnic groups engage themselves in the cattle herding trade. Just last year, a Nigerian friend (in the UK) invited me and my family to his house for dinner. On seeing me, his mother-in-law (who came to visit from Nigeria) concluded that I was Fulani. When I asked her why she thought I was Fulani she replied: “the hair and the height.” This is identification by morphology, and I am not sure that the same woman could identify other non-Fulani people in Nigeria by their “hair and height.” If I had committed a crime in the house I visited, the woman would perhaps use my non-European skin colour and my non-British accent to identify that I was African, but she will even take her definition of me to the lowest possible order by also saying that I was Fulani. This will help the police to go out in search for an African and a Fulani. So, while other people with the same skin colour and accent as mine could escape being identified by their ethnicity from this Nigerian woman (who is even from the southern part of Nigeria and has never lived in the north), I do not seem to have the advantage of dissolution, to allow me dissolve unrecognisably into ‘African’ and/or ‘Nigerian’ identities at the most; so that I could be a little bit more preserved. But the distinctive features of the Fulani in the wake of the farmerherder crisis (prominent amongst these is the fact that they are the only known ethnic group that carry

cattle around the place) that gives them away for media profiling must be campaigned against in order not to criminalise an entire ethnic group. One way of achieving this campaign effectively is for the Fulani people to demonstrate to other Nigerians on the absurdity of attaching the ethnicity of all criminals to their crimes. When you demonstrate to Nigerians that a criminal is a criminal, not Hausa criminal, Yoruba criminal, or Igbo criminal, then the profiling of the Fulani might stop immediately. However, before we castigate the media by labelling them haters of the Fulani ethnic group (rightly or wrongly), we must not forget that the main cause of the media profiling has its roots in the ‘giveaway clue/ cue’ that the Fulani people embody. The situation is the same as you have in racism. All rational human beings condemn racism and there is even a hypothesis that shows that people are not born to discriminate against themselves on the reason of variations in skin colour. However, whether we believe that racism is a natural or an acquired instinct, the first clue that gives you away to racism is your difference — those distinctive cultural, religious, morphologic features, etc., that stands you out within a larger group whose members have the advantage of featural (to lend Geoffrey Sampson’s term) dissolution.

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Frank Aigbogun EDITOR-IN-CHIEF Prof. Onwuchekwa Jemie EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, SALES AND MARKETING Kola Garuba EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi HEAD OF SALES, CONFERENCES Rerhe Idonije SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North)

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Between the Senate and IGP of Police

he Nigerian Senate and the Inspector-Gene ra l o f Po l i c e (IGP) Ibrahim Idris have been locked in a battle of wits in recent weeks over the appropriateness of the Senate summons on the IGP. It all began when the Senate, on April 25, invited the IGP to appear before its plenary to explain the circumstances surrounding the arrest of one of them, Dino Melaye, and the incessant killings across the country and the seeming inability of the police to halt the killings. The Senators only gave the IGP a 24-hour notice though. The IGP sent his deputy and later released a statement that he was on an official assignment with the President in Bauchi. The Senate denied his deputy appearance. The Senate subsequently gave him a week’s notice in which he failed to appear and after he failed to appear a third time on Wednesday May 9, the Senate accused the IGP

of disrespect for snubbing its summons and declared him an enemy of democracy and unfit to hold any public office. “The Senate in a closed session deliberated on the non-appearance of the IGP to the senate to the plenary after a series of invitation. The Senate noted that this has been a gross disrespect to our constituted authority and to also know that his earlier refusal to appear before investigative committee was overruled by competent court of jurisdiction just in April this year. “ Th e S e n a t e t h e r e f o r e views this persistent refusal as a great danger to our democracy and hence the Senate resolved to declare IGP as an enemy of democracy and not fit to hold any public office within and outside Nigeria. The leader of the Senate would also mandate to look into the matter for further necessary action,” Mr Saraki said in a statement thereafter. The IGP, Ibrahim Idris, on his part, said he failed to app ear b efore the re d

chamber because he found no reason to do so, having learnt that the invitation was “a deliberate blackmail, witch-hunting, unfortunate and mischievous” on the part of senators. But the very survival of democratic governance rests on the rule of law and supremacy of the constitution. The Senate, regardless of the people running the institution and their idiosyncrasies, remains a critical unit of the second arm of government constitutionally assigned the important function of oversight. All elected and appointed government officials therefore, including the President, are duty bound to respect its resolutions and summons. We have noted the penchant of the IGP, the supposed Chief Law officer of the federation, to disrespect and disregard legitimate authority. In January 2018, the president ordered the IGP to relocate to Benue state following deadly attacks on villages there, but the IGP barely spent two days there before relocating to neigh-

bouring Nassarawa state and from there back to Abuja. Over a month later, it was a shocked president who told a shocked nation that Idris flouted his order. The next day, the State House released a statement saying the IGP was summoned and queried by the President. But the IGP fired back instantly saying he was never summoned and challenged administration officials who issued the statement to show evidence of his being queried. The presidency has remained quiet on that matter ever since. The import of these for presidential authority and Nigeria’s democracy is clear: president Buhari is increasingly losing the ability to perform the functions of the president, and as more appointed and elective officials realise this, they will seek to ruthlessly exploit the vacum to pursue their own p ersonal/selfish interests with little or no regard for other arms of government leading to confusion, anarchy and the proliferation of grand corruption. This cannot be good for the country!

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Monday 14 May 2018

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BUSINESS DAY

Monday 14 May 2018

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In Association With

Nuclear fallout

Macrinomics

Tension surges across the Middle East as America turns tougher on Iran Donald Trump’s decision to pull out of the nuclear deal with Iran is rippling across the region

LMOST everybody claims to have foreseen Donald Trump’s decision, but when the thunderbolt came it was even more cacophonous than most people expected. Excoriating the nuclear bargain with Iran struck by his predecessor and five other leaders as a “horrible, one-sided deal”, the president finally declared on May 8th that he was pulling out. Henceforth, he promised, America would use its muscle to extract far bigger concessions from the Islamic Republic. These would include an end to “terrorist activities” in the region and to the development of ballistic missiles. Faced with such a show of strength, Mr Trump predicted, Iran’s leaders “are going to want to make a new and lasting deal”. There was little sign of any such desire in Tehran, where hawkish figures gloated that Mr Trump had confirmed their doubts about bargaining with the West, while relative moderates, such as President Hassan Rouhani, said there was only a small window of opportunity to save the agreement. Signed by Barack Obama in 2015, the deal severely curbed Iran’s nuclear-fuel programme in return for sanctions relief worth billions of dollars. UN inspectors and a broad range of other observers, including Tamir Pardo, a former Israeli intelligence chief, agree that Iran had more or less kept its part of the accord. The leaders of the three European countries that signed the deal—Britain, France and Germany—reacted immediately to Mr Trump’s thundering speech with a declaration that they remained committed to its terms, despite the president’s decision to ignore their advice and walk away. The other parties, Russia and China, came together to issue their own proclamation of “unwavering support” for the accord. A Trumpian retort However Ayatollah Ali Khamenei, Iran’s supreme leader, snarled at Mr Trump, via Twitter, that he would be “worm food” before the Islamic Republic bowed to his demands. He said his country would quit the agreement unless

Argentina’s economic woes A plummeting currency prompts Argentina to seek a credit line from the IMF

N MAY 8th, as the peso continued to tumble, Mauricio Macri, Argentina’s president, addressed his nation on television. His government had opened negotiations with the IMF for a credit line in order to “avoid a crisis like those we have faced before in our history”. That steadied the peso. But it also brought back painful memories for Argentines, highlighted doubts about Mr Macri’s approach to mending Argentina’s economy and cast a shadow over the reformist president’s future. Argentines have bitter memories of the last time their government sought the IMF’s help. Many blame the fund for imposing austerity in return for loans and then pulling the plug in 2001, tipping

the European signatories could offer solid guarantees that trade relations would be unaffected by the American withdrawal (see article). Mr Rouhani, meanwhile, said there was a “short time” to negotiate ways of salvaging the agreement with the five remaining parties. And, just in case this failed, he ordered Iran’s atomic agency to be ready to ratchet up its enrichment programme. That would amount in Western eyes to resuming the quest for a nuclear bomb, and raise the spectre of war. Mr Trump said this would incur “very severe” consequences. General Muhammad Ali Jafari, the head of Iran’s Revolutionary Guard, which reports directly to Mr Khamenei, never placed much hope in the nuclear deal. “We welcome Trump’s decision on pulling out of the deal,” he said sarcastically, predicting that the Europeans would soon follow America’s lead. Binyamin Netanyahu, Israel’s prime minister, cut short a visit to Cyprus to hail Mr Trump’s “bold decision”, which he had strongly advocated, although many in his country’s defence and intelligence establishment feel that the deal was, on balance, beneficial. Minutes after the American president spoke there were fresh reminders

of regional tension, which will certainly escalate, in the short term, as a result of Mr Trump’s move. Israel denounced “irregular Iranian activity” in the Golan Heights, called up conscripts and opened bomb shelters for civilians. On May 10th Israel said it hit dozens of Iranian positions in its most intensive attack on Syria in decades after 20 rockets were fired by Iranian forces in Syria towards Israeli territory. Mr Netanyahu accused Iran of preparing to deploy “very dangerous weapons” in Syria with the aim of destroying Israel. Soon afterwards he left for Moscow, where he was expected to urge his Russian hosts to restrain their Syrian and Iranian friends. Russia, however, is unlikely to be willing or able to exercise that sort of leverage, and some senior Israeli defence officials said they hoped Mr Netanyahu would also press Mr Trump to keep American troops in Syria. (The president has promised to withdraw his country’s small contingent.) Fallout from Mr Trump’s decision was felt across the Middle East, where hostility between Saudi Arabia and Iran, respective champions of Sunni and Shia Islam, crackles on many fronts. In Iraq, which will hold an elec-

tion on May 12th, hard-line and pro-Iranian members of the country’s Shia majority were expected to raise their profile, making it tougher for Haider al-Abadi, the incumbent prime minister and likely victor, to maintain his balancing act between the Saudis and the Iranians (see article). Hopes suddenly seemed to fade that Iraq could at long last overcome sectarianism as the defining feature of its bitter internal contests. Although he stopped short of explicitly calling for regime change in Tehran, Mr Trump made a bid for Iranian hearts and minds by declaring that “the people of America stand with you” and by deploring the fact that 40 years had passed since a “dictatorship seized power and took a proud nation hostage.” He said Iran’s citizens were “rightful heirs to a rich culture” and the future should belong to them. But commentators in Tehran said the regime could all too easily use America’s hostility as an excuse to come down hard on dissent, which is rising as a result of the country’s economic doldrums and plummeting currency. In recent months, one observer noted, Iran’s rulers have been relatively tolerant of strikes and protests by workers; Mr Trump’s move could give them a perfect excuse to crack down.

their country into a devastating $82bn sovereign default. It was followed by widespread unemployment, a sharp rise in poverty and the corralito, in which the government froze bank accounts for a year to halt a run. Argentina’s economy had been battered by the lunatic policies of a succession of populist governments. But most Argentines still hold the IMF responsible for their own Depression. To turn to it for help was, therefore, politically risky, but Mr Macri was running out of alternatives. Argentina’s peso has fallen by a fifth against the dollar since the beginning of the year (see chart). The central bank’s frantic efforts to halt the slide failed. Between April 23rd and May 4th it sold $5bn of currency reserves and raised interest rates in stages by 12.75 percentage points. As part of the effort to reassure investors, Nicolás Dujovne, the treasury minister, cut the target for this year’s primary budget deficit from 3.2% to 2.7%. It had reached 3.9% in 2017. But each new step brought only brief respite before the peso started to fall again. Like other emerging markets, Argentina is suffering from the strengthening dollar and higher American interest rates. On April 24th the yield on ten-year Continues on page 15

Monday 14 May 2018

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BUSINESS DAY

In Association With

A fragile recovery

Argentina’s economic...

Africa’s economies are turning a corner

Continued from page 14

But risks remain

MONTAGE of miracles plays on the giant screens in the Perez Dome, a Pentecostal church in Accra. A paralysed man tosses away his crutches. A woman’s tumour vanishes. It is not only the sick who need help. “I pray for businesses,” intones the pastor, promising that struggling ones will “resurrect”. A stall outside sells recorded sermons on “financial prophecy” and “creating wealth God’s way”. Someone up there is listening. After several tough years Ghana’s growth rate in 2017 was 8.4%, the third fastest in the world. African economies often seem like victims of divine whimsy. Most of the continent’s workers are farmers, reliant on the rains. Much of its wealth comes from oil and minerals, at the mercy of markets. When prices are high, as they were in the first decade of the century, Africa booms. But in recent times drought and a commodities slump have stymied growth. In 2016 economies in subSaharan Africa grew by just 1.4%, the slowest rate for two decades. Now the gods are smiling, faintly. Commodity prices are up. Better harvests have helped reduce inflation. Governments in the region have already sold about $12bn of international bonds in 2018, a full-year record. In its latest regional update, published this week, the IMF forecasts growth across sub-Saharan Africa of 3.4% this year. Abebe Aemro Selassie, the director of the IMF’s African department, plays up the potential

for faster growth. “The question I ask is why isn’t a country growing at 6 or 7%?” But he frets that the recovery is fragile. Rising debt or a weaker world economy could stop it in its tracks. Aggregate figures for the region are driven by three big economies, all recovering from recession. Nigeria and Angola stumbled when oil prices fell; in the former, militants also choked off production by blowing up pipelines. Both made their situation worse by trying, quixotically, to prop up exchange rates. They have now seen some sense. Nigeria partly eased restrictions on its currency last year to encourage investment and is pumping more of the black stuff. Angola has let its currency slide by 28% against the dollar this year, though the adjustment will make it costlier to repay dollardenominated debts.

South Africa, the third big beast, is also on the mend. Cyril Ramaphosa, its new president, took over in February with promises to lure $100bn of investment and stop the rot in state-run firms. That was enough to save the country’s only investment-grade credit rating. But Mr Ramaphosa will struggle to achieve many of his goals because of infighting in his party, the African National Congress, says Azar Jammine of Econometrix, a consultancy. One in four jobseekers can’t find work. These three countries are less of a drag on regional growth than they were (see chart). But their recoveries are modest. The IMF expects that income per person will shrink in all three in 2018, for the fourth consecutive year. This mirrors a wider trend. In 12 countries with about one-third of the region’s population, incomes per person declined last year. They will fall again in most of them this year. Instead, the sprightliest performers are a group of midsized economies, from Ivory Coast to Tanzania, with sustained growth rates above 5%. Most import oil. Their cities are swelling and they are reaping the rewards of innovations like mobile banking. Many (though far from all) have sound economic policies. Most are holding down inflation. Their consumer class is small but growing. And politicians are cutting plenty of ribbons. Kenya and Ethiopia have new railways. Senegal has a new airport. Public investment has added to growth in the short run. It could help in the long run, too, if better infrastructure boosts trade. But three risks loom. The first is public finances. Governments have borrowed heavily to replace oil revenues or fund capital projects. The median level of public debt rose from 30% of GDP in 2012 to 53% last year. The median country’s interest payments now swallow a tenth of revenues. Six

governments are already in a debt crisis. Anzetse Were, an economist in Kenya, questions whether public investments there will do much for productivity. She thinks some of the money may have been diverted into private pockets. A second risk is the world economy. Distant trade wars could crimp demand for African raw materials. Hikes in American interest rates would push up the cost of refinancing debts. And the oil price is still too low for many African exporters. Even if it doubled, Cameroon and Nigeria would still not balance their books. The third risk is politics. Elections typically rip holes in public budgets and can cause months of uncertainty. The only thing worse is not holding a vote at all. In the Democratic Republic of Congo, while billionaires bicker over cobalt, the president is driving his country off a cliff. Some think growth rates are a distraction. “We don’t see it,” says Courage Gamli, a Ghanaian barman, of his country’s recent spurt. The numbers are only a rough guess: a rebasing of the calculation next month may add more to Ghana’s GDP than several years of actual growth. A more basic problem is how to share the benefits. “The economy is growing but it’s not translating into jobs,” says George Boateng of the African Centre for Economic Transformation, a think-tank in Accra. In 2002 some 57% of Africans were extremely poor, based on the World Bank’s benchmark income of $1.90 a day. In 2013, after a long resource-fuelled boom, 42% were. More children were in school; fewer died young. There is reason to worry, then, when the IMF says that regional growth will hover below 4% for the next few years. Since populations are rising, income per person will creep up by barely 1% a year. That makes Africa look more like Italy than China. Better keep praying.

Treasury bonds rose above 3% for the first time since January 2014. That fuelled a sell-off, which gained fresh impetus on May 8th when Jerome Powell, chairman of the Federal Reserve, spooked investors by saying, in effect, that interest-rate policy would be set without taking much notice of the impact on emerging markets. The Turkish lira, Mexican peso and Polish zloty all fell. But Argentina is unusually vulnerable. Inflation expectations for this year have risen to 22%, well above the central bank’s target of 15%. Investors are worried by foreign-currency debt that has risen to 40% of GDP, up from 26% in 2015, and by large fiscal and current-account deficits. High interest rates and underdeveloped capital markets mean Argentina has been unable to find the financing it needs locally and in its own currency, as some developing countries have done. Squabbles over the speed of deficit reduction have created fractures in Mr Macri’s coalition. An emboldened opposition is seeking to derail his economic reforms. “Investors are questioning whether the government is willing to assume the political costs required to sustain its long-term economic strategy,” says Dante Sica of Abeceb, an economic consultancy. Mr Macri has taken a cautious approach to cleaning up the mess he inherited from his predecessor, Cristina Fernández de Kirchner. When he took office in December 2015, the economy was in complete disarray. The national statistics institute produced fictitious inflation figures to disguise annual price rises of more than 40%. The central bank printed money to finance the deficit, which swelled to 5.4% of GDP in 2015. Currency controls artificially inflated the peso. Export taxes encouraged farmers to hoard grain. A dispute with bondholders meant that Argentina was locked out of international credit markets. Mr Macri quickly lifted currency controls, cut export taxes and settled with holders of Argentina’s defaulted debt. But lacking a majority in congress, and hoping not to stifle economic growth, he decided to reduce the deficit slowly. Subsidies on transport and utilities were withdrawn only gradually in order to avoid a spike in inflation. Low international borrowing costs allowed the government to plug the fiscal deficit cheaply. Foreign investors appeared to endorse the strategy. In June 2017 they snapped up Argentina’s first 100-year bond, with an annual yield of 7.9%.

BUSINESS DAY

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Monday 14 May 2018 In Association With

Make work can’t work

A jobs guarantee is a flawed idea Democrats are trying to impress their base, rather than writing good policy

N APRIL America’s unemployment rate fell to 3.9%, its lowest since December 2000. That is not good enough for Democrats eyeing the 2020 presidential race. Senator Bernie Sanders recently promised to introduce a bill guaranteeing every American a taxpayer-financed job, should they want it. His colleague, Senator Cory Booker, has already written a bill which would test such a policy in 15 places with high joblessness. Senators Kamala Harris, Elizabeth Warren and Kirsten Gillibrand, three other potential presidential contenders, are co-sponsors. Ms Gillibrand will reportedly soon pen her own plan, too. For a long time, so-called full employment was the holy grail of economic policy for Democrats. In his 1944 state of the union address, President Franklin Roosevelt proposed a “second bill of rights” that would guarantee the right to work. In 1946 Congress passed the Employment Act, which declared it the responsibility of the federal government to “use all practicable means” to ensure there were jobs for everyone who was willing to work. The Keynesian demand management that followed kept unemployment fairly low for several decades.

But even as the post-war consensus on economic policy was collapsing in 1978, Congress passed the Humphrey-Hawkins Full Employment Act, which set a goal of 3% unemployment by 1983. The act, much of which turned out to be toothless, also asked the government to create a “reservoir of public employment”. Had the left got its way, the welfare reform President Bill Clinton signed in 1996 would also have guaranteed a minimum-wage job, as a last resort, for those leaving the welfare rolls. The timing of Democrats’ revival of the idea of a jobs guarantee is strange because many economists, including those at the Federal Reserve, think that the economy is

beyond full employment. To their mind, the unemployment rate is unnaturally low, and if policymakers try to sustain it via stimulus, inflation will result. If they are right, today’s joblessness is the result of structural factors, such as insufficient skills, unrealistically high wage demands, or an unwillingness of workers to leave stagnant areas. It is not the involuntary unemployment, resulting from a weak economy, which so concerned Keynes. Still, a strong economy does not make a jobs guarantee pointless. It would reduce structural unemployment. If recession did strike, more government jobs would both provide a safety net for workers and

automatic stimulus to demand. Most important, guaranteed alternative employment would raise the bargaining power of unskilled workers. They could use it as leverage when negotiating with their existing employers. Mr Booker’s plan would offer parental leave, health insurance and pay its participants a wage that would eventually rise to $15 an hour. Private employers would have to compete with this generosity when hiring workers. That appeals greatly to those who fear automation and the gig economy are combining to create a glut of low-paid workers without bargaining power (in Britain, such workers have been dubbed the “precariat”). Low-paid jobs are concentrated in the food, hospitality and retail industries. Some employers would match the government’s terms. It is easy to imagine, say, restaurants in San Francisco or New York, whose wealthy customers may not balk at higher prices, paying their workers more and passing the costs on to customers. But others, such as those in the beleaguered retail industry, could struggle. The policy’s supporters compare it to the minimum wage, which they say has not much dented employment even when set high. But that has typically been in rich cities. Were

the terms of employment as generous as Mr Booker wants across the country, the impact on the government payroll could be huge. About half of America’s 148m workers earn less than $15 per hour. In some southern and south-western states, the figure is almost 60% (see chart). That would not be a problem, were the government capable of productively employing tens of millions of new workers. Supporters of the policy envisage armies of labourers erecting infrastructure, caring for children and cleaning up the environment. Yet some of these jobs are skilled. Others are unsuitable for a programme that would face high turnover in a strengthening economy, and sudden influxes during recessions. In any case, it is hard to imagine the government operating the programme efficiently, even if the job of running projects were delegated to states, as proposed by the Centre on Budget and Policy Priorities (CBPP) a left-leaning think-tank. Government at all levels employs 22.3m Americans. Even if the CBPP’s estimate of take-up of about 10m is right, it would represent nearly a 50% expansion of the government payroll. It is not clear whether these workers could be sacked if they performed poorly.

(b/d) in the Bakken, a 9,000 squaremile formation in North Dakota and Montana where it pioneered a combination of hydraulic fracturing (“fracking”) and horizontal drilling; last quarter production reached as much as 161,000 b/d. In 2014 Continental suffered a severe blow when Mr Hamm rashly unwound its oil hedges in the mistaken belief that falling oil prices would swiftly bottom out. Once again it is unhedged, but this time that means it is benefiting more from the current oil-price rally than conservative peers. Unlike many rival shale producers, it has stuck with the Bakken and with shale deposits in Oklahoma, rather than chasing the more fashionable reserves of the Permian Basin in west Texas and New Mexico. For the past few years this has been a millstone, but now “the Bakken is back—and booming,” executives say. The firm’s production there grew by a whopping 48% in the first quarter of 2018, compared with the same period a year earlier, amid overall growth in its portfolio of 37%. Hess, a rival, is also doing well there. “The notion that you have to be in the Permian to be appreciated no longer holds up,” Mr Tudor says. Reassuringly for shareholders and creditors, the growth is partly being used to shore up corporate finances. For years the shale-oil

industry has been seen as a money pit. According to Bernstein, a research firm, ever since 2012 shale producers on average have spent more than they earned; by the first quarter of 2016 they were burning through more than three times as much cash as they produced. But since last year they have been living within their means, with profit margins rising to about 10% with oil at $55 a barrel—and going even higher now.

In the light, sweet spot

American shale-oil producers are on a roll Surprisingly, they have not yet roiled the oil markets

UST over a year ago Harold Hamm, billionaire boss of Continental Resources, one of the biggest shale-oil producers in America, issued a stern warning to his fellow frackers. Drill with restraint or we will “kill the market”, he said. This month the 72-year-old Mr Hamm, son of an Oklahoma cotton sharecropper who went on to become one of the founding fathers of the shale revolution, had a different message. Restraint is working. The price of West Texas Intermediate (WTI), the light, “sweet” (or low-sulphur) crude that is a benchmark for American producers, rose to $71 a barrel on May 9th, its highest level since November 2014. OPEC, which Mr Hamm once called a “toothless tiger”, is successfully leading efforts to balance the market. Oil prices are partly rallying because President Donald Trump this week pulled America out of the nuclear deal with Iran and said he would reimpose sanctions on a big oil producer. Meanwhile a free fall in Venezuelan production may be further exacerbated by the move of ConocoPhillips, a large American producer, to freeze some Caribbean assets of PDVSA, Venezuela’s state oil company, as part of a longrunning legal dispute. But arguably the most remarkable development is that the rise in

the oil price has not yet unleashed a flood of new shale-oil supply, as many market experts had predicted (and Mr Hamm had feared). The reasons for this are threefold: pressure from shareholders more interested in a steady stream of dividends than a gush of oil; production bottlenecks in pipelines and ports in America; and the fast depletion of shale wells after bountiful beginnings. The question, as producers begin to savour higher profits and investors’ appetite for them increases, is whether the restraint will endure. Bobby Tudor of Tudor Pickering Holt, an oil-and-gas investment bank, says that as oil prices are rising, so are animal spirits. That could perpetuate the

age-old pattern of overexpansion in commodities markets. If he is right, the impact of higher supply will be felt throughout global oil markets. Bringing home the Bakken Mr Hamm’s Continental is a decent place to start to understand the countervailing forces at play in the shale industry. Like many of its peers, the company has demonstrated the grit and discipline that has brought the shale industry back from the edge of disaster since 2014-16. Now the good times have returned, and with them the temptation to slip the leash. Continental is a wildcatter’s dream. Started by Mr Hamm when he was 21, a decade ago it was still drilling just 7,000 barrels a day

Monday 14 May 2018

C002D5556

BUSINESS DAY

Monday 14 May 2018

CityFile 3 killed, others homeless as windstorm hits Bauchi

hree persons have been confirmed killed and others rendered homeless by a windstorm in parts of Duguri District in Alkaleri local government area in Bauchi State. Yusuf Kobi, the director, relief and rehabilitation, State Emergency Management Agency (SEMA), confirmation the development, weekend, saying the incident occurred in the remote areas of the council on last Wednesday Two persons also sustained various degrees of injury, while over 200 houses, 136 electric poles, six primary schools, domestic animals, foodstuff and shops, were destroyed. Kobi listed some of the affected villages to include Yuli, Bandibit, Gaji, Bun, Bayak, Kunzum Tummi, Nyalan, Tonlon, Bajoga and Taksamat in Yali District. The others villages are Sharan and Dagudi villages in Dan District of the council.

Fagged out A wheel barrow pusher obeying the call of nature after the day’s hustle in Lagos. Pic by Pius Okeosisi

Tour operators nabbed over trafficking of 96 Nigerians

Lagos, health service providers in talks to revive PHCs ... as traders, artisans access N5bn loan from state

JOSHUA BASSEY

mid challenges of managing Primary Health Centres (PHCs), in Lagos, some of which no longer offer medical services to the residents, the state government has opened discussions with private health service providers to finance, resuscitate and run some of the health centres. About 45 non-functional PHCs have been listed, with 12 private health service providers already concluding talks with the government ahead of the takeoff of the deal. The collaboration will see the health centres revamped, and repositioned to offer 24-hour medical services in communities located. “The idea behind this is to facilitate improvement in both public and private sector health facilities through the provision of finance, with the support of private sector organisations,” said Uzamat AkinbileYussuf, commissioner for wealth creation and employment, Lagos State.

According to Akinbile-Yusuf, the project will result in effective management of the PHCs which are presently dilapidated and under-utilised. “Health is wealth”. It is therefore incumbent on the state to have functional, standard and quality-driven private healthcare providers to complement government’s efforts, said Akinbile-Yusuf. Meanwhile, as part of strategies to also boost the state’s economy and create jobs, the government has advanced loans totaling N5.22 billion to 6,462 artisans, traders, small and medium scale entrepreneurs. The loans were sourced from the N25 billion Lagos State Employment Trust Fund (LSETF) initiated by the current administration three years ago, with the aim to encourage artisans, traders and young entrepreneurs to translate their business ideas into reality. Akinbile-Yussuf, told journalists that in addition to the already disbursed loans, more applications have processed and

successful applicants have been contacted to access their loans. “In fulfillment of the mandate handed to the LSETF, we have now disbursed N5.22 billion to 6,462 beneficiaries, out of the approved loans totaling N5.98 billion for 8,229 beneficiaries received. Akinbile-Yussuf also added that as part of efforts to encourage in innovation and technology, the state government has launched innovation-driven enterprise programme tagged “Lagos Innovates” where access to high quality infrastructure, learning and networks are provided. According to her, the projection is to cement the place of Lagos as the leading destination for start-ups in Africa. Government, she said through the Lagos State Employability Support Project, has also concluded plans to produce 10,000 skilled persons within three years to cater for demand in key sectors such as manufacturing, healthcare, construction, entertainment, garment making, tourism and hospitality.

Kidnapping: ‘How Evans forced N99.7m from me’

n employee of Maydon Pharmaceuticals Ltd., Uchenna Okagwu, has narrated to an Ikeja High Court, in Lagos, how Chukwudumeme Onwuamadike, alias Evans, forced him to pay 232,000 Euros (about N99.76 million) to secure the release of an abductee. Okagwu told the court on Friday that he paid the sum to the Anambra State-born kidnap kingpin, to secure the release of his boss, Donatus Dunu, managing director of Maydon Pharmaceuticals Ltd, who was kidnapped by Evans. Evans is standing trial alongside Uche Amadi, Ogechi Uchechukwu, Okwuchukwu Nwachukwu, Chilaka Ifeanyi and Victor

Aduba for sundry cases of kidnapping. Okagwu, a manager at Maydon Pharmaceuticals Ltd., while being led in evidence by TitilayoShitta-Bey,thedirectoroftheDirectorate of Public Prosecutions, said that Evans and his gang threatened him that any mistake made in the delivery of the ransom would cost his life. “I have been working with Maydon Pharmaceuticals Company for over seven years, after we heard of the kidnap of Donatus Dunu, we waited to hear from the kidnappers so we know what to do to rescue him. “As the manager of the Idumota branch, we worked towards raising money for the kidnappers when they asked for ransom. After about two months, I was called by Anselem

Dunu, the brother of Donatus, to deliver 232, 000 euros that was raised to the kidnappers. “After counting the money, we put it in a polythene bag and wrapped it very well with cello tape and I went with the money. Anselm gave me his phone that they (kidnapers) would use it to direct me where to take the ransom. I started receiving calls with the phone from the kidnappers, who warned that I should make no mistakes that if I do, I would be shot. Okagwu gave a step by step account of how he delivered the ransom to Evans. He said: “I was asked if I knew the way towards Mile 2 and I said yes. I went with the money in a car under the passenger’s seat and I moved towards Mile 2.

wo tour operators have been arrested by the National Agency for the Prohibition of Trafficking in Persons (NAPTIP) in Abuja for alleged trafficking of persons. Stella Nezan, head of media in NAPTIP, said the suspects were arrested for trafficking of 96 Nigerians to Saudi Arabia using the 2017 Hajj exercise. She gave the names of suspects as Ibrahim Wali, managing director/ CEO of Family Travel & Tour Limited and Musa Jubril, chairman/CEO of Divine Travel & Tour limited. She said flags were raised recently by the National Hajj Commission of Nigeria (NAHCON) in a letter of complaint against “Family Travel & Tour Limited which applied for and got allocation to take 450 persons to Saudi Arabia during the 2017 hajj exercise’’. According to Nezan, months after the hajj, the company has been unable to account for the 96 people and all attempts to get the company to bring them back have proved abortive. “In the course of the investigation, Wali alleged that his friend Jubril, used his company to transact the business, the two suspects are making useful statements as investigation continues” she said. NAPTIP warned travel and tour operators to desist from recruiting innocent Nigerian for sexual and labour exploitation, adding that their actions were inimical to the development of the nation. Travel agents and airline operators’ responsibilities are spelt out under Section 35 of the Trafficking in Persons (Prohibition) Enforcement and Administrative (TIPPEA) Act 2015, which regulates their activities with respect to curbing the crime of human trafficking. The penalty for aiding and abetting a human trafficker, intentionally or unintentionally upon conviction is jail term and a fine of not more than ten million naira. “I received another call and I asked if I should follow Oshodi Isale or Oshodi Oke they said I should follow Oshodi Oke. I was driving slowly, so I stayed on service lane in order not to slow down traffic flow. I was asked to enter the express lane when I got to Ijesha so they will not collect the money from me.” “I was asked if I know the eatery at Apple Junction, called Tank and Tummy and I said yes and was told to park there. I waited for about 15 to20minutesandwasdirectedtomovetoApple Junction at Festac. They asked me to switch on the inner light of the vehicle and drive slowly. “I was directed towards Okota and was told to get to a street immediately after the canal where commercial motorcyclists stay. I was asked to drive down the street and was asked to describe everything I see and should tell them when I see a blinking light on an electric pole.

Monday 14 May 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 14 May 2018

BUSINESS

COMPANIES & MARKETS

Wema Bank grows earnings by 20%

Pg. 22

Co 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

ay & Baker Plc, a leading player in the fast moving consumer goods (FMCG) industry and health care space has recorded improvement in its bottom-line at the end of first quarter 2018 following reduction in operating cost. Despite a 0.57 percent limp in revenue, the drug maker reported a 488.03 percent surge in profit after Tax to N141.9 million from N24.1 million the same period last year. R e v e n u e f ro m s a l e s crawled by N13.604m from N2.305bn in the corresponding period of 2017 to N2.375bn, driven by the pharmaceuticals segment, which contributed N2.163bn or 91.05 percent of total revenue; up from N1.854bn or 78.52 percent of prior Q1. The Beverage segment followed with N18.748m, up from N15.342m, while the foods segment dipped 153.9

DAY

May & Baker profit up 488% in Q1 over reduction in operating cost MICHEAL ANI percent from N491.932m, to N193.745m. By geography, sales revenue from the companyâ&#x20AC;&#x2122;s eastern Nigerian market remained the biggest contributor at N879.483m, even as it dropped to N999.796m; Lagos accounted for N770.054m, up from N754.335m; ahead of N413.51m from western Nigeria, from N362.103m; while N312.713m came from the north, as against N245.922m in 2017Q1 May & Baker share price has risen 9.23 per cent this year, outperforming the NSE All share index at 7.42 percent, according to data compiled by

BusinessDay. It was priced at N2:80 as at the close of trading in Lagos on Monday, with a market capitalisation standing at N2.783 billion. Businessday had earlier reported an N775m deal between May&Baker and De-United Foods Industries Limited (DUFIL), owners of Indomie Noodles, where the former sold a 100 percent stake of its food production line to the latter. The drug maker exclusively disclosed to Businessday that divestment from the Noodles business, provides much needed cash for the company, and will also reduce the losses hitherto

contributed by this unit by helping management refocus on its new corporate vision which is â&#x20AC;&#x153;to be a leading healthcare brand in Sub-Saharan Africaâ&#x20AC;? Further analysis shows that Cost of sales dropped slightly to N1.628bn, from N1.678bn; leaving gross profit of N747.368m, compared to N683.731m reported in the previous Q1. While the pharmaceutical segment contributed N783.231m to gross profit, up from N613.404m in 2017Q1; The beverage segment posted a N1.307m loss, down from N2.206m in 2017; which was minute when compared to the N34.556m loss from the

food business from a profit of N72.533m. O t h e r o p e ra t i n g i n come rose to N3.58m from N1.179m, representing miscellaneous income earned on insurance claims received from HUGG Robinson and BCM Insurance Broker, besides being part of income from sale of waste box, waste sugar cartons, flour bags, waste sacks, pallets, woods, bottles, etc. Distribution, sales and marketing expenses fell to N292.612m from N308.457m; While administrative expenses fell from N143.636m in 2017 to N136.94m. Operating profit therefore climbed to N321.396m, up from

N232.817m, representing an N88.579m or 38.04 percent growth. Profit before tax for the period stood at N208.762m from just N35.502m, while tax expenses jumped five-fold from N11.361m to N66.804m, resulting in net profit of N141.958m, as against the N24.141m in the 2017Q1. The net profit translated to Earnings per Share of 14.49 kobo, as against the previous 2.46 kobo; just net profit margin for the period improved to 5.97 percent, compared to 1.02 percent. Total asset also dropped 15.88 percent to N7.5bn, while liabilities slipped from N5.9 billion to N4.01 billion.

BUSINESS DAY

Monday 14 May 2018

C002D5556

COMPANIES & MARKETS

Wema Bank grows earnings by 20% …plans N50bn debt issuance programme ODINAKA ANUDU

ema Bank Plc’s gross earnings rose from N54.36 billion in the 2016 financial year to N65.27 billion in 2017, representing a 20.07 percent jump, the bank’s financial statement shows. The bank’s interest income grew 19.10 percent to N53.07 billion as against N44.56 billion reported by December 31, 2016. At the annual general meeting (AGM) held in Lagos, the bank said it would re-open the second series of its N50 billion debt issuance programme, from this quarter, on the back of relative decline in interest rates and possible growth within the economy. At the AGM where the financial report for the year ending December 31, 2017, was presented to shareholders, the bank announced commitment to its growth phase, seen as the final stage of a restructuring process that started in 2009. Segun Oloketuyi, managing director/ CEO, said the bank’s growth was supported by the launch of ALAT, Nigeria’s first fully digital Bank, which enhanced the bank’s already existing alternate platforms, recording a combined growth rate of 205.67 percent in transactions executed and with an estimated 30,000 accounts opened monthly. “We have made necessary steps to consolidate on the growth achieved in the new financial year,” Oloketuyi said. He c o m m e n d e d t h e shareholders for their understanding over the years and for seeing the bank through the first two restructuring phases of the bank, adding that Wema Bank was now in the final stage of its threepronged strategy: Stability(2009 2012), repositioning (2013-2017) and growth (2017 and beyond). “Despite the slow start to the year, 2017 recorded significant progress, highlighted by the introduction of the Investor & Exporters (I&E) window and recovery in oil prices,” he said. In October, the bank held its Extra-Ordinary General Meeting (EGM) directed at its proposed Capital Reorganisation Scheme. The CEO announced that the exercise had been concluded. He explained that with

all relevant regulatory approvals in place and duly passed and reflected in the 2017 financial year accounts, the conclusion of the exercise would now lead to an efficient balance sheet, as ploughed back profit could be capitalised to grow the business, while positioning

the bank for dividend payment in the near term. “We approached the money market in November 2017 to raise N25 billion in two series under a commercial paper programme; Series 1, N10 billion 182-day tenor; and Series 2, N15 billion- 270day tenor,” he stated.

On his part, Tunde Mabawonku, chief finance officer, noted that the bank’s earnings from non-interest income remained strong at N12.19 billion, from N9.80 billion in 2016; surpassing its 2017 guidance of a 19 percent growth rate. Wema Bank closed with

a Profit before Tax (PBT) of N3.01 billion, as against N3.24 billion recorded the previous year. Profit After Tax was N2.25 billion, from N2.56 billion reported in 2016. “Risk management remains at the core of our operations, as we leverage

on our prudent risk management practices and reported a Non-Performing Loan (NPL) ratio of 3.52 percent as against 5.01 percent in 2016. We remain confident that the bank’s credit rating will continue to remain affirmed at investment grade level,” Mabawonku said.

Monday 14 May 2018

C002D5556

BUSINESS DAY

Monday 14 May 2018

Access Bank Rateswatch

Market Analysis and Outlook: May 11 - May 18, 2018

KEY MACROECONOMIC INDICATORS Indicators

Current Figures

Comments

GDP Growth (%)

1.92

Q4 2017 — higher by 0.52% compared to 1.40% in Q3 2017

Broad Money Supply (M2) (N’ trillion) Credit to Private Sector (N’ trillion)

24.30 22.44

Increased by 1.18% in Mar’ 2018 from N24.02 trillion in Feb’ 2018 Decreased by 0.78% in Mar’ 2018 from N22.62 trillion in Feb’ 2018

Currency in Circulation (N’ trillion) Inflation rate (%) (y-o-y)

1.67 13.34

Decreased by 13.88% in Mar’ 2018 from N1.94 trillion in Feb’ 2018 Declined to 13.34% in Mar’ 2018 from 14.33% in Feb’2018

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

14 14 (+2/-5)

Raised to 14% in July ’2016 from 12% Lending rate changed to 16% & Deposit rate 9%

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

47.86 76.86 1.8

May 10 2018 figure — an increase of 1.06% from May Start May 11, 2018 figure— a decrease of 2.29% from the previous week Mar’ 2018 figure — an increase of 1.12% from Feb’2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Change(%)

11/5/18 41022.31

4/5/18 41218.72

(0.48)

14.86

14.93

(0.47)

Volume (bn)

0.21

0.25

(13.63)

Value (N’bn)

4.23

3.77

12.41

NSE ASI Market Cap(N’tr)

MONEY MARKET NIBOR Tenor

Friday Rate

OBB O/N CALL 30 Days 90 Days

Friday Rate

Change (Basis Point)

(%)

11/5/18

4/5/18

65.0000 73.4200 76.0500 14.5038 15.4722

2.8300 3.3300 3.0000 11.2696 12.9418

2196 2105 7305 323 253

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

11/5/18

4/5/18

11/4/18

Official (N) Inter-Bank (N)

305.75 338.91

305.70 338.71

305.55 337.39

BDC (N) Parallel (N)

360.50 363.00

360.00 362.00

359.81 362.00

BOND MARKET

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.)

Tenor

Friday

Change (Basis Point)

(%)

11/5/18

4/5/18

3-Year 5-Year 7-Year

0.00 13.38 12.60

0.00 12.68 12.52

0 70 8

10-Year 20-Year

13.30 13.26

12.98 13.07

32 19

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.

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

(%)

2.29 2.93

18.56 (8.05)

2754.00 124.45 84.62 11.65 532.75

(2.13) (4.22) 0.12 (3.86) (5.68)

42.25 (8.45) 9.32 (26.94) 15.92

1309.13 16.39 307.90

1.17 2.38 1.23

0.52 (2.39) (4.91)

Friday 11/5/18

Friday

Change

(%)

(Basis Point)

4/5/18

1 Mnth 3 Mnths

10.81 12.00

9.31 10.90

149 110

6 Mnths 9 Mnths 12 Mnths

12.15 12.79 13.13

11.31 12.09 11.94

84 70 119

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Friday (%) 11/5/18

Index

Disclaimer

YTD Change

76.86 2.81

(%)

Indicators

Friday

1-week Change

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

AVERAGE YIELDS Tenor

11/5/18

2679.49

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

9.08 5.93 9.08

YTD return (%)(US $)

-46.12

Friday

Change

(%)

(Basis Point)

4/5/18 2695.01

0.58

9.13 5.99 9.71

1.03 0.96 0.20

-45.47

0.17

TREASURY BILLS (MATURITIES) Tenor 91 Day 182 Day 364 Day

Amount (N' million) 9,541.92 47,709.62 38,167.69

Rate (%) 10.2557 10.950 11.149

Date 02-May-2018 02-May-2018 02-May-2018

Global Economy In the US, the non-farm payrolls registered 164,000 job gains in April, up from an upwardly revised 135,000 in March, a report by the Bureau of Labour Statistics showed. The gain in payrolls reduced the unemployment rate by 0.2 percentage points to 3.9% in April, after it had remained unchanged at 4.1% for six months. This is the lowest unemployment rate since 2000. In China, the Caixin Manufacturing Purchasing Managers Index (PMI) rose by 0.1 index points to 51.1 in April, an indication of sustained growth momentum. While the output sub index rose modestly on a monthly basis, new export orders declined for the first time in seventeen months, indicating cooling foreign demand. In the UK, the Monetary Policy Committee (MPC) of the Bank of England (BoE) last week voted to leave the Bank Rate unchanged at 0.50%. The Bank voted unanimously to continue its purchases of investment-grade corporate bonds of up to GBP 10 billion and to maintain the total stock of UK government bond purchases at GBP 435 billion. In the Eurozone, the preliminary GDP figure for Q1 2018 moderated to 0.4% quarter-on quarter (qo-q), from 0.7% in Q4 2017, data from the European Union Statistics agency showed. Growth was pulled down slightly by France and Austria, while growth was unchanged in Spain and Italy. Temporary factors, including cold weather, striking workers, and an outbreak of the flu weighed on GDP growth in Q1 2018. In Brazil, the consumer price index rose 2.76% in April from a year before, up from the 2.68% pace in March according to the country's statistics office (IBGE). April’s acceleration in inflation came as prices for clothing and health care rose more quickly. Even with the faster pace of price increases, the inflation rate remains below the Central Bank of Brazil's target range of 3% to 6%. Local Economy According to the National Bureau of Statistics (NBS), the recently released Capital Importation report showed that there was an upswing in the total value of capital imported in Q1 2018 which stood at $6.30 billion. This marked the fourth consecutive quarterly increase since Q2 2017. A breakdown of the total capital inflow revealed that 72.4% came via portfolio investments, 23.67% from other investments (comprising trade credits, loans, currency deposits and other claims) and 3.9% from Foreign Direct Investment (FDI). The Portfolio Investment grew to $4.56 billion from $3.47 billion in the previous quarter while other investment recorded $1.49 billion in Q1 2018, declining by 2.29% from Q4 2017, however, growing by 289.25% compared to the corresponding period of 2017. FDI settled at $246.62million. The top 3 countries with the highest value for capital importation are UK, US and Republic of South Africa leaving Canada, Botswana and India as the lowest 3 countries. In another news, total credit to private sector stood at N15.06trillion in Q1 2018. Oil & gas continued to receive the highest allocation at N3.43 trillion (21.92%), followed by manufacturing with N2.08 trillion (13.29%). The lowest contribution is to the mining and quarrying sector with N10.47 million (0.07%) of total allocation. In a separate development, total volume of transactions recorded on Electronic Payment Channels (EPC) in Q1 2018 was 457.23 million valued at N32.48 trillion. Automated Teller Machine (ATM) transactions dominated with 212.37million valued at N1.57 trillion. Stock Market Trading indicators at the local bourse ticked down last week. The negative performance occurred at a time when it is expected that investors should be positioning their portfolio in anticipation for Q1 earnings scorecards. The All Share Index (ASI) slipped by 196.41 points to close at 41,022.31 points from 41,218.72 points the previous week, representing a loss of 0.5%. Similarly, market capitalization lost 0.5% to close at N14.86 trillion from N14.93 trillion the previous

week. Stocks in the industrial goods, consumer goods and the oil & gas sectors aided the decline in the market as investors took profit from gains that had built up in previous weeks. This week, performance gauges may trend upwards as bargain-hunting sentiment takes hold. Money Market Rates significantly accelerated last week as a result of Open Market Operation (OMO) auction of about N450 billion and retail Secondary Market Intervention Sales (SMIS) sucked up market liquidity. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates ascended to 65% and 73.42% from 2.83% and 3.33% respectively the previous week. Longer dated placements also increased. The 30-day and 90-day NIBOR finished higher at 14.50% and 15.47% from 11.27% and 12.94% the previous week. This week, rates may remain elevated due to expected OMO auction. Foreign Exchange Market The naira-dollar exchange rate at all market segments depreciated last week. At the official window, it lost 5 kobo to settle at N305.75 from N305.70 the previous week. Interbank rate pared 20 kobo to close at N338.91/$ from N338.71/$ while the parallel market rate lost N1, closing at N363/$. The depreciation recorded at the parallel market may have resulted from high demand occasioned by tight dollar liquidity following some exit from the bond market by offshore investors due to fall in yields. Multinational companies also repatriating dividends contributed to the naira weakness. This week, the naira may likely face more pressure stemming from more FX outflows relating to low yields in the fixed income space. Bond Market Bond yields ticked higher for the third consecutive week due to large sell-offs across all placements from counterparties. Sales were driven by investor’s appetite for higher rates in OMO instruments and tight liquidity. Yields on the five-, ten- and twenty- year debt papers closed at 13.38%, 13.30% and 13.26% from 12.68%, 12.98% and 13.07% respectively the previous week. The Access Bank Bond index declined by 15.52 points or 0.58% to finish at 2,679.49 points from 2,695.01 points the previous week. The direction of bond yields would be determined by the expected bond auction and the release of the bond calendar. Commodities Market Oil prices surged in the week ended May 11, 2018 due to concerns on the potential disruption to oil flows from major exporter Iran in view of U.S. sanctions as well as Venezuela’s crude production further declining. The Organization of Petroleum Exporting Countries (OPEC) benchmark crude added $3.80 or 5.38% to $74.46 per barrel from $71 the previous week. Bonny light, the Nigerian benchmark crude also marginally increased to $76.86 from $75.14 by $1.72 in the previous week. The price of precious metals rebounded after the third week-on-week drop. Prices were driven up by a weaker dollar and lower U.S. bond yields. Gold price inched higher by $15.28 to $1324.41 per ounce from $1309.13 per ounce in the preceding week representing a 1.17% rise. Silver price on the other hand slightly increased to $16.78 from $16.39 depicting a 2.4% expansion. The tension between Iran and the U.S. may continue to uphold crude oil prices. Precious metals prices may remain elevated due to the geopolitical tension between the U.S and Iran. MONTHLY MACRO ECONOMIC FORECASTS Variables

May’18

Jun’18

Jul’18

Exchange Rate (Official) (N/$)

338.50

339.90

340.10

Inflation Rate (%)

11.89

11.50

10.80

Crude Oil Price (US$/Barrel)

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

Monday 14 May 2018

C002D5556

BUSINESS DAY

C002D5556

Monday 14 May 2018

Business Event

L-R: Tosin Runsewe, chief client officer; Kunle Ahmed, chief executive officer; Olusola Adeeyo, chairman and Omowunmi Adewusi, company secretary, all of AXA Mansard Group, at the annual general meeting of the company in Lagos.

L-R: Kolawole Ayeye, group managing director / chief executive officer, Growth & Development Asset Management Ltd; Peter Shodipo, group compliance and risk management, Growth & Development Asset Management Ltd; Henry Ogbuaku, group head, asset management, Growth & Development Asset Management Ltd, and Ofonama Joshua, group head, treasury, Growth & Development Asset Management Ltd, during the Growth & Development Asset Management Ltd (GDL) press conference, In Lagos.

L- R: Peter Ewesor, MD/CEO, Nigerian Electricity Management Services Agency (NEMSA); Awosanya Temtayo, senior fire officer, Lagos State Fire Service ; Adeyinka Adebiyi, director, safety training and education ,Lagos State Safety Commision, and Soomaya Abdool, head, marketing, Eaton at the Eaton safety roundtable in Lagos. Pic by Pius Okeosisi

L-R : Tony Ibeziako, Ag. head, listing business division, The Nigerian Stock Exchange (NSE); Rukayat O. Salaudeen, company secretary/legal adviser, Jaiz Bank Plc; Tinuade Awe, executive director, regulation, NSE; Hassan Usman, managing director/CEO, Jaiz Bank Plc and Mahe Abubakar Mahmud, executive division, Jaiz Bank Plc during the Facts Behind the Figures presentation at the NSE in Lagos.

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COMPANIES & MARKETS

FirstBank Contactless Naira MasterCard to boost consumer experience HOPE MOSES-ASHIKE

irst Bank of Nigeria Limited has introduced the Contactless Naira Master Card to its array of debit cards to promote convenience, ease of transactions and the security of funds. FirstBank debit cards are acceptable nationwide and globally, they can be used to withdraw cash and access value added services including bills payment, airtime recharge, flight and hotel booking among others. The Contactless Naira Master Card enables quick pinless purchases and is a fast secure way for customers to shop locally and globally. The contactless card can be used for making payments in the London transport network such as buses, tubes, trams, Dock and Light Railway (DLR) and the London Overground as well as in Grocery shops, supermarkets and Gas stations within London metropolis. The card is designed to enhance a cashless lifestyle by promoting increased card usage for lower value transactions. Payments are made by tapping the card on the POS machine with contactless functions for low value transac-

tions; the card can also be used in a regular POS as a normal MasterCard. The daily limits for pin-less transactions are N3000 for the contactless naira master card and N10,000.00 for the contactless Platinum Debit MasterCard. The FirstBank Verve debit card is Chip & PIN secured for greater protection of customers’ funds, provides extra protection for web based transactions with “Safetoken”, is Naira- denominated, and personalised, bearing the customer’s name. It is accepted wherever the Interswitch or Verve logo is displayed and can also be used to perform transactions via the Quickteller services menu on FirstBank ATMs. This Card is issued in 15 minutes at FirstBank branches, saves time and is very easy to obtain. With the FirstBank Expressions on card, customers now have the freedom to design the look and feel of their cards with their most cherished memories and spend with a card that is as unique as them. The card is Naira-denominated and is accepted globally for online, ATM and PoS transactions. The Bank also issues the Platinum Naira MasterCard to serve High Net-worth Customers. The Platinum Naira

MasterCard is a Naira denominated international Debit card issued in partnership with MasterCard Worldwide, and enables transactions all over the world wherever the MasterCard logo is displayed. This card provides access to e-Commerce across the globe and enhanced security with the Europay MasterCard Visa (EMV) technology that greatly reduces the cloning of cards; access to international emergency services such as card replacement and cash advance. Customers with the Platinum Naira Master Card also have access to higher local daily transaction limits from FirstBank. The card is accepted worldwide at over 29.million merchant locations and can be used for transactions over the WEB or POS as well as cash withdrawals at over 1.8 million ATMs, in over 200 countries. The card is also secured by Chip & PIN technology and is issued within 15 minutes at FirstBank branches. The Visa Debit Card is a dual currency card denominated in NGN and USD, allowing customers spend Naira from their Naira account when in Nigeria and Dollars from their domiciliary account when outside the country.

African Alliance celebrates 58 years of successful business in Nigeria Modestus Anaesoronye

frican Alliance Insurance Plc, Nigeria’s foremost life insurance company with over 35,000 customers, having weathered the storm of harsh economic environment over last 58 years has reached an exciting milestone in her history. This is as the company rolls out drums to celebrate its 58 years of service as an underwriting company, promising better service to its numerous customers. The company has grown from a single branch insurance company to its current over 18 branches across Nigeria. At the end of the 2017 financial year, the company posted a gross premium income of N6.29 billion and a 32 percent increase in the payout of claims from N6.56 billion in 2016 to N8.69 billion in 2017. Funmi Omo, managing director, African Alliance Insurance Plc, who also celebrated her one year anniversary as the company’s CEO having resumed in May 2017, commended the milestone achievements of the company stating that it is only the beginning of the transformation rolled out by its present management, having also support of the Board.

She said that African Alliance Insurance Plc’s strategic vision and culture of innovation has been sustained since its inception in 1960. “We are proud of our milestone achievements, but this is only the beginning. As a financial services company with a vision of improving the quality of life in Nigeria, we realise that we cannot achieve this without technology. We are currently working on the complete transformation of our systems and processes to provide excellent services and relevant solutions to our customers,” she said. She indicated that one of the company’s top priority is establishing a sound corporate governance track record to fur-

ther establish the confidence of shareholders. “We have partnered with the foremost accounting and auditing firm, Deloitte & Touche to ensure that all remittances, policies, regulations and deadlines are strictly adhered to. We have also partnered with Ernst & Young for sound technical advice to better position our company. Our shareholders have complete confidence in our ability and commitment to returning value to them and to the society”. To celebrate the 58th anniversary, African Alliance Insurance Plc has commenced a campaign to educate the public on the value of insurance as a means of increasing and protecting wealth.

PTML access control facility targets improved security at Ports MAKA ANAGOR-EWUZIE

he Ports & Terminal Multiservices Limited (PTML), a concessionaire in Nigerian port, said it has invested over N100 million to develop a state-ofthe-art access control and operational management system in its terminal, to authenticate the credentials of port users and facilitate trade in the terminal. PTML, one of the largest RoRo terminals in West Africa, which is located at the Tin-Can Island Port, handles a large chunk of cars that come into Nigerian port. PTML, which is concession to Grimaldi Agency Nigeria on build, operate and transfer (BOT) agreement, takes very seriously, its obligations to the provisions of the International Ship and Port Facility Security Code (ISPS), in order to provide safe and secured business environment for all actors in the

terminal. “The aim of the access control measures we have is to control the flow of persons into our terminal through designated access points by enabling scanning of cards to gain access. It ensures that only authorise persons can transit through our restricted areas and we have developed this system in compliance to the ISPS Code and strictly in adherence to all relevant Nigerian regulations in line with the provisions of Customs and Excise Management Act (CIMA), said Steve Oko, Admin manager of PTML during an interactive session with BusinessDay in Lagos on Tuesday. Oko said that the access control and identification management system has became very critical to PTML because of the peculiarity of its business, which attracts a huge number of touts claiming to be clearing agents and freight forwarders. “They constitute serious security threat to all governmental authorities, staff and other legitimate players

working in the port. Reacting to the accusation that PTML initiated the access control to make money from freight agents, Oko said: “The fee of N10,000 is charge for the first time an agency is registering with us and it entitles it to register seven persons. We do not register an individual rather we register a corporate entity like a clearing and forwarding agency.” “By using our biometric access card, the whole process of cargo release is facilitated and secured such that a registered Customs agency does not have to show scores of documents to take delivery of its consignment from our port. Rather, once an agency is registered with us and presents a Bill of Lading, it will not provide any other document or ID to do business with us,” Oko explained. Oko further said that the biometric card is a one-stop-shop that gives the port user access to transact business with the terminal without delay.

Sovereign Trust Insurance grows Q1 gross written premium by 25% Modestus Anaesoronye

nderwriting firm, Sovereign Trust Insurance Plc has recorded gross written premium of N5.2 billion at the end of first quarter 2018, as against the N4.1 billion during the same period in 2017, representing an increase in growth rate of 25.7 percent. The Gross Premium Income also grew by 30 percent from N3.8 billion that was generated in the first quarter of 2017 to N4.9 billion in the review period. Riding on the heels of the

impressive performance recorded at the year-end in 2017 with a Gross Premium Written of N8.5 billion as against the N6.3 billion in 2016, the company is optimistic it will close the year on a good note. Highlights of the 2018 first quarter performance of the firm is the underwriting profit which increased by N182 million from N746 million in the first quarter of 2017 to N928 million in the same corresponding period giving a growth rate of 24.5 percent. The Profit before Tax hit a 28 percent increase rising from

N488 million in 2017 to N625 million during the review period in 2018, while profit after tax also leapt from N437 million in first quarter 2017 to N560 million in the first quarter of 2018, representing a growth rate of 28 percent as well. The company is resolute in maintaining a positive performance scorecard during the year, with regard to its operations and by extension, consolidate on the confidence that has been reposed in it by the insuring public and the numerous shareholders of the company.

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11 banks made N829.20 billion income from treasury bills in 2017

N5.3 billion Union Bank posted a profit after tax of N5.3 billion in the first quarter 2018 which is a 17 percent increase compared to N4.5 billion achieved in the comparative period of 2017, an increase of 17 per cent.

$6.3 billion

BALA AUGIE

leven Nigerian banks made N829.20 billion income from treasury bills (T-bills) in 2017 as they took advantage of high yields environment. The above figure represents a 47.70 percent increase from N561.41 billion recorded in 2016 as lenders continue to ingeniously maximize the wealth of shareholders despite a tough and unpredictable macroeconomic environment. Treasury bill (T-Bill) a type of government securities issued on behalf of the Federal Government by Central Bank of Nigeria (CBN) to control money supply in the economy. T-bills are short term securities issued at a discount for a

tenor ranging from 91 to 364 days, which yields no interest. The banks are Zenith Bank Plc, Access Bank Plc, Fidelity Bank Plc, First City Monument Bank (FCMB) Plc, Guaranty Trust Bank (GTBank) Plc, Union Bank Plc, First Bank Nigeria Holdings (FBHN) Plc, Sterling Bank plc, Wema Bank Plc, Diamond Bank Plc, and United Bank for Africa (UBA) Plc. Yields from T-bills hovered around 18 percent and 22 percent from April and September last year as the CBN intensified on the sale of short term securities to help fund the budget deficit and control inflation. Dr illing dow n the numbers of some banks shows FBHN Plc’s income from T-bills in-

creased by 50.22 percent to N173.28 billion from N115.35 billion the previous year. Zenith Bank’s income from short term government securities increased by 82.33 percent to N109.74 billion in December 2017 from N60.18 billion as at December 2016. Access Bank’s income from T-bills was up 85.43 percent to N83.23 billion in the period under review from N44.88 billion as at December 2016. UBA’s income from short term government securities increased by 30.10 percent to N115.58 billion in the period under review from N88.81 billion as at December 2017. “High yield environment boosted bank’s interest income. Yields were between 22 percent

and 18 percent at some point in 2017,” said Wale Okunrinboye, analyst at Sigma Pensions Limited. But a precipitous drop in T-bills yields from August last year to date could signal the end of free money for these lenders as margins are expected to shrink; an unavoidable event that could force them to start lending. Yields on treasury bills now hovers between 11 percent and 13 percent while bond yields that were between 16 and 17 percent last year now hovers around 12 percent and 13 percent. For instance, analysts at Fitch, a global ratings agency in a recent report said they expect banks’ profit to take a hit in 2018 on the back of the decision of federal government to cut back on the

issuance of treasury bills in 2018. “We expect falling Tbills yields and lower issuance to put pressure on Nigerian banks’ profitability in 2018. The CBN’s latest issuance schedule shows N1.1 trillion (USD3.6 billion) of rollovers in the first quarter of 2018 against N1.3 trillion of maturing bills,” said Fitch. Volatility in foreignexchange related gains, limited scope for cost efficiencies and rising political risks before elections are other challenges that could cloud industry outlook. Analysts are of the view that banks may see revaluation gains wane while the transition to the IFRS 9 could drive impairment loss especially of the ones that have weak capital adequacy.

The first quarter in 2018 saw a continuous growth in total Capital Importation into Nigeria, as the total value of capital imported in the quarter stood at $6.3 billion, which is a year on year increase of 594.03 percent and a 17.11 percent growth over the figure reported in the previous quarter.

N13 billion ExxonMobil affiliate, Mobil Producing Nigeria Unlimited, operator of the Nigerian National Petroleum Corporation/Mobil Producing Nigeria Joint Venture, has unveiled plans to invest about N13 billion ($43 million) in three community health, economic empowerment and education projects in Akwa Ibom State in the next 18 months.

BusinessDay MARKETS INTELLIGENCE (Team lead: BALA AUGIE - Analyst: DIPO OLADEHINDE, ENDURANCE OKAFOR, BUNMI BAILEY Graphics: DAVID OGAR )

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

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Markets Intelligence ECONOMY

Data show Nigerian banks starve mining, education, others of funds Stories by DIPO OLADEHINDE

ining and quarrying, education and transport were denied lifelines in the first quarter of 2018 as they received least amount of credit allocations from commercial banks; latest report from the National Bureau of Statistics (NBS) has shown. According to the report released by NBS, the three months ending in March of 2018, mining and quarrying sector was the lowest beneficiary from commercial banks credit allocations at N10 million representing 0.07 percent of the total credit facilities worth N15.60 trillion. Also, education and services received N73 million representing 0.47 percent; under the service sector transport and storage received N291 million under the service sector while power and energy received N426 million representing 2.73 percent. Commercial banks in Nigeria extended credit facilities worth N15.6 trillion to the private sector in the first quarter of 2018 representing a marginal decline of 0.14 per cent compared to fourth quarter 2017, when the private sector got N15.74 trillion. The credit allocation to private sector, which came under three categories:

agriculture, industry, and services, saw the agriculture sector receiving N501.6 billion, representing 3.21 per cent of the total credit. With that, oil and gas sector, being the lead beneficiary recorded N3.4 trillion accounting for 21.92 per cent of the total credit, while the manufacturing sector being the second highest benefactor of the bank credits in the fourth quarter of 2017, accounted for 13.79 per cent of the total credits of N2 trillion.

Real Estate sector under the services category received N784.2 billion, which is 5.03 per cent, while Finance, Insurance and Capital Market got N999.4 billion, representing 6.41 per cent of the total credit. On private sector deposits at commercial banks for the quarter, the report shows that a total of N19.5 billion deposits were recorded. Private sector deposit at the Central Bank of Nigeria (CBN) for the period under review was

put at N7.9 billion. Meanwhile, as at the end of first quarter, total number of banks staff had declined by 0.93 per cent from 90,453 in Q4 2017 to 89,608. This means that 845 bank officials lost their jobs between December 2017 and March 2018. However, further analysis of the banks’ staff strength shows that the decline affected only junior and contract staff categories. For instance, under the executive staff category, the banks recorded 11.7 per cent increase in staff strength in the first quarter, rising from 188 in Q4 2017 to 210. In the same vein, senior staff category in the banks recorded 2.25 per cent quarter- onquarter growth from 16,568 in Q4 2017 to 16,941 in Q1 2018. The number of junior staff of the banks went down from 41,338 in Q4 2017 to 40,444, representing 2.16 per cent decline. The banks also recorded decline in their number of contract staff, which went down by 1.07 per cent from 32,359 to 32,013. A total volume of 457,226,406 transactions valued at N32.48 trillion were recorded in Q1 2018 as data on Electronic Payment Channels in the Nigeria Banking Sector revealed. Automated Teller Machine (ATM) transactions dominated the volume of transactions recorded. 212,370,853 volume of ATM transactions valued at N1,568 bn were recorded in Q1 2018.

Fintech: Key driver of Nigeria’s financial inclusion - Ernst and Young

anks all round the world including Nigeria are looking for new and smart ways to grow revenue and increase it level of digitization to attract the unbanked population. This was the focus of a report released by Ernst & Young, a multinational professional services firm headquartered in London, England. “We believe that there is a current conflict of market forces that has altered banking customer opinions which opens the door for innovators to tap into traditional financial services,” Ernst & Young said. According to Ernst & Young, “80 percent of the top 5 reasons why a customer will switch banks is customer experience while 65 percent of customers think having a digital presence is highly important.” In Africa, traditional banking is not a viable option for many of the poor and those living in rural areas as high fees, low education and literacy, as well as long distances between banking facilities get in the way of simple transactions. The report noted that there are 60 million of digital natives’ between age 13 to 35 in Nigeria who are willing to try and adopt new market innovations; it further advised that leaders must transform their legacy and also open up to the power of rural communities. Ernst & Young (EY), also one of the largest professional services firms in the world acknowledged that there is a disconnect between customer objectives and bank strategy as four out of ten customers has used non-bank providers in the last 12 months

due to experience and convenience. Fintech is already a hot topic for investors. According to data from Disrupt Africa, Fintech was the biggest attraction for investors in Africa in 2017, gulping one-third of venture funding. Although a chunk of this was enjoyed by Nigerian start-up, Flutterwave, marketing Nigeria as a viable investment destination for Fintech services would attract more of these investments. “The rise of Fintech is disrupting banks globally and local, as 20 percent of traditional banking revenues at risk mainly deposit and payments, Ernst & Young (EY) said. Fintech software, Paga, a mobile payment platform, is helping to drive financial inclusion in the country, where over half of the adult population remain unbanked and under banked.

Also Flutterwave, co-founded by a 26-year-old Nigerian entrepreneur, has the most impressive start, having attracted $10million in investment in 2017.It was founded just two years back by a team of ex-bankers, entrepreneurs and engineers, with the mission to provide a technology platform that allows businesses to make and accept payments anywhere in Africa. Ernst & Young (EY) said business strategies in Nigeria do not have an effective response to the threat of digital disruption, as scattered data limits our ability to understand our clients’ needs. “Although the economic growth of the country might not be as fast-paced as its counterparts’, it is full of hopes and promises, Ernst & Young (EY) noted. Reacting to the role of digital initiatives in

Nigeria banks, the London based accounting firm noted that cost remains elevated and efficiency poor while sustainability of ROI on digital innovations remains questionable. Also data from Ernst & Young revealed globally that, 51 percent of investors are dissatisfied with advisor’s ability to meet their needs while 72 percent of customers would rather bank with Google. Undoubtedly the giant of Africa, with an estimated population of 194 million people, remains the largest mobile market in the continent and still has more potential for growth, and for competing on a levelplaying ground with the developed nations. “Mobile phone penetration in Nigeria is at 81 percent while there is still 53 percent of internet penetration,” Ernst & Young said. Nigeria can take a cue from other countries to improve the availability of capital for new and existing firms. For instance, in 2016, the monetary authority of Singapore made a meaningful commitment to the development of digitization by investing about $225million over the next five years in start-ups. As reported by Deloitte, the country also co-hosts events such as hackathons with accelerators to encourage growth and create strong links between Fintech and the public sector. Similarly, Australia developed hubs for Fintech and committed approximately $500million to promote innovation. Dubai International Finance Centre also launched a $100 million Fintech-focused fund to develop the sector.

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REAL SECTOR WATCH BUSINESS DAY

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Solving energy jigsaw in Nigeria’s manufacturing sector

ing concerns world over are working towards being energy efficient. One key reason why China is competing with the rest of the world is its renewable energy potency. Apple announced late last month that three more of its suppliers— Sunwoda, Compal and Biel— in China would use 100 percent renewable energy in manufacturing its products by the end of 2018. More than costs, many manufacturers are using renewable energy because they want to reduce CO2 emissions. Johnson & Johnson, NIKE, Inc., Procter & Gamble, and Steelcase, among others, fall into this category. These firms have pledged to source 100 percent of their electricity from renewable energy. But the reason is not just to reduce CO2 emissions but also to cut costs. Across the world, costs of solar and wind have continued to crash and the challenge of storage capacity is continually diminishing. The International Energy Agen-

cy predicts that renewable energy will comprise 40 percent of global power generation by 2040. Nigeria has an advantage over the US, China and many countries in Europe, in that it is located in the sub-Saharan Africa where sunshine and wind are not in short supply. More so, solar panels are becoming increasingly cheaper, though reduction in cost will be determined by how much number Nigerian businesses and homes can buy. The fact remains that renewable energy is an option for Nigerian manufacturers. They can migrate little by little, like their counterpart—Lafarge Africa— which has at one point deployed biomass as source of energy. “Renewable energy is our lowhanging fruit in Nigeria. Already, we power 45 businesses through solar energy, and many businesses are increasingly expressing interest,” Ovoke Ekrebe, co-founder of Vanpeux Global Synergy, said. Though coal is a non-renewable energy, it is also another source that can keep manufacturers away from gas and diesel. Amid gas crisis in 2016, Aliko Dangote, president of Dangote Group and Africa’s richest man, urged large corporations and multinationals to explore the coal option, having himself been developing this energy source. Coal is affordable and easy to burn, experts say. “Coal is cheap, and government has given a lot of incentives on coal exploration. Virtually everything is zero,” Dangote said during a presidential dialogue organised by the Lagos Chamber of Commerce and Industry (LCCI). Hence, manufacturers must begin to look at the possibility of diversifying energy sources. This may look expensive in the shortterm but cheap in the long-run, say analysts.

team would be deployed to ensure compliance, adding that hawking would not be tolerated at the venue of the fair. He further announced that this year’s processes would go digital. “This year, exhibitors can now sit in the comfort of their offices, register, pay and book for a space of their choice. The process has been designed to be seamless and friendly.” He stated that the chamber was working on alternative publicity strategies that would attract quality patronage, rather than making a noise and becoming a threat to other stakeholders at the fair. “We will make the findings available to all exhibitors to support their marketing efforts,” he

stated, adding that there would be improved sectorisation of the exhibition areas, upgrade of facilities, improved security arrangement and secondary school essay competition. Apart from the LCCI international investment conference, he said there would be foreign participation from over 25 countries. Babatunde Paul Ruwase, President, LCCI, said this year’s event was unique, being the first time the chamber was choosing a special media forum to officially commence the marketing activities of the annual LITF. “We are doing this because we believe in the strength and power of the press in projecting the image of the fair and creating a positive perception,” Ruwase said.

Stories by ODINAKA ANUDU

his is not the best time for manufacturers. It is also not the worst time. But in between the best and the worst times are numerous age-old challenges that have refused to go. One of these problems is the energy challenge, which is gulping 30 to 40 percent of manufacturers’ expenditure. Energy spend in Nigeria’s manufacturing sector has continued to rise rapidly, owing to incessant power outages experienced not just in industrial clusters but also across the country. Between the first six months (H1) of 2015 and H1 of 2017, manufacturers’ energy expenditure jumped 125 percent, from N29.34 billion to N66.03 billion. In the whole of 2015, total energy expenditure by members of MAN was estimated at N59 billion. This figure leaped 121 percent to N129.95 billion in the whole of 2016. While N66.99 billion was expended by manufacturers in the first half (H1) of 2016, N62.96 was spent by this group in the second half (H2). Also, manufacturers spent N66.03 billion in H1 of 2017. The second half of 2017 is yet to be released and there are indications that the amount may be higher than that of 2016. It must be noted that energy spend here involves manufacturers’ expenditure on alternative energy sources such as gas, diesel, inverters, and UPS, among others. Amid this challenge, manufacturers have founded the MAN Power Development Company and have already had an agreement with a number of firms,

including Tower Energy Solution & Systems Limited, and Negris Group, among others, for the supply of power to various industrial clusters. This happened because manufacturers lost hope in power distribution companies (DisCos). However successful this measure is and can be, the fact remains that cost of providing energy by these private firms is still considered high by some manufacturers. Again, the energy provided by these private firms is still from the failing DisCos, making the situation dicey. However, as pointed out by Ibrahim Usman, chairman of MAN Power Development Company Limited, the group would seek renewable energy support in other parts of the country where there is no gas. Nevertheless, the fact is that renewable energy is becoming a reliable alternative energy solution for manufacturers across the world. In September 2017, a report by David Gardiner and Associates, a strategic advisor to organisations

seeking a sustainable future, reviewed 160 of the largest global manufacturing firms in the United States. According to the report, entitled, ‘The Growing Demand for Renewable Energy Among Major US and Global Manufacturers’, 25 percent of manufacturers, including General Motors, AnheuserBusch InBev, and Mars, have renewable energy targets while 83 percent have greenhouse gas reduction goals. The report says that renewable energy, particularly wind and solar, is now among the cheapest and cleanest generation resources, stating that manufacturers are pursuing that type of energy to help reduce costs. As reported by Alyssa Danigelis of energymanagertoday.com, of the 160 companies surveyed, 18 have 100 percent renewable energy targets. Even though some may dismiss this as an American example, the fact remains that this is happening across the world and manufactur-

Big changes at 2018 Lagos Trade Fair

he 2018 Lagos International Trade Fair is scheduled to take place from November 2 to November 11 at the Tafawa Balewa Square (TBS). The fair is annually organised by the Lagos Chamber of Commerce and Industry (LCCI). The fair, as usual, is a platform to showcase the products of local manufacturers, small and medium enterprises, and creative artists, among others. However, this year’s trade fair comes with big changes, with zero tolerance to noise pollution taking the centre stage. According to Gabriel Idahosa, chairman, Trade Promotion Board of LCCI, musical instruments found in any of the exhibi-

tion stands would be confiscated. According to Idahosa, the decision was informed by consistent complaints of exhibitors and visitors concerning excessive use of public address system and music gadgets at the fair. “It is true that some of our exhibitors believe that the noise helps them attract potential buyers to their stands. It is indeed fast becoming a culture, to say the least. This year, we will not allow the use of music gadgets in exhibition stands,” he said. Idahosa said LCCI’s central public address system would be made available to disseminate information and light music to make the environment welcoming. According to him, a special

Gabriel Idahosa

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REAL SECTOR WATCH FIIRO produces brake pads, bumper, others from kenaf …Signs MoU with KPPMAN, CEC Stories by ODINAKA ANUDU

he Federal Institute of Industrial Research Oshodi (FIIRO) has produced brake pads, bumpers and other vehicle parts from Kenaf, a fibrous plant. The brake pads and other vehicle accessories manufactured by FIIRO from the fibrous plant were displayed at the institute’s headquarters in Lagos during the signing of the Memorandum of Understanding (MoU) between FIIRO, Kenaf Producers, Processors and Marketers Association of Nigeria (KPPMAN), and the Crystal Entrepreneurship Centre. In her opening speech, Gloria Elemo, director-general of FIIRO, stated that the research that went into the production of motor vehicle non-mechanical parts was borne out of the institute’s quest to industrialise Nigeria. Elemo pointed out that

L-R:Iyalode Alaba Lawson,national president,Nigerian Association of Chambers of Commerce, Industry,Mines and Agriculture (NACCIMA) and Okechukwu Enelamah,minister of industry, trade and investment during the 58th NACCIMA Annual Conference in Kano recently.

research and development (R&D) was useless until taken to the market, buttressing that this led the institute to collaborate with KPPMAN and CEC to commercialise the parts. Nigeria has a population of 198 million, with about 12

million vehicles plying on its roads. It has estimated 10,000 car sales annually, a significant drop from 50,000 cars sold in 2013. The country does not produce brake pads, bumper and other vehicle parts manufacturers, with Star Auto Indus-

tries Limited, only brake pads manufacturing firm, shutting down in 2014. Dunlop and Michelin, two tyre makers, left Nigeria in 2008 on the back of high energy cost, inability to compete with second-hand vehicles and lack of liquidity, those

LCCI woos Chinese auto makers

trucks, some of which were made by Chinese firms, underlining the healthy relationship between Nigeria and China. He added that Lagos had over 20 million population, which was an opportunity for Chinese parts dealers and manufacturers. Nigeria has up to 12 million vehicles plying on its roads and a substantial share of the $15 billion African car market. The country is populated by 198 million people, making it largest on the continent. Car sales dropped from 50,000 units in 2013 to 40,000 vehicles in 2015; 20,000 in 2016 and 10,000 in 2017, according to Oseme Oigiagbe, executive director, Truckmasters Nigeria Limited. Bambo Adebowale, chairman, LCCI Automobile and Allied Products Sectoral Group, told Chinese delegation that appreciating the size and enormous potential in car and spare parts industry would require going round the country, including Ladipo. “Government is on the drive for us to stop used cars and parts. What this

means is that we will be buying news cars and parts from a country like China. You cannot be trading and selling; eventually, you will get to a level where you have to manufacture here,” Adebowale stated. Olayinka Oladunjoye, commissioner for commerce, industry & cooperatives, advised Chinese businesspeople to take the issue of quality seriously. Oladunjoye, who was represented by Hakeem Adeniji, director of commerce in the Lagos State Ministry of Commerce, Industry and Cooperatives, pointed out that the negative perception about China was doing a big damage on the reputation of the country. “I urge you to set up factories in any part of auto value chain Lagos. We are trying to create a sustainable business environment to guarantee prosperity,” she said. Responding, Zhang Yazhu, vice chair, organising committee, China International Auto Parts Expo, called on Nigerian exporters to show integrity, fidelity and loyalty to the citizens by buying good products

(PPP) was important for the development of the national economy, adding that such collaborations and innovative research would help in moving the country away from being oil- dependent economy to becoming production-led. Chika Ezeanyanaso, who supervised the project, disclosed that she was motivated to embark on the project because it cost Nigeria $2 billion annually to import agro-sack and jut bags. “We sought an alternative plant, which is Kenaf. So we went into research and found out that the chemical component of Kenaf is better than that of jute bags. We also went into research on plantain and banana stems to produce agro-sack, ropes, as well as use it to reinforce plastics that are used for the production of certain vehicle components. Our target is to use it to make non-mechanical parts of vehicles. We have also used it to produce disposable cups and plastics,” Ezeanyanaso said.

African Food Exhibition: NACC’s blueprint to scale up non-oil exports

…urges spare parts dealers to set up local factories he Lagos Chamber of Commerce and Industry (LCCI) wants Chinese vehicle and motorcycle spare parts dealers to consider setting up assembly and full manufacturing plants in Nigeria. Speaking at the NigeriaChina Auto Parts Economic Trade Seminar and Business Match-making Meeting in Lagos on Tuesday, Knut Ulvmoen, deputy president of the chamber, told Chinese spare parts dealers gathered in Lagos that they could not afford to sit in China, make spare parts and export to Nigeria. “If you are not in Nigeria, you can’t compete. Don’t sit in China, make cars and spare parts and bring them into Nigeria. Whatever you will make, make it in Nigeria,” Ulvmoen said. “Look at opportunities and you will hardly want to go back to China. There is no other place with opportunities than Nigeria. You can talk about safety and security, but Lagos and other parts of Nigeria are safe,” he said. According to him, Dangote Group had 10,000

knowledgeable about the firms said. If commercialised, the new vehicle parts are tapped to reduce Nigeria’s import bill and increase local input sourcing in the country. “Kenaf will turn the economy of this country around as it has numerous products that come out of it, such as brake pads, vehicle bumpers, ceiling boards, papers, doors, agro-sack, rope and others,” Elemo said. “This collaboration is to jointly develop projects and empower stakeholders with FIIRO technology for the needed economic development. “Nigeria is still classified as underdeveloped because we did not make use of our R&D results over the years. We are very happy that FIIRO today has developed over 250 R&D results for commercialisation,” she added. Commending FIIRO for its giant strides, Ibrahim Gwazo, chairman of governing board, FIIRO, noted that public- private partnership

from China. “I want you to buy good products from China. Chinese people do not refuse business. If the price is $100 and you bargain $90, they will try to produce what they will give you “So, you can’t blame China for giving you fake parts. You can find good partners only if you can pay the good price,” Yazhu said. Luqman Mamudu, chairman, Resident Automotive Components Dealers Association of Nigeria, urged the Chinese people to eventually consider setting up factories in the country. “It will be more sensible for China to partner with Nigeria. While Nigeria makes soft parts, China makes more sophisticated ones.” He urged the government to cut importation of spare parts obtained from cars that had reached the end of their lifespan, into the country. Mamudu asked the federal government to develop auto supplier parks located in Osogbo and Enugu as that would host future spare parts makers and create jobs.

… 2017 exhibitors raked in N185m

he Nigerian-American Chamber of Commerce (NACC) has concluded plans to hold its Annual Bilateral Exhibition & Conference. The 2nd African Food and Products Conference and Exhibition (AFPE) is themed, ‘Non-Oil Exports: Scaling Up Productivity to Meet Global Demand’ and is scheduled to take place on May 25 and 26 at the InterContinental Hotel, Lagos. The exhibition is aimed at promoting the growth of Nigeria’s non-oil export, trade, commerce, investment and industrial technological relationships between the public and private sectors of Nigeria, Africa and the United States of America. A number of industry experts, market leaders, business professionals, analysts and research professionals across the non-oil export value chain will attend, while Yemi Osinbajo, vice president, ministers, governors, US ambassador to Nigeria, CEOs of leading Nigerian and multinational

firms, captains of industries, private sector investors, and the U.S. diplomatic corps, among others, will be present. The AFPE 2018 will attract MSMEs, start-up business owners, international & local suppliers, and distributors of food & beverage products, among others, with a view to further projecting their brands and increasing export sales by maximising the benefits of the African Growth and Opportunity Act (AGOA). In 2017, the event had over 1500 attendees from within Nigeria and the United States and it produced about N185 million in actual and projected sales for the companies that exhibited. “This year, over the 2-day period of the , we expect to have over 2,500 attendees from across Nigeria, Africa and the United States, thus presenting a viable opportunity for exhibiting companies to grow their sales, showcase their products to a target audience and strike million dollars international deals,” a statement from NACC says.

BUSINESS DAY

Monday 14 May 2018

This is M NEY A daily guide to your Personal Finance

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

Habit for successful selling is prospecting daily is the simple but amazing truth. Never be disappointed if a sale doesn’t go through. If you are, it just means you don’t have enough prospects you’re currently working on to convert to clients. If you have a lot of prospects you should just

Iyore Ogbuigwe

habit for successful selling is prospecting daily; constantly reaching out to tell people what you do in your business or the service you render. Successful sales people do daily, what unsuccessful sales people do occasionally. A common question I get is, “but Iyore, how do I find prospects?” Let me just say it here, “start with people you know, move to people who you know know, then graduate to cold calling on people you don’t know” this

Like fishing from the ocean, your bait should be tailored to get a certain kind of fish

smile then move on to the next prospect. NEXT! This is a new month; who are your primary and secondary prospects for this month? Like fishing from the ocean, your bait should be tailored to get a certain kind of fish. You don’t use the bait to get Titus fish to also get Sharks (I actually laughed when I wrote this). Also, even if your bait can get only Titus you should carefully plan to get big ones (primary prospects) but not at the expense of not so big ones (secondary prospects). I’m sure this gives a clear difference. Bottom line is, revenue contribution to your business is a cue to differentiating the primary and secondary prospects.

Get more money by focusing on selling value instead of price

lot of people think their products or services don’t sell because of price. Price is never a major factor unless the prospect is not in your income target market. What is price? Price is simply a perception of value. This is so powerful. Price is simply perception. If you bought a cup of ice cream for N2,000 why did you pay that amount without complaining it was too expensive? You could afford it or let me say, “you had the money”You ‘perceived’ the feeling you’ll get by having the ice cream will be greater than the feeling of having the N2,000 in your pocket. When did the percep-

tion b e gin? When you tasted the ice cream? Of course not. Your perception began from the beginning- the name of the store, the ambience of the store, the quality of customers you saw at the store, the brand and look of the ice cream or even a referral. Everything counts in creating perception. No one knows what creates the perception of a customer because no two customers are alike. Therefore pay attention to every detail. Your appearance, business cards, brochures and other instruments of your business must always look neat and clean. Knowing that perception is value and value determines price, feel free

to give any price you feel you’re worth. Your price will never be higher than your confidence in your product which is directly tied to your self confidence and your confidence to deliver results. Give your prospect price options; Option 1: List the value you’ll be offering Quote the price: N10,000 Option 2: Value from option 1 plus additional value you’ll be offering for option 2 Quote the price: N13,000 Option 3: Value from option 2 plus additional value you’ll be offering for option 3 Quote the price: N17,000 What this does is it

makes the prospect take a mental shift from, “should I do business with you?” to “How should I do business with you?” The first statement means you’re still being considered, the latter statement means you’ve gotten the offer. Just for the records, most prospects pick option 2. Never negotiate price downwards without negotiating value downwards (value, not quality please). Remember, price is a perception of value and customers will always perceive they’ve gotten what they paid for. Iyore Ogbuigwe is a Sales & Persuasion Expert | Trained 14,000 salespeople across Nigeria | Sales seminars in Nigeria, Ghana & USA | Author of 5 revolutionary sales books Iyore Ogbuigwe is a highly sought after sales and persuasion expert for local, international and multinational corporations. He co-led the team that trained a 14,000 plus sales force across the six regions of Nigeria for a multi million dollar corporation and Nigeria’s number one online retailer - JUMIA. Iyore has a wealth management background from the prestigious multinational - Standard Chartered Bank - where he success-

fully doubled a portfolio of $3.5 million to over $7 million in only eleven months. At Diamond Bank, Iyore was overseeing a portfolio of over 700 affluent individuals; he brought in 21 High Networth Individuals to the bank in one month and was rewarded with an all expense paid trip to the FIFA World Cup. Iyore is the CEO of Ultravantage Solutions. Ultravantage Solutions is a team of sales consultants who undertake sales consulting, coaching, training and recruitment assignments that result in direct contribution to the client’s profitability as measured by monthly or quarterly results. We also design and implement sales workshops that result in demonstrable behaviour changes on the job, as determined by customer feedback. Iyore has trained a list of local & international clientele, some of which include Jumia, GTBank, The Lagos Business School, Standard Alliance Insurance PLC, Kwese TV, Hygeia HMO, Rain Oil, House of Tara Intl., Beauty Therapy Institute, PWAN Homes, Alpha Mead, So-Kleen, Believers’ LoveWorld Inc., Daystar, ChamsAccess, Main One, Jobberman, The American International Insurance

Company, Porcelanosa, Vessie Goldsmith and Sage West Africa. Iyore’s sales and persuasion seminars tagged ‘Peak Performance Selling’ which hold in Nigeria, Ghana and in the United States of America have produced amazing results in the lives and businesses of the participants. Iyore is the creator of ‘How To Sell When No One Wants To Buy®,’ the most advanced sales system for exceeding sales targets. Iyore was a Lead Faculty at the Lagos Business School (Pan-Atlantic University) on ‘Planning and Executing Marketing and Sales Strategy’ for the JCI Annual Individual Development Seminar. Iyore Ogbuigwe has started a movement of helping young people have a mindset shift towards sales; this is because of the important role that sales play in the growth of an organization and economy. This he currently does through his Sales Academy. He is an author of 5 books on selling, he’s been a columnist for the Guardian Newspaper on sales strategies; he’s been featured on DSTV Channel 416 (Arise News), 92.3 Inspiration FM, EKO 89.7 FM and Lagos Talks 91.3 FM.

BUSINESS DAY

Monday 14 May 2018

Start-Up Digest

In association with

Ihuoma Ohiorenoya: Quintessential cook, caterer ODINAKA ANUDU

huoma Ken Ohiorenoya is a graduate of English and Literature from the University of Benin. She is the chief executive officer of Cuisine Supreme, a business that caters for Nigerians who need good food and cakes. Ihuoma started this business in November 2015 with no capital, which goes to validate the point often canvassed by Start-Up Digest that there are many businesses young Nigerians can start without capital. She makes money today from mobilisation fees and from anyone who places an order. Ihuoma sees herself as a ‘mompreneur’, meaning a mother who believes in diverse income streams and a wife who loves to make tasty meals for her husband and children. “I love the art and business of food and I get fulfilment from satisfying the food cravings of those around me. I love to bake and decorate beautiful cakes and I consider myself a cake artist,” the entrepreneur tells Start-Up Digest. Ihuoma was motivated to set up this firm by her love for good food. The entrepreneur says love for cooking and the encouragement she got from those who had seen her ‘cater’ for free in

Ihuoma Ken Ohiorenoya

family and church functions were sources of encouragement. She believes that food business is a multi -billion naira industry, big enough for every bird to fly. “Every day, new ideas are coming up, creating more opportunities. More people rely on caterers like us to solve their cooked food problems: bowls of food for the week, dinner setting for

two, breakfast in bed, luncheons among friends and colleagues, and big events. Every occasion is special. “And these days, some people even take their ‘Naija’ caterers to Owambe overseas. So the world is our playground,” she says, confidently. Ihuoma has just relocated to Lekki and is trying to break into

the market in the high-brow area. “Getting to meet with those who need and will appreciate our business is the current challenge, but by the time people begin to try us, they will definitely become repeat customers. So it is a temporary challenge,” she explains. Ihuoma says that every day, she wakes up with the aim of making God proud.

“Most of our clients are in Lagos mostly. We also have a lot of customers in most of the banks in Sagamu, where we manned the lunchroom of banks like GTB, and catered to more than 60 percent of Diamond bank staff, before we relocated to Lekki and they still reach out to us to cater for them,” she further says. The young entrepreneur points out that the only thing she regrets about catering is not working in a professional food company or restaurant environment and not training professionally as a chef before starting her business. “I had to teach myself on the job,” she discloses. “But I still plan to make the professional training happen soonest. I want to be a real chef,” she adds. Like many entrepreneurs in Nigeria, Ihuoma is in dire need of funds for expansion. “I will need about N30 million to really expand. I will use the money to set up a comfortable lounge for the food business; buy more equipment like better mixers, larger food processors, exquisite dining sets; set up power backup and alternative power supply; do advertising and total rebranding. I will also hire more hands,” she states. Ihuoma will advise her younger yourself to find a passion very early and direct all her focus and training on that passion.

Meet Laila Balogun, 13-year-old candle maker ANGEL JAMES

aila Balogun is the CEO of Laila candles, a startup that produces various forms of scented candles. Laila, a 13-year-old secondary school student of Caleb International College, Lagos, was inspired to start this business out of her love for fragrance. While many of her mates are still in their parents’ cocoons, Laila is already an entrepreneur. “My journey into entrepreneurship is one that is quite interesting. I personally got inspired by my mother when she would burn scented candles at home to give our environment a beautiful fragrance,” the young entrepreneur tells Start-Up-Digest. “After making research online and practising it, my mum enrolled me with Abela Candles,” she says. The young entrepreneur says that her business is just two years old and was supported with startup funding from her parents. “I started with N70, 000 and my business is worth N2 million. When we opened an Instagram account to promote the business

sometime last year, we started having so many supporters and orders for weddings as well as souvenirs, birthdays, other events and event vendors too.” When Laila started attending a proper candle- making class, she knew that was all she wanted to do at that time, even though her ultimate ambition was to become an Aeronautic Engineer. “I took it as an opportunity to do something useful with my time and to also be a benefit to myself in the process. I told my elder sister, Salma Balogun, about the candle- making business idea and how I wanted it to be something serious. We both started coming up with ideas on how to promote it and she supported me on it. So, we basically have collaboration,” the young entrepreneur explains. Laila is fortunate to have an elder sister Salma Balogun, a 15-yearold, who is her business manager in senior secondary school II. Despite being in school, Laila and her sister were awarded young entrepreneurs of the year 2018, at the just concluded Nigerian Brands Carnival and Trades Exhibition. “We are very grateful to God

and the support of Governor Akinwunmi Ambode of Lagos State, who is supporting micro and small business through the Lagos State Employment Trust Fund,” she says. When asked the challenges of combining school with business,

Laila Balogun

Laila says that there hasn’t been so much challenge as she has learnt time management . “Time management is one of the major challenges we face due to difficultly in balancing school and the candle making. Another

thing is that we can’t purchase soy wax in Nigeria so we still have to import them. Soy wax is one of the healthiest types of wax for candle making. It doesn’t contain toxins,” she explains. “It was difficult at first, but it got easier with time when we started making in bulk during the holidays and mid-term breaks. The ones that were not available, we make them on weekends,” she states. Speaking on her long term plan, Laila points out that she wants the business to be known worldwide and her candles to be displayed in big stores all around the globe. “Yes, other students can also combine their studies with it if they can manage their time efficiently. My advice to my peers is that you can progress in anything you set your mind to, with a little faith or little passion. I am happy to be a candle maker. “I enjoy doing a lot of repair, braiding hair, arts & beading too. I just enjoy keeping my mind and hands creative, which made me fascinated with scented candles. I didn’t know when my sister and I started @lailascandles we would get this much attention but we thank God for it.”

BUSINESS DAY

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Monday 14 May 2018

Start-Up Digest

Institutions providing capacity building for Nigerian start-ups Josephine Okojie

alumni support services.

MBC Africa MBC Africa is a collaborative platform providing comprehensive business solutions, addressing four key needs of SMEs: access to affordable Business Development Service (BDS), innovation and technology, market development and financing.

narguably, lack of entrepreneurial capacity building has remained one of the greatest challenged confronting small and medium businesses in Nigeria. This has continued to limit their growth potential and, to a large extent, their impact on the economy. Entrepreneurial capacity building involves developing the combination of all four key strategic areas – operational, management, financial management, and personal capacity elements, to provide the ingredients for a great entrepreneurship success. According to experts, for any entrepreneur to be successful, he or she must build capacity. So, in line with Start-Up Digest’s mission of ensuring that entrepreneurs are successful in their entrepreneurial journey, we are presenting some institutions that are involved in entrepreneurship capacity building, which the Nigerian entrepreneurs can take advantage of, to deepen their entrepreneurial capacity. Enterprise Development Centre (EDC) The Enterprise Development Centre (EDC) of the Pan-Atlantic University provides holistic business development and support programmes for small and medium enterprises in Nigeria. EDC provides capacity building programmes and a variety of wrap-round services such as advisory services, mentoring, expertsin-residence, network meetings, implementation of organisational plans and access to market and information, which are key challenges facing entrepreneurs in Nigeria. Lagos State Employment Trust Fund Apart from dedicating N25 billion to fund SMEs, the Lagos State

Growth Mosaic Growth Mosaic is a social-purpose business preparing small and growing businesses to access and manage growth investment. It reduces execution risks and improve the viability of clients as investible opportunities. Gaining management experience in a field or business will be directly applicable for entrepreneurs to manage their own businesses. Employment Trust Fund (LSETF) is also building the capacities of operators of small and medium businesses in Lagos state. LSETF builds the operational, managerial, and financial capacities of businesses by deepening their understanding of the industry at which they operate from the ground levels. “What we are doing at the moment is identifying the skills that the market needs. Some might take as long as a year to build the people from scratch to the level that these organisations want,” Akin Oyebode, executive secretary said on LSETF website. “Some might take as long as three months, and in some cases the technical skills are available. It’s the personal effectiveness skills that need to be developed. So, it will vary, depending on the skills gap. For some, it might take a month, but for some others it may take as long as a year,” Oyebode said. “For the loan programme, we train you after we give you an offer letter. And that is a compulsory bootcamp to ensure you know how to run a business. But for our employability programme, we are

training and placing people in jobs. We have gone to the industry and asked, ‘What jobs do you have skills-gap and struggling to fill?’ We are training people and placing them on those jobs. We are also giving people the opportunity of getting jobs. It is not a guarantee that you will get jobs but we try to provide jobs for them at the completion of training,” he told Start-Up Digest recently. Also, LSETF has partnered with some private sector organisations to train entrepreneurs at different layers of skills. Tony Elumelu Foundation Apart from providing seed capital for small businesses, the Tony Elumelu Foundation is also deepening entrepreneurial capacities entrepreneurs need to scale up their businesses. Since its establishment in 2010, it has trained and empowered entrepreneurs, promoting an integrated entrepreneurial ecosystem that drives the African entrepreneurship. Leap Africa Leap Africa, a non-profit organisation has, over the years, focused on

equipping entrepreneurs with the skills to lead ethically while implementing initiatives that transform their communities and organisations as well as contributing to national development. Through its yearly annual flagship event- the CEO’s, Leap Africa builds the capacity of over 1,000 SMEs for growth and effective leadership. FATE Foundation FATE Foundation, Nigeria’s nonprofit making organisation has continued to deepen entrepreneurs’ capacity through its various boot-camps programmes for small business operators. Since inception, FATE has graduated almost 5000 entrepreneurs from its aspiring, emerging and special entrepreneurs’ development programmes and trained over 28,000 Nigerians in its short entrepreneurship certificate courses. The foundation has also enabled over 60,700 Nigerian youths on the path to entrepreneurship. About 65 percent of its alumni are actively running their businesses and most are beneficiaries of

Wennovation Hub Wennovation Hub is the pioneer innovation accelerator in Nigeria, with offices in Lagos, Ibadan, Abuja and recently Kaduna, focused on inspiring, empowering and building capacity of African entrepreneurs to solve economic problems by leveraging technology resources and networking. LCCI Best Unit The Lagos Chamber of Commerce and Industry (LCCI) has the Business Education Services and Training (BEST) unit that trains and mentors entrepreneurs all-round. The LCCI mentoring programme started in 2013, with a view to raising a generation of well-trained, dynamic and young entrepreneurs well equipped to confront ever-changing challenges in business. The programme is for six months and it is an intensive training with testimonies. MAN Resource Centre The Manufacturers Association of Nigeria (MAN) also has a resource centre that empowers entrepreneurs and real sector players.

IO Furniture boosts local content patronage with fair OBINNA EMELIKE

n May Day, IO Furniture, a leading indigenous furniture and interior designing firm, threw its doors open to customers and staff alike to witness its innovative products that are wholly made in Nigeria by Nigerians and for the world. Tagged, ‘Labour Day Exhibition’, the event, which held at IO Furniture’s office at Ilupeju, Lagos, was a boost to local content creation and a further campaign for the patronage of made in Nigeria goods initiative by the present administration. On display at the exhibition

by the furniture firm were new products showcasing new trends in interior decoration, stylish living, corporate friendly, space-focused products, among others. Speaking on the rationale for the exhibition, Muni Shonibare, managing director/CEO, IO Furniture, explained that the fair was organised to celebrate members of staff working with the firm, as well as customers who have patronised different products of the firm over the years. She noted that the firm has evolved over the years wooing customers beyond the Nigerian shores. For her, the firm’s success story is the unique selling proposition, which is using locally sourced

raw materials in their production and African themed designs. “With the exhibition, we are promoting made in Nigeria goods by Nigerians. As a furniture company, we are promoting our industry and can compete with any furniture company globally. But we also know there is a need to constantly refresh our brand, so we introduce new designs in the market to keep with the new trends”, she explained. On what inspired the designs, the MD/CEO explained that, “We try the new lifestyle; what people like and want. We make sure that we introduce furniture designs and accessories that align with people’s lifestyle. It is about appreciating that lifestyles are

changing in our environment and what is required to keep up with that lifestyles is to anticipate what people need and plan toward it in terms of materials and designs. As much as possible, we begin to introduce our own African touch into furniture-making”. As well, looking inwards for raw materials, according to her, has been a boost to local content creation, curbed importation and impacted on price of the finished products here. “The fair comes with discounts because we want the products, though new, to be affordable and pocket-friendly for our target customers”, she said. However, she called all govern-

ment and private sector to make sustained efforts at closing the gap in skilled labour availability in the country, noting that it is the bane of productivity and industrial advancement in the country. “Our greatest challenge in this environment is the lack of skilled labour. Every segment of the society; from legal, medical to engineering professions need skilled labour required for that industry. While I appreciate what the government is doing to promote and protect the industry, but we need require skilled labour. You can only make progress and generate workforce as it should if you have educated and skilled labour force to drive it”, she concluded.

BUSINESS DAY

Monday 14 May 2018

Start-Up Digest Adeola and Babajide: Entrepreneurs using digital channels to redefine business

ness in early 2017. “The business was inspired by overstrained and out-dated schooling system in Nigeria and Africa at large. We believed that if we leveraged on technology, we could address some of the challenges evident in education in Nigeria, which included slow payment processes, and insecurity, among others,” he says. Jide and his partners pooled funds from personal savings and secured a preseed funding from Procyon Group, which cumulatively amounted to over N2.5 million. This fund was used to set up the business. The Actuarial Science undergraduate tells Start-Up Digest that the business has grown since starting over six months ago. He says that the business has experienced early adopters of its technology in parts of Lagos and has signed a partnership deal with the regional sections of National Associations of Proprietors of Private Schools. “We also recently just graduated from the 2017 Next Economy Business Accelerator Programme by Co-CreationHub, which was supported by the Dutch Ministry of Foreign Affairs. We have also had advanced discussions with new investors ready to partner with us in scaling our technology considerably in other parts

of Nigeria,” Jide discloses. It has not all been rosy for the University of Lagos undergraduate’s Skoolkive start-up business, as access to relevant data has remained a key challenge confronting it. “Access to the relevant data, which is critical to our business, was a very big challenge when we started. There wasn’t enough data we could access on key figures in education such as updated number of schools in Nigeria and number of student enrolments for the past five years among others,” the young entrepreneur says. Jide wants the government to take more radical approach to data collation, emphasising the relevance of data in planning and decision-making. He also notes that such data should be made available in the public domain. The young entrepreneur stresses that it is the various challenges in the education sector that has made the country lose over $4 billion estimated to be spent by Nigerians schooling aboard, adding that if the government had invested heavily to develop the sector, the estimated dollar spent would have helped in growing the Nigerian economy. He, however, commends the government for its recent increase in budgetary allocation to education sector in the 2017 budget but adds that much more still has to be done. The founder, who is also the CEO of thatbluebook, a digital media start-up, says that the online business has started growing within a short period of start-up owing to its strong value proposition that has helped it continue in business. “Some of these propositions include our partnerships with financial technology companies which allow partner parents to access loans that will enable them pay school fees via salary deductions. This is an initiative we believe will keep us in business for a long time,” he discloses.

promote healthy lifestyles and address obesity. Speaking in the same vein, Olukemi Adeyanju, state lead, Healthy Lifestyle Project, Helen Keller International, said, “When it comes to preventing malnutrition, we are not afraid to get our hands dirty. We are doing this in Lagos State through the Healthy Lifestyle Project in public primary schools to provide nutrition edu-

cation, physical exercise through active play, and cultivate gardens for a quality diverse diet.” One of the participants in the programme Olufunke Anjorin, school manager, Agidingbi Primary School, said “the training is an eye-opener; we are now equipped with appropriate information and skill to grow food in small space, and agronomic practices for better farm yield.”

JOSEPHINE OKOJIE

s globalisation continues to take the centre stage, it has become imperative for businesses to leverage on new technologies in novel ways to grow their businesses. Nigeria and Africa need more innovators, particularly when it comes to harnessing the power of technology to find solutions to key challenges. In this regard, two young entrepreneurs are leveraging various digital channels to grow their businesses. They are: Adeola Abdulrasheed Adeola Abdulrasheed is the founder of Cameraman. ng, a start-up that connects users to professional photographers and videographers within their locality. He holds UI x UX certificate, which is given to qualified designers at the Graphics Design department of Yaba College of Technology (Yabatech). He is also a professional photographer. Adeola was inspired to establish Cameraman.ng out of his love and passion for capturing memories. While still an undergraduate, he built D’AwareImages to capture existing memories in school. As a result of its success, he was inspired to venture into full-time photography. “I started and successfully built D’AwareImages while still in school because I loved to capture memories and that developed my interest in photography,” he says. After his tertiary education in 2016, Adeola picked up a job in photography. One year after, he established Cameraman.ng. The graphics designer started his business with N200,000, an amount he raised from family and friends. After a few months of starting the business, he won €1,000 in the Co-Creation Hub Next Economy Acceleration Programme challenge.

Adeola Abdulrasheed

The Yaba Tech graduate tells Start-Up-Digest that he used the money to further expand the business and develop its scope in the Nigerian photography market. The young entrepreneur says that despite the large number of already established talents in the country’s photography business, Cameraman.ng has been able to create a niche market for itself by leveraging technology, stating that the business has continued to grow since starting. “We outsmart our competitors by leveraging technology to deliver photography services with the fast automated booking system and affordable packages for all categories of customers, using reliable professional photographers and videographer,” the young entrepreneur says. Speaking on how the platform connects users to photographers and videographers across the country with just a click, Adeola says that “Cameraman.ng instantly matches you with professional photographers and videographers with just a few clicks around your locality.” “We have made the platform easy and affordable to users who are willing to capture and record every beautiful moment of their events,” he explains. On how the photogra-

Babajide Esho

phers and videographers are selected by the organisation, the entrepreneur says, “For the photographers and videographers, we have a created a form that allows us to vet them and know who is fit for the platform because we have pledged to give our users the very best. We also invite them to a physical meeting to get a better knowledge of who they are and their personalities.” Answering questions on the challenges confronting the business, he points out that funding remains the major challenge confronting the business, noting that a lot of youths with entrepreneurial skills are limited because of the absence of funds to see their ideas to fruition. He adds that the country’s huge infrastructural gap is also another challenge facing his business, urging governments at the federal, state and local levels to provide key infrastructure such as power, good road network, good and affordable office spaces and forums for learning and collaboration especially for start-ups. Adeola tells Start-UpDigest that his business plans to “expand its solutions across the continent, as we are all about capturing irreplaceable moments, and of course, everyone has a day in their lives they want to capture forever, so we want

to capture it for them at a great price.” The photographer says he currently works with a team that has brought the business to its current position, among whom are Ademosu Adetutu, who has seven years’ experience in brand design; Abdulazeez with vast knowledge in technology, and Bosun Tijani, who is a mentor. Speaking on his advice to other entrepreneurs, Adeola says, “Your mind is a soil, what you plant grows. So, always push yourself to the limit and you would realise you can still push further. Never stop. Keep on moving.” Babajide Esho Babajide Esho is the founder of Skoolkive, an online educational platform that helps schools automate and effectively manage their processes. The platform helps school administrators and parents to easily receive and make payments through a single channel. The business, through its biometric features, also helps record students’ clockin and clock-out, which can be sent to parents to enable them to effectively and efficiently monitor their children in secondary schools. Jide was inspired to establish Skoolkive to help address some of the challenges in Nigeria’s educational system. He established the busi-

Cadbury Nigeria’s capacity building programme kicks off

adbury Nigeria Plc is training stakeholders that will drive its on-going community partnership project, which seeks to promote healthy lifestyle among Nigerian children and adults, in collaboration with Helen Keller International (HKI). In a statement, Bala Yesufu, director, Corporate and Government Affairs, Cadbury West Africa, said,

“Our partner, Helen Keller International, has so far trained 130 participants that cut across nutritionists, agriculturists and teachers in Lagos State, on the mechanics of the programme. “The training is in phases and we will eventually teach nearly 6,000 children and families in nine schools in Lagos, the importance of proper nutrition, physical activity

and gardening through inschool and after-school activities. We are embarking on this project in Nigeria to inculcate healthy habits in children from an early age. We are happy to partner with HKI in this initiative that will help improve the well-being of Nigerians.” At the launch of the programme in Lagos on 11th April, 2018, Yesufu described the event as a milestone for Cadbur y

Nigeria because it was the first-ever Mondelez International Foundation-funded effort in the country, while noting that it would further complement the Company’s existing corporate social responsibility (CSR) initiatives. Cadbury Nigeria joined nine other countries in the Mondelez International family in the initiative that involves a $50million multi-year commitment to

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What data on Formula One crashes suggests about workplace rivalries HENNING PIEZUNKA, WONJAE LEE, RICHARD HAYNES AND MATTHEW S. BOTHNER

o mp e t i t i o n fueled by a similarity in status can be especially destructive. To examine this more closely, we studied how competitive dynamics precipitate potentially deadly collisions in the world of Formula One racing. We hoped to glean insights about the dangers of competing with near-peers, and the conditions that intensify those dangers, that we could then apply to the business world. For those unfamiliar with Formula One, the first thing to know is that crashes are usually not random. It’s not that a driver makes an unforced error at breakneck speed; it’s that two drivers, locked in oneon-one opposition, goad

each other into increasingly reckless moves. At some point, both lose sight of the bigger competitive picture, becoming more intent on overtaking their immediate rival. What ensues is the classic game of chicken.

Collisions, we found, were particularly likely among pairs of drivers who were roughly equivalent in status. That is, their competitive histories across the entire racing season looked similar — e.g. they had

beaten, and been beaten by, many of the same people. Their standings in the insular world of Formula One racing were very similar. What does this mean for business? First, it sounds a note of caution

regarding the recent buzz around “flat” corporate structures. Management schemes such as holacracy — which replaces top-down decisionmaking with a horizontal network of self-organizing teams — promise a pragmatic, rational antidote to ego-driven office politics. However, our Formula One findings suggest that leaders intending to promote an egalitarian culture by flattening hierarchy, removing job titles and so on may inadvertently exacerbate competition, rather than reining it in. But the effect is not immediate. Our findings reveal that crashes between status-similar peers in Formula One were more likely later in the racing season. It takes time to pack the powder keg. Tension gradually builds as rivals become aware of their similar status, size each other up, and square up for battle.

We also found, somewhat to our surprise, that the association between status-similarity and crashing was nonexistent in poor weather conditions. We theorize that when poor weather adds an extra element of danger to the race, it prevents drivers from getting carried away by status anxieties, keeping their focus entirely on personal safety.

(Henning Piezunka is an assistant professor at INSEAD. Wonjae Lee is a visiting professor at the Graduate School of Culture Technology, Korea Advanced Institute of Science and Technology. Richard Haynes is a senior economist at the Commodity Futures Trading Commission. Matthew S. Bothner is a professor at ESMT Berlin.)

Mindfulness as a management technique goes back to at least the 1970s JIM BUTCHER

indfulness is now seen as a crucial skill in business. Meditation practices have the capacity to calm the mind, relax the body, boost resilience and even increase situational awareness. The study of mindfulness — often defined as paying attention, nonjudgmentally and on purpose — is a regular part of the creativity and wellness culture at firms around the world. But although mindfulness may seem to be a fairly

new phenomenon, it’s not. It first influenced business decades ago, through the development of an unmistakably hard skill that senior managers must master: strategic planning. Leaders today would be wise to learn from the past and to view strategic planning and mindfulness together. Pierre Wack, who was head of Group Planning at Royal Dutch/Shell in the 1970s, studied meditation extensively with teachers in Asia and, later, with the famous 20th-century mystic G.I. Gurdjieff in Paris. Wack

perceived the world differently than his colleagues in the energy business. Through his unique lens, he came to create what we know as scenario planning. As Art Kleiner described in the The Age of Heretics,

Wack had “a lifelong preoccupation with the art of what he called ‘seeing.’” To see, in Wack’s understanding, meant not merely being aware of an element of the environment, but seeing “through it,” with full

consciousness. Planning well, in his estimation, required “training the mind.” Fundamentally, this is what scenario planning is all about: creating insightful stories about the future using good research and analyses, and identifying important patterns unfolding today that will shape the future for a company and its possible strategic options. This is as important today as it was in Wack’s era. But like mindfulness, successful scenario planning doesn’t just happen on the first try. It’s the con-

tinuous work of challenging mindsets that enables innovation and insight and leads to improved decision making. The rise of mindfulness is unquestionably a positive development. But mindfulness is much more than a mental fitness tool; it’s an asset for leaders seeking to perceive — and re-perceive — the world and make better strategic choices. (Jim Butcher, a longtime mindfulness practitioner, helped start the Global Business Network)

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NEWS

French Embassy signs 500,000 funding contract to support humanitarian aid in North-East ODINAKA ANUDU

f u n d i n g c o n t ra c t amounting to €500,000 hasbeensignedbetween the French Embassy and the representatives of Alima and Première Urgence Internationale (PUI), which are both French humanitarian organisations active in the providing aid in north-east region of Nigeria. Guillaume Audren de Kerdrel, first counsellor of the French Embassy in Abuja, received the representatives of bothorganisationsinAbuja.The two projects said the amount would cater to improve medical care for children suffering from malnutrition in the newly accessiblearea,especiallyinKukawa Local Government Area in Borno State, and improve the food security of vulnerable populations in Maiduguri. The French government through the French Embassy in Nigeriaisexpressingitscommitmenttocontributingtohumanitarian efforts that will lead to the continual rehabilitation and restoration of the north-eastern region of Nigeria, a statement from the Embassy of France says.

Globally competitive economy is achievable in Nigeria through improved taxation - expert HARRISON EDEH, Abuja

aiwo Oyedele, partner, West Africa Tax leader, PwC, has expressed optimism that the Nigerian government at various levels can achieve a globally competitive economy through improved taxation. The tax expert, while speaking at the just concluded Chartered Institute of Taxation of Nigeria (CITN) annual conference, said political office holders and administrators in the country must prioritise issues on taxation to build a vibrant economy. “It is not out of place if they ensure bulk of their revenue for state spending comes from taxation. Taxation has a way of connecting the government with the governed, and this is one of the easiest way to grow people’s confidence in transactions,” he said. According to Oyedele, “To make Nigeria more competitive, we have to have to build our economy focusing on infrastructure,

mainly on power and transport. Also, the speedy implementation of tax policy must be prioritised as well as ensuring ease of doing business deliver on expected results.” Speaking further, he said, “The government must be willing to invest $3 trillion into infrastructure development over the next 30 years. Leverage public-private partnership, investments funds and other guarantee arrangements to optimise infrastructure.” He stated the Federal Government must be willing to tackle constraints around governance, funding, legal, regulatory, pricing and sabotage. He pointed out that, “Rail projects have been signed off and 85 major roads projects are ongoing and concession process for the four major airports underway, as proper monitoring mechanism is key in ensuring that MDAs deliver on the expected projects with corresponding contractors.” The Federal Government cannot achieve much of these feat if there is no ap-

preciable progress made to improve taxation in the country, he said, saying, “Recent statistics put Nigeria’s tax to GDP ratio at 6 percent, which is one of the lowest in the world. Essentially, tax’s contribution to the economy is low.” Country comparison shows that Botswana’s Tax to GDP ration is 35.2 percent, Belgium is 47.9 percent, Canada is 39 percent, Denmark is 50 percent, Finland is 54 percent, Sweden is 50.5 percent, etc. While lauding the efforts and some of the reform initiatives put up by the government to advanced taxation, he said, the Federal Government must sustain its effort through robust systems, structures and institutions that sustain these initiatives. “The government’s reforms through Voluntary Assets and Income Declaration Scheme (VAIDS), and other initiatives are key in solving so many of our challenges and ensuring proper social inclusion through strategic social services,” he said.

Adenuga boosts professorial chair on Good Governance at Onabanjo University

ba Sikiru Adetona professorial chair on Good Governance at the Olabisi Onabanjo University, Ijebu Ode,OgunState,receivedaboost over the weekend as the chairmanofGlobacomLimited,Mike AdenugaJr,donatedN20million to the cause. Thefundismeanttopromote the expansion of the frontiers of knowledge and generation of ideas for Nigeria’s development. Adenugamadethedonation at the second annual professorial lecture and Oba Adetona’s 84th birthday celebrations in Ijebu Ode. Inagoodwillmessageread on his behalf by Folu Aderibigbe of Globacom at the event, the company’s chairman described Oba Adetona as a forthright and incorruptible nationalist who works tirelessly for the enthronement of goodgovernanceinthecountry. “Anybody who knows our royal Father very well would not be surprised that he endowed a professorial chair for Good Governance. Since infancy, our royal Father has been deeply involved in the promotion of good governanceinthecountry.Inthe overfivedecadesthattheAwujale has been on the throne of his forefathers, Ijebuland has witnessedphenomenalgiantstrides in all sectors of the economy,” Adenuga said. He described the monarch

as his “very dear first cousin and family head” and wished him more fruitful years in the service of Ijebuland in particular and Nigeria in general, adding that the Oba Sikiru Adetona Professorial Chair Lecture is living up to its ideal of generating ideas for the enthronement of good governance and the building of an egalitarian society where no man will be oppressed. HesaidtheProfessorialChair holderandlecturer,ProfessorAyo Olukotun,wasaperfectchoicein view of his pedigree as a prolific publiccommentatoranderudite scholar of repute, adding that the topicforthelecture,“CivilSociety and Governance in Nigeria’s evolving democracy 1992-2018,” was on point and germane. Delivering the lecture, Professor Olukotun disagreed with the view that the civil society was dead, and opined that it was rather in a state of stupor requiring general re-awakening. He urged the society “to increasingly find ways of transcending the familiar divisiveness and centrifugal conflicts that bedevil the Nigerian polity.” Responding, Oba Adetona thanked guests for honouring him and lamented the shoddy treatment meted out to traditional rulers, submitting that governments at all levels should consultmorewithtraditionalrulerstoenthronegoodgovernance.

ExxonMobil to invest N13bn in Akwa Ibom community projects FRANK UZUEGBUNAM

L-R: Alaba Viwanu Akingbogun, head teacher, St.Judes Nursery and Primary School, Oyingbo Lagos; Temitope Onitiri, partner, audit service, KPMG; Bunmi Oteju, director, SUBEB, Lagos State, representing Oluremi Sopeyin, chairman, SUBEB, Lagos State; Lord Michael Hastings, KPMG Global Head of Citizenship, and Kunle Elebute, senior partner, KPMG in Nigeria/chairman KPMG Africa, at the Nigeria launch of KPMG Family For Literacy (KFFL) programme (a global KPMG programme targeted at combating childhood illiteracy) at St.Jude’s Nursery and Primary School, Lagos. Pic by Pius Okeosisi

NNPC says gas-to-power supply now boosted to 88.89% HARRISON EDEH, Abuja

igerian National Petroleum Corporation (NNPC) has increased the supply of gas to the power sector, between January 2017 and January 2018 by 88.89 percent. Ndu Ughamadu, NNPC group general manager, Group Public Affairs Division, said in a statement that the information was contained in the corporation’s monthly Financial and Operations report for January 2018, released in Abuja. He quoted the monthly report as saying that gas-to-power supply as of January 2018, stood at 731 million metric standard cubic feet (mmscf) per day as

against 387mmscf/d in January 2017, representing 88.89 percent increase. “An average of 731mmscf/d of gas was sent to over 20 domestic thermal power plants in the month of January 2018, generating a thermal power output of 3,076 megawatts (mw) to the national grid, representing 76.7 percent of the total national power generation,” the report stated. The report indicated that an additional 365mmscf/d of gas was supplied to the industrial sector to power over 50 companies in the period under review to boost the nation’s economy. The total gas production for the month was put at 8,169mmscf/d out of which 14

percent was supplied to the domestic market, 43 percent for export, while 31 percent was reinjected and the balance flared. The 30th edition of the monthly Financial and Operations report gave the total crude processed by the local refineries - Kaduna Refining and Petrochemical Company (KRPC) and Port Harcourt Refining Company (PHRC)] for the month of January 2018 as 204,877MT, with KRPC accounting for 183,022MT, while a total of 21,855MT was processed by KRPC. It stated that production by the two refineries during the period translated into a combined yield efficiency of 89.97 percent as against the 88.99 percent in

December 2017. The report said in the month under review, 1,463.66 million litres of PMS and 33.79 million litres of DPK were supplied into the country through the Direct Supply Direct Purchase (DSDP) arrangements, adding that the corporation’s supply of PMS into the country during the period was far above the normal daily supply of 35 million litres per day to ensure products availability nationwide. The report reiterated that NNPC was inching closer to choosing financiers for its refineries with a view to achieving a 90 per cent capacity utilisation per stream day before the end of 2019.

xxonMobil affiliate, Mobil Producing Nigeria Unlimited, operator of the Nigerian National Petroleum Corporation/Mobil Producing Nigeria Joint Venture, has disclosed plans to invest up to N13 billion ($43m) in three community health, economic empowerment and education projects in Akwa Ibom State in the next 18 months. These investments amount to one of the largest community investments by any company in Nigeria. The three projects include a technical skills centre in Ikot Akata, a trauma centre at the University of Uyo Teaching Hospital and an engineering complex at the University of Uyo. “These investments will provide long-term health, education and economic benefits to many in our communities,” Paul McGrath, chairman/managing director of Mobil Producing Nigeria, said, saying, “We continue to work closely with the government of the Akwa Ibom State as part of our commitment to communities where we operate and helping to improve quality of life.” The technical skills centre will consist of a three-block training complex for critical skills required in oil and gas careers, such as pipeline fabrication, welding, electrical works, chemical lab works, civil works and engineering design. The centre is expected to train more than one hundred students annually. The trauma centre, which is to be housed in a two-floor medical complex, will help

reduce mortality rates in major medical emergencies. The centre will include a resuscitation and burns room; a theatre suite; helipad; ambulance bay and triage area; high dependency and radiology units; mini labs; wards; pharmacy; administrative offices; library; and doctor, call and seminar rooms. The engineering complex, which will be equipped with generators and independent water supply, will feature two floors of workshops, laboratories, a lecture theatre, conference rooms and faculty offices. It is expected to serve about 2,000 students, mostly from Akwa Ibom State. In his address, Governor Udom Emmanuel applauded ExxonMobil for making the projects a reality in the state, saying the state government remained supportive of ExxonMobil’s initiatives to develop Akwa Ibom State. Emmanuel appealed to youths in the communities where the projects are located to allow contractors working on the projects unfettered access. He added that he would hold the council chairman of Mkpat Enin Local Government Area, Ekanem Brown and the House member representing the area, Otobong Ndem, personally responsible should the project be stalled by restiveness. He assured ExxonMobil and other IOCs in the state that Akwa Ibom State Government is currently constructing a 21-storey digital building in Uyo to aid their relocation and an ultramodern logistics centre at Ikot Abasi to ensure ease of operations in the state.

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BusinessDay MTN NIGERIA PRE-IPO REPORT

MTN Nigeria IPO: Growth or value play?

SUMMARY he proposed listing of MTN Nigeria shares on The Nigerian Stock Exchange (NSE) is set to lift the market capitalisation of the bourse by close to $10billion. According to our valuation MTN Nigeria is forecast to have a market capitalisation ranging from $8.56 billion to $10.88 billion. BRIU, used various valuation methodologies including the discounted cash flow valuation (DCF) and relative valuation to estimate the Value of MTN Nigeria. This is the first major pre-IPO valuation attempted by a research firm using publicly available data. BRIU used peer telecommunication companies from various emerging markets in order to obtain a multiple for MTN Nigeria. Comparing telecommunication companies in various emerging market including Vodacom in South Africa, Safaricom in Kenya, Bharti Airtel in India, PLDT Inc., in the Philippines and Total Access Management in Thailand, BRIU obtained an industry average using price to cash flow (P/CF) of 9.9x, price to sales (P/S) of 2.9x, price to earnings of 47.6x, price to book (P/B) of 5.2x, and EV/EBITDA of 9x. Our findings reveal a market capitalisation ranging between N1.4trn and N7.2trn. We arrived at an average value of N3.2trn (equivalent US$8.9bn). MTN Nigeria has around 402 million shares in issue, the same amount in preference shares. As part of the IPO it would split one share into 50 units, to create 20 billion shares. Going by this estimate, BRIU arrived at a share price of N159.42 per share (market cap/shares outstanding). Also, using the free cash flow to firm valuation methodology, we arrive at a value of N3.9trn, or US$10.9bn ($1/N360). Going by the number of shares estimate of 20 billion, the shares are estimated to price at N195.90. The MTN group has made good progress on the IPO processes in Nigeria, and they aim to conclude it during 2018. MTN Nigeria is the largest subsidiary of MTN Group which is a multinational telecommunications group that offers cellular network access to over 223 million subscribers in 22 countries in emerging markets. As at the reporting date in 2017, MTNN had a total of 52.3 million subscribers. MTN Nigeria is the second largest contributor to MTN Group revenue of about 27.2 per cent closely behind South Africa which contributes 32.2 per cent. MTN Nigeria is expected to achieve double digits growth and the IPO is set to be highly successful with major demand from Pension Funds, global fund managers, domestic investment firms and institutional investors looking for exposure to the last of its kind pure play emerging markets Telecommunications firm with a dominant position in a large country by population (200 million) and GDP ($400 bn). BusinessDay will update the valuation report as more IPO information is released by MTN Nigeria. BACKGROUND The Information and Com-

BRIU ANALYSTS Abisinuola David-Olusa Esowe Isaac Afolabi Esther (CFA Level 1) Estimated Market Cap: $8.56 billion - $10.88 billion Estimated IPO pricing range: N159.42 - N195.90 per share

munications sector of which the telecommunications industry falls, contributed 10 per cent to the total nominal GDP in the fourth quarter (Q1) of 2017 with an annual contribution of 10.03 per cent. TheNigeriantelecommunication industry is the largest segment of the information and communication sector. It can currently be regarded as a self-aware industry which adapts to the stark realities of business¬¬. The sector started operation in 2001 after the deregulation of the industry by ex-president Olusegun Obasanjo led administration. The sector had evolved over the years and has contributed immensely to sustained growth and the communication needs of Nigerians. The leading players in the Nigerian telecom space are MTN, a South Africa-based multinational company with a present market share of 36.6 per cent. Closely following MTN in the fight for increased market dominance is Globalcom, an indigenous multinational firm with a market share of 26.2 per cent. More so, Airtel, an Indian telecom firm has a present market share of 26.2 per cent and 9mobile trails behind with a market share of 11 per cent . GSM remains the most dominant technology type for accessing the internet for subscribers. Data released by the National Bureau of Statistics in Q4 2017 reveals that active GSM internet subscriptions stood at about 98.4

million, representing a 5.82 per cent increase relative to the previous quarter. GSM internet subscriptions recorded an increasing trend throughout the year 2017 as it grew by 7.1 per cent as at year end 2017 compared to 2016 figures. A delineation according to the major player in the space shows that, MTN retained the highest share of all GSM active internet subscribers as at Q4 2017, capturing 36.6 per cent of the total subscriptions. This was followed by Glo with 27.4 per cent subscription, Airtel with 24.3 per cent subscriptions and 9mobile (EMTS) with 11.5 per cent subscriptions. Key Products MTN Nigeria is one of the major players in the Nigeria telecommunication space. The telecom giant’s key product includes: • Voice data (incoming and outgoing calls) • Data services (internet service, mobile internet mobile Wi-Fi services); • and digital (Enabling people to make financial transactions using their cell phones, and bringing them entertainment and online shopping through investments in mobile platforms, apps and online ventures business) In the FY’17, data revenue grew by a robust 86.6 per cent. Contribution of the telecommunication industry to the Nigerian Economy MTN GROUP Operating Model/Strategy

MTN Group is well positioned to capture growth as Africa and the Middle East are forecasted to be among the world’s key growth regions in the long and medium term. The benefit from this development by MTN is massive as they continue to leverage on the favourable demographic growth of Nigeria which is estimated to become the third most populous country in the world by 2050 and low data penetration in these region. MTN Group has defined clear initiatives (which serve as performance indicators to sustain growth in the long term. Its strategy which is explained below is succinctly captured with the acronym “BRIGHT” • Best customer experience In 2022, MTN Group hopes to reduce monthly customer churn, achieve the best brand in the market and lead the market in NPS. This it hopes to do by revamping the customer experience and refresh the brand. Last year, MTN Group deployed the services of Nokia’s Cognitive Analytics for Customer Insights and Nokia Service Quality Manager which provides a complete view of customer satisfaction, device, network performance and revenue. This would enable MTN Nigeria speed the identification of service issues like data session quality, poor voice calls and also maximise the benefits of Nokia’s software which includes: data science and automation. • Returns and efficiency focus

Improve ROIC, EBITDA, increase the yield on average free cash flow. This it hopes to achieve by focusing majorly on cash flows, ensure return-based capital allocations and leverage on its scale • Ignite commercial performance MTN plans on growing subscribers, market share, ensure stable voice revenues and grow enterprise and wholesale revenue through implementation of segmented propositions and go-to market plans, enhance, launch its wholesale business unit, grow enterprise products and channel. • Growth through data and digital Achieve 200 million data subscribers, achieve 100 million digital subscriptions, including 60 million for MTN Mobile Money. This it would achieve implementing dual-data strategy and scale up its mobile financial services. • Hearts and minds Improve employee engagement, enhance reputation and ensure effective and compliance practices. • Technology excellence Increase population coverage, improve network quality. MTN NIGERIA MTN Nigeria is the largest subsidiary of MTN Group which is a multinational telecommunications group that offers cellular network access to over 223 million subscribers in 22 countries in the emerging markets. As at the reporting date in 2017, MTNN had a total of 52.3 million subscribers. MTN Nigeria is the second largest contributor to MTN Group revenue of about 27.2 % closely behind South Africa which contributes 32.2%. In 2017, MTN Group’s top-line growth was driven by a healthy growth in data revenue. There was a robust increase in data revenue of about 34.2%which was driven majorly by the robust 86.6% growth in Nigeria’s data revenue. Data revenue in Nigeria was driven by strong network quality which encouraged high data usage and customised data offerings. A 14.2% Growth in Digital revenue was majorly supported by Mobile financial services like MTN Mobile Money and rich-media services which were pulled down by a reduction in digital revenue in MTN by 3.5 per cent. The MTN Nigeria is expected to achieve double digits growth. Nigeria’s borrowings are highly denominated in dollar of about 51% of total borrowings. Financial Outlook In 2017, MTNN recorded an EBITDA Margin of 39% Security issues Nigeria telecom industry have been threatened by the following security issues which has taken a different dimension ranging from case of cybercrime(fraudulent and inappropriate use of the internet infrastructure such as cyber-fraud,

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BusinessDay MTN NIGERIA PRE-IPO REPORT cyber-intrusion, cyber-bullying, spam, privacy violation and online defamation) cracking, copyright infringement, identity theft. These security issues can adversely affect the nation’s security and its critical ICT infrastructure Mobile penetration Globally, despite a slowdown in the number of people purchasing as a result of saturation in the developed economy, mobile subscribers as at 2017 was put at 5 billion. In Nigeria, the n mobile penetration rate was 49 per cent in 2017 and it’s projected to hit 55 per cent by year 2025. In the same vein, smart phone penetration rate in Sub-Saharan Africa (SSA) is estimated at 34 per cent (about 230 million people). This is expected to grow by 34 percentage points to 68 per cent by year 2025, buoyed by proliferation of cheap smartphones, increasing population coverage of 3G and 4G networks, rising appetite for social media and so on. In 2016, smartphone market weakened by 8% year on year due to persistent fall in Gross Domestic Product (GDP) as a result of falling oil prices which plunged the economy into recession. By 2017, smartphone market experienced 6 per cent growth per annum as the market is slowly moving out of recession. The feature Smartphone market also grew by 15 per cent annually thereby offsetting the smartphone decline in 2016. With the upward increase in the growth rate of smartphone market, if all things been equal one can easily predicted positive growth in the market, the market is still open to opportunities . Regulatory issues The telecommunication industry has over the years faced serious regulatory issues which include: multiple regulations and multiple taxation which is characterized by unfair taxes and levies billed by tax authorities on the telecom industry and delays in securing approval for site for new base stations. BROADBAND POLICY • Define the open access framework and secure ROW Waiver wit states • Enable expedited ROW permit for the rapid rollout of base stations • Declare critical National infrastructure • License new operator as required Valuation Using PEER multiples, BRIU arrived at a value of N3.2trn, equivalently US$8.9bn. We made use of comparable companies in emerging markets which are Vodacom in South Africa, Safaricom in Kenya, Bharti Airtel in India, PLDT Inc. in the Philippines and Total Access Management in Thailand. We arrived at an industry average of 9.9 using price to cash flow (P/CF) multiples, 2.9 using price to sales (P/S) multiples, 47.6 using price to earnings multiple, 5.2 using price to book multiples and 9 using EV/ EBITDA multiples. Our findings reveal a range between N1.4trn and N7.2trn. We arrived at an average value of N3.2trn (equivalent US$8.9bn). “MTN Nigeria has around 402 million shares in issue, the same amount in preference shares, which it sold at $0.99 in 2007.As part of the IPO it would split one share into 50 units, to create 20 billion shares, which would be listed on the bourse and set the IPO

price via book building,” according to Reuters. Going by this estimate, BRIU arrived at a share price of N159.42 per share. Also, using the free cash flow to firm methodology, we arrive at a value of N3.9trn, equivalently, US$10.9bn. Going by the number of shares estimate of 20 billion, the share price is given as N195.90. Disclosures Analysts certification This research report has been prepared by the research analyst(s), whose name(s) appear(s) on the front page of this document, to provide background information about the issuer or issuers (collectively, the “Issuer”) and the securities and markets that are the subject matter of this report. Each research analyst hereby certifies that with respect to the Issuer and such securities and markets, this document has been produced independently of the Issuer and all the views expressed in this document accurately reflect his or her personal views about the Issuer and any and all of such securities and markets. Each research analyst and/or persons connected with any research analyst may have interacted with sales and trading personnel, or similar, for the purpose of gathering, synthesizing and interpreting market information. This document is for information purposes only. Any decision to purchase securities in any proposed offering should be made solely on the basis of the information to be contained in the final prospectus published in relation to such offering. This document does not form a fiduciary relationship or constitute advice and is not and should not be construed as an offer, or a solicitation of an offer, or an invitation or inducement to engage in investment activity, and cannot be relied upon as a representation that any particular transaction necessarily could have been or can be effected at the stated price. All information and opinions are subject to change without notice, and neither Business-Day nor any of its subsidiaries or affiliates is under any obligation to update or keep current the information contained herein or in any other medium. Descriptions of any company or companies or their securities or the markets or developments mentioned herein are not intended to be complete. This document and/or information should not be regarded by recipients as a substitute for the exercise of their own judgment as the information has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The information and opinions herein have been compiled or arrived at based on information obtained from sources believed to be reliable and in good faith. Such information has not been independently verified, is provided on an ‘as is’ basis and no representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness, reliability or fitness for a particular purpose of such information and opinions. All statements of opinion and all projections, forecasts, or statements relating to expectations regarding future events or the possible future performance of investments represent Business-Day’s own assessment and interpretation of information available to them currently.

CALCULATION OF WACC

VALUATION USING MULTIPLES

S/NO

ASSUMPTION

REMARK

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46 BUSINESS DAY NEWS Atiku confirms intent to run in 2019... Continued from page 1

he told Reuters in an interview. Abubakar also confirmed that he intends to run in next year’s presidential election, becoming the biggest opposition heavyweight to say he will take on Muhammadu Buhari. The winner of February’s poll will lead Africa’s top oil producer and most populous nation, which is central to regional stability as it battles Islamist militants in the northeast. Abubakar has long enjoyed support from the business elite in Nigeria’s commercial capital Lagos for his conservative-capitalist ideals and, as vice president in a PDP administration from 1999-2007, he implemented a program of liberalization in areas including telecoms sector. Abubakar said he would go further if elected president. “I am also going to expand it to include the oil and gas sector which have not been touched at all and other major sectors of the economy like mining, solid minerals,” he said. Abubakar said he would privatize parts of Nigerian National Petroleum Corporation (NNPC) which has been beset by decades of mismanagement and is crucial to the OPEC member’s economic fortunes. He did not specify the parts that would be privatized. “I am a strong believer in very, very small government and also the private sector,” he said. A drop in crude oil prices from late 2014 pushed Nigeria into its first recession in 25 years in 2016, spawning chronic dollar shortages because oil receipts make up two-thirds of govern-

Atiku Abubakar

ment revenue and most of the country’s foreign exchange. The economy moved out of recession last year but growth remains weak and multiple exchange rates remain in place,

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imposed by the central bank to support Buhari’s insistence that the naira should not be allowed to float. “I will allow the naira to float because I believe that is one of the ways foreign direct investment can be encouraged to come in,” said Abubakar, who hopes to replicate Buhari’s 2015 feat of winning a presidential election at the fourth attempt. Buhari, who took office in 2015, and whoever becomes president next will face challenges ranging from weak economic growth to communal violence between semi-nomadic herdsmen and farmers, as well as the Boko Haram insurgency. Abubakar - who, like Buhari, is a Muslim from the north - said

voters would welcome someone who could revive their fortunes, adding that of his three previous presidential campaigns he was only once rejected by the electorate. He was not selected as a party candidate on the other two occasions. Parties must select their candidate by Oct. 7. The next president should be a northerner, under an unofficial power-sharing agreement under which the presidency alternates between the north and south after every two four-year terms. Abubakar, a former key ally of President Buhari whose resources helped propel him to power, quit the ruling party in November and re-joined the opposition People’s Democratic Party (PDP) a month later.

L-R: Adebowale Adeagbo, chief operating officer, Halogen School of Security Management and Technology; Adekunle Ajanaku, special adviser on security and intelligence to the governor of Lagos State, and Wale Olaoye, managing director, Halogen Security Company Limited, during the special adviser on security and intelligence to the governor of Lagos State’s visit to Halogen School of Security Management and Technology’s premises in Lagos.

Inside story of how Nigeria pulled out of... deal will deal a big blow on the business interests of Northern Nigeria, international sources told BusinessDay. Southern industrialists who do not want to compete are also culpable, convincing the Presidency cabal that the deal would not favour Nigeria, even when the country stands to gain more from it than many African countries, sources said over the weekend. Multiple international sources told BusinessDay that the major consideration for President Buhari’s withdrawal from the deal was how much impact the AfCFTA would have on the deindustrialised North, rather than the touted pressure mounted by the Organised Private Sector, notably the Manufacturers Association of Nigeria (MAN) and the Nigeria Labour Congress (NLC). One of the sources said the leader of the cabal convinced Buhari to pull out at the eleventh hour, pending when experts would have studied and weighed the impact of the deal on the North. The source also said that the Nigerian government might pull out of the deal completely once the cabal is convinced that doing so will not worsen smuggling of goods into Nigeria from other African countries. “If they are sure that not signing

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the deal will not cause smuggling, Buhari will not sign,” the source said. “This is not the first time this has happened in this government and other previous governments. It is all about ethnocentric, primordial and selfish interests; it has nothing to do with your Nigeria or nationalism,” the source said. MAN and the Lagos Chamber of Commerce argue that the treaty would hurt the un-competitive manufacturing sector, which is under the heavy yoke of high production cost, caused by the harsh operating environment. However, trade experts counter the argument, saying that Nigeria ‘s manufacturing sector is the biggest in West Africa and can compete effectively over and above more than 40 countries on the continent. On March 21, 44 out of 55 African leaders gathered in Rwanda to ratify the AfCFTA, which is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994. The AfCFTA is a trade treaty among African countries targeted at opening up the continent to business and exposing its firms to a potential $3.4 trillion opportunity. It is meant to create a single market for goods and services on the continent, including a customs union with free movement of capital and persons as the focus. The AfCFTA is expected to raise Africa’s nominal GDP to $6.7 trillion

by 2030 if all the countries sign up. The treaty will liberalise 90 percent of products manufactured in Africa. South Africa’s new president Cyril Ramaphosa did not sign the AfCFTA and the Free Movement Protocol, but he penned the Kigali Declaration and pledged more time to ratify the two others during the Rwanda meeting. Nigeria’s federal cabinet had, one week before the signing of the treaty, approved the deal, saying that it would boost export, growth and job creation, while eliminating barriers against locally made products. The cabinet had said that it would provide a dispute settlement mechanism for stopping the hostile and discriminatory treatment directed against the country’s natural and corporate business persons in other African countries. Few days to D-day, however, Buhari backtracked. “Nigeria’s refusal to sign the AfCFTA agreement is extremely embarrassing,” said Olu Fasan, a visiting fellow at the International Relations Department of the London School of Economics (LSE) and trade expert. “Nigeria has, at least symbolically or rhetorically, been at the forefront of efforts to integrate Africa economically. Think of the 1980 Lagos Action Plan for an African common market or the 1991 Abuja Treaty establishing the African Economic Community. What’s more, a Nigerian was

the chairman of the Negotiating Forum for AfCFTA and Nigeria’s trade minister was responsible for the AfCFTA negotiations at the ministerial level. Nigeria was even bidding to host the AfCFTA Secretariat. Yet, when it came to the underlying trade-liberalising agreement, Nigeria retreated.” “There is a strong protectionist sentiment in Nigeria, so strong that even if there was proactive public outreach, it probably wouldn’t have mattered,” Fasan said. “There is lack of political will. President Buhari is a Marxist, who instinctively believes that capitalism and free markets are a conspiracy against the poor. So, it’s not surprising that he impetuously ducked out of attending the AfCFTA signing event in Kigali. As The Economist rightly said, ‘Free trade runs counter to political currents in Nigeria’, and Buhari provides political cover for the anti-free trade sentiments,” Fasan added. Rafiq Raji, chief economist at Macroafricaintel, explained that a market of more than 1.2 billion people with a combined GDP of over $2.2 trillion is a far stronger bulwark against limiting external trade forces than the tiny ones that inevitably get overwhelmed in negotiations with humongous countries such as America, Britain and China. “When compared with intraregional trade in other continents – 67 percent in Europe, 58 percent in Asia and 48 percent in North America – intra-African trade is quite low,” Raji says.

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Commercial Paper... Continued from page 4

amid a change of tack in Nigeria that saw the federal government cut back on domestic debt supply to manage ballooning service costs and free up capital for the private sector. It is therefore, commendable that at such a time when banks, non-bank financial institutions and small and medium-scale enterprises are striving to flourish despite the economic challenges in the country, the CP market can be looked to, to provide a viable, stable and cost-effective means for the achievement of their business goals. CPs, which are short-term debt financing instruments issued for a period not exceeding two hundred and seventy (270) days, present a cost-effective and stable means of sourcing scarce capital when compared to traditional bank loans and enable businesses diversify their funding sources. In addition, by accessing the CP market, businesses are able to build confidence in their brand as well as raise their corporate profiles ahead of tapping the market for longer-term debt such as bonds in preparation for the impact of banks implementation of Basel 3 liquidity management principles. As an investible asset class, CPs are often sought by investors to diversify their portfolios, thus, enhancing overall portfolio return, with their short-term nature permitting high relative return on investment, and allowing these investors to remain relatively liquid. Companies that have tapped the CP market have achieved significant reduction in their borrowing costs compared to bank loans. Commercial bank lending rates aren’t letting up to the extent at which yields on domestic government bonds and Treasury bills have over the past one year. Average bank lending rates stood at 25 percent as at end March 28, 2018 according to data collated by the Lagosbased economic advisory and research firm, Financial Derivatives Company. Coming at a time when FMDQ has affirmed its commitment towards the development of the Nigerian debt capital markets (DCM) and its subsequent deepening and integration to its international counterparts, one can expect that the successes recorded by the Nigerian CP market can be cascaded into other aspects of the Nigerian financial markets within FMDQ’s purview. “FMDQ has embraced the role of a change agent in the Nigerian financial market and it is expected that the OTC Exchange will not rest on it oars but continue to deploy initiatives to improve the prosperity of all categories of capital raising, investing and trading stakeholders - governments, businesses, and individuals through its compelling activities in promoting access to capital, democratising investment, enhancing transfer of value and championing transfer of risk in the DCM,” Onadele added.

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Kwesé partners Nigeria Info for 2018 FIFA World Cup … Femi & The Gang to provide live radio commentary for 32 free-to-air matches

ENDURANCE OKAFOR

wesé has entered an agreement with the Aim Group, owner of Cool FM, Wazobia FM, Nigeria Info and Arewa Radio, to broadcast the 32 free-to-air (FTA) matches of 2018 FIFA World Cup Russia live on radio. The Radio Rights Sub-licence Agreement was signed at the Nigeria Info studio in Lagos, last week. Kwesé’s exclusive free-toair channel, Kwesé Free Sports (KFS), will provide the feed, and Nigeria Info’s celebrated “Femi & The Gang” crew will be the voice of the radio commentary on Aim Group stations in Lagos, Port Harcourt, Abuja, and Kano. Kwesé Free Sports (KFS) is a 24-hour sports TV station that transmits on UHF channel 32 in Lagos, but this partnership extends the station’s presence to radio, giving millions of Nigerians access to enjoy the 2018 FIFA World Cup commentary in English language, Pidgin English and Hausa. Chichi Nwoko, general manager, Kwesé Free Sports Nigeria, said: “We are excited to be bringing millions of Nigerians 32 of the 64 World Cup matches live, and in partnership with Nigeria Info. Through Kwesé’s multi-platform offering, one of which is the Kwesé Free Sports channel, we are committed to ensuring that all Nigerians get to enjoy the 2018 FIFA World Cup. “We are calling on all Nigerians to unite behind the Super Eagles and other African teams in their quest for glory. As a result, the 32 free-to-air matches include all Super Eagles’ and

African teams’ matches, select matches from the quarterfinals, semi-finals stages and finals, as well as the opening and closing ceremonies.” Live radio broadcasts will take place from the Nigeria Info studio in Lagos and all Nigeria Info and Wazobia FM stations across Nigeria, as well as over 38 stations that will hook up to the feed. Serge Noujaim, CEO of Cool FM, Wazobia FM, Nigeria Info and Arewa Radio, said: “This is a momentous development for the radio audiences across Nigeria, especially listeners of Nigeria Info as we witness the country’s premier sports presenters Femi & The Gang drive the commentaries from our studios to all of Nigeria. To make it even grander, we are adding pure Pidgin commentaries on our Wazobia FM stations across Nigeria as well as Hausa commentaries on our purely Hausa station, Arewa Radio, in Kano. “We are proud to work with Kwesé as 2018 FIFA World CupTM radio partner and to pull in a nationwide network for a joint broadcast to cover every corner of the country.” Kwesé Free Sports is part of the largest and only pan-African free-to-air network available in more than 25 countries in Africa. It is Africa’s largest and only pan-African free-to-air channel available in more than 25 countries in Africa. It offers live premium sports viewing across Africa for free. Watch Kwesé Free Sports by tuning to UHF channel 32 in Lagos or on your FTA set-top-box (FreeTV channel 732) in Abuja with no subscription fee.

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BUSINESS DAY

Impeachment: Senate may give Buhari soft-landing on $496m Tucano payment OWEDE AGBAJILEKE, Abuja

here are strong indications that the Senate CommitteeonJudiciary, Human Rights and Legal Matters investigating President Muhammadu Buhari’s payment of $496 million to the United States government for the purchase of 12 Tucano military aircraft without National Assembly approval may absolve the President of any wrong doing, BusinessDay gathers. Last month, the Senate had asked the David Umaru-led committee to legally advise on whether the President violated the Constitution. This followed a Point of Order moved by the chairman, Senate Committee on Public Accounts, Matthew Urhoghide, that Section 143 of the 1999 Constitution be invoked if the President had engaged in anticipatory approval. The Section spells out the procedure for the removal of the President from office. Although the committee failed to submit

its report by May 2, the chairman, Senate Committee on Media and Public Affairs, Aliyu Sabi Abdullahi, assured that the panel would do so last week, adding that the committee was yet to conclude its assignment. However, the Senate adjourned plenary till Tuesday, May 15, without submission of the report. A member of the committee, who spoke on condition of anonymity, said the panel might absolve the President of wrongdoing. According to him, the committee would hinge its decision on Section 83 (1) (2) of the 1999 Constitution, which borders on Contingency Fund. The sections provide that: “The National Assembly may by law make provisions for the establishment of a Contingencies Fund for the Federation and for authorising the President, if satisfied that there has arisen an urgent and unforeseen need for expenditure for which no other provisionexists,tomakeadvances from the Fund to meet the need. “Where any advance is made

in accordance with the provisions of this section, a Supplementary Estimate shall be presented and a SupplementaryAppropriationBill shallbeintroducedassoonaspossible for the purpose of replacing the amount so advanced.” It was gathered that the panel shifted ground after bowing to pressure from the Presidency. The source, an All Progressives Congress (APC) lawmaker, disclosed that the panel might likely justify the President’s action. “The Committee will come out with a report that the President has not violated any law. That he approved the purchase of the Tucano warplanes out of exigency,” he said. On his part, a Peoples Democratic Party (PDP) senator, who also did not want his name mentioned, expressed concern that the Committee chairman may absolve the President due to his loyalty to Buhari. Hesaid:“Don’tforgetthateven the chairman of the committee, David Umaru, is an APC senator and over the years had been a staunch supporter of Buhari.”

InaninterviewwithBusinessDay, an Abuja-based legal practitioner, Kayode Ajulo, described the impeachment threat as dead on arrival. According to Ajulo, payment for the security equipment is in order, stressing that the President acted in the best interest of the country. He said: “The impeachment is an overkill. It is unsustainable and therefore dead on arrival. The Senate should find something better to do. Please note that I do not subscribed to the President spending money without the requisite approval but the needful has been done by making spending and the approval anticipatory. “The Senate should either approval or reject same. The circumstantiality of the whole saga is what is paramount.” Since Nigeria became a Republic in 1963, no President has ever been impeached. A political analyst,TaiyeOdewale,attributed this to what he called political, religious and ethnic considerations by Nigerian politicians.

BudgIT commends NNPC on plan to reduce gas flaring

… asks for more transparency HOPE MOSES-ASHIKE

udgIT has asked the Nigerian National Petroleum Corporation (NNPC) to be more transparent in its operations, even as it applauds the corporation on the plan to end the prevalent but disadvantageous practice of gas flaring. Ibe Kachikwu, minister of state for petroleum, in 2015, initiated the process of publishing monthly financial and operational reports of the NNPC. However, the reality in the report released so far is an outcry for improved transparency and efficiency. BudgIT also noticed that NNPC had not published the monthly report in 2018, falling short of openness and accountability. According to a press release by Abiola Afolabi, communications lead of BudgIT, the plan of NNPC to reduce gas flaring will not come at a better time than this, as the menace is not only ravaging lives in the host communities but also costing the economy over $2.5 billion annually, and yet the economic implications of ending this practice should significantly improve Nigeria’s power generating capacity. Gas flaring also has significant impacts on the life expectancy of the “working poor” and “have-nots” who struggle to live within these communities. BudgIT welcomes NNPC’s

new three-point smart strategy aimed at ending gas flaring in Nigeria, but encourages the corporation to release more information about the process, performance metrics, regulations and enabling laws that will aid in the fulfilment of this plan. BudgIT’s recent publication on gas flaring indicates about 30 million people residing in the Niger Delta are affected by unnecessary gas burning by oil companies in the region. It says it is therefore commendable that Maikanti Baru in his speech at the 50th Offshore Technology Conference (OTC) laid out a three-point smart strategy aimed at ending the practice. BudgIT is pleased with NNPC announcement to reduce gas flaring ahead of 2020 flare out deadline by the Department Petroleum Resources (DPR). “We urge the media, Civil Society Organisations, oil companies and the government to ensure that this laudable initiative is monitored and implemented. It is equally important to see a demonstrable plan with specified timelines of strategy implementation,” it states. While BudgIT acknowledges and commends the government on the lofty goal of ending gas burning, the lead partner of BudgIT, Oluseun Onigbinde, notes, “We believe the perennial issue of gas flaring can be contained if there is a political will to implement the declared policies.

L-R: Serge Noujaim, CEO, Cool FM, Wazobia FM; Femi Obong-Daniels, head of stations/group head, Sports, Cool FM, WAZOBIA FM, Nigeria Info, and Chichi Nwoko, general manager, Kwesé Free Sports Nigeria.

NCAA suspends First Nation Airways over illegal operations IFEOMA OKEKE

igerian Civil Aviation Authority (NCAA) has suspended the Air Operators Certificate (AOC) of First Nation Airways indefinitely. This suspension was conveyed to the airline via a letter with reference no. NCAA/DG/ CSLA/RM/1-06/18/2304 dated May 11, 2018, signed by the director general. The letter titled Notice of SuspensionofAirOperatorsCertificate wasdeliveredtotheairlineMay11, and had acknowledged receipt. According to Sam Adurogboye, general manager, public relations, NCAA, the suspension is sequel to the flagrant and continuous violation of the terms and conditionsofissuanceofitAOCby theairlinetherebycarryingoutunauthorised and illegal operations. The letter revealed that when

the AOC of First Nation Airways expired, the airline did not have at least two airworthy aircraft capable of servicing its approved schedule as required by Part 9.1.1.6(b)(2) (ii) of Nigerian Civil Aviation Regulation (Nig. CARS) 2015. “Consequently, the Airline’s Air Operators Certificate (AOC) was, upon renewal, restricted to non-scheduled operation (Charter) only. “However, First Nation Airways embarked on scheduled operations with continuous advertisement of its services and sold tickets at its check-in counters in Lagos and Abuja airports,” Adurogboye said in a statement issued to the media Sunday. The authority had earlier notified the airline that it was investigating these violations. Subsequently, by a letter dated August 31, 2017, the airline

was directed to stop the illegal operations forthwith, warning that failure to desist would lead to a suspension of its operating authorisation. Onfurtherinvestigation,itwas discovered that it had disregarded all warnings and continued with the unauthorised and illegal operations in violation of its AOC terms and conditions of issuance. This is contrary to the provisions of Part 9.1.1.4(d) of the Nig. CARS 2015, which provides that “Each AOC holder shall at all times, continue in compliance with the AOC terms and conditions of issuance, and maintenance requirements in order to hold that certificate. “The Authority has therefore determined that, pursuant to Section 35(2),(3) (a) (ii) and (4) of the Civil Aviation Act, 2006, First Nation Airways is no longer fit to operate air transport business

under the authority of the AOC. “Accordingly, the Airline’s AOC has been suspended indefinitely, with effect from the 11th May, 2018, when it received the notice. “In addition, the operators of the Airline are expected to return theAOCtotheAuthority’sDirector of Operations and Training within seven days of receiving the letter. “However, it should be noted that anytime the Airline demonstrates ability and willingness to comply with the extant regulations, the Authority shall review the Airline’s operations and restore the AOC to enable it commence operations,” the statement noted. The NCAA restated its zero tolerance for violations of the Nig.CARS and shall continue to enforce compliance through application of appropriate sanctions for any infractions.

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A1 NEWS

BUSINESS DAY

2018 budget is the most delayed in 19 years BUNMI BAILEY AND ANI MICHAEL

heproposed2018budget, which Nigerians thought would take a paradigm shift from the traditional practice of delay in passage, has failed expectations as the budget sets a record of the most delayed in 19 years, BusinessDay calculation shows. The 2018 budget marks the longest budget passage since Nigeria exited military rule to a democratic setting from 1999 - till this present period. May 10, 2018 makes it one year since the National Assembly passed the 2017 budget, yet 2018

Lagos woos filmmakers at global scene JOSHUA BASSEY

ola Adeyemi, permanent secretary, Lagos Ministry of Tourism, Arts and Culture, says the state holds the most potential in film making and any international filmmaker not yet in Lagos has not tasted Africa. Adeyemi made the observation at the unveiling of ‘Cinema,’ a magazine that showcases the endowment of Lagos in culture, arts, tourism and film making, at the Cannes International Film Festival, in France, on Saturday. According to Adeyemi, filmmakers and producers around the world are, therefore, advised to take advantage of infrastructure and enabling environment provided by the state government to shoot their films in Lagos. Adeyemi, who described Lagos as a land of opportunities, also encouraged global investors to look in the direction of the state, he said operated with liberal policies and programmes that guarantee returns on investment. He said the Governor Akinwunmi Ambode-led administration was passionate about creative arts/ entertainment with the vision to making it the next global money-spinner. According to Adeyemi, Lagos is blessed with natural beaches and scenery for film quality and production, and “we warmly invite you to Lagos to shoot your films.” Desmond Elliot, chairman, Lagos House of Assembly committee in tourism, arts and culture, on his part, said, “Lagos State is not just in Cannes to sell and market itself as a venue for shooting films but to tell the world that the government back home is a lover of the arts and entertainment industry.”

proposed budget has not been passed despite continued assurance by Senate president, Bukola Saraki that the 2018 budget would be presented this week. Instead, both chambers of the National Assembly adjourned till Tuesday, May 15, 2018, without laying the proposal. “It is a problem in Nigeria; our fiscal year is not defined. For some countriestheydoaJanuarytoJanuary or May to May, but in Nigeria I can’t remember the last time we have a structure, and because of this constant lateness in budget they have the system so unbalanced,” Ayomide Faleye, a senior analyst at BudgIT, said.

BusinessDay analysed the dates from when 2018 budget was presented to when it was assented from 1999 - 2018. The analysis showed that the 2018 budget as of May 10 marked 185 days from November7,2017,whenPresident MuhammaduBuharipresentedit. Faleye said, “The countdown is when the proposed budget was presented till now, which makes it the longest since 1999. “Considering the fact that we areadvocatingforamoretransparentandaccountablegovernment; the Legislature and Executive are responsible for the release of the budget document are not sensitive to things that are of interest to

the citizens.” Since 1999, budget delay has been a common tread. It was only the 2009 budget that had the shortest time frame. It took a period of 16 days from December 2, 2008 - December 17, 2008, for the budget to be presented by then President Umaru Yar’Adua, and accepted and passed by the National Assembly. “There was harmony between the President and the National Assembly, and it can also be that there was a lot of rapour between them then, unlike what we have now,” Johnson Chukwu, CEO of Lagos-based financial advisory firm, Cowry Assets, said.

Section 81 of the 1999 Constitution mandates the President to prepared and laid before each House of the National Assembly, at any time in the financial year, estimates of the revenues and expenditures of the Federation for the next following financial year. Since 1999, successive presidents have persistently laid the budget estimates in the National Assemblyverylateintheyear.Itwas only in 2001 and 2007 that budgets presented to the National Assembly were approved before January. Extant literature affirms that global best practice, especially among the Organisation for Economic Co-operation and Devel-

opment (OECD) countries, puts the time for the presentation of the budget to parliament at two-four monthsbeforethebeginningofthe next fiscal year. The time allowed for parliament to deliberate and approve the budget is two-three months before the next fiscal year. Also, the Chilean Constitution mandates that the executive provide the legislature its budget 60 days before the end of the fiscal year. AyodeleShittu,alectureratDepartmentofEconomics,University of Lagos, also said if the standard number of days required to pass the budget was 60 days then ours was abnormal.

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BUSINESS DAY

A4 BUSINESS DAY NEWS Buyers returning to high-end property market as inquiries increase in Q1’18 CHUKA UROKO

igerian property market is still challenging with over 20 percent drop in prime office rent, but the market has seen increased enquiries, meaning buyers are returning to the market. This reflects the situation in the prime property market in London, which is also challenging with prices down 3 percent in the first quarter of 2018. Known for its slow reaction to changes in the wider economy, the property market recorded gradual rebound in the first quarter of this year (Q1’ 2018) several months after the economy exited recession and witnessed significant improvement. There has been an increase in enquiries estimated at 10 percent in the last six months, but those enquiries could not translate into closed transactions or increased prices, leaving the market and asset value largely unchanged. But this has raised the hope that the market rebound is in sight, meaning that investors whose money had been tied down all these while will start recouping their investment, investing more in the economy and creating more jobs through activities at construction sites.

“We are getting much more demand. In real estate, the reaction time is usually slow and I am talking specifically about Agrade commercial office space,” affirmed a leasing agent who did not want his name mentioned. He disclosed that the number of square metres of space rented out between June 2017 and now from majority of the A-grade offices they have in their books has exceeded all they did in the previous two years put together. This shows that, though the market is still not where it should be, there has been much more successful outing in the last six months than the previous two years combined. Besides that, enquiries are increasing which means that there is hope that in the very near future, transaction and sales will happen. The residential segment of the market is telling similar story of buyers gradual return to the market which is not yet back to the 2014 and 2015 transactions, but the situation in the first quarter of this year cannot be compared to the same period in 2016 because the former is a lot better. But there is a challenge. Rising construction cost in the face of low demand has compelled most developers to slow down to watch the market. “I see a situation where, because development has slowed down, the economy

is recovering, money is trickling into people’s pockets, property prices which had been flat for so long, has to go up because a developer who borrows to build cannot sell at today’s price any longer,” the agent noted. From the buyer’s side, there has been a significant shift because, with the economy starting to pick up, there has also been a shift in enquiries such that if in a week early last year there were just three serious calls, now there could be up to 10. Many prospective tenants are still inspecting, saying they are raising funds. The fall in the value of the naira relative to the dollar is still haunting and piling pressure on the retail segment of the market. Retailers are still struggling with dollar rents and a good number of them are closing shops at the structured malls and moving to stand alone houses. The mathematics is yet to add up for that sector. For instance, a retailer who was bringing in goods at $100 before the naira devaluation had N16,000 as his cost and so, he could sell for N20,000. Now, the same retailer is still bringing in goods at $100, but his cost has moved from N16,000 to N36,000, and the buyers are not yet ready to pay N40,000. So, the next thing for him to do is to leave the mall.

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Monday 14 May 2018

Nasarawa University produces Nigeria’s first professor of capital markets CYNTHIA EGBOBOH

istory was made recently when the Governing Council and the Senate of Nasarawa State University, Keffi, pronounced Uche Uwaleke a professor of finance and capital markets, thereby making him the first Professor of Capital Markets in Nigeria. A multi-disciplinary scholar, Uwaleke holds a B.Sc degree in accounting, an MSc in Economics (specialising in finance), and a PhD in finance with over 20 years of lecturing engagements in reputable higher institutions in the country. At various times, he taught ‘’Capital Markets and Institutions’’ to students of University of Abuja and Kaduna State University. Currently, he is the head of Banking and Finance Department at Nasarawa State University, Keffi, where he handles investments and securities markets studies at both undergraduate and post-graduate levels. Uwaleke is a thoroughbred professional. He is a Fellow of the Institute of Chartered Accountants of Nigeria, a Chartered Banker and a Chartered Stockbroker. He is also a member of the Chartered Institute of Taxation of Nigeria, the Institute of Capital Market Registrars and the Nigerian Economic

Uche Uwaleke

Society. His contributions to the growth of the Nigerian capital market have been immense. He is on the Editorial Board of the Nigerian Journal of Securities Markets, a publication of the Securities and Exchange Commission. He is also a member of the Advisory Committee of the Nigerian Stock Exchange and has been actively involved in capital markets literacy efforts of the Abuja branch of the NSE. He led research teams drawn from SEC that put together a compendium of the ‘’African and Middle East Capi-

tal Markets’’ as well as a publication on ‘’Nigeria’s Fixed Income Market’’. He has facilitated several training programmes for staff of SEC and has made significant inputs in the on-going effort by the Commission to introduce capital market studies in the curriculum of secondary schools in Nigeria. He has authored/co-authored over 60 articles in referred local and international journals including 10 books among which are ‘’Contemporary Issues in Capital Market Studies’’ and ‘’An Insight into the Nigerian Capital Market’’.

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A8 BUSINESS DAY

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Monday 14 May 2018

NEWS

CBN, UBA, Access Bank, FBNH to earn N19.01 bn dividend from AFC BALA AUGIE

fricaFinanceCorporation (AFC), a developmentfinance institution that funds infrastructure on the continent will pay N19.65 billion in dividend to the Central Bank of Nigeria (CBN), United Bank for Africa (UBA), Access Bank Plc, and First Bank of Nigeria (FBHN) Plc. The apex bank and three otherlendersaremajorityshareholders in the corporation. Abreakdownofthedividend figures show CBN with 42.30 percent shareholdings will get N8.30 billion as reward for investing in the Corporation. UBA, Access Bank, and FBHN, WEMPCO and Gloria Investment with shareholdings of 10.70 percent, 10.20 percent, 9.10 percent, 4.60 percent and 4.60 percent will earn N2.10 billion, N2.0 billion, N1.78 billion, N903.56 million and N903.69 million respectively. The dividend payment represents a payout ratio of 54.60

percent,signallinganaggressive policy as the Corporation continues to invest in infrastructure acrossAfricawhilecontemporaneouslyusingtheseinvestments tocreatevalue,generateincome and capital appreciation for its shareholders and stakeholders. Notwithstanding the challengingoperatingenvironment, AFC posted a profit after tax of N36.11 billion ($100.31 million), which represents a 8.30 percent decreasefromtheN39.15billion ($109.36million)profitrecorded the previous year. The decrease in profit was brought on by a 126.38 surge in impairment charge on financial assets to N22.70 billion ($63.07 million) and a loss on financial assets of N8.36 billion ($23.29 million) in the period under review. The upswing in impartment charges was largely as a result of impairment taken on equity investment as the Corporation achievedareturnoninvestment of 6.80 percent in the period under review.

Interest income from loans and advances to customers and banks grew by 21.32 percent to N84.21 billion ($233.94 million) in the period under review from N69.41 billion ($69.41 million) the previous year. The Corporation’s gross revenues increased by 22.82 percent to N94.43 billion ($263.70 million) in the period under review, driven by strong accrual income and impressive annuity revenues on the existing debt portfolio. Netinterestincomefollowed the same growth trajectory as it increased by 21 percent to N51.37 billion ($142.7 million), driven by higher yields and volumes on interest earning assets, with net interest margin at 4.6 percent. “Notwithstanding the challenging operating environment, Africa Finance Corporation delivered strong underlying operating results for 2017,” said Okwu Nnanna, Chairman Africa Finance Corporation (AFC).

DBN to commence credit guarantee scheme before Q1, 2019 ONYINYE NWACHUKWU, ABUJA

evelopment Bank of Nigeria (DBN) would,beforethefirst quarter of next year, commence a credit guarantee scheme that would allow it give some comfort to commercial lenders to provide long-term moneytothemediumsmalland microenterprisesinthecountry. The World Bank is already collaborating with the DBN on the risk guarantee model, and according to Tony Okpanachi, DBN managing director, the bank plans to provide up to 50 percent partial guarantees for financial institutions who want to lend to MSMEs. “We have gotten the regulation approval to set it up, it going tobeasubsidiaryofthedevelopment bank of Nigeria and we havestartedworkingwithWorld Bank to get the consultant, put the structure in place. It is our projection that towards the end

of the year or early next year the credit guarantee should come on board,” Okpanachi said in an interview in Abuja. The DBN commenced operations in March 2017, as a Wholesale Development Finance Institution to provide sustainablefinancingtoMSMEs througheligiblefinancialinstitutions. The bank, which targets to promote growth and sustainability, commenced actual disbursements in October 2017, with some N5 billion long-term money to over 20,000 Micro, Small and Medium Enterprises (MSMEs). Giving a progress report on the bank’s operations after one year, Okpanachi said, “... recall, 1st of November last year we started our lending activities with three microfinance institutions. We have made available to them N4.9 billion, for several SMEs, so as they bring their clients on board, we sign. “Beyond that we have start-

ed bringing on board some commercialbanks,wehavealso made lines available to them. But I’m glad to tell you that we have almost nine institutions currently on our list both commercial and micro banks, and between now and the end of June we expect more commercial banks.” He explained that the bank’s rates could not be as cheap as expected because, according to him, the sustainability of the bank as a long-term, selfsustaining, private sector-led institution is quite critical. Speaking on simplifying the bank’s loan processes to enable more MSMEs access the funds, he informed that they engaging the Participating Financial Institutions on the matter. “There is an engagement going on with the PFIs. The PFIs do the credit appraisal, which we can’t get involved. ButwhenitgetstotheDBNside, unlikeotherinstitutions,it’swith speed,” he stated.

ICAN, ICAEW sign MoU to strengthen capacity of SMEs accounting practitioners KELECHI EWUZIE

resident of Institute of Chartered Accountants of Nigeria (ICAN), Ismaila Muhammadu Zakari, says the memorandum of understanding (MoU) signed with Institute of Chartered Accountants in England and Wales (ICAEW) is to strengthen capacity of Small and Medium Accounting practitioners in Nigeria. Zakari observes that the collaboration will help both institutes share information on how to improve in standards development, international auditing standards, international public sector accounting, and internationalaccountingeduca-

tion standards. Speaking after signing the MoUattheICANofficeinLagos, Zakari says the MoU will further strengthen skills, competencies andensurethataccountingprofessionalsthroughadvocacycall forimprovedaccountabilityand tackle the menace of corruption in Nigeria. According to Zakari, “The nature of the MOU is such that we have agreed to collaborate to strengthen our capacities and learn from each other all withtheaimofimprovingglobal economies.” Nick Parker, president, ICAEW, says what the MoU will do for both bodies is that it will make sure that both institutes learn from each other; share

information on how to make computer based examination recently started by ICAN to be smoother. Parker says the two accounting bodies are working for the same goal of entrenching transparency in accounting practise adding that if you have transparency, then you have accountabilitytobringindividuals, companies to answer for their actions. “Weareveryimpressedwith ICAN’s examinations. We have had an independent assessment of the examinations and found that they are of very high standards. So we are very keen to collaborate with ICAN going forward so that both institutes can improve,” he says.

Billion dollar Malabu oil bribery trial kicks off against Shell, Eni, CEO, executives ISAAC ANYAOGU

n Monday 14th May Royal Dutch Shell and Italian oil giant Eni, alongwith a number of their senior executives, face criminal charges in Milan of aggravated international corruption for their role in a $1.1bn deal for a Nigerian oil block. No company as large as Royal Dutch Shell or such senior executives of a major oil company have ever stood trial for bribery offences. Analysts say the trial should signal a turning point in the way the oil industry has operated as some of the most senior executives of two of the biggest companies in the world could face prison sentences for a deal struck under their watch. Shell has recently accused one of these former executives of taking kickbacks in a separate Nigerian deal. “This trial is a clear signal that it is no longer business as usual for oil companies in Nigeria. It’s time justice was served,” said Lanre Suraju,ChairmanofNigerianNGO HumanandEnvironmentalDevelopment Agenda. Eni’s current CEO Claudio Descalzi, former CEO Paolo

Scaroni, and Chief Operations and Technology Officer Roberto Casula are also standing trial alongside four former Royal Dutch Shell staff members including Malcolm Brinded CBE, former Executive Director for Shell’s Upstream International operations and two former MI6 agents employed by Shell. The prosecution by the Milan public prosecutor was triggered by a complaint filed in autumn 2013 by Global Witness, The Corner House, Re: Common and Nigerian anti-corruption campaigner Dotun Oloko. The case has also been investigated in Nigeria and the United States following the groups’ complaints. Public prosecutors in the Netherlands are also investigating the case. Shell, Eni and their executives have denied all charges. A Shell statement sent to Global Witness on 28th March 2018 said: “Shell filed a criminal complaint with the Dutch authorities because we suspect a crime may have been committed against Shell by a former employee in relation to the sale of Oil Mining Lease (OML) 42 in Nigeria in 2011. Based on what we know from an internal investigation, we suspect this is a case of possible

kickbacks, related to the actions of a former employee who left Shell more than three years ago. The individual in question is Peter Robinson, then VP Commercial Sub-Saharan Africa.” Shell also stated “that based on what we know today, the OML 42 issue is unrelated to the OPL 245 settlement.” An Eni executive Roberto Casula, who will also stand trial in Milan over the OPL 245 case, took a leave of absence from the company in April. Casula told Reuters in an emailed comment: “Noting the recent allegations made against me, and given the esteem in which I hold our business and colleagues, I have decided to take a temporary leave of absence from work. My primary objective is to fully and promptly address these allegations and cooperate to the fullest extent with the judicial authorities.” For years, Shell had claimed that it only paid the Nigerian Government for the OPL 245 oil block. But after the joint investigations of Global Witness and UK investigative journalism group Finance Uncovered, Shell confessed it had dealt with convicted money launderer and former oil minister Dan Etete.

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Eventbrite: Building a business through acquisitions

Silicon Valley: It’s not fair!

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Theresa May’s Brexit options attacked by Conservative factions Rival wings of the party criticise prime minister’s customs plans LAURA HUGHES

he warring factions inside Theresa May’s Conservative party on Sunday heaped further pressure on the prime minister over the government’s Brexit policy by attacking her two options for a new customs policy after the UK leaves the EU. Environment secretary Michael Gove, a leading Eurosceptic, said there were “flaws” in Mrs May’s preferred option of a “customs partnership” with the EU after Brexit. Anna Soubry, a pro-EU Conservative MP, strongly criticised the second option for a post-Brexit customs policy — the “maximum facilitation” plan, which is being championed by Eurosceptic ministers. The interventions highlight the acute problems facing Mrs May as she attempts to end government paralysis over Brexit policymaking. Her cabinet committee on Brexit is due to meet on Tuesday to consider the two options for a new customs policy, with the prime minister keen to finalise an agreed position before an EU summit in June. Without a breakthrough on this issue, the other 27 EU member states could hold back on discussions about the bloc’s long term relationship with the UK. Under the customs partnership that Mrs May favours, Britain would in theory have frictionless borders with the EU — crucially in Ireland, where Brexit risks undermining the Good Friday peace agreement. The UK would mirror EU customs rules at its ports, collecting tariffs for the bloc while maintaining the right to set Britain’s own duties and trade policy. But Mr Gove, speaking on the

BBC’s Andrew Marr Show, said there were significant questions over whether the plan could be delivered in time for Brexit. Asked whether he agreed with foreign secretary Boris Johnson that the plan was “crazy”, Mr Gove said: “It’s my view that the new customs partnership has flaws and they need to be tested.” He also dismissed the possibility of extending UK involvement in the existing EU customs union beyond the post-Brexit transition period, to allow for relevant technology to be developed for the plan. One official saidHM Revenue & Customss had told ministers that the customs partnership could be vulnerable to legal challenges. Meanwhile, Ms Soubry attacked the maximum facilitation plan, under which borders between the EU and the UK would be smoothed by the use of new technology. She said the plan amounted to a Brexit deal “in name only”, adding: “It’s a no deal Brexit — [World Trade Organization] rules through the back door. The PM needs to . . . see it off.” Irish deputy prime minister Simon Coveney rejected the possibility of any form of border infrastructure on the island of Ireland. With Irish prime minister Leo Varadkar having last week said Mrs May’s customs partnership could potentially be made workable, Mr Coveney said he hoped there could be a negotiated “shared customs space or shared customs territory”. Writing in the Sunday Times, Mrs May issued a public call for unity and said she could be “trusted” to deliver Brexit. “Of course, the details are incredibly complex, and, as in any negotiation, there will have to be compromises,” she added.

Italy’s populist parties close to forming government Five Star and far-right League have ‘an agreement on key points’ JAMES POLITI

taly’s leading populist parties are within striking distance of forming a government in the eurozone’s third-largest economy after claiming progress in talks at the weekend. Luigi Di Maio, the leader of the anti-establishment Five Star Movement, and Matteo Salvini, the head of the far-right League, met each other and staff at the Pirelli Tower in Milan on Saturday and Sunday to thrash out details of a coalition deal. “Obviously we are writing history and it takes a bit of time,” the 31-yearold Mr Di Maio said after Sunday’s meeting with Mr Salvini. “There’s an excellent climate at the table, we are tackling very important issues.”

But on Sunday afternoon the two sides had still not reached agreement on a choice of prime minister and were considering proposing a shortlist of candidates to Sergio Mattarella, Italy’s president. Mr Salvini, 45, had previously told reporters after Saturday’s meeting that the two parties “essentially have an agreement on key points.” Five Star and the League emerged as the big winners in Italy’s last general election in March after scoring significant gains to the detriment of the country’s traditional centrist political parties. These included the incumbent centre-left Democratic party, and Forza Italia, the centreright party led by former premier Silvio Berlusconi — who on Saturday Continues on page A10

Theresa May: ‘Of course, the details are incredibly complex, and, as in any negotiation, there will have to be compromises’ © Getty

Deutsche Bank looks to remove investment unit underperformers Group looks to follow in footsteps of Goldman as it vows to shake up the division BEN MCLANNAHAN AND LAURA NOONAN

eutsche Bank will step up efforts to boot out underperformers, according to a new co-president of its troubled investment banking division, as it tries to emulate Wall Street rivals such as Goldman Sachs. Mark Fedorcik, head of US corporate finance who was promoted last week to the additional role of co-president of the corporate and investment bank, indicated there was more cutting to come, telling the Financial Times that Deutsche was now “doing a much better job on a systemic basis at looking at the underperformers”. He added that Deutsche was looking to be more like Goldman, which routinely prunes the bottom 5 per cent of staff each year, across the board. Christian Sewing, the new chief

executive of the Frankfurt-based bank, has vowed to shake up the global division, the bank’s largest, as he tries to put an end to years of losses and litigation. The bank has already made big cuts in the US, including the closure of the Houston office, which Deutsche had opened four years earlier in a bid to challenge the top oil-and-gas lenders such as JPMorgan Chase and Citigroup. “Morale is actually pretty good; people are encouraged by the state and the pace of change,” said Mr Fedorcik, a loans specialist who started at Bankers Trust and joined Deutsche in the 1999 merger of the two. “People want to be focused, they want to see the bottom performers taken out.” In 2017, Deutsche eliminated performance-related bonuses for all but its most junior staff, triggering a fresh wave of departures from a bank that has already lost a lot of talent as its share price plumbed record lows while

rivals recovered. Under Mr Sewing, who headed Deutsche’s retail banking before his promotion to chief executive, it has been refocusing on business clients in Europe, cutting corporate finance activities in the US and Asia. Deutsche has also vowed to shrink its markets businesses such as equities, interest rates trading and prime broking, as it seeks to reduce its balance sheet and leverage. One person familiar with the restructuring effort across Deutsche’s markets businesses said that a similar approach was under way there: lay-offs of poor performers in good units, as well as good performers in poor units. Total cuts across the US could come to about 10 per cent of staff, according to people familiar with the plans. The bank had about 10,300 US employees at the end of April, roughly one-tenth of the global workforce, and has already cut about 400.

Mahathir moves to quell doubts over reformist credentials Tensions emerge in coalition after return to power of 92-year-old ex-premier BEN BLAND

ew Malaysian prime minister Mahathir Mohamad has moved to quell doubts about his reformist credentials after the 92-year-old returned to office last week in the first transition of power since Malaysia won independence in 1957. Investors have reacted cautiously to his remarkable election victory, largely because of his chequered past as prime minister between 1981 and 2003, and his populist economic policies. Mr Mahathir at the weekend banned his predecessor Najib Razak from leaving the country and faced complaints from some members of his parliamentary coalition that he was already ignoring their views But in a press conference on Sunday, he sought to emphasise his commitment to good governance despite his strongman past. “We’re going to use majority rule in the cabinet,” he said. He added that, once complete, the 35-person cabinet would reflect the

parliamentary representation of the four parties in his coalition, of which the biggest is the People’s Justice Party (PKR) of Anwar Ibrahim, his imprisoned former nemesis. But tensions emerged within the coalition at the weekend. On Saturday, senior members of Mr Anwar’s party accused Mr Mahathir of failing to consult them before making the first Cabinet appointments. In a bid to overcome the strains, Mr Mahathir and Mr Anwar met on Saturday night, in the hospital where Mr Anwar is recovering from an operation. Mr Anwar said on Sunday that he had conveyed to Mr Mahathir the “unease” of his party’s leadership at the prime minister’s behaviour and their desire for a “more inclusive” approach. But he also reiterated his support for his former mentor and called for politicians to unite to “rebuild our country”. Mr Anwar, who was jailed by both Mr Mahathir and Mr Najib on separate, politically motivated sodomy

charges, is expected to be pardoned and freed from jail within days, opening the way for him to eventually take over as prime minister. Wong Chen, a PKR MP, said that the key to the success of the new government was for “Mr Mahathir and Mr Anwar to work well together”. He added: “Otherwise we will be in trouble.” Seeking to reassure investors before markets open on Monday, Mr Mahathir appointed three ministers and a team of economic advisers, pledging to appoint seven more ministers this week. He also signalled his intention to tackle the corruption scandal at 1MDB, the Malaysian state investment fund, a big factor in Mr Najib’s fall in last week’s election. “The next few days might be a bit bumpy until there’s more clarity on the new government’s economic policies,” said one investment banker. “But give it a few weeks and there’s going to be a real feelgood factor because Malaysians are much happier now and that’s going to help growth.”

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Landmark bond sales hit by emerging markets downturn Investors who bought debt sold by rare sovereign issuers are left nursing losses KATE ALLEN

nvestors who bought some of the riskiest emerging market sovereign bond sales in the past year have been left nursing paper losses as a strengthening dollar has rattled sentiment for emerging markets.

JPMorgan’s emerging markets bond index has lost 5.1 per cent since the start of this year. Some of the worst-hit bonds are those from countries that were rarely seen in debt markets until last year, when demand for sovereign debt paying attractive fixed yields was paramount

among investors. As the US dollar rises in value, there is a concern that indebted EM countries face a higher burden of paying back their borrowings in local currency terms. These include Tajikistan, whose debut $500m, five-year bond was sold last year at a cou-

pon of 7.125 per cent and is now trading at a 9.26 per cent yield; and Ecuador, which sold $2.5bn of 10-year debt in October at a 8.875 per cent coupon which is now trading at a 10.8 per cent yield. The hit to emerging market investors comes as fears are

Labour’s Tessa Jowell dies at 70 after cancer fight

Italy’s populist parties close to forming... Continued from page A9 saw a court lift a ban on him holding public office a year before it was due to expire. During the campaign and afterwards, the two populist parties each vowed to take tougher positions against Brussels, promising to seek a “revision” of existing EU treaties amid widespread discontent with the way the EU has handled economic policy and migration. A government of the two parties would represent one of the biggest upheavals in postwar Italian politics. But the issue of who will serve as prime minister remains difficult to resolve for the new populist alliance. While both parties have sought to claim the job for themselves, they are considering technocrats for the post. Among the names that have been floated in recent days are Giampiero Massolo, a veteran diplomat and chairman of the Italian Institute for International Political Studies think-tank, and Guido Tabellini, an economist at Bocconi University. Five Star and the League — who were rivals during the campaign — did not begin serious negotiations to govern together until last week, when Mr Mattarella called for a caretaker government to be installed ahead of new elections. On Friday, Mr Di Maio and Mr Salvini had claimed progress in reconciling key economic policies, including Five Star’s desire to implement a guaranteed minimum income for the poor, as well as the League’s push to introduce a flat income tax. They have long championed the repeal of a landmark pension reform introduced at the height of the eurozone’s sovereign debt crisis in 2011 to reassure markets. The combination of those plans to cut taxes and raise spending has triggered alarm bells about Italy’s fiscal discipline, since the country already suffers from one of the eurozone’s highest debt burdens proportional to economic output. In a thinly veiled warning to Mr Di Maio and Mr Salvini, Mr Mattarella — who will be the gatekeeper of the new government — reminded the two parties that he had the power to strike down laws that he believed to be inconsistent with the constitution. He specifically cited the precedent of Luigi Einaudi, the Italian president between 1948 and 1955, who struck down two measures that did not balance spending increases with offsetting budget cuts. Mr Mattarella also noted that he had the final word on the new prime minister and the rest of the cabinet. As Mr Di Maio and Mr Salvini forged ahead with a deal on Saturday, their political calculations were shaken by the ruling of the tribunal that lifted a ban on public office hanging over Mr Berlusconi, ahead of its scheduled expiry.

growing about the levels of debt that many low-income nations carry. The International Monetary Fund recently warned of a mounting risk of debt crises in low-income economies, noting that the world’s poorest countries are increasing their borrowing at a worrying pace.

Former cabinet minister helped to bring the Olympics Games to London in 2012 LAURA HUGHES

Can oil prices extend their Iran-fuelled rally? US dollar’s direction and emerging markets will also dominate trading screens this week FT REPORTERS

new week for investors and markets will focus on whether oil prices can extend their current rally, while the direction of the US dollar and emerging markets will dominate trading screens. What’s the peak for oil prices? Twelve months ago few people in the oil industry were prepared to bet that oil prices would ever trade consistently above $60 a barrel again. This week, some traders and analysts are starting to talk openly about the return of $100 crude. It has been quite the turnround for oil, with Brent crude hitting $78 a barrel last week after the US withdrew from the Iran nuclear deal, reimposing sanctions on the third-largest producer in Opec. Prices are now at the highest level since 2014, when the rise of the US shale industry first swamped the market and prompted many to write obituaries for triple-digit prices. The rally, many believe, can continue. Forecasts for the impact on Iran’s sanctions are wide, with them seen cutting as little as 200,000 barrels a day to 1.5m b/d. Demand has been incredibly strong, boosted by a global economy that is growing at the fastest pace since 2008. Supply cuts by Opec and Russia have exceeded expectations, with a handful of members — not least Venezuela — not so much cutting output as battling to stem a precipitous decline in their ability to pump crude. Also, there is a risk that the US could also sanction Venezuela’s remaining barrels over its opposition to a vote they believe is fixed for Nicolás Maduro. From the supply side, US shale output is soaring as prices have recovered. But the market has quickly come to the conclusion that this one corner of the industry cannot keep the market well supplied alone.

The wild card is the response of US president Donald Trump to rising petrol prices. His administration has already leaned on Saudi Arabia — the only producer with significant spare production capacity — to make sure oil prices do not get out of hand. But with Riyadh balancing a fragile oil market alliance with Russia and its own need for higher revenues, it is not clear how eager the kingdom will be to stall the rally. For now, expect more oil market fireworks and — as the past 12 months as shown — more surprises. The oil market has a habit of quickly shattering conventional wisdom. Are dollar bulls pausing for breath? The relentless rise in the US dollar since mid-April stalled last week, and the next stage of the asset allocation trade depends greatly on whether or not this is a pause in bullish momentum for the reserve currency. Recent US data showing no breakout in wages and inflation has knocked the ranks of dollar bulls as they reconsider the prospect of a more aggressive tightening pace being adopted by the Federal Reserve in the coming months. The dollar’s recent pullback has helped ease a modicum of pressure across the fragile areas of emerging markets. And a weaker dollar helped the S&P 500 close above its April high last week. The case for an extended bounce in risk assets rests on the dollar keeping quiet, an outcome that is vulnerable should upcoming US growth data show a greater divergence with that of the eurozone and other global areas. Any evidence of a faster growing US economy that extends the current business cycle is a powerful tailwind for the dollar. Will a lack of liquidity put further pressure on emerging market currencies? The dollar’s resurgence is being felt across the currency world, but

EM forex is feeling particular strain. Some of its weakness is exacerbated by liquidity problems, notably the pronounced moves in the Argentine peso, which have culminated in the government opening talks with the International Monetary Fund over financial help. The peso’s decline, by 11 per cent in 10 days, “were magnified by low liquidity within a broad-based EM sell-off ”, says Win Thin at Brown Brothers Harriman. Some traders reported that peso liquidity had been “terrible”. The Bank for international Settlements last year noted that the forex market turnover in Latin American currencies had been in decline from 2013-16 for many reasons, including structural changes, tighter financing conditions and political uncertainty. The broader concern for investors is whether Argentina’s problems can be ringfenced or spread to other parts of EM. “There are EM countries where the fundamentals are good, but you’re seeing big price moves,” says Kiran Kowshik, EM forex strategist at UniCredit Bank. “Where liquidity gets hampered, that reflects market moves which are not so aligned with fundamentals.” Attitude to risk is EM investors’ primary issue, but that is complicated if liquidity prevents them from withdrawing investments when they want. Could 3 per cent represent a cycle top for 10-year US Treasury yields? Twice in recent weeks the 10year has nudged over 3 per cent and each time buyers have been found to push prices higher, and yields lower. A solid $25bn auction of 10-year notes last week bolstered sentiment that investor appetite exists to own Treasuries at current yields, in spite of the size of the auction increasing.

ormer Labour cabinet minister Tessa Jowell has died peacefully at the age of 70 after a battle with cancer, her family announced on Sunday. Dame Tessa was diagnosed with a brain tumour last year, and her family said she suffered a haemorrhage on Friday and had remained in a coma until her death on Saturday. She was an influential member of Tony Blair’s New Labour government, and played an important role in bringing the Olympics Games to London in 2012. She became a dame for her services to politics and charity. A social worker before entering politics, Dame Tessa served as public health minister and culture secretary, among other roles. A spokesman for Dame Tessa’s family said: “It is with great sadness, and an enormous sense of loss, that we announce the death of Tessa Jowell. “She died peacefully at the family home near Shipston-on-Stour in Warwickshire . . . Her husband David and their children Jessie and Matthew were by her side.” Dame Tessa Jowell speaking in the House of Lords after she was diagnosed with a brain tumour © PA Speaking in the House of Lords on the subject of cancer treatment in January, Dame Tessa told peers: “In the end, what gives a life meaning is not only how it is lived, but how it draws to a close. I hope this debate will give hope to other cancer patients like me. So that we can live well with cancer, not just be dying of it. All of us. For longer.” Her call for more treatments to be accessed through the NHS received a standing ovation in the second chamber. Prime minister Theresa May said: “The dignity and courage with which Dame Tessa Jowell confronted her illness was humbling and it was inspirational. My sympathies to her loving family — Dame Tessa’s campaigning on brain cancer research is a lasting tribute to a lifetime of public service.” Mr Blair said Dame Tessa was “the most wise of counsellors, the most loyal and supportive of colleagues, and the best of friends”. “There was no one like Tessa and no one better. I will miss her more than I can say,” he added. “What she achieved was remarkable. She was the first senior politician fully to understand the importance of public health and to shift health policy towards prevention of illness and not only cure. “She brought the 2012 Olympics and Paralympics to London, and ensured their success.

Monday 14 May 2018

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COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Silicon Valley: It’s not fair! US government is not hounding Facebook and Theranos

im Draper, founding partner of venture capital firm DFJ, took to CNBC last week to complain that Facebook was being “picked on” by the government, the founder of Theranos had been unfairly persecuted and regulations were deterring companies from going public. It was not just his bitcoinbranded tie that should have made Silicon Valley cringe. Facebook shares last week recovered entirely from their 18 per cent price slide since March, after revelations that its customer data were acquired by a political intelligence firm. Investors have belatedly realised that the extent of the US government’s “picking on” Mark Zuckerberg is likely to be a couple of congressional hearings. Having regained its poise, and $500bn market capitalisation, Facebook is also a good counterpoint to the obdurate belief that companies are staying private because US public markets are so arduous. With the sixth anniversary of its initial public offering coming on Friday, Facebook has fared nicely — admittedly after a bumpy launch. Those supposedly onerous rules do not prevent Mr Zuckerberg from keeping a majority of the votes despite holding only 13 per cent of the shares. Sarbanes-Oxley, the 2002 law

passed in response to the Enron scandal, does add to the accountability (and bureaucracy) of public executives. Since then not only Facebook but also Alphabet (formerly Google), have gone public: both are among the top five companies in the world by market capitalisation. Being public does not eliminate fraud. Roomy Khan, a former insider trader herself, compares Theranos, the scandal-hit bloodtesting company, to Bre-X, a defunct Canadian miner. Its stock price soared on false reports of gold discoveries. It is difficult, however, to imagine Theranos going through the rigours of preparing an S-1 prospectus with so little evidence that its technology worked. And though it is obviously a shame that wealthy investors including DFJ and Rupert Murdoch lost money on Theranos, at least retail investors were spared. Most significantly, the episode has shown that unicorns are not outside the jurisdiction of the markets watchdog. It was the Securities and Exchange Commission that branded Theranos a “massive fraud”, forced founder Elizabeth Holmes to give up most of her stock and barred her from being a public company director for 10 years. Rules exist on both sides of the private-public divide. Neither of Mr Draper’s “victims” has reason to complain.

Apple and Samsung return to court in ‘Groundhog Day’ spat Smartphone giants back for another round in long-running battle over iPhone patents TIM BRADSHAW

onday will be Groundhog Day for Apple and Samsung as the two smartphone makers go back to court in California for another round of their longrunning patent battle. Like Bill Murray reliving the same day over and over again in the 1993 classic film comedy, lawyers on both sides are still fighting over patent damages, seven years after Apple first sued Samsung for copying the iPhone. A jury in San Jose will this week weigh up complex arguments over the value of Apple’s design patents, which describe the iPhone’s signature grid of colourful app icons and black rectangle with rounded corners. “It is remarkable that this case is still going on,” says Mark Lemley, a law professor at Stanford University. “The

parties have already spent more on lawyers than can possibly be at stake in the remaining case.” This week’s retrial will be the third time the same set of five patents have been the subject of litigation. In 2012, a jury awarded Apple $1.05bn in damages from Samsung but that sum was later reduced by Judge Lucy Koh after errors were found in the jury’s calculations. A retrial in 2013 handed Apple $290m but Samsung appealed to the Supreme Court, where it argued against the basis of the original ruling that damages from a single design patent could amount to a product’s entire profits. In December 2016, the Supreme Court agreed with Samsung that for products with many components, such as smartphones, the damages could be proportionate to the specific parts that were copied. However, the justices did not pro-

vide a final determination on how the damages should be calculated, sending the case back to San Jose again. The jury this week will be instructed to consider Apple and Samsung’s arguments as though they had woken up in 2012, under what Judge Koh has called her “Groundhog Day” principle. That means Samsung can fall back on the same metaphor it has been using for years: that a carmaker should not have to hand over a vehicle’s entire profits because it copied another car’s cupholders. Apple, despite the Supreme Court’s ruling, could still demand hundreds of millions of dollars in damages on the grounds that it sells the iPhone as a complete package, not in component parts. This time around, the jury will not have to decide whether Samsung infringed Apple’s patents — only the appropriate penalty.

Few funds sold to retail investors beat benchmark after fees

Trump orders U-turn over sanctions against Chinese telecom group

Italian consultancy Prometeia say managers do not take enough active risk

President intervenes with commerce dept in ZTE case after talks with Xi

CHRIS FLOOD

ess than one in five of the funds sold to retail investors in Europe in the past three years outperformed their benchmark after fees were taken into account, says research by Prometeia. The Italian consultancy examined the three-year record of 2,500 equity, bond and money market funds, with combined assets of €1.8tn, and found that only 18 per cent beat their benchmark. Absolute return, target date and alternative mutual funds were excluded from the analysis. Claudio Bocci, head of the asset management advisory team at Prometeia, said: “Many managers are unable to compensate for fees because they are not taking enough active risk, so they are very unlikely to beat their benchmark. This is a structural problem”. Performance records suggest that many fund managers struggle to deliver consistent success. Half the top-ranked managers of global and European equities, global bond and flexible balanced funds, measured by returns over three years, drop out of the top performance decile over the following 12 months.

Huge gaps also exist between the best and worst managers across all fund types, complicating the decisions facing retail investors. Mr Bocci said there was widespread misalignment between the fee structures and expected returns of many funds sold to retail investors in Europe. Prometeia estimated that up to a quarter of the funds (mainly bond and money market products) sold to retail investors faced a near-impossible challenge in delivering abovebenchmark returns net of fees. “Some of these conservative funds have close to a 100 per cent probability that they will fail to beat their benchmark because of costs. This is not a sustainable position,” said Mr Bocci. Prometeia’s findings echo criticism by the European Commission, which last month highlighted large variations in the cost of investment products and the quality of advice provided to retail investors across Europe. Many politicians want to redirect huge savings that remain locked in low-yielding bank accounts into useful investments. This task has been made difficult by the failure of financial product providers to give clear information to investors, especially the less financially literate, about fees and charges.

SAM FLEMING AND SHAWN DONNAN

onald Trump has ordered the US commerce department to assist a Chinese telecoms group that the agency nearly put out of business a month ago, following a personal request from China’s president. The U-turn on ZTE Corp, announced by Mr Trump on Twitter, comes despite a commerce department decision in April banning the manufacturer from sourcing vital components from US companies because of findings it had illegally sold equipment to Iran and North Korea. That move in effect put ZTE out of business, and the company announced on Friday it had halted operations because of the seven-year ban. The reversal marks an unusual intervention by the US president in what the administration had previously portrayed as a legal and procedural rather than political case. US officials insisted when they announced the ban last month that it was not related to broader US-China trade tensions. “I am speechless,” said Kevin Wolf, who oversaw the launch of the ZTE case as assistant secretary of

commerce in the Obama administration. “I’m highly confident that a [US] president has never intervened in a law-enforcement matter like this before . . . It’s so outside the way the rules were set up.” It also marks the second time in the last month the Trump administration has moved to roll back sanctions against a foreign company that had nearly been pushed into insolvency, raising questions over how thoroughly the White House is co-ordinating sanctions polic y with federal agencies. In April, the administration signalled it was prepared to undo sanctions against Russian aluminium group Rusal after the measures sent metals prices skyrocketing. The commerce department bar re d ZTE from purchasing components in the US for seven years after it was caught violating the terms of a $1.2bn settlement agreed last year in which ZTE admitted illegally selling equipment that included sensitive US parts to Iran and North Korea. Wilbur Ross, commerce secretary, accused ZTE of “egregious” behaviour that could not be ignored. At the time, US officials said the case launched during the Obama

administration was not part of Mr Trump’s escalation of trade pressure against Beijing. Officials said they had acted only because ZTE had been caught giving bonuses to the very officials responsible for the elaborate scheme used to circumvent US export control rules and had lied to US authorities about it. But during a meeting in Beijing earlier this month, Chinese officials raised a resolution to the ZTE case as one of their demands for a broader agreement on trade. Those trade talks are due to continue this week with the expected visit to Washington of Xi Jinping’s top economic adviser. “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast,” Mr Trump wrote on Twitter on Sunday. “Too many jobs in China lost. Commerce Department has been instructed to get it done!” Mr Trump’s move to help ZTE despite the allegations of sanctions busting comes even as the administration is attempting to convince foreign companies to cut off business ties to Iran following his decision last week to withdraw from the Iran nuclear deal and reimpose sanctions against Tehran.

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INTERVIEW ‘We don’t know when your decoder is on or off’ MultiChoice Nigeria recently organized a digital dialogue conference in Dubai. JOHN UGBE, the Managing Director and Chief Executive Officer of MultiChoice Nigeria, who was at the conference, shared his views on the Pay TV market in Nigeria and how MultiChoice is positioning for a digital future. DTT network we had Russians coming to study it. We look to the future for what is possible to do.

W the billions?

hat is your reaction to the assertion that 170million votes from the recently concluded BBN, came exclusively from SMS, thereby yielding profit in

Recently, MultiChoice ran a promo asking subscribers to pay for two months and get one month free, but there were complaints from customers who didn’t get the promised month. What is your response to this? It is true that we ran a retention offer late last year. When we received feedback that some customers did not get the free month on schedule, we identified those customers that were affected and we fixed it. We introduced a new process which helps to identify those who received the offer, and ensure that get the benefit immediately. Additionally in terms of improving on technology, we upgrade our decoder software from time to time to improve customer viewing experience. We ran a free swop campaign where we asked customers to bring in obsolete decoders for a free swop. It’s all in line with always striving to improve our offers to our customers. We also introduced toll free lines a few years ago. These numbers are available on our website and social media care platforms. On twitter, the address is @DStvNgCare.

There has been a lot of focus on the figure 170million, but to set the record straight; 170million votes came from 49 African countries, and more than 90% came from online voting. Under 2% of the entire votes came from SMS voting. Nigeria is the only country that was enabled to vote via SMS. The actual revenue generated from SMS voting could not be further from the much touted purported figure. Over and above the administration and platform set up costs, the majority of the profit went directly to the GSM and data service providers. Is there a way that you can review the location of Big Brother Naija to ensure it is domiciled in Nigeria, so that all economics of the hosting and its associated benefits come to Nigeria? Tinsel is domiciled in Nigeria and shown all over Africa. We just premiered a new epic series in Lagos. For this we built an entire village from scratch to portray the realities of a village setting. Our group of channels are called Africa Magic to reflect our African Heritage. Nigeria has the biggest movie industry that is why our productions are domiciled in Nigeria. For Hotel Majestic we had to take over a hotel in Nigeria for 2 years as a set. It’s a lot of investment. Big Brother demands a lot of complexities and outfitting a house. For the Big Brother shows, we set up one facility for the Nigeria, Angolan and other editions. It makes sense from a production perspective. It is impractical to replicate sets across our operations in 49 African countries. We choose the best location for each specific production. Big Brother Naija’s production team is made up of 90% Nigerians even though it wasn’t set in Nigeria – so a good deal of skills transfer occurs. Africa Magic Viewers Choice Awards (AMVCA) comes to Nigeria every year. Speaking as a Nigerian and an advocate of Nigeria – we keep looking at what it will entail to run it locally. Have you considered implementing a Pay as you consume model considering that work and life schedules make it difficult to catch shows without steady power? From a producer’s perspective – we have to buy the movie in full and we have to buy enough content to fill the channel and put it on air. That’s what the pay-TV model prescribes anywhere in the world. We have to aggregate content for our different packages, this means ensuring there is something for everyone on the package depending on your interest and pocket strength. But there is a good spread of a variety of content across all packages. Everyone thinks of today. From Day one, you have to buy enough movies to make up the channel and sell that package to one person. It’s a risk as you cannot determine if after buying content, only one or ten people will subscribe. If only one person does, you cut your losses and move on, but you continue to invest in content with the hope that more people will be interested in watching. Regarding breaking off viewing according to your availability, the challenge is in the model of the business. We don’t know when your decoder is on or off. That makes it impossible to say I want to start billing because this customer has started viewing. Pay as you go is a mobile network term. The mobile operators have the technical resources to measure what is being used. For pay-Tv on the other hand,it is not the same thing. Last August, the Mayweather vs. McGregor Boxing match was delayed for close to 3 hours. The reason it was delayed is because of the technicalities of pay-per-view in the US. Pay-per-view for a fight like that would be $99 – that is more than your one-month subscription on Premium – about double. However, we buy the fight and aggregate it for our Premium subscribers, who were able to record it, even when the live event did not happen on schedule. What we encourage our subscribers to do is download DStv Now, and you can

I hope the call centre is 24 hours. DStv should have a 24 hour call centre. This is good feedback and something we tested in December. However, there are a few challenges with labour laws. So we’ve been looking at how best our customers can reach us at any time of the day. We will communicate changes and updates in due course. Your payment operations is 24 hours. As soon as the payment drops the thing comes up immediately Payment is automated, and we encourage our customers to use our payment platforms such as eazy. dstv.com. This way, the customer can troubleshoot and resolve reconnection issues directly from their mobile phones without having to call into our call centre to be reconnected.

John Ugbe

watch all the content on your current subscription on the go, on your phone or tablet. You do not have to be bound by availability of power. Catch Up is there… Get it before the World Cup so it’s right there on your phone and your ipad and your laptop. Those are the innovations we’ll continue to make. What Social responsibility programs do you invest in as an organization? We focus on Education, Health and Youth and Economic Empowerment. Our MultiChoice Resource Centre project is our Education initiative that we have been active with for over 14 years. What we do here is work with the governments in each state to select beneficiary schools. We then provide audiovisual equipment (which include a dish, decoder with educational channels, TV, generating set, tables, chairs, UPS), to bring learning and the school’s curriculum to life. We set up our Education package in the chosen schools, train the teachers on how to select relevant programs intended to illuminate and animate information that would otherwise have remained theoretical or textbook based. The MRCs are present in over 400 schools across 33 states in Nigeria, tens of thousands of students have benefitted from these centres since inception. The feedback has been astounding. The rate of passing school leaving exams has improved. Several beneficiary students have gone on to become medical doctors, lawyers, and a good number are working in several other professions, as a result of this foundation that changed how they learn and retain information. I have experienced how this centre is used, and saw how students responded when they saw how a tsunami actually happens. They saw it happen on our platform and this made it easier for them to imagine how destructive a tsunami could be. Also in terms of Education we have partnered with Eutelsat for many years to roll out DStvEutelsat Star Awards, a satellite based competition for secondary school students across Africa. The students are required to answer questions on how satellites can be used to improve processes, the advantages of satellite and so on. These ques-

tions need to be answered through an essay or a poster. Last year, a Nigerian; Emmanuel Ochenjele emerged overall winner from the poster category. He met a real life Astronaut – Claudie Haignere, right here in Nigeria, and not long ago, he returned from Paris, as part of his winning prize, where he went to the Eutelsat headquarters to witness how rockets are assembled. This has changed his perspective forever. We implement our health responsibility by supporting the Sickle Cell Foundation. We have been partners for many years. We support them because the statistics of how Sickle Cell Anaemia affects Nigerians paints a dire picture. The Foundation seeks funds to carry out research, treat and inform sufferers. Their key objective is creating awareness on how to minimize its effects, research on how to avoid and ultimately cure the ailment. On our part we offer support through creating awareness, which we do on an ongoing basis through educational videos, community outreach programs, fund raising and other initiatives to support them in what they do. Our GOtv Boxing Next Gen clinics support the growth of Boxing, which we brought out of near extinction in Nigeria. Over and above the boxing matches which provide an avenue for the boxers to earn a living, the clinics provide tips on welfare, training and psychological support to these young ones. Some of the young boxers were picked from our Next Generation Search (for talented and passionate amateurs), they have now proven themselves in mainstream boxing and have won millions over the years. Ultimately, we train them to go professional, so that one of our boxers can proudly fly the Nigerian flag internationally. Is it possible to put my subscription on hold when I travel for a month? Yes we have made it possible for you to do that. You can put your subscription on hold when you travel for up to two weeks each time, twice a year. One of the things we thrive on is technology. The dual view decoder was first introduced in the world by MultiChoice. Digital Satellite TV (DStv) was only second after the US. When we build the

I know this is a question you’ve been looking at for a while. The strength of signals is still a problem. For instance if you watch a match and it rains you lose signal To shed some light on that, it is called rainfade. Satellite signal from the KU Band is susceptible to weather. I have taken pictures of my tv screen when I’ve been in New York or other parts of the world and I experienced interruption as a result of bad weather. It’s not a Nigerian problem. Your DSTV will work even with 40% signal. There is a need to boost the signal to have less interruption. We also make available quality cables to reduce interference. If rain comes in it will affect the quality. We recommend getting a certified installer to conduct regular checks to verify signal strength. Also, some dishes have not been checked in up to 5 years. Regular checks ensure that your dish works optimally, thereby reducing rain fade. Star Trek inspired a lot of Americans to go into science and go into the moon. What does Big Brother inspire among Nigerians? We are in pay TV, we are in entertainment. Entertainment is a mix of fun, inspiration and education. Remember, Reality TV is reality. This is what happens. The fact that they are on TV doesn’t change it. Entertainment can inspire in a variety of ways. A lot of people have come out of Big Brother and have grown into entertainment powerhouses. It’s a platform for exposure and advancement. Furthermore, we have a lot of educational and kids content. We ask our viewers to set up parental guidance so you can control what your child views. The parents have and have always had the control. Kids these days have smartphones and can download anything, but the blame is often put on TV. You can opt out of a channel or block it completely at any time. We put the power into your hands. And back to Big Brother, we can learn from their interaction in the house. They have tasks that promote nationalism, patriotism. You see those contestants singing the National Anthem proudly. When they talk about malaria day – we use it as an opportunity to educate. A lot of the tasks are subtle but meant to inspire and lead.

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NEWS YOU CAN TRUST I MONDAY 14 MAY 2018

Opinion Still on AfCFTA: The imperative of good faith fulfilment GLOBAL PERSPECTIVES

OLU FASAN Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

ith an unending fixation with the newly established African Continental Free Trade Area (AfCFTA), I want to continue, in this third consecutive article, my discussion on the subject. Two weeks ago, I praised the point man for the emerging intra-Africa free trade zone, Nigeria’s Chiedu Osakwe; last week, I analysed the agreement itself. My focus this week is on its implementation. The phrase “good faith fulfilment” is an international law concept. It is a variation of another international law principle pacta sunt servanda, Latin for “Agreements must be kept”; parties to a treaty must faithfully implement and comply with it. But legal principles aside, the AfCFTA’s success would depend on its implementation. As I tweeted amid the buzz and euphoria surrounding the launch of AfCFTA: “It’s all about implementation!” Last week, Ghana and Kenya became the first African countries to ratify the agreement. Once 22 countries have submitted their instruments of ratification, the AfCFTA treaty would enter into force. Thereafter, the question is one of implementation. But what are the prospects that most African countries would faithfully implement and comply with the agreement? Going by precedents, the prospects are not promising. Well, let’s consider two sources of evidence: the WTO and Africa’s regional economic communities (RECs), such as ECOWAS. As I noted last week, the texts of the AfCFTA instruments are almost entirely the same as those of the equivalent WTO agreements. Furthermore, there is a symbiotic relationship between AfCFTA and the RECs. Indeed, the agreement describes the RECs as “building blocks for the AfCFTA”. Given the similarities and/or relationships between AfCFTA and both the WTO and the RECs and considering that AfCFTA state parties are members of the WTO and belong to at least one REC, their behaviour with respect to the WTO and REC obligations must be indicative of their likely response to the AfCFTA obligations. Surely, if they are not substantially complying with their WTO commitments or meeting their REC obligations, it would be misguided to assume that they would faithfully fulfil their AfCFTA commitments. So, what does the evidence show?

Well, take the WTO first. The truth is that most African countries have made little efforts to implement their WTO commitments. Like most developing countries, African countries, bar South Africa, which negotiated as a developed country, were given a long transitional period of up to 10 years to implement the WTO agreement. Yet, several years after the end of the implementation period, most African countries did not meet the basic procedural obligations, such as notifications, let alone comply with the substantive commitments. For instance, successive WTO trade policy reviews of Nigeria consistently showed growing incidence of protectionism, with Nigeria failing to introduce any significant WTO-specific legislation. The AfCFTA instruments are suffused with WTO-type procedural and substantive obligations. Given their lack of enthusiasm, and poor record of compliance, with WTO law, one must wonder whether the attitude of most African countries to the WTOstyled AfCFTA would be different. The assumption must be that it won’t! Then take the RECs, which, unlike the WTO, are homegrown and thus indigenous to Africa. Yet, the evidence is also of poor implementation. In a study, Jaime De Melo, emeritus professor at the University of Geneva, found that although African RECs have “ambitious objectives”, they have very poor records of implementation, resulting in shallow rather than deep integration. Trade costs, he pointed out, are high within African RECs relative to non-

poor implementation records, how is the AfCFTA going to be different? Compliance scholars are divided on how best to secure state compliance with international obligations. The enforcement school regards compliance as a function of enforcement, namely that compliance can be induced through direct mechanisms, such as sanctions. But the managerial school takes a dim view of this approach. As the renowned international legal scholars Abram and Antonia Chayes put it, “sanctioning authority is rarely granted in treaty, rarely used when granted and likely to be ineffective when used”. Instead, the managerial school recommends ensuring compliance through “instruments of active management”, such as transparency, reporting, data collection, verification and monitoring, capacity building and technical assistance. But the AfCFTA provisions are short on technical assistance and monitoring but long, very long, on dispute settlement mechanism. Of course, there are provisions on technical assistance, such as Article 28 of the Protocol on trade in goods; special and differential treatment (Article 30); and “implementation, monitoring and evaluation” (Article 31). However, these provisions are relatively weak compared with those on dispute settlement. For instance, unlike the WTO, which creates an elaborate trade policy review mechanism, the AfCFTA agreement leaves the decision about verification and monitoring to a political organ, the Council of Ministers. This is one area where AfCFTA

There is, as everyone knows, a huge institutional deficit in Africa that, even with the best intentions, creates significant implementation capability traps. There are huge weaknesses around government effectiveness, legislative efficiency and the administrative and technical capacities of the public sector, not to mention corruption. regional trade. He concluded: “Reducing intra-regional trade costs by tackling barriers to trade remains a challenge for successful integration across African RECs”. The truth is that the establishment of the RECs has not stopped intraregional protectionism. In a lecture at the London School of Economics in 2014, the then President of Ghana, John Mahama, lamented that Nigeria’s protectionism was undermining deeper integration within ECOWAS. Indeed, several of Nigeria’s regional partners have complained about its violation of the ECOWAS treaty, with its import prohibition policy. So, again, if the RECs have such

is, arguably, WTO-minus! By contrast, AfCFTA’s dispute settlement provisions are the same as those set out in the WTO’s Dispute Settlement Understanding (DSU), a system described by one scholar as “more far-reaching than any multilateral arrangement for resolution of disputes among states in history”. It would involve the establishment of dispute panels and an appellate body, as well as the authorisation of trade sanctions where a party fails to comply with the ruling of the dispute settlement body. While the Abuja Treaty establishing the African Economic Community provides that disputes would be settled

by a putative African Court of Justice, the AfCFTA creates a WTO-style multi-layered dispute settlement system. Yet, it’s instructive to note that, in the nearly 25 years of the WTO, no African country has been a complainant in a WTO dispute. It would be ironic if African countries that are not challenging China, the EU and the US at the WTO, despite their anti-Africa trade policies, are dragging each other before the AfCFTA dispute panels and imposing trade sanctions against each other in a free trade zone that is expected to morph into one African market. But, let’s face it, enforcement and sanctions will play no significant role in inducing compliance with the AfCFTA agreement. Rather, three factors would be central to the success or otherwise of AfCFTA. The first is national will, the second is state capacity and the third is regime type. Let’s briefly consider each in turn. Surely, national political will, as influenced by policy objectives and priorities, would be critical to the implementation of the AfCFTA. Ghana and Kenya are pursuing outwardoriented policies, and so are enthusiastic about AfCFTA; Nigeria is inward-looking and wants to protect its import-competing industries, hence it’s lukewarm about the agreement. So, notwithstanding ratification, the domestic political economy will shape a country’s response to the AfCFTA obligations. Then, state capacity and institutional quality. There is, as everyone knows, a huge institutional deficit in Africa that, even with the best intentions, creates significant implementation capability traps. There are huge weaknesses around government effectiveness, legislative efficiency and the administrative and technical capacities of the public sector, not to mention corruption. These are critical factors in the AfCFTA’s domestic implementation process. Then, finally, what I call domestic regime type. This refers to whether a country has a strong commitment to the rule of law and legality. A rule-of-law state is more likely to honour its international commitments than one that has a poor reputation on the rule of law and legality. In a rule-of-law state, public servants constantly act under the shadow of the law; they ask whether the policies they are introducing are consistent not only with domestic law but also with the country’s international obligations. But in African countries, like Nigeria, where domestic and international law considerations hardly feature in the policy-making process, international agreements, such as the AfCFTA treaty, will suffer neglect. So, beyond the signing, ratification and entry into force of the AfCFTA treaty, the real challenge is its faithful implementation. Sadly, going by precedents, the prospects are not good! But miracles do happen!

Nigeria’s rating outlook to remain unchanged for sometime

here is a flurry of activities focusing on Nigeria’s economy lately. Two global ratings giants Moody’s and Standard & Poor’s have recently been in Lagos. Later this month, the Financial Times will stage its Nigeria conference in Lagos for the first time. And in between, IMF’s chief of mission to Nigeria, Amine Mati will present the fund’s regional economic outlook for sub-Saharan Africa to a select audience in Lagos, focusing on domestic revenue mobilization and private investment. At the session, a panel will get more granular by sharing perspectives on Nigeria’s “slow recovery amid growing challenges.” BusinessDay attended the annual summits held in Lagos last week by both Moody’s and Standard & Poor’s, two global giants who unusually, found they meeting in the same hotel room back to back. Moody’s were the first to arrive Lagos for their meeting with the theme: Nigeria’s recovery: slow and sturdy. They had their meeting at the Wheatbaker on Wednesday May 9 and were followed the next day with the S&P meeting. Both meetings had mostly bankers as guests. At each of the meetings, the ratings firms provided their own perspectives on both the global economy and Nigeria’s with one featuring Amine Mati, IMF Nigeria chief who delighted guests with IMF’s perspectives on Nigeria. As you would imagine, Bismarck Rewane, the CEO of Financial Derivatives, an economist many want to hear. Both Moody’s and S&P had presentations focusing on Nigeria’s fragile economic recovery with panels examining both Nigeria’s oil industry and the banking sector. In one case, there was special focus on the marginal or indigenous oil producing companies in Nigeria and how for them, the mid term prospects have brightened up. When it came to banking, discussions and presentations centred on the nagging issue of nonperforming loans, their concentration in the case of a couple of banks as well as outlook for the profitability of banks in an era of diminishing treasury bills and bond yields. Many of the guests at the two events were keen to understand the process adopted for sovereign ratings and in particular why and how a stable outlook was assigned to Nigeria. What we learnt was that analysts from both agencies believe that Nigeria took a great leap in 2015 when it seamlessly had power transfer from a defeated incumbent to the opposition candidate and so they do expect that the next elections early next year will pass off quietly. This explains the stable outlook. However, Nigeria’s rating remains weighed down by the absence of a meaningful economic reform programme and in particular the failure to significantly improve the country’s abysmal tax to GDP ratio, which is one of the lowest in the world. The issue of multiple exchange rates came up for mention a number of times and most speakers promoted the idea of a single exchange rate. The speaker acknowledged the exchange rate stability and the improved liquidity on the back of rising oil prices. The analysts were convinced that Nigeria and its monetary policy managers would keep things as they are now through the election.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Ghana Office: Business Day Ghana Ltd; ABC Junction, near Guinness Ghana Limited, Achimota – Accra, Ghana. Tel: +233243226596: email: mail@businessdayonline.com Advert Hotline: 08116759801, 08082496194. Subscriptions 01-2950687, 07045792677. Newsroom: 08022238495 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.