BusinessDay 14 Oct 2019 by BusinessDay

Sanwo-Olu launches Financial Centre for Sustainability, Lagos

Iheanyi Nwachukwu

n F r i d ay , O c t o b e r 4 , 2019, Babajide SanwoOlu, governor of Lagos State, officially launched the

… FMDQ to serve as secretariat Financial Centre for Sustainability, Lagos (FC4S, Lagos) at a prestigious event which held at FMDQ’s business complex,

news you can trust I * * MONDAY 14 OCTOBER 2019 I vol. 19, no 413

N300

Exchange Place. As a crucial step towards operationalising FC4S Lagos, a declaration was unveiled and

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signed by Governor Sanwo-Olu and Bola Onadele. Koko, chairman, FC4S Lagos, conveying the commitment of both parties, as

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LOLADE AKINMURELE & IFEANYI JOHN

Crude Oil

$1,482.40 $60.56

With ambitious budget, FG needs more than tax credit to lure private sector OLUFIKAYO OWOEYE & SEGUN ADAMS

igeria’s plan to leverage the private sector in plugging infrastructure gaps in 2020 will require more than tax incentives as the stakes become higher for 200 million Nigerians with a budget that would see virtually all the government earns spent on debt and recurrent expenditure. In the proposed 2020 budget,

MARKETS

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Gold

Cocoa

US$ 2,506.00

Declining corporate profit margins could signal recession next year iger ia may have recently pulled out of its first economic recession in 25 years but sustained declines in the profit margins of its biggest corporations flash signs that the economy may be well on its way to another downturn next year if the fundamentals fail to improve in the near term. Over the last six months, Nigeria’s real economic growth though remaining positive has decelerated for 2 consecutive quarters, posting GDP growth of 2.1 percent in the first quarter (Q1) of 2019, a decline from 2.38 percent recorded in the fourth quarter (Q4) 2018 and growth of 1.9 percent in the second quarter (Q2) 2019, which marked another

Foreign Reserve - $41.46bn Cross Rates - GBP-$:1.27 YUANY-N 50.93 Commodities

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UNDERCOVER INVESTIGATION (1)

L-R: Doyin Salami, vice chairman, governance board, Financial Centre for Sustainability (FC4S) Lagos; Babajide SanwoOlu, governor, Lagos State; Mary Uduk, acting DG, Securities and Exchange Commission, and Bola Onadele. Koko, chairman, governance board, FC4S Lagos, at the official launch of FC4S at FMDQ’s Exchange Place in Lagos.

Bribery, bail for sale… Lagos police station where innocent civilians are jailed and criminals P. 8 are recycled

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UNDERCOVER INVESTIGATION (1) Bribery, bail for sale… Lagos police station where innocent civilians are jailed and criminals are recycled Investigative journalist FISAYO SOYOMBO spent two weeks in detention — five days in a Police cell and eight as an inmate in Ikoyi Prison — to track corruption in Nigeria’s criminal justice system, beginning from the moment of arrest by the Police to the point of release from prison. To experience the workings of the system in its raw state, Soyombo — adopting the pseudonym Ojo Olajumoke— feigned an offence for which he was arrested and detained in police custody, arraigned in court and eventually remanded in Prison. In the first of this three-part series, he uncovers how the Police pervert the course of justice in their quest for ill-gotten money.

a N1,000 note. Immediately the money touched her hand, Odo turned on me: “Look at you. Fine boy like you; just look at yourself. Instead make you go find better work, you dey defraud people. Oya, come here!” The suspects in the cell had gathered by the iron barricade,hungering for an entrant, clinging to the bars and chillingly rolling their eyes from the policewoman to me andthen to the complainant. My heart began to pound: Are they going to pummel me? Would they accept it if I offered some cash in exchange for beating? Odo stripped me of my shirt, singlet, belt, wristwatch, shoes and cash. “Look at his hair; na you gangan be Ruggedy Baba,” she said as she unlocked the cell and bundled me in.

questions but only allowed me to write the answers that suited him; if the answers didn’t, he cut me short halfway. Afterwards, I was led to the expansive office of the Divisional Police Officer (DPO), a tall, dark, rotund, middle-aged man who pronounced me guilty in a matter of minutes. “This is one of the many criminals destroying this city,” he yelled after a long, menacing glance all over me. “Please hold him well!” Armed with this new order, the CO, who had been relatively civil all along, groped for my trousers then grabbed me by the waist as we made the short return trip to the counter. It was a walk of no more than 50metres, but by the way he held me, anyone would have thought we were walking over a www.businessday.ng

thousand kilometres and there was the potential for escape. The complainant was already registering the case with a policewoman by the time we returned, and, soon after, they were haggling over the fees. Chigozie Odo, the policewoman, had rejected his offer of N500. After some five minutes of talking, he handed her

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The Police in Nigeria have a history of unlawful arrests and extrajudicial killings

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t cost only N500 for a policeman to arrest me, and N1,000 for another to hurl me into a cell. Of course, they didn’t know I was a journalist; I had assumed a pseudonym and grown my hair long enough — for 10 months — to blend with artificial dreads. My locks were tinted in gold and almost all my facial hair removed. I cut the profile of the kind of youth the Police indiscriminately railroad into their ramshackle vans for no reason, for onward transfer to their cells. One look at me and the typical policeman would have mistaken me for a compulsive hemp smoker, an incorrigible internet fraudster or a serial drug abuser. The Police in Nigeria have a history of unlawful arrests and extrajudicial killings. In July, Chinedu Obi, a musician better known as Zinquest, was accosted for spotting tattoos and shot in Sango, Ogun State. Only two months ago, policemen in Lagos shot two unarmed civilians — they died instantly — suspected of phone theft. In April, anti-cultism policemen killed Kolade Johnson, a civilian, at a football viewing centre in the Onipetesi, Mangoro area of Lagos. One bus driver in Ayobo, Lagos, was even shot dead by a policeman in May for refusing to part with his money. In Ifo, Ogun State, in April, a policeman shot a motorcycle rider during an argument over N100 bribe. All five incidents happened within the last six months;all six victimsdied in the end. Therefore, it didn’t take too long after my arrest for me to begin to see the Police in their true elements. My supposed offence was that someone had sold me a car worth N2.8 million in November 2018; however, after paying N300,000 cash, I began to avoid him — until I was eventually apprehended on Monday July 8. Once I was arrested and whisked into an innocuously passing danfo, I imagined I would be immediately taken to the cell of Pedro Police Station, Shomolu, Lagos. But it wasn’t that straightforward. I was first shoved behind the counter; and after halfan-hour, the Crime Officer (CO), Inspector Badmus, fetched me into a back office where I was grilled for close to two hours, culminating in a written statement from me that represented his thoughts more than mine. He asked me

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A MINOR IN THE CELL As I take my first steps into the cell gate, I immediately attempt to ingratiate myself with my ‘new friends’ by asking what they want — food or drink? It endears me to them, and the policewoman immediately proclaims me the new “leader”. It didn’t take quite long for the foodto arrive; it was around 3pm or thereabouts and they apparently hadn’t been fed that day yet. As they guzzle their food — rice for some, bread for others — I embark on a quick, surreptitious survey of the cell. To the right is a small opening housing a bathroom and a latrine oozing with thick fecal stench, one I very quickly resolved my buttocks would never near. To achieve this, I would eat only once daily — bread with a bottle of water or softdrink — throughout my stay. Opposite it is the smallestof the inner cells. Lying awkwardly on the flooris a mat too small to contain even one person;but every night, five or six cross-breathing inmates share it. Being the warmest inner cell, it proved the popular cell of choice — particularly at nighttime. Further ahead are two bigger cells, dingy and often damp, each measuring roughly 16 by 16 metres, with fading, defaced blue walls. Holding my head in my hands, I slump into one of the cells, enveloping myself with thoughts of the hardship to come. “Do not disturb; the leader is in a very bad mood,” a faint voice arrests my thoughts. “Let’s come @Businessdayng

back to see him later,” adds another — that of a boy who, by his mien and slender build, couldn’t possibly be more than 15. What‘s a minor doing in detention? I motion them over. “Wetin happen?” asks Austin, the fair-skinned, slim-figured, natural dreads-donning leader I inadvertently deposed minutes earlier.In the prison and in police cells, “wetin happen” is the lingo for asking an inmate or prisoner how they landed in prison or detention. I give them my prepared line and hand them the baton. Austin, a gate keeper at a small company in Lagos, was accused of illegal gun possession by his boss after an unlicensed pistol was reportedly found inside the gate house. He vehemently denied knowledge of the act, but his claims of innocence had been ruined by his previous backdoor sale of the company’s 50 litres of diesel for N8,000. Determined to let him rot in the police cell, the accuser left with Austin’s phone, obliterating any chance of phoning a friend or family to process his bail. With Austin is Loris, the minor whose arrest and detention was masterminded by her sister. Loris had electronically withdrawn the sum of N23,500 from his sister’s account, without her knowledge,to pay for the General Certificate Examination (GCE) of the West African Examinations Council (WAEC). Since the exam actually costs N13,950, it is either Loris stole more than he needed or he registered at a special centre. The boy claims his sister declined his initial requests for the funds when he asked. Asked how he pulled off the funds transfer, unnoticed, he replies: “I know where she keeps her ATM; I also know the password.” Also in the cell is Buchi, a young man accused — and he didn’t deny it — of stealing a phone. Small matter it may have been; but after the Police tracked him to his house with the same phone he allegedly stole, his accuser claimed N100,000 had also gone missing from the car where the phone was ‘moved’. Like Buchi, the fourth suspect is also accused of stealing a phone worth N17,000; too bad for him because the Police then went on to set his bail at N50,000. The Police have always in-

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Reps faulted for late presentation of 2019-2023 legislative agenda ... analysts say it shows lack of commitment to national development James Kwen, Abuja

nalysts have faulted the 9th House of Representatives for the late presentation of a legislative agenda that would guide the operations of their mandate in the next four years (2019 - 2023). They wonder why it has taken the House four months after inauguration to put in place a common policy document that would have been drafted in a couple of weeks if leadership and members were committed to the progress of the masses whose mandate they hold in trust. Unlike the 8th House of Representatives under the headship of Yakubu Dogara that unveiled its legislative agenda barely two weeks after proclamation in 2015, the present House under Femi Gbajabiamila since coming on board in June just presented its legislative agenda just last Friday. The 9th House legislative agenda generally intends to develop an effective and efficient House of Representatives, positioned to carry out its constitutionally recognised mandate of legislation, oversight functions. The general principles also aimed at, establishing and maintaining high ethical standards in the conduct of House business, strengthening the mechanism

and processes of the Committee system of the House to deliver on legislative goals and adopting a strategy that will open communication within the House and between both chambers, the judiciary and stakeholders. Others are to, “Identify and target passage of priority legislation with agreed time frame. Foster engagement and collaboration with CSOs, civic groups and constituents. Take necessary legislative steps to address national challenges, poverty, and infrastructure decline, waste of resources, revenue leakage and corruption. “Take necessary legislative initiative to promote equality and inclusiveness to ensure that the rights of women, youth’s, vulnerable and displaced persons in the society are addressed. Initiate comprehensive legislative action to address unsettled issues related to the constitution and electoral reform including the alterations to the Constitution. “Improve the use of modern communications technology in the conduct of House business and the use of same to publish proceedings, in full compliance with the Open Government Initiative. Work harmoniously and inter-dependently with the executive without undermining the principle of Separation of Power.

“Make laws that will block leakages and devise improved means of generating revenue, especially through the amendment and review of our tax laws which will help to reduce reliance on local and foreign loans to enhance budget. Ensure that the budget process is made to deliver on the objectives of development. “Run the 9th House of Representatives transparently, through open accountability with the full participation of all Members. Protect and improve on the welfare, rights and privileges of National Assembly support staff inclusive of the Legislative Aides Cadre. “Utilise the experiences of our former colleagues and other parliamentary experts by engaging them as, consultants to committees and members of boards exclusive of NationalAssemblynamelyNational Assembly Budget and Research Office (NABRO), National Assembly Service Commission (NASC), Public Complaints Commission) and the National Institute for LegislativeDemocraticStudies(NILDS).” But,SolomonGbenga,national youth director, Young Progressives Party (YPP), views the late unveiling of the legislative agenda as lack of commitment to national development by the lawmakers, insisting they would be held responsible for socioeconomicwoesofthecountry.

MAN initiatives global campaign for buy Nigeria products … circulates members’ product list to embassies, MDAs Adeola Ajakaiye, in Kano

anufacturers Association of Nigeria (MAN) has intensified advocacy campaign it mounted in respect of buy Nigeria products bycirculatingitmembers’product listing booklet to all the country’s embassies around the world and allFederalMinistries,Department and Agencies (MDAs). The advocacy campaign recently initiated by the new leadership of the Association is geared at providing visibility for all the products being manufactured in the country as well as easing their procurement by the government. Mansur Ahmed, national president of the Association, who made this known last Thursday while addressing the 46th annualgeneralmeeting(AGM)ofthe Kano/Jigawa branch of the Association,saidtheinitiativewasastep towardsreachingouttoindigenous manufacturers and patronising Made-In-Nigeria products. He stated that the Association under his leadership would continue to engage the Federal Government and its MDAs with a view to ensuring they adequately patronise and give benefit of first refusal in government procurement exercise in line with the

Presidential Order 003. “Distinguished members, it could be recalled that since the current leadership of MAN came into office in September last year, it has been committed to up-scaling the performance and relevance of the Association by raising the tempo of our advocacy. “One of the steps we have so far taken was to intensify our efforts and engagements with heads of Governments, Ministries, Departments and Agencies on policies that we believe can impact the real sector of the economy. “As part of the advocacy, MAN has also published Members ` Product Listing Booklet which was distributed to all Embassies of Nigeria around the world and Federal Ministries, Departments, and Agencies in Nigeria, with the aim of placing before them, a comprehensive list of our members and their products for ease of procurement by the Government. “It is hoped that this step will encourage the Government to reach out to indigenous manufacturers and patronise MadeIn-Nigeria products, in line with the association `s on-going campaign,” he said.

AU targets 2030 to connect 73 million Africans to electricity MIKE OCHONMA

o reach the goal of affordable and sustainable energy for every single African by 2030, Africa needs to connect around 73 million people to electricity every year, says the African Union (AU) Commission. Atef Marzouk, head of the Energy Division of the AU Commission’s Department of Infrastructure and Energy, says he hoped wind energy would help to move the continent towards this goal in line with the UN Agenda for Sustainable Development. “For the clean energy transition in Africa to meet all the development needs, there is a need to embrace wind potential alongside the other renewable energy sources, since it is found in all parts of the continent. With necessary resources, we shall be in a position to formulate a continental wind energy programme,” he told delegates at the Windaba, Africa’s annual wind energy conference, in Cape Town, South Africa. About 600-million Africans still lack access to electricity. Half of the African population and less than 43 percent of people in sub-Saharan Africa have access to electricity. “This calls for radical and innovative measures and the AU Commission is at the forefront of these efforts. Africa must change the script of her energy development story and turn radically towards a more sustainable path using clean and renewable sources,” Marzouk said. Even in areas where there is electricity, it is often inefficient

and carries health and environmental risks. Marzouk said Africa’s total energy consumption was dominated by biomass to the tune of 50 percent. “The majority of this is in rural areas, where people often use old and inefficient methods. This has effects on health, the environment and long-term effects on climate change.” He said renewable energy generation was still low on the continent, with hydro at 16 percent, solar and wind at 1.3 percent, geothermal at 0.57 percent, biofuels and waste-to-energy at 0.23 percent and nuclear at 1.57 percent. Despite the low figures, Marzouk said, there was now greater potential to move towards renewable energy technologies, especially given that the prices of wind and solar, in particular, had declined rapidly. “This creates enormous opportunities for tackling energy access, growth and the generation of jobs, while addressing climate change.”

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Marzouk said the AU Commission played a critical role in facilitating the creation of the right policy and regulatory environment to speed up public and private investments in energy. The commission is spearheading harmonisation of regulatory frameworks in the electricity sector in order to establish a continent-wide electricity market. Marzouk said a strategy and action plan adopted by the AU policy organs in 2017 was currently being implemented. He said the commission was also involved in innovative financing mechanisms. The flagship Geothermal Risk Mitigation Facility supports public and private geothermal energy project developers with grants during the initial and most risky phase of development. Marzouk said this had contributed immensely to geothermal energy development in the East Africa region where around 30 projects with a potential of nearly 1,500 MW across 11 countries had benefitted from grants.

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In the same vein, the MAN’s president noted that his leadership had focused on promotion of value-chain development as a meansofachievinggreatermanufacturing sector contribution to the nation’s GDP, job creation and prosperity for the businesses of members of the Association. “On our own part, we would ensure that we comply with the regulations and laws of the land, but should find any untoward or inhibitive regulations or laws, the Association will lead the process by advocating for change. “In the last quarter of 2018, members of the Executive Committee and the Directors held a retreataimatreviewingthestateof the Association and came up with a 4-year transformation map that clearly charted the way forward in our Government relations, engagements with the external publics, and internal productivity,” he said. Commenting further, he noted that the profile of MAN had been on the rise as well as a rise in her responsibility in the West Africa sub-region, and in the continent, such as the responsibility for reviving the Federation of West Africa Manufacturers Association (FEWAMA)assignedbyECOWAS Commission and Africa Union.

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United Nation’s stress test for Nigeria – Security dominance of one ethnic group

BASHORUN J.K RANDLE

urther worries for the US secretary general was the front page of “Vanguard” newspaper of June 19, 2019: “This Nigeria must die for true Nigeria to rise” “Ifeanyi Okowa, governor of Delta state made a startling but sobering declaration recently. In paraphrase, the governor declared that the only thread holding Nigeria together is the indecision or prevarication of the South-South states of the Niger Delta zone over where to belong.” According to him, any day the zone decides to join forces with the proBiafra protagonists of the Southeast zone, the current Nigeria will cease to exist. In the mind of the newly reborn vocal governor, the life of the present Nigeria hangs in the balance awaiting the final decision of the South-South states. The governor went on to lament the fact that in a nation with about 300 ethnicities, only one ethnic group, the Fulani, controls all the security, political and economic forces available. For him, this will ultimately determine what will tilt the balance on whether Nigeria survives or not. There is no faulting Okowa’s analysis in this regard. The final decision of the Niger Delta region is crucial towards solving the grave problem of the Nigerian nation. They have the power to tilt the balance and save our nation that is on a perpetual life support. If the people of the zone continue to play their wartime and post-civil war subservient role to the Fulani oligarchs, Nigeria will die eventually but quite slowly. But if

they rise and assert their God-given right as equal citizens of Nigeria and not continue to present themselves as slaves to any other region or ethnic group in Nigeria, then they will be respected and our nation will survive. Currently the minerals underneath their feet are being taken as booty by the oligarchs. They have endured this pillaging for more than 50 years now. If they wish to continue enjoying being pillaged by the conquering oligarchs, let them continue with their indecision. This is most painful as Okowa lamented because while the minerals of the Niger Delta are being carted away and employed in the development and urbanisation of western and northern cities, the south-south zone is littered with primitive villages that have no hope of seeing any glimmer of civilisation until the turn of the fourth millennium. If this is not enough incentive for the south-south zone to call off their indecision, then their fate with that of the entire nation of Nigeria is forever sealed and hopeless. While the minerals of Niger Delta are being “officially” exploited for “common good” of the “the nation” the precious minerals of the north like gold, diamond, uranium, platinum etc, that have the capacity to turn the entire economy of Nigeria around are tactically left in the hands of a few prominent members among the oligarchs who have become international millionaires by mining them. If this type of information does not help those in the south-south zone make up their minds on where they should belong; if they cannot realise that those they serve as slaves in Nigeria are even their worst enemies, then nobody should weep for them because they are forever doomed. But back to Governor Okowa’s declaration. The real danger that spells imminent death for the present Nigeria is the concentration of all

security apparatuses in the hands of one ethnic group. This is the clear and present danger for the nation of Nigeria. If this concentration had been in the hands of any other ethnic group besides the Fulani, it could be treated as benign. But for it to be in the hand of the Fulanis with all their history of invasion and conquest in Nigeria, the matter is far more serious than ordinary Nigerians are willing to concede. The only reason why an ethnic group would seize all the security powers of a multi-ethnic country like Nigeria is because they are planning a conquest. They see war in the horizon. And this is what will kill the present Nigeria sooner than any one of us could imagine. Any day the Fulani that have all the powers in present-day Nigeria decide to use it according to their customary way of invasion and conquest, Nigeria will exist no more. If Nigerian politicians cannot find ways to decentralise and redistribute Nigerian security apparatuses, we can as well begin a requiem for this hobbled and beleaguered nation of ours. The current Nigeria of powerconcentration in the hands of one ethnic group, of election manipulation to perpetuate incompetence in power, of economic blockade and strangulation of one section of the country, of political marginalisation of nearly one half of the nation, of booty-taking 50 years after the civil war, etc. must die and die soonest for a new Nigeria to rise...” By nature, and based on his previous posting, Antonio Guterres has massive empathy for refugees. He does not subscribe to the cynical view that one refugee is a disaster but one million refugees are a matter of statistics. Hence, he has a keen interest on the global refugee situation and the likelihood of any fallout from the deterioration in Nigeria further compounding what is already a heart-wrenching problem. His morning was ruined by the United Nations Refugee Agency re-

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The only reason why an ethnic group would seize all the security powers of a multiethnic country like Nigeria is because they are planning a conquest. They see war in the horizon. And this is what will kill the present Nigeria sooner than any one of us could imagine

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

The future of real estate in Nigeria

he future of real estate in Nigeria is its youth. But not in the way that you think. With rising concerns over Nigeria’s exploding population growth, we are seeing an emergence of a more dynamic, technologically savvy young working population. Young people are becoming nimbler, and increasingly embracing risk by establishing their own start-ups; from tech companies to new-age restaurants. Young professionals are shunning traditional and expensive office and residential arrangements, and embracing the flexibility and cost savings provided by shared living and working spaces. The real estate industry is being forced to innovate and redefine its value proposition, as mobile technology has put greater power into the hands of consumers. However, there remains a significant supply-demand gap in the various real estate sub-markets: residential, office, retail and hospitality. Decent housing options for university students and young professionals are limited and often unsafe; and secure, affordable office spaces in proximity to the central business districts remain scarce. Plug-

ging this gap has proven difficult, as developers continue to focus on delivering luxury apartments and Grade A offices, despite high vacancy levels and falling prices. Whilst real estate investments provide an opportunity for citizens to participate directly in the economy, the traditional means of doing so are too far out of the reach of many, and the system needs to evolve. Lack of access to affordable financing; cumbersome title registration processes and a go-it-alone culture, are just a few of the factors that have served to limit participation. In order to re-energise this sector and boost the economy, Nigeria’s government must start to aggressively push policies which encourage public and private sector financial institutions to provide innovative, affordable financing options; unlocking dead capital and restoring access to the industry. Nigerians continue to look to developers to meet their individual needs, tastes and preferences. Our youth are responding to affordability constraints and technological advances which are changing how they live, work and shop. As Nigeria’s real estate market rebounds and stabilizes, what is evident, www.businessday.ng

DEBORAH NICOL-OMERUAH

is that the future of the industry rests on a redefinition of what value means. This will involve developing new strategies to meet the growing demand for flexibility and delivering them seamlessly – whilst maintaining sustainable returns on investment. The need for alternative real estate options for a new peer-to-peer based economy: student housing, co-living, co-working and even crowdfunding; is an emerging trend that cannot be ignored. The players that will survive the coming paradigm shift are those best able to adapt and remain flexible enough to respond to these needs. UACN Property Development Company (UPDC) is fully embracing the need to innovate. With its recently announced plan to embark on a recapitalisation exercise via a rights issue (awaiting regulatory approval to commence), the company is reinforcing its faith in the real estate industry in Nigeria and standing firmly behind it. Having already established a position as one of Nigeria’s leading indigenous real estate companies with a strong track record for successfully completing landmark developments; UPDC aims to build on that track

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port carried on June 19. 2019 by CNN which stated “African migrants denounce conditions at Mexico border.” “More than 70 million people have been forced to flee their homes due to violence or persecution, the United Nations has said, as the global migrant crisis pushed the number of refugees and displaced people to an all-time high. The world’s displaced population is now almost double that from a decade ago, and includes an estimated 13.6 million people who fled their homes in 2018, according to the UN Refugee Agency’s annual Global Trends Report. It is a rise of 2.3 million on last year’s figure, and includes 25.9 million refugees also the highest number ever recorded. Overall, an average of 37,000 people are forced from their homes every day, the report said, and one in every 108 people on the planet is now displaced. Released ahead of World Refugee Day on Thursday, the body’s findings paint a bleak but predictable picture of the rate of displacement around the world – as conflicts in several corners of the earth continued to tear people from their homes. The Syrian war remained a major driver, while Venezuela joined the ranks of the worst-affected countries after tens of thousands fled the humanitarian and economic crisis roiling the nation. More than two-thirds of refugees came from just five nations: Syria, Afghanistan, South Sudan, Myanmar and Somalia. A further 41.3 million people worldwide were displaced within their own countries, and 3.5 million were recorded as asylum seekers.

record – leveraging the recapitalisation which will put us on the pathway to achieving a sustainable financial position in the near to medium term. Unencumbered by significant short-term debt, we will gain more operating flexibility to access new sources of capital and strengthen our market position. Energising the industry will be a collaborative effort. Today, the world and Nigeria in particular; face an urgent demographic challenge. An appropriate response to the current and impending real estate infrastructural needs of nearly 200 million people, is a matter of national priority, and will determine, and directly impact the dividends we reap from an increasingly youthful population. The Nigeria story is promising; however, as we write it, we must take stock of the mistakes of the past and ensure we are well positioned to avoid them by delivering properties and services which are physically, financially and fundamentally fit for the Nigeria of tomorrow. Nicol-Omeruah is chief commercial officer at UPDC

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The inflation problem nipping at the CBNs REER

PATRICK ATUANYA

he Central Bank of Nigeria (CBN) seems to be fighting numerous battles on all fronts these days. It is rapidly expanding its balance sheet in a bid to support the cash strapped Federal Government to finance the fiscal deficit, issuing enormous amounts of expensive OMO bills to help support a naira under pressure, and providing direct interventions to various sectors of the economy. The CBN is also battling persistently elevated and sticky inflation levels that has stubbornly remained at double digits for years. Some of the actions the CBN is taking is making it difficult to achieve some of its other stated goals. For instance by directly financing the Federal Government (FG) to the tune of N4.5 trillion (ex FG deposits) as at August 2019, the apex bank is heightening inflation expectations, despite its attempts to sterilize funds through OMO issuance. Consumer prices rose 11.02 per-

cent in August from a year earlier compared with 11.08 percent in July. Higher inflation in turn makes it difficult to maintain a stable foreign exchange (FX) rate between the dollar (USD) and naira (NGN), another goal of the central bank, as this tends to weaken the real effective exchange rate (REER). The real effective exchange rate or REER is a calculation that strips out the effects of inflation. So as an example if Nigerian inflation runs at 10 percent on average and US inflation runs at 1 percent, the NGN would need to sell off (or adjust lower) by 10 percent annually in nominal spot terms, just to keep the currency stable against the US dollar in real terms. The key thing to note is that if a currency peg is held under these circumstances, then imbalances will grow quickly after a while, necessitating a sharp weakening of the currency exposed to high inflation to bring it nearer to equilibrium. This happened when Nigeria saw sharp devaluations under CBN Governor Chukwuma Soludo in 2008 and again in 2015 and 2017 under Godwin Emefiele. Recently investment firm Renaissance Capital compared the REER rate for all of emerging markets (EM), most of Frontier and a few beyond Frontier countries – against both their long-term average REER implied currency rate – and against the weakest point seen over the last 20 years. The investment Bank used the Bruegel database which arbitrar-

ily chooses December 2007 as 100 and compares how currencies have moved over 20 years around that level, relative to inflation. The results from the data shows that if the NGN had kept pace with inflation differentials since its 20-year low in 1995 – it would be exchanging at $1/NGN 1,063 today! Since Nigeria is a major oil producer which can defend its currency peg in times of high oil prices, Renaissance Capital also provides 2 REER estimates for the country, one for when oil is trading at around $60 per barrel and a second one for when it’s higher at about $80 per barrel. The former puts “fair value” at around $1/NGN464, while the latter (higher oil prices) at $1/NGN382. The investment firm notes that inflation of 10 percent pushes both numbers higher by roughly 7 percent each year – implying N500 or N410 as the average rate versus the dollar next year. If a global recession emerges next year that hits oil prices then the REER number should weaken further, given that CBN reserves fell by $2.2 billion in the last two months. The current account deficit has already surged to $5.6 billion in the first half of 2019 amid a negative balance in the financial accounts. Atedo Peterside a renowned Banker noted in a speech last week at the Nigeria Economic Summit Group (NESG), that “with U.S inflation at 2 percent and Nigerian inflation at 11 percent, the 9 percent per annum differential is too high and

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The current account deficit has already surged to $5.6 billion in the first half of 2019 amid a negative balance in the financial accounts.

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

The budget chickens are home to roost

ince 2015 the budgets have been afflicted with an unfortunate disease: over-optimism. This is especially with regards to revenue expectations. In the wake of dwindling revenues from falling oil prices in 2015, the new government stated its intention to plug leakages and “grow” non-oil revenues. To be fair they are not the first government to state that intention. If you read old newspapers you will quickly see that almost all governments have made increasing non-oil revenues a policy objective. However, in 2015 the new regime took that policy mandate and laced it a heavy dose of belief in their abilities. This belief resulted in budgets and revenue expectations that were borderline fantastical. The 2016 budget assumed that revenue would be 20 percent higher than it was in 2015. That unfortunately did not happen. But if at first you don’t succeed, please try again. The 2017 budget assumed that revenue would be 67 percent higher than what it actually was in 2016. To be fair there was a devaluation effect there because oil income was expected to be worth a lot more in devalued naira terms. Still it was wildly optimistic. Actual revenue came in 47 percent below target. The year 2018 saw the same expectations repeat itself with a bit more prayers

attached. The budget assumed that revenue would be 170 percent more than what it actually was in 2017. The 2018 budget assumed revenue of over N7 trillion while actual revenue in 2017 was 2.5 trillion. In 2019? The budget assumed revenues that were 75 percent higher than actual revenues in 2018. We have not finished 2019 yet but based on half year actual revenue we can say the federal government is assuming that revenue will grow by 100 percent between 2019 and 2020. Even if you are a prayerful person you know that these expectations were a tad bit extreme. Of course, if you expect to get revenue then you must also expect to spend money. As everyone knows, getting money is very hard but spending money is very easy. The same was true for the federal government. As it raised its revenue expectations it also raised its spending expectations. However, not only did it plan to spend money that it was expecting to raise, it also planned to spend money that it was going to borrow. One of the most popular phrases in 2016 was “we are borrowing money to reflate the economy”. In all the years since 2015 the budget has planned to run deficits of around N2 trillion. Sometimes above and sometimes below. To summarise we planned to raise www.businessday.ng

ECONOMIST

significant revenue and also planned to raise expenditure to even higher levels which we expected to be funded by debt. We are a prayerful nation but apparently our prayers were not really answered. Our actions did not yield that much fruit either, at least not to the level we expected. As anyone could have predicted, the expected miraculous revenue growth did not materialise. We still kind of spent the money though. Government expenditure grew rapidly. New debt grew rapidly. Other indirect debt from sources which will not be named also grow rapidly. The outcome is that the government now finds itself with significant debt service payments, liabilities that it will continue to struggle to meet, and revenue expectations that still look like a struggle. The 2020 budget proposal contains some interesting highlights such as oil revenue now being significantly lower than non-debt recurrent expenditure meaning that oil income cannot even pay salaries anymore. Debt servicing continues to rise and is almost as large as expected oil income. We still plan to “borrow to pay salaries”. The capital expenditure expectation still looks like something that was plucked out of thin air. Finally, there is a mysterious other revenue expectation. It

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is inconsistent with the declared goal of maintaining exchange rate stability.” Analysts at Cardinal Stone argue that consensus expectations of double-digit inflation in the next two years implies that a devaluation of the naira at a later date would be of a higher magnitude. To defend the currency following the devaluation in 2017, the CBN increased its issuance of OMO bills from N4.2 trillion in 2016 to N7.7 trillion in 2017 and N17.0 trillion in 2018. Between 2017 and 2019, the CBN issued N35.8 trillion at an average stop rate of 15.1 percent, which translates to an associated interest expense of about N5.4 trillion in the period, according to estimates by Cardinal Stone Partner’s research. The interest expense incurred by the CBN in 2018 alone is over 6 times the average interest expense recorded in the 4 years leading to 2017. The CBN’s 2018 interest expense is also some 75 percent of Federal Government’s actual retained revenue, showing that it is clearly unsustainable. The most important thing for the economy is having a flexible exchange rate that clears at (or near) the market rate so that there is incentive to take risk by entrepreneurs as well as an elimination of corrupt practices of round trippers and those that benefit from arbitrage.

NONSO OBIKILI

will be interesting to see where that comes from once the detailed budget breakdown in published. To summarise, the budget looks unimplementable. Revenue will probably increase compared to 2019 thanks to all the revenue generating measures being proposed. Still it is unlikely to grow by 100 percent. Once the revenue expectations fail then it will be back to scraping around to see what can be done. Debts must be serviced, and salaries must be paid. Capital expenditure will be cut as usual and around we go again. The seeds for our budget problems were planted long ago and it look like we will keep harvesting those problems for some time. Nonso Obikili is chief economist at Business Day.

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BUSINESS DAY

Monday 14 October 2019

EDITORIAL PUBLISHER/CEO

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

Bashir Ibrahim Hassan

Ending sexual harassment in our universities

lthough the Nigerian authorities and especially the University of Lagos was forced to act because of the publicity generated by the recent British Broadcasting Corporation’s (BBC) sex for grade documentary, the reality is that the Nigerian university environment encourages and is quite tolerant of sexual assault and rape of female students especially. Beyond the mere tokenism of punishing the two lecturers captured in the documentary, the authorities must be forced to implement sweeping reforms of the university environment by outlawing any form of emotional relationship between teachers and students, putting structures in place to make academics account for the awesome powers they enjoy over students. In 2012, a pilot ICPC/NUC University System Study and Review (USSR) of corruption in the university system was undertaken and the review identified a series of infractions including admissions racketeering, misapplication and

embezzlement of funds, sale of examination questions, inducement to manipulate awards of degrees, direct cheating during examinations, deliberate delays in the release of results, victimisation of students by officials, lack of commitment to work by lecturers, and above all, sexual harassment and exploitation of students by lecturers. At the presentation of the report in 2012, the ICPC Chairman, Ekpo Nta, was quoted as saying, “we have uncovered many corrupt practices in our universities. Sexual harassment seems to rank extremely very high among corrupt practices in our universities. Our report is based on the quantum of petitions we have received on this corrupt practice. We’re emphasising this because sexual harassment has to do with the immediate challenge we need to address.” In fact, the rampant cases of reported cases of sexual harassment in our tertiary institution forced the senate in 2016, to propose a bill, known as the Sexual Harassment in Tertiary Education Institution Bill, which prescribes a 5 year jail term for lecturers and educators convicted of sexual

harassment of either their male or female students and also ban lecturer-student relationships altogether. According to the sponsor of the bill, Senator Ovie Omo-Agege, explained that “Indeed there is no family in Nigeria where you don’t find a victim of sexual harassment...It is either your wife when she was younger or your daughter, your sister or even a niece who has gone through the tertiary education system at one point or the other...You will find out that they have had this brush with these lecturers who continue to see these young women as perquisite of their office as lecturers. We feel that is unacceptable. We have to put a stop to it.” However, despite the novelty of this bill, the Academic Staff Union of Universities (ASUU), vehemently opposed the bill and successfully lobbied for the bill to be dropped. The reason the union gave then for opposing the bill was that it was discriminatory because its targeted educators. They rather proposed legislation on dress code – the usual alibi used to justify rape and sexual harassment. At a time when progressive

universities are outlawing any form of sexual or romantic relationships between students and teachers, our universities are being turned to centres of sexual harassment, rape and transactional sex. How can any meaningful knowledge be learnt and transmitted in such an environment? It is not surprising therefore that our universities are bereft of any serious academic endeavours and our so-called academics are lost in the conversations within their disciplines and have resorted to conversing among themselves in beer parlours and “giving tutorials” to ladies in university “cold rooms”. This, to us, is one of the major problems in our universities and not just underfunding because even when the universities are properly funded, we will be faced with a bigger problem – total lack of academics worth their salt but only sexual predators, corrupt lay-about pretending to be academics. Clearly the universities and ASUU cannot be relied upon to undertake these reforms. It has to be foisted on them – and that is where the government and ministry of education must show leadership.

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

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BUSINESS DAY

Monday 14 October 2019

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Nigeria needs a new economic model, not just an advisory council GLOBAL PERSPECTIVES

OLU FASAN

hroughout his first term, President Muhammadu Buhari loathed economists, who he disparagingly called “the socalled economists”. In 2016, as the debate about the value of the naira raged, President Buhari lashed out in one interview: “I challenge Nigerian economists to tell me what benefits Nigeria has got from devaluation, how many factories have we built by killing the naira?” He went on, goading them. “I am still waiting for you Nigerian economists to convince me why the naira should be reduced to a disgraceful level over the last 30 years”. It was obvious that President Buhari had no truck with economists. Thus, although the government set up the Economic Management Team, EMT, headed by the vice president, Yemi Osinbajo, it consisted only of ministers and government officials, with no independent expertise or private-sector input. As the president said, “We are averse to an economic team with private sector members”, adding that such people “frequently steer government policy to suit their narrow interests rather than the overall national interest”. The vice president’s media adviser, Laolu Akande, also said that private-sector actors or independent experts were excluded from the EMT because the presidency regarded economic management as “a government affair”! That was, of course, wrong because no serious government excludes independent experts and private-sector actors from its economic management. Independent economic councils are part of the fabric of economic management and most presidents have them from their first term. For instance, in South Africa, President Cyril Ramaphosa, who started his first term last year, recently constituted a Presidential Economic Advisory Council, to which he appointed my friend Mzukisi Qobo,

an associate professor at the University of Witwatersrand, as a member. In the US, the government is suffused with independent sources of economic advice, including the independent Council of Economic Advisers tasked with providing the president with “objective economic advice”. So, Buhari’s approach to economic management without independent experts was an aberration. Now, however, in his second term, the president seems to have had a change of heart about economic experts. Recently, on September 16, he constituted a Presidential Economic Advisory Council, EAC, chaired by Doyin Salami, who, for 8 years, was a member of the central bank’s monetary policy committee, and include Chukwuma Soludo, a former CBN governor, as well as Mohammad Sagagi, Ode Ojomu, Shehu Yahaya, Bismarck Rewane and Iyabo Masha, all respected economic, financial or development experts. The president tasks the EAC with advising him on “economic policy matters, including fiscal analysis, economic growth and a range of internal and global economic issues”. Surely, with such an assemblage of high-profile economic experts, and with a wide scope of remit, the presumption must be that President Buhari really wants to prioritise sound economic management in his second term and sees a major role for economic technocracy. However, here’s the rub. There are doubts as to whether President Buhari’s decision to establish a council of economic experts was a genuine Damascene conversion, given his past antipathy towards economists, or whether it was forced on him by the harsh reality of Nigeria’s continuing economic decline? And even if, as is apparently the case, the president was forced by circumstances to constitute the EAC, the next questions are: What levers do the members really have to transform government’s economic thinking and policies, particularly the president’s dirigiste economic worldview? And would they be effective in creating, as Buhari tasked them, an economy “that works for all”? Well, the omens are not good. President Buhari said that the Nigerian economy was “not growing well enough” considering the government’s goal “to lift 100m Nigerians out of poverty in 10 years” and charged the EAC to “come up with home-grown solutions.” The truth

is that Nigeria’s economy needs to be growing productively at about 7% or 8% to create the conditions for tackling the chronic and acute problems of unemployment and poverty in this country. Yet, the truth is that, despite its embedded technocracy, the EAC may not succeed in tackling these problems. I say that for three reasons. First, the premise of the president’s anticipated solutions is flawed. There are no “home-grown ideas” for tackling Nigeria’s economic problems. The principles that drive economic growth are universal. For instance, the theories of choice, rationality and opportunity costs that shape market behaviour and economic performance have strong predictive powers. Members of the EAC must judge which institutions and policies are needed to turn Nigeria’s ailing economy around. But, in doing so, they must draw appropriately on world leading economic thinking, research and analysis. Of course, economic institutions and policies must be adapted to local contexts, but they must be underpinned by universal principles, namely about how different factors or incentives affect the markets or economic performance. Let’s face it, the main problem with Nigeria’s economy is that it lacks the right institutions and the right policies to create the right incentives for growth and prosperity. The economy is asphyxiated by excessive government interventions and control rather than being oxygenated by openness and competitiveness needed to attract significant private capital and investments, local and foreign, to the economy. Money goes where it will get the best and safest returns, but, despite its potential, Nigeria is not deemed by many investors as a safe and conducive place to do business. So, if the EAC is under pressure to come up with so-called “home-grown solutions” that ignore universal economic principles, it would fail. Now, the second reason why the EAC may not be effective is linked to the first. And it is that President Buhari has not had a genuine ideational conversion to economic liberalism. He is still very much a protectionist. He said in his first budget speech in 2015 that the “underlying philosophy” of his government’s economic policy “is to promote import substitution”. Nearly five years later, despite constituting a seemingly technocratic and “independent” economic advisory

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Let’s face it, the main problem with Nigeria’s economy is that it lacks the right institutions and the right policies to create the right incentives for growth and prosperity. The economy is asphyxiated by excessive government interventions and control rather than being oxygenated by openness and competitiveness needed to attract significant private capital and investments, local and foreign, to the economy

council, he said in his recent Independence Day speech that “our journey to self-sufficiency is well underway”. Of course, the policy tools for promoting import-substitution and self-sufficiency are exchange controls, import bans, prohibitive tariffs and excessive regulations and interventions – all elements of a closed economy that stifle innovation, productivity and competitiveness. Is that what members of the EAC believe Nigeria needs? If not, can they persuade President Buhari to change his protectionist stance and embrace free enterprise capitalism, which is the best model for creating wealth, reducing poverty and raising living standards? For if they can’t, they won’t succeed in transforming Nigeria’s ailing economy. Which brings me to the final reason I am sceptical about the efficacy of the EAC: the lack of embedded economic technocracy in the government. President Buhari said members of the EAC would have access to all ministries, departments and agencies, MDA, including holding monthly technical sessions with them. Fine, but that can’t solve the acute problem of lack of economic expertise in the MDAs. Every government department in the West has dedicated teams of economists, statisticians and social researchers, who subject policy proposals to rigorous, evidence-based, cost-benefit analysis. But economic considerations and data-based analysis are not central to policymaking in Nigeria. President Buhari said that “the absence of reliable data is hindering Nigeria’s development”. True, but the EAC can’t fix it! President Buhari is right to establish the economic advisory council. But unless Nigeria’s economic model undergoes a seismic shift and unless there is embedded economic technocracy within government, an advisory council would have only minimal impact. The good thing is that Nigeria’s membership of the African Continental Free Trade Area, AfCFTA, provides strong incentive and impetus for transforming this country’s economic model and embedding economic technocracy in its governance. But would the EAC build on that? Well, they should! 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

The Nigerian Code of Corporate Governance, 2018 principle 22 – shareholder engagement & shareholder activism

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he establishment of a system of regular dialogue with shareholders balances their needs, interests and expectations with the objectives of the Company.” Principle 22, Nigerian Code of Corporate Governance, 2018 (NCCG). Shareholder engagement can be defined as a relationship building process that provides the board of directors and management the opportunity to communicate with and receive feedback from shareholders. It is the medium through which shareholders communicate their concerns and proffer suggestions on the company’s activities. Traditionally, shareholders are typically engaged through Annual General Meeting (AGM). The NCCG however recommends an enhanced shareholders’ engagement that would balance shareholders’ needs, interests and expectations with the objectives of the companies. The code recommends that the board should develop a policy to be hosted on the company’s website that ensures appropriate engagement with shareholders. Shareholder activism on the other hand is a way in which shareholders can influence a company’s behaviour by exercising their rights as owners (Investopedia). Financial Times defines Shareholder Activism as “the idea that investors should work to influence the running of the companies in which they invest, primarily through the casting of shareholder voting. This activity is designed to deter poor governance that might pose a long-term threat to the profitability of the companies that

shareholders invest in”. Shareholder activism is not the prerogative of minority shareholders as it can involve institutional investors (mutual funds, pension funds, banks, private equity investors, etc) and shareholder associations. Activism covers a range of activities and includes “voting with one’s feet” (divesting), private discussions or public communication with the board of directors and management, press campaigns, whistle blowing to regulators, active participation at general meetings, seeking to replace individual directors or the entire board, etc. Unresolved issues between shareholders and the board (and management) have the potential to detract from the operations of the company. Attitudes to overly vocal shareholders tend to range from ambivalence to irritation. However, it is possible for shareholder activism to be used as an effective tool for ensuring sound corporate governance. Many institutional investors tend to be passive “gate-keepers” and have allowed shareholder associations to take the front seat at general meetings. In the wake of corporate governance scandals that witnessed substantial erosion of investment globally, institutional investors should take more interest in the affairs of the companies in which they have invested. A common complaint of shareholders is that the Annual General Meeting (AGM) is the only opportunity they have to interact with the directors and management and to air their views on the affairs of the company. It is recwww.businessday.ng

ommended that the board and management should organise additional avenues to engage shareholders, whilst being mindful of corporate governance considerations on granting preferential treatment to shareholders. In Nigeria, “shareholder activism” can be said to be a euphemism for disruptive, uninformed, populist “rabble-rousing” at AGMs and in its extreme form, is perceived as an extortion scheme. However, it can be argued that companies with active and engaged shareholders are more likely to uphold good corporate governance practices and ultimately be more successful in the long term than those that are left to do as they choose. Thus, shareholder actions (not antics) could be potentially powerful in ensuring the enthronement and practice of sound corporate governance. Shareholders are encouraged to play an active role in ensuring the board and management pay due attention to the principles and practices of good corporate governance. In particular, institutional shareholders are obliged to “seek to influence positively the standard of corporate governance in the companies in which they invest.” Indeed, there is a SEC code of conduct for shareholders made pursuant to Section 8(y) of the Investments and Securities Act (ISA) 1999 that seeks to guide the conduct of members of shareholders’ associations during general meetings of public companies and their relationship with public companies outside the general meetings. The code is intended

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BISI ADEYEMI to ensure the highest standard of conduct amongst members of shareholder association and to ensure that shareholders make positive contributions in ensuring that the affairs of public companies are run in an ethical and transparent manner and also in compliance with the code of corporate governance for public companies. Companies should actively engage shareholders by providing up-to-date and accurate information and have a clear investor relations policy. However, engaging with shareholders without a clear process may expose the company to risk of a breach of legal obligations, miscommunication, or an ineffective use of resources.

Bisi Adeyemi is the managing director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. DCSL provides governance advisory, corporate restructuring & board evaluation, board & senior management training, retreats & strategy sessions, executive talent recruitment, HR outsourcing, company secretarial services.

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Monday 14 October 2019

BUSINESS DAY

In Association With

Wall of silence

On impeachment, Congress struggles with an obstructive president Unstoppable force meets immovable object

ORDON SONDLAND, America’s ambassador to the European Union (EU) and author of lawyerly texts denying “quid pro quo’s of any kind” between Mr Trump and Ukraine’s president, was due to testify before the three House committees on October 8th. That morning, in a tweet that showed he shared his ambassador’s fondness for errant apostrophes, the president blocked Mr Sondland from appearing before “a totally compromised kangaroo court, where Republican’s rights have been taken away.” Pat Cipollone, the White House counsel, later broadened this recalcitrance. The executive branch could not “be expected to participate in” the House’s impeachment inquiry, which he called a “highly partisan and unconstitutional effort”. Where does that leave Congress? As a matter of law, Mr Cipollone is wrong: the constitution gives the House of Representatives “the sole power of impeachment”. Mr Cipollone complained that the president cannot cross-examine witnesses or see the evidence against him. That misunderstands the process. In an impeachment proceeding the House plays the role of a grand jury, evaluating evidence and weighing whether to indict. The president mounts a defence in the Senate trial. Mr Cipollone has asserted that the lack of a full House vote to begin an impeachment inquiry renders the current process invalid. This has no basis in law or House rules. Nancy Pelosi, the House Speaker, may be playing politics in trying to ensure that Democrats from districts Mr Trump won do not have to cast a tough vote, but impeachment is a political process as well as a quasi-

A Balkan War woundsbetrayal

A violent election in Mozambique threatens a hard-won peace Conflicts old and new have dashed hopes of a free, fair and peaceful vote

legal one. There are no rules that say Ms Pelosi needs backing from a floor vote to open an inquiry. Where Mr Cipollone is right is that support for the inquiry is partisan. But that is largely because many Republicans are now reduced to excusing conduct that before 2016 they would probably have deemed unacceptable. In a civil or criminal trial, people who flout a court’s instructions can be found in contempt, and either fined or imprisoned until they comply. This is not an option for those running the impeachment inquiry in the House. Congress has not detained anyone since 1935, when a Hoover administration official was held at the Willard Hotel. As fractious as American politics is today, Ms Pelosi dispatching the Capitol police to seize Mr Cipollone or Mr Sondland at the White House, possibly precipitating a physical confrontation between security forces, would make things worse. Some Democrats have considered reviving Congress’s powers of “inherent contempt” which,

at least in theory, allow them to levy fines on recalcitrant witnesses. Adam Schiff, the House Intelligence Committee chair, suggested fines of $25,000 per day. That would solve two problems for the House, and appeals for two reasons. First, it would be quick, whereas obtaining penalties for civil contempt charges can require lengthy court battles. Second, criminal contempt citations require the Justice Department to prosecute, which, under William Barr, the attorney-general, it is vanishingly unlikely to do. But it is an untried strategy. The House would first have to establish rules, and provide contemnors with some form of due process. The House majority would almost certainly face a legal challenge if it invoked inherent contempt, limiting its capacity to change anyone’s behaviour. Democrats thus find themselves with a familiar dilemma. How should they exercise oversight when the White House refuses to follow the rules? One option would be to move swiftly to an

impeachment vote and make the stonewalling part of an obstruction charge. Yet Democrats would rather take more time in the hope of swaying public opinion, which seems to be moving their way (see Lexington). If they impeach the president on what sounds like a technicality, and before conducting a full inquiry, it would be easier for Senate Republicans to defend him. That may explain the White House’s strategy. Reasoning that the House will probably vote to impeach eventually, why not get it over with now? As soon as the House votes to impeach, control of both the procedure and the news cycle will shift from Ms Pelosi and House Democrats to Mitch McConnell and Senate Republicans. By the time voters head to the polls next year, impeachment would be old news. And it will have been more than a year since the president’s lawyer affirmed in writing that seeking intervention from a foreign government in an American election “was completely appropriate”.

N OCTOBER 7TH Anastácio Matavele left a training session for election observers in Xai-Xai, the capital of Gaza province in southern Mozambique. Matavele, an experienced observer, was chased in his car by men allegedly belonging to a specialist police unit, who then shot and killed him. Authorities were already struggling to explain how the electoral roll in Gaza, a stronghold of FRELIMO, the ruling party, came to have 300,000 more names on it than there are adults in the province. Now they must explain whether the state murdered a warden of Mozambican democracy. Matavele’s death is just the latest cause for concern ahead of elections on October 15th. These are the sixth presidential and parliamentary

votes since the end of the civil war, which ran from 1977 to 1992. They will be among the most violent, says Zenaida Machado of Human Rights Watch, an NGO. Campaigning is taking place against the backdrop of two conflicts: one old, the other relatively new. The old is between FRELIMO and RENAMO, former guerrilla fighters who are now the main opposition party. After 1992 the end of civil war gave way to a mostly peaceful impasse, whereby FRELIMO kept control of the state, which it has persistently looted, while leaving RENAMO with enough support and fighters to retain influence. But in 2013-14, and again in 2015-16, RENAMO resumed attacks so as to extract more concessions from the ruling party. A peace deal was signed between the two sides in August. In Continues on page 19

Monday 14 October 2019

BUSINESS DAY

In Association With

Green light, go

Turkey launches an attack on northern Syria The long-feared clash will have consequences across the Middle East

FTER YEARS of threats, it took Turkey mere days to strike. On October 9 t h t h e Tu rk i s h armed forces began bombing parts of north-east Syria. Controlled by a Kurdish-led militia, the region had been an American protectorate until just days before, when President Donald Trump abruptly decided to abandon it. Turkish troops are now moving into Syrian towns, backed by local rebels under their command. The nascent offensive will have implications far beyond Turkey’s intended 30-kilometredeep “safe zone” inside Syria. It will displace hundreds of thousands of people, complicate an already-chaotic war and offer the jihadists of Islamic State (IS) a chance to regroup. President Recep Tayyip Erdogan of Turkey says his aim is “to destroy the terror corridor which is trying to be established on our southern border”. In other words, he wants to oust the Kurds from their Syrian statelet. The main Kurdish force, called the People’s Protection Units, or YPG, gained control of the area while fighting with America against IS. That created an intolerable situation for Turkey, because the YPG has close ties with the Kurdistan Workers’ Party (PKK), a separatist group that has fought the Turkish army for 35 years. As Turkey advances, the fighting will probably grow bloodier. Civilians have begun fleeing towns under bombardment. The incursion could displace many of the 750,000 people living along the border. But Kurdish fighters deprived of American support are unlikely to want open conflict with the larger Turkish army. The YPG is already talking of cutting a deal with Bashar al-Assad, Syria’s dictator, that might see them relinquish some autonomy in exchange for the regime’s protection. The fighting risks benefiting IS, which has been kicked off the territory it once held, but which is resurgent, says the Pentagon. Operations against the jihadists have reportedly stopped. The Kurds, reasonably, say they have other priorities. They are still holding

tens of thousands of IS detainees and their families in camps like Al-Hol, home to some 70,000 people who live in increasingly desperate and unsafe conditions. America says the IS prisoners will become the responsibility of Turkey. But Mr Erdogan’s proposed safe zone does not include Al-Hol. And Turkey does not have a good record when it comes to jihadists. Many first reached Syria by taking advantage of lax Turkish border controls. On October 10th President Donald Trump tweeted that America had taken custody of the most notorious prisoners and moved them out of the country— a tacit admission that Turkey was not up to the job of holding them. In general, though, Mr Trump has cleared the way for Turkey. On October 6th he announced that he was withdrawing the 100 or so American troops in northernmost Syria. They had been in the awkward position of standing between a NATO ally, Turkey, and a reliable partner, the YPG. The open-ended deployment of American troops in Syria (who, in total, number about 1,000) frustrates Mr Trump. He tried to withdraw all of them in December. That decision (announced, naturally, on Twitter) prompted his defence secretary, James Mattis, to resign. His equally abrupt decision this month blindsided American officers, to say nothing of the Kurds, and was followed by more erratic behaviour. Mr Trump argued America owed the Kurds no

lasting loyalty since they “didn’t help us in the second world war”. In fact, the Kurds fought under allied command in Albania and Greece. As for Turkey, in the space of 48 hours he all but endorsed the Turkish operation, threatened Turkey with sanctions should it cross his unspecified red lines and then praised its contribution to NATO. The Pentagon worries about how the limited withdrawal in the north will affect the rest of its deployment in Syria. As the Turkish army advances, backed by rebel groups that are not terribly fond of America, it will grow ever harder to protect American troops stationed elsewhere. What began as a limited pullout may end with America abandoning all its positions. In a rare split with the president, Republican lawmakers joined their Democratic colleagues to condemn the move. Lindsey Graham, a Republican senator close to Mr Trump, introduced a bill to sanction Turkey’s leaders, armed forces and energy sector until it withdraws troops from Syria. Turkish officials who thought they had a deal with Mr Trump were left puzzled and fuming. “We don’t see only a single US any more, but many voices coming from different interest groups,” says Mesut Hakki Casin, an adviser to Mr Erdogan. Apart from Turkey’s own Kurds, and some liberals, most Turks are likely to cheer the offensive. Opposition parties tend

to defer to Mr Erdogan whenever he invokes national security. He suffered a setback earlier this year when his Justice and Development party lost control of Turkey’s biggest cities in local elections. Success in Syria could offset the damage. Most Turks are also likely to back Mr Erdogan’s plan to flood the areas now under Kurdish control with some of the 3.6m Syrian refugees living in Turkey. Opinion polls show mounting levels of resentment towards the guests. Since the start of the year, Turkey has sent thousands of them back to Syria. Mr Erdogan says the 30km “peace corridor” his army plans to create would be a magnet for up to 2m refugees. This is either delusional or a euphemism for forced resettlement. Sending mostly Arab refugees to a region populated mainly by Kurds risks fanning tensions and future conflict. On paper the Turkish offensive seems simple enough, an attempt to deny territory to a hated foe. But capturing and holding hundreds of kilometres of territory will be a costly and perhaps bloody slog. The fighting could force a flood of refugees into Iraq, which has its own problems. And by giving Syrian rebels a new foothold in the north-east, it will complicate matters elsewhere in Syria, where Russia and Iran are trying to help Mr Assad consolidate control. Almost nine years into a conflict that reshaped the Middle East, there is still no end in sight.

A violent election in Mozambique threatens... Continued from page 18

exchange for laying down its arms RENAMO received pledges of jobs and pensions for its ageing fighters, as well as an agreement to devolve power to provinces, whose governors will henceforth be indirectly elected, rather than appointed by the president. Negotiators hoped that the deal would be the prelude to peaceful elections. That has proved naive. Since RENAMO gave it a scare in elections in 1999, FRELIMO has been accused of rigging votes, including those it might have won anyway. Although President Filipe Nyusi will retain power in the presidential race, elections to the national assembly will be close. RENAMO is hoping for victory in five of the ten provincial votes. FRELIMO’s share of the vote has slipped in the past four elections (see chart); many expect it to use any means necessary to slow its decline. Evidence of chicanery is growing. Opposition presidential candidates have been stopped from holding rallies in some areas. Thousands of election observers have been prevented from registering. Victims of Cyclone Idai, which struck in March, have reportedly been told that if they vote for the opposition they will not get food aid. Dozens of journalists and pro-democracy activists have been harassed, assaulted and detained in recent years. Some, like Matavele, have been killed. Then there is the second, newer conflict looming over the ballot. In Cabo Delgado, a province in the far north-east, a poorly understood Islamist-linked insurgency has terrorised local people since 2017. It has also led to an influx of private security firms to protect the installations that will tap vast offshore reserves of natural gas. This year 184 people have died in attacks, estimates Jasmine Opperman, an analyst. Mr Nyusi claims the situation is under control. It is not. Violence has increased since election campaigning officially began on August 31st. On September 23rd ten people were killed in a single attack, which also saw the local FRELIMO office set on fire. The army is “totally illequipped”, says Ms Opperman.

Monday 14 October 2019

BUSINESS DAY

In Association With

Money to burn

Kenya’s demonetisation was unexpectedly orderly Even if it led to squabbles over a dead president’s picture

HEN KENYA announced in June that it would issue new 1,000 shilling ($10) notes and destroy the old ones to fight corruption, many predicted chaos. India’s efforts to do the same by “demonetising” rupees in 2016 led to riots, deaths and a dent in economic growth. Few doubted the need for Kenya to do something: corruption and tax evasion are pervasive. Tax revenue as a share of GDP has slipped steadily since 2014 to less than 16%, which is less than half of the average of countries in the OECD. The central bank hoped that by abolishing the old notes it would flush out criminals and well-heeled tax dodgers when they brought out large sums of hidden cash to exchange for the new notes. But critics fretted that the plan would hurt the poor, many of whom live deep in the countryside, and the millions of Kenyans who do not have bank accounts. “My aunties and grandma in the village

have had challenges trying to get the new notes,” says Peter Ndegwa, a taxi driver in Nairobi. “They’ve been conned by being issued fake currency.” Traders were also hit when businesses in Uganda and

Tanzania sniffed at Kenyan notes. Even their design caused controversy. Activists took the central bank to court, arguing the notes were unconstitutional because they featured an image of Jomo

Kenyatta, Kenya’s first president and the father of the current president, Uhuru. This seemed to violate a constitutional ban on banknotes showing the “portrait of any individual”. After a review

of dictionary definitions the court ruled that since the image showed his feet it was clearly a sculpture and not a portrait, which would have shown him only from the “bust or head upwards”. At least Kenya learned from India by giving people four months to change their money (in India the old bills became invalid overnight and people had just 50 days to exchange old bills for new). Yet this may also have allowed time for crooks to launder their money. Many rushed to buy dollars. Others handed over wads of cash for new cars. By the time the deadline had passed, the authorities were able to identify only a few thousand suspicious transactions for further investigation. The central bank declared a success, saying that 96% of the old notes had been handed in. But teething pains continue. “The new notes don’t fit in the parking meters,” grumbles Anstes Agnew, a visitor from Rwanda who got stuck in the airport garage. “You have to go on a hunt and hoard the old notes.”

Free exchange

What to make of the strife at the ECB As Mario Draghi prepares to step down, his critics are bashing his legacy

OT LONG ago it was hard to find anyone with a bad word to say about Mario Draghi, the Italian boss of the European Central Bank (ECB). He is credited with saving the euro by pledging, in the depths of a crisis in 2012, to do “whatever it takes” to stop the currency from breaking up. He seemed certain to leave office at the end of October to gushing tributes and an assured place in the pantheon of Europe’s great leaders. Instead, his critics are out in force. Their fury was aroused by the stimulus package Mr Draghi unveiled on September 12th, which included cutting interest rates from -0.4% to -0.5% and resuming quantitative easing (QE), the purchase of bonds with newly created money. In the hope of reviving inflation, the ECB has pledged to keep rates low and continue buying bonds until underlying inflation returns to its target of “close to, but below, 2%”.At least seven members of its 25-strong rate-setting body, including the central-bank governors of France and Germany, opposed restarting QE. Klaas Knot, the head of the Dutch central bank, called it “disproportionate”. On October 4th the old guard joined the fray. Six former Austrian, Dutch, French and German central bankers released a memo criticising the ECB’s direction under Mr Draghi. The bank misinterprets its job of maintaining price stability, they say,

and its policies have become entangled in politics. One of the signatories, Otmar Issing, the ECB’s first chief economist, was its intellectual leader for its first eight years. If Mr Draghi is the euro’s preserver, Mr Issing is one of its creators. How to interpret the strife? To make the single currency palatable to the inflation-phobic Germans, the ECB was modelled on their central bank, the Bundesbank, with control of inflation at the heart of its mission. (In 1992 Jacques Delors, then the president of the European Commission, joked that “not all Germans believe in God, but they all believe in the Bundesbank.”) On Mr Issing’s watch, the ECB began life with a “reference value” for growth in the money supply and a flinty view of inflation: anything below 2% counted as price stability. But the reference value fell by the wayside.

Mr Draghi views the bank’s inflation target as symmetrical, not an upper limit, and has said he would tolerate prices growing faster for a spell. Teutonic toughness was necessary to tame high inflation in the 1970s and 1980s. But that world is gone. Inflation has exceeded 2% in only 29 of the past 120 months; core inflation, not once. In this environment the memo’s worry that the ECB’S symmetrical target might stoke runaway inflation seems absurd. It confirms what Mr Draghi told the Financial Times on September 30th: that he inherited a “very conservative” institution. This rankles with old-timers, but it is true. On the eve of the great recession in 2008, the ECB raised interest rates as other central banks were loosening. In 2011, as the euro zone’s economy teetered on the brink of a double-dip downturn, it raised rates twice. Those

mistakes, and its slowness compared with America and Britain to start QE, left it struggling to convince investors that it would act speedily to head off deflation. Critics of negative interest rates fear that they do more harm than good by reducing bank profits, thereby deterring lending. But in June the ECB’S economists concluded that banks were passing negative rates on to their borrowers and depositors, thus avoiding a squeeze on their margins and providing an economic stimulus. Even some of the hawks on the ECB’s governing council think interest rates can safely be pushed even further below zero. A fear often heard in the northern countries of the currency bloc—and one implied by the memo—is that QE, by lowering the financing costs of indebted southern governments, allows them to avoid painful reforms. It is true that loose money has benefited highly indebted countries the most. But the old guard are wrong to say that the ECB is deliberately cosseting the southerners. Northerners, too, have enjoyed lower debtservice costs—the German state, for instance, to the tune of €368bn ($402bn), or 11% of a year’s GDP, according to the Bundesbank. Now the ECB is wading into deeper political waters. It has set a limit of 33% on the share of a government’s public debt that it will buy. That ceiling will soon be reached

in countries, including Germany and the Netherlands, with little debt relative to their size. The bank will then face an unpalatable choice. If it raises the limit it could become such a significant creditor that it might one day have to decide whether or not to veto a country’s debt restructuring— a highly political question. If it keeps the limit where it is, it will be able to buy more assets only in those countries where the limit has not yet been reached—making it even clearer that the main beneficiaries of QE are indeed the southerners.

Monday 14 October 2019

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BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

BANKING

New battleground is pricing, speed, as banks chase retail pockets …Here’s how the banks compare in terms of pricing LOLADE AKINMURELE

igerian b a n k s a re locked in a tussle to lure clients with low pricing and speed of processing transactions, as competition for retail pockets heats up. Most banks market their retail loans with names speaking to the speed of obtaining a loan, whether it’s Guaranty Trust Bank (GTB)’s “Quick Credit”, First City Monument Bank (FCMB)’s “Fast Loan” or Sterling bank’s “Quick cash.” Others include Wema bank’s “Express credit” and Fidelity’s “Fast loans.” In terms of pricing, rates are largely within the 4.5-5.5 percent range per month with GTB’s 1.75 percent being the positive outlier and the cheapest. Stanbic IBTC’s “Easy Cash” loan product and First Bank of Nigeria’s salary advance loan products are priced at 4 percent respectively, with UBA’s “U-Advance” priced at 5 percent monthly. Access Bank charges a monthly interest rate of 5.15 percent for its pay-day loans while Fidelity Bank’s “Fast loans” is priced at 5.25 percent. Effectively, annual rates are within the 48 percent to 60 percent range and 21 percent for GTB, materially higher than the prime lending rate of 15.9 percent (2019 average as at August) for good quality large corporates, reflecting the higher risk of retail lending. The explosion in retail lending is coming on the heels of a regulatory-induced effort to boost loans to the real sector or lose their cash to a zero interest yielding account with the Central Bank of Nigeria, CBN.

It is supposed to force banks towards rechanneling their efforts to their core function of lending rather than park cash in high yielding government securities, which the banks have used to protect their balance sheets in a risk-laden environment tainted by low economic growth and weak corporate earnings. The redistribution of loans towards retail should come at a steady pace given the risks of higher NPLs and impairments on retail/consumer lending under soft macro conditions, accord-

ing to Aderonke Akinsola, a banking analyst at Lagosbased investment bank, Chapel Hill Denham. “However, credit controls and tight risk management framework could keep asset quality relatively intact despite increased retail lending,” Akinsola said in a note to clients. Retail customer size looks poised to drive growth in retail loans, with UBA, GTB and Access were the biggest retail lenders as at H1-19. GTB and Access reported retail customers of about 16 million and 31 million

respectively as at H1-2019, according to data provide in their financial statements. The recent regulatory guidelines by the CBN have resulted in banks either renewing their retail focus or adopting a retail-driven lending model. Despite the higher risk that comes with retail/consumer lending, banks are increasingly shifting their focus towards this segment and the higher weighting for such loans for LDR computation further supports this. During their H1-2019

results conference calls, the banks emphasized the focus on growing their retail loan books in the second half of 2019 and beyond. The banks are in a haste to achieve the CBN’s recent directive to maintain a minimum loan-to-deposit ratio of 65 percent by 31 December 2019. The directive favours loans to small businesses retail borrowers. When some 12 banks failed to meet an earlier directive to achieve a loan to deposit ratio of 60 percent by the end of September, they debited with about half

a trillion as penalties. The cash was pulled out of the banks and added to their cash reserves with the CBN. It would seem the banks are indeed ramping up efforts to meet the CBN’s directive and avoid any penalties. In its latest letter to banks on 30 September, the CBN disclosed that gross credit increased by 5.33 percent to N16.4 trillion between May and 26 September 2019, implying year to date growth of 8.3 percent. As at June 2019, the loan book of listed banks fell by 1.1 percent year to date to N14.3 trillion. Ho w e v e r, b a s e d o n available data for the listed banks, Retail/Consumer/ Mortgage loans (the choice sectors under the CBN’s new 65 percent LDR directive) advanced by 7.7 percent since the start of the year to N875 billion as at H1-2019, contributing 6.1 percent to their loan books. In 2018, these loans contributed 5.5 percent. Based on the published accounts of the banks, gross loans fell by 3.7 percent year to date as at H1-2019 while their retail/consumer book grew by 5.1 percent, contributing 6 percent to the total loans of these banks.

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

Monday 14 October 2019

BUSINESS DAY

COMPANIES&MARKETS CONSUMER GOODS

Spivi Beverage Company rolls out unique shot products for Nigeria market KELECHI EWUZIE

candinavian beverage company Spivi has introduced into the Nigeria market a new product called SMA SHOTS that will cater for the ever changing tastes of consumers. The products are produced with refreshment of the young crowd consumers as its focal point especially as to the world of flavours keep changing.. S eba st i a n G ro n s kov, Chief executive officer and export manager of SMA SHOTS says every almost hypnotic bottle of SMA SHOTS is a promise kept. Gronskov while speaking to newsmen at the unveiling of the products in Lagos said Spivi intends to export SMA SHOTS around the world. According to him, “We have been exporting in several countries; Denmark,

Norway, Sweden, Finland, Germany, Japan, Iceland and now Nigeria. We chose Nigeria as the first African country because it is such a dynamic market and the biggest in Africa. We wanted to make sure our brand works well in Africa-and Nigeria is an ideal testing ground. “Our first distributor is First Bottling Limited and our marketing push will be focusing on Lagos to get a good footprint. Then we roll it out from there. “We have engaged experts with proven record in this business and this product has all the essential ingredients for success. Consumers can be rest assured of buying a product worth the value of the money spent.” Tosin Obafemi, head of distribution in Nigeria says SMA SHOTS is premium brand and is creating a unique category in the alcohol sector, adding that Spivi is the first to

introduce a brand like this in Nigeria, and we are looking at getting across all the major states in the next six months. Obafemi observes that the bottle containing SMA SHOTS is longer than a normal bottle with a unique colour for easy identification. The red bottle is the strawberry flavour and the black bottle is the strong menthol flavour. SMA SHOTS is lower in alcohol than ordinary spirits and is colourful and tasty. SMA SHOTS is Scandinavia’s most popular Shots brand and has enjoyed incredible success since it was first introduced in Denmark. The global roll out is now underway, with China recently added. The Brand Owners of SMA SHOTS are international experts in creating new and unique shot flavours that consumers will recognise as the favourite flavours of each country in which it is sold.

COMPANY RELEASE

Fidelity Bank canvasses better data sharing in retail growth

he executive director, operations and information, Fidelity Bank plc, Gbolahan Joshua, has advised data validation agencies and organisations to adopt appropriate policies that provide financial institutions with the required flexibility to utilise available customer data. Joshua who gave the counsel during a panel session at the 10th anniversary celebration of Verve in Lagos recently, explained that this would assist banks in the country drive new levels of customer engagements across digital channels and systems. He harped on the need for data generating institutions in Nigeria to explore fresh ways to collaborate with one another. Alluding to the importance of data validation as a major driver in enhancing the Know Your Customer (KYC) policy, Joshua noted that harmonization of disparate databases will accelerate

lending processes by Banks. “Digital identity is very critical in digital banking operations. Industry collaboration must be embraced by both financial institutions and database generating institutions to simplify digital banking operations” he said. Whilst stating that the bank was not averse to data sharing, Joshua said that the lender had signed a Memorandum of Understanding with Open Technology Foundation (OTF) for the adoption of a standard Application Programming Interface (API) for its operations as a financial institution. Open Banking is a system that provides a user with a network of financial institutions’ data through the use of application programming interfaces (APIs). The Open Banking Nigeria Standard defines how financial data and services should be created, shared and accessed. By relying on networks instead of centralisation, open banking helps customwww.businessday.ng

ers to securely share their financial data with other financial institutions. The panel discussion was moderated by Chief Executive Officer, Verve International, Mike Ogbalu III. Deputy Chief Executive Officer, Payment Processing, Interswitch, Akeem Lawal, Head, Consumer Distribution, Ecobank Nigeria, Stanley Jacob and Executive Director, Retail Bank, FCMB, Olu Akanmu also featured as panelist at the event. Mike Ogbalu expressed gratitude to Fidelity Bank and all partners of verve that were present at the event whilst assuring them that endless possibilities awaits the digital space in Banking. The event which offered a unique opportunity for all participants to network with the industry’s brightest, had in attendance, a number business leaders and industry experts who gave valuable insights into the latest tech trends and shared experiences. https://www.facebook.com/businessdayng

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Monday 14 October 2019

BUSINESS DAY

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Monday 14 October 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

AVIATION

Cabo Verde Airlines to commence direct Lagos-Cape Verde flights December IFEOMA OKEKE

ational carrier of the Cape Verde Islands, Cabo Verde Airlines will commence direct flights from Lagos, Nigeria to Cape Verde on 9th December 2019. This was disclosed recently at a media briefing to officially launch the airline to the Nigerian public. The airline’s Boeing 757-200 will fly five times a week from the Lagos International Airport to its hub in Sal, Cape Verde. Jens Bjarnason, CEO and President, Cabo Airlines said: “We are excited to add the most populous country in Africa as one of our destinations. Nigeria has a vibrant travel sector and we look forward to servicing our customers and connecting them to Cape Verde and beyond, seamlessly. Bjarnason stated that passengers can look forward to comfort, quality and a memorable travel experience on their aircrafts which have 161 Economy class seats and 22 Executive Morabeza Premium Class seats. Tariye Orianzi, Nigeria Country Manager, Cabo Verde Airlines said of the airline “We

are targeting African entrepreneurs, leisure and business travellers as well as world travellers with our competitive pricing and offers, including a Cape Verde stopover program at no additional ticket costs. Interestingly, Cape Verde is a member of ECOWAS making it visa free for Nigerians. “Cape Verde has some of the most beautiful untouched natural Islands in the world. We hope to bring the Cape Verdean culture and colours to all corners of the world, as our mission suggests – connecting four continents while also serving as the gateway for fast travel. We also believe the addition of this route will improve tourism in Africa” she added. Cabo Verde airlines will commence operations on the Lagos - Sal, Cape Verde route from December 9, 2019 with flights on Mondays, Tuesdays, Thursdays, Saturdays and Sundays. Other destinations the airline flies to include Washington DC, Boston, Lisbon, Milan, Rome, Paris, Luanda, Dakar and several cities in Brazil – Recife, Porto Alegre, Salvador and Fortaleza. Cabo Verde Airlines is a scheduled airline whose new hub operates at the interna-

tional airport on the island of Sal. Since November 2009 it has been an active member of the International Air Transport Association (IATA). Cabo Verde Airlines is the air flag carrier of the Republic of Cape Verde, owned in 49 percent by the State of Cape Verde and 51 percent by Loftleidir Cabo Verde, an Icelandic investment firm majority of which is owned by the Icelandair Group. It was established in 1958, as a public enterprise when it absorbed the then called Aero Club of Cabo Verde. Up to 1984, the company operations were restricted to the domestic market for eight of the nine inhabited islands of the archipelago. As an international operator, Cabo Verde Airlines has been implementing regularly the ever more demanding requirements in the area of aeronautical security, imposed not only by the European Union but also by the United States of America. In February of 2009, the company acquired its registry in the IOSA program of IATA. In May 2018, TACV changed its name to Cabo Verde Airlines. It is certified as IOSA Operator, the IATA Operational Safety Audit Program.

L-R: Folashade Ambrose-Medebem, communications, public affairs and sustainable development director, Lafarge Africa Plc; Soromidayo George, chairperson, Global Compact Network Nigeria; Lise Kingo, CEO/ executive director of the Global Compact; Muhammad Sanusi II, emir of Kano, SDG advocate, and Adewale Tinubu, group chief executive, Oando Plc, at a breakfast meeting with the Global Compact Network Nigeria (GCNN) to discuss ‘Bridging Nigeria’s Sustainable Development Gap’ in Lagos

L-R: Sheila Ezeuko, company secretary; Kenny Odogwu, chairman, and Olawale Banmore, acting group managing director, all of Royal Exchange Plc at the 50th annual general meeting of the company in Lagos. Pic by Pius Okeosisi

FINANCIAL SERVICES

Chartered Institute of Stockbrokers partners with AERMP to drive risk management DAVID IBIDAPO

he association of Enterprise Risk Management (ERM) recently signed an MoU with the Chattered Institute of Stockbrokers (CIS) in the bid to foster the knowledge and importance of risk management in businesses particularly in the capital market and non-financial sector of the Nigerian economy. In what is termed a step in the right direction, the memorandum of understanding is said to help expand the frontiers of both training institutes in impacting adequate skills in risk management to its members amid the prevalence of systematic and unsystematic risk businesses are exposed to. “This is really a step towards the right direction. An MoU with AERMP means we can expand what we do and help people know the importance of risk management in every business most especially in the world of investment,” Adedeji D. Ajadi, registrar and chief executive officer of CIS told

BusinessDay. AERMP is the foremost professional body for risk management practice in Nigeria. It is an independent, not-for-profit institute, duly registered and approved by the federal government of Nigeria under the Company and Allied Matters Act 1990 to set professional standards in enterprise risk management practice among the practitioners in all industries and sectors (both private and public). With the Nigerian economy barely growing at 2 percent on the back of unstable global oil prices, huge infrastructure gap, negative market sentiment prevalent in the capital market, weak consumer spending and high cost of production amongst domestic firms, to mention but a few, the success of a business is largely dependent on efficient risk management. “Since expansion plans of businesses rests on capital investment and financing of capital-intensive projects, risk management cannot be over emphasised. This is why we need to train businesses

most especially in the nonfinancial sector since we’ve identified huge knowledge gap in this aspect,” Olayinka Odutola, Director General, AERMP. Taiwo Ige, President AERMP, “this signing will assist both practitioners and the investors in assessing their risk in taking investment decisions as to what stocks to buy and other financial decisions.” “risk management in Nigeria is a new development and only being imbibed by the financial sector of the economy but in recent times there as been a lot of gap even in the stock market, hence, the need to bring them on board in risk management training,” she said further. AERMP also noted that the institute plan signing such MoUs with other professional bodies and see members of those bodies get certified in risk management through aggressive trainings. “we will further see how student members of our institute also get certified in risk management upon the completion of the CIS programme,” Ajadi noted.

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L-R: Abor Chiadikaobi Lilian, industrial officer, Federal Ministry of Industry, Trade and Investment; Thomas Oloriegbe, group CEO, Nosak Group (second left); Francis O, Alaneme, director, Federal Ministry of Industry, Trade and Investment (third left); Osaro Omogiade, Managing Director, Nosak Distilleries (third right); Awerikihi Mamuzo Blessing, industrial officer, Federal Ministry of Industry, Trade and Investment (second right) and Osagie Ogunbor, group executive director, corporate services, during a visit tour of Nosak factory by the ministry’s team in Amuwo Odofin, Lagos. Pic by Olawale Amoo

L-R: Damilola Emmanuel MD, Lagos State Water Authority; Fredrick Oladehinde, commissioner for Trasport, Lagos State; Babajide Sanwo-Olu, Lagos State governor; Lola Kassim, group manager, West Africa Uber, and Tayo Oyegunle, country manager, Nigeria Uber, at the Uber boat launch in Lagos. Pic by Olawale Amoo

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BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Sacred Cows that turns family into battle ground The Solid Wealth Messenger

Grace Agada

he traditional autocratic family system has come to an end. But not without the many sacred cows it has created in families. An autocratic family system is a family system that demands obedience from children. Children born into this type of family simply comply. They comply with certain ideas, beliefs, and traditions without questioning, scrutiny or reason. These children adopt beliefs they can hardly defend or give reasons why there exist. As these children grow these beliefs are ingrained and form strongholds that then become the family’s untouchable sacred cow. A sacred cow is any belief, ideology or concepts considered to be exempted from criticism, any form of questioning or open for negotiation. Children who grew under the autocratic family system dragged some of these family sacred cows into their own families. But rather than a blind or fearful compliance from their own children, they are faced with a lot of thought-provoking questions. These children who now ask questions are members of the age of reasoning. In this age, reasons rule. Children of this age are looking for logical reasons why sacred cows exist. They are accessing the relevance and application of family sacred cows in their own lives today. If a family sacred cow does not withstand critical scrutiny they will violate it. This violation can lead to family conflict. The presence of conflict in a family will break family unity and the absence of unity will destroy the long-term preservation of wealth. If parents must maintain the peace in their families they must find convincing reasons for family sacred cows. There are three major areas within a family where sacred cows can cause conflict. When conflict results in these areas it

is because parents have certain beliefs that can affect the lives of their children. If children see these beliefs as positive they will accept them otherwise they will violate them. These three areas are the choice of career, the choice of whether to join the family business or not, and the choice of who to marry. Many wealthy parents attempt to impose a particular career path on their children for certain reasons best known to them. Children then enter these career paths and end up experiencing frustration. Some end up struggling through school only to abandon these careers in the latter part of their lives in favor of what they love. The conflict of career choice can affect the relationship between parents and children and can drive children far away from home. The second area within a family that causes conflict is the decision of whether to join the family business. Family leaders assume that because they have built a successful business that everyone will be willing to join them. They are usually shocked when they realize that their children never wish to join the family business. Accepting this fact is a difficult thing for wealth creators. What they fail to understand are the real reasons why a child will choose to abandon the privilege of joining the family business. Whatever these reasons, parents must first understand them and factors that encouraged them. They must also find creative ways to achieve the same result without sacrificing the happiness of their children. The third area within a family that can lead to a huge source of conflict is the choice of who to marry. Many families have traditions, beliefs and expectations about who their children should marry. Most times, these expectations are unclear until a life partner shows up. Parents also do not help their children develop the skill to choose the right relationships and marry well. When children make the wrong choices they begin to panic and children rebel. The key to success in marital relationships is to show children the right way and give them a blueprint long before they meet the men and women of their dreams. Anything less and you will experi-

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ence rebellion, blame or regret. Today’s younger generations are different and so are the family systems that create them. They were born at a time where there is increasing awareness for education and reason. They are exposed to advanced critical thinking techniques and diverse cultures. This exposes them to their rights and why they should question authorities, even when this authority is their parent. Promoting a culture of critical thinking is important for the long-term success of your child. But it also poses a threat to certain family sacred cows. Parents who are custodians of these sacred cows must find ways to provide answers to the question children are asking. Unfortunately, parents did not get answers from their own parents about certain family sacred cows. If they are to thrive with today’s family system, they must get help. With the right professional help, parents can have open conversations with their children and provide the answers children need without causing conflict. These answers can be structured in ways that addresses important questions like what kind of sacred Cows should a child obey and why? When should a child raise appropriate questions and be critical of a sacred cow? When should a child outright defy a sacred cow? And How would a child know the sacred cow that is in his best interest?. Parents can also be helped to gain clarity about family sacred cows.

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Many families have traditions, beliefs and expectations about who their children should marry. Most times, these expectations are unclear until a life partner shows up. Parents also do not help their children develop the skill to choose the right relationships and marry well

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They can be guided to answer the questions, where do my beliefs about this sacred cow come from? And how much evidence do I have to support my belief? And so on. If you are a parent and you need help having this kind of healthy conversation with your children. You can get help through our productive family meeting where we will help you organize and facilitate these conversations in such a way that will preserve the unity in your family . For more information about our productive family meeting Text “Productive Family Meeting” to 08101860042 To discourage children from asking critical questions is to raise a generation with blind obedience. Children who obey blindly cannot create or preserve wealth. The best way for a parent to encourage the thinking that promotes wealth and unity in a family is to have open conversations with the children. Parents must also be willing to change their minds if a family sacred cow was blindly adopted. Children are not trying to reason their parents out of their beliefs they asking to know why there exist. Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer. Email: info@createsolidwealth.com Tel: 08101860042

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Comfort levels rising with new insurance technologies, strategies - PwC Modestus Anaesoronye

hile generational change is still buffeting the insurance industry, many insurers are becoming more comfortable with new technologies and changing from product-focused to customer-centric organizations. They are increasingly open to forming partnerships with InsurTechs and using technology and new ways of thinking to streamline operations, better serve customers and augment a changing workforce. In addition, prescient companies are using changes to industry standards (most notably LDTI in the US and IFRS 17 elsewhere) as a catalyst to implement many of these strategic and operational changes, as well as determine viable business strategies for the future. As PwC’s annual CEO Survey notes , insurance

L-R: Segun Balogun, managing director; Aderinola Disu, company chairman; and Gertrude Olutekunbi, company secretary at the 39th Annual General Meeting of LASACO Assurance PLC in Lagos

industry leaders have lost much of their initial trepidation about InsurTech and now view it as a driver of positive change for their businesses. Reflecting a growing maturity linking technology and strategy, existing and new players are increasingly

focusing on distribution channels and how carriers interact with policyholders and employees in order to create a “beautiful,” brand differentiating experience. As a result, and in a clear break with previous technology cycles, InsurTechs are

investing much less in core areas like policy, billing, and claims but in the periphery. Driving change with InsurTech Cloud capabilities offer much more than just getting rid of internal data centers and switching to cheaper shared services.

SUNU Assurances targets over N10b in new recapitalization Modestus Anaesoronye

UNU Assurances Nigeria Plc, a member of SUNU Group’s will exceed the N10 billion regulatory requirements on recapitalization to underwrite all classes of general business, Samuel Ogbodu, managing director/ CEO of the Company has said. Ogbodu spoke with brokers during the monthly edition titled, “Engagement with Brokers in Abuja and its Environs” held in Abuja. He said in order to meet the new National Insurance

Commission (NAICOM) recapitalization regime of N10 billion for general business, the company is going through the route of right issue. He stated that the Sunu Group based in Paris, France, owned 65 per cent of the Company and they have secured the firm’s commitment to pick up the 65 per cent of the right issue. He said the company operates with a recently increased authorized share capital of N7 billion. He also said they have submitted their recapitalisation plan and approval obtained from NAICOM. He further disclosed that

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when SUNU bought into the hitherto Equity Assurance, they increased the Authorised and paid up capital to N7 billion. He said: “Nigeria is pivotal to the growth and expansion of SUNU Group in Africa and they have submitted their recapitalization plan as instructed by NAICOM. The commission has duly acknowledged the plan and letter of no objection was issued. “The Company is committed to the principle of corporate governance and code of best practices. The Board is committed to full disclosure and transparency in the conduct of the Company ac-

tivities. The Company has in place a robust, dedicated and competent management team that see to the day to day management of the Company.” He explained that SUNU was incorporated as Equity Assurance Nigeria on December 13, 1984 and was licensed to underwrite all classes of general business. “The company changed its name from Equity Assurance Plc to SUNU Assurances Nigeria Plc with due approval from the shareholders and its regulator, NAICOM. The approval was dated 29th March, 2018 and a new license was issued by NAICOM.

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PTAD verifies 11,335 pensions in North West Modestus Anaesoronye

he 2- week verification exercise for Parastatal Pensioners by the Pension Transitional Arrangement Directorate (PTAD) in the North West has ended. The exercise began on Monday, September 23, 2019 and was successfully concluded on Friday, October 4, 2019. There were four (4) centres located in Arewa House and Dakhole Angels Multipurpose Centre Kaduna, Marhaba Event Place, Kano, and Hidima Conference Centre, Bodinga Road, Sokoto. A total of 11,335 (Eleven thousand, Three Hundred and Thirty-Five) Parastatal Pensioners were verified. The breakdown of the numbers verified shows Kaduna Centre 1 had the highest number of 4,073 followed by Kaduna Centre 2 with 3, 170 pensioners. Kano Centre had 2,739 and Sokoto Centre had 1,353. In line with PTAD’s tradition, the pensioners were treated with respect and empathy. The exercise was conducted in a conducive environment where Pensioners were also provided with lunch

and medical facility to take care of any emergencies. The NASS members were at the verification centres to monitor the exercise. The Senate Committee Chairman on Establishment and Public Service, Ibrahim Shekarauwas at Kano centre. Kabiru AlhassanRurum, house committee chairman on Pensions wasa t the Kano and Kaduna Centres. Mpigi Barinada, dep chairman, Senate Committee on Establishment and Public Service was at the Kaduna Centre. Bamidele Salam, dep. chairman, House committee on Pensions wasat the Sokoto Centre. They gave PTAD excellent remarks and promised to support the Directorate with necessary appropriation. Ejikeme appreciated members of the National Assembly for their love for the senior citizens and support for PTAD. She promised to continue to work with the National Assembly towards improving the welfare of pensioners. She also thanked the staff for their commitment and the pensioners for their cooperation. Sheassured that the upcoming verification exercise in the North Central will include all the feedback received during the North West verification exercise.

Can insurance help survivors of extreme weather events overcome trauma?

s the Bahamas continue to reel in the wake of Hurricane Dorian, the focus is naturally on helping the survivors meet their immediate needs of food, water and shelter. Early estimates put the damage at about $7 billion excluding infrastructure and vehicles - with up to 60 percent uninsured. But the physical and mental health impacts of Dorian and other disasters remain long after houses have been rebuilt and roads repaired. Extreme weather events such as tropical storms, floods, sea level surges, droughts and for-

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est fires - which But the physical and mental health impacts of Dorian and other disasters remain long after houses have been rebuilt and roads repaired. Extreme weather events such as tropical storms, floods, sea level surges, droughts and forest fires which scientists agree are made more frequent and more intense by climate change - have long-lasting effects on people’s lives. Yet insurance and risk management has tended to focus on infrastructure resilience and rebuilding, whilst failing to address long-term trauma, and in particular mental health impacts.

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Anger, frustrations as new FG retirees stay one year and three months without pensions Modestus Anaesoronye

ederal Government employees that have retired for upward of a year and three months now were yet to start receiving their pensions over non- payment of their accrued rights by the Federal government. Many of them are not happy and are in deep frustration since income has stopped coming, and nothing to fall back on after they have hoped to start receiving their pensions as soon as the left employment. This is following the failure of the Mohammadu Buhari led government to pay pension accrued right of those who have left employment since a year and three months now. With this development, the Pension Fund Administrators (PFAs) have been unable to pay the retirees from their contributions in the Retirement Savings Accounts (RSAs) under the Contributory Pension Scheme(CPS) as pension suppose to be the sum total of accrued rights (from the old scheme) plus the balance in their RSAs. This situation therefore has made it difficult for the retirees to get their pensions paid since the left employment. A retiree, Zainab Usman lamented that since she retired one year ago, her family has been suffering as a result of non-payment of pensions. She said: “How can President Buhari abandon us and be planning to pay us over a period of three years. It is the same President that says we should shun corruption in public service but he is the same person that has left us on the street to go hungry. Another retiree, Paul Ogadinmma, said “I did not expect that I will come out of service and can’t see money to feed myself and my family. I had thought it was the fault of my PFA, only to discover that it is president Buhari government that has failed to pay our accumulated entitlements before the new pension scheme(CPS). A senior official in one of the Pension Fund Administrators (PFAs) said the operators have been inundated with complaints from retirees. He said it is sad that the retirees who are employees of the Federal Government are the ones affected, as the private sector employers have been reasonably compliant with pension. He wondered why the Federal Government will be planning a payment plan of three years instead of three months. He stated that presently, they are paying retirees who retired in August 2018 by November 2019. “Before now, there has been no delay in pension payment under the scheme. The maximum delay lasted for one month. “It is quite understandable that the problem started during the 2016 recession, but the economy has since recovered. We are now talking of minimum wage increase and the legislators want to buy N500 billion worth of vehicles. One would have expected that the Federal Government will priotise pension and put its

Buhari

payment on first line charge. The amount due for payment is always known by PenCom a year before the retirees are due to retire and the commission submits same to the Presidency and the ministry for it to be budgeted for. Despite this, the Federal Government has failed to follow through a seamless payment pattern which have been causing problem for the PFAs and the industry as a whole.” The operator continued “Unfortunately, retirees take their anger out on us as the PFAs. They confront and create scenes that the PFAs are holding back their money. I just received a call by a Next-of-Kin that his father, a retiree has just died because he did not have money to buy drugs. He accused us of killing his father. For us, this is very sad. We are not happy that his father had to die that way and not happy that we are accused of what we did not do. The President is fighting corruption but on the other hand aiding corruption. Because people are now questioning why they should not have stolen or diverted money while in office when they will not have anything to fall back on after retirement. People have bills to pay and you say they should not steal.”, he added. A recent plan by President Muhammadu Buhari to pay backlog of N62.83 billion accrued rights in three-years is causing an uproar among retirees, others. The pensioners have described President Muhammadu Buhari’s attitude to their plight as awful and insensitive. The pensioners criticized the president for not considering pension as priority under his administration and condemn a recent plan by him to pay backlog of N62.83 accrued rights in three-years. The President had in August this year directed the Minister of Finance, Budget

and National Planning, Zainab Ahmed, to appropriate and release in full a total of N62.83 billion to clear backlog of accrued pension rights of retirees in the next three years. Industry observers and pensioners faulted the plan, noting that by the end of the three-year plan, retirement benefits of FGN employees will be more than doubled. An expert who spoke under the condition of anonymity said the Government is violating the Pension Reform Act (PRA) 2004 as amended in 2014. The tradition, since the pension reform in 2004 which established the CPS is that retirees receive their pension at least, one month after retirement. Section 39 (2) of the Pension Reform Act (PRA) 2014 mandates the Federal Government to pay into the Retirement Benefits Bond Redemption Fund Account an amount not less than 5 per cent of the total monthly wage bill payable to employees in the Public Service of the Federation towards the redemption of the accrued pension right of FGN retirees. But report shows that in the last five years, budgetary funding and releases of accrued right has not been regular and adequate for the payment of outstanding pension rights over decline in government revenue. Consequently, since 2017, the Federal Government has been releasing funds for payment of the accrued rights in piecemeal, against amounts requested by PenCom for the payment. The shortfall has been responsible for the accumulation of several months of unpaid accrued pension rights, that has now led to about 15 months of unpaid pensions. The objectives of the CPS are to ensure

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that every person who has worked in either the public or private sector receives his or her retirement benefits as and when due. It is also to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age; while also it is to establish a uniform set of rules and regulations for the administration and payment of retirement benefits in both the public and private sectors;. Giving background information on the pension reform in Nigeria, and specifically the level of implementation of the PRA 2014 by the National Pension Commission (PenCom) since the commencement of the reform in 2004, Aisha Dahir-Umar, acting director-general said the pension reform was necessitated by the many problems bedeviling the public and private sectors’ pension schemes in Nigeria. “In the public sector, the Defined Benefits Scheme was faced with the problem of huge pension liabilities arising from lack of adequate and timely budgetary provisions as well as increases in salaries and pensions. Pension administration was largely weak, inefficient, less transparent, cumbersome and marred with corrupt practices. Many private sector organizations did not have any pension arrangement for their employees and where it existed, it was characterized by very low compliance ratio due to lack of effective regulation and supervision of the system. “After a thorough consideration and detailed evaluation of these issues, the Federal Government decided to take measures aimed at developing a system that is sustainable and has the capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for employees in both the public and private sectors in Nigeria. This culminated in the enactment of the Pension Reform Act 2004 (PRA 2004), which introduced a mandatory Contributory Pension Scheme (CPS) for employees of the Federal Government, the Federal Capital Territory and the private sector organizations with three or more employees. The Act also established for the first time in Nigeria, a regulator and supervisor of pension matters, the National Pension Commission or PenCom. “The PRA 2004 was subsequently repealed and replaced in 2014 by the Pension Reform Act 2014 (PRA 2014), which, among other things, enhanced the benefits accruable to the contributor upon retirement, enhanced the protection of pension fund assets, unlocked the opportunities for the deployment of pension assets for national development, reviewed the sanctions regime to reflect current realities, provided for the participation of the informal sector and also expanded the coverage of the CPS to include employees of States and Local Governments.” Experts said these objectives which was significantly achieved in the first ten years of the reform, took a downward trend when the backlogs commenced in 2017, following recession that occurred in the country. They opined that the Federal Government should priotise pension and put the payment on first line charge.

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Oluwabukola Ajayi: Baker, caterer, social media influencer JOSEPHINE OKOJIE

n the highly competitive baking business in Nigeria, it is difficult to stand out from the crowd. But this is certainly not the case with Oluwabukola Bosede Ajayi, founder of Naija Baker, a digital platform that showcases and promotes speciallytalented bakers. Bukola has been a baker, caterer and event planner for over 12 years. She has carved a niche for herself in Nigeria’s baking and confectionary industry. She was inspired by her mother and her love for baking, event planning and entrepreneurship. Bukola, who has been an entrepreneur since 2008, established Naija Baker in 2018 as an online vehicle to help showcase Nigerian bakers. Apart from that, Bukola set up the platform to provide free online and offline training to bakers in an attempt to equip them with essential skills for a successful baking and confectionary business. “Whether we like it or not, social media is the new market,” she says. “If bakers, especially the

young ones, are not given a platform to showcase what they can do and what they have to offer, how then do we build a sustainable economy in Africa?” the young entrepreneur asks. The University of Abuja graduate says she had to take up courses in baking,

event planning and blogging to broaden her skills before venturing into the business. She tells Start-up Digest that she started her business small and has continued to grow since then. She is doing a good job promoting lots of bakers, she alludes. “The business has grown

tremendously since starting as over 1,000 bakers have been impacted through our platform and we have been able to organise tour for bakers in major cities in the country,” the young baker says. She says Naija Baker has remained in business owing to the impact it is making on other businesses. According to her, the firm organises periodic exhibitions for bakers to display their talents as well as network and collaborate. “The list of talented bakers is on our platform where individuals can select and contact any baker of their choice for business,” she explains. She has a programme called ‘Naija Bakers Cake Exhibition and Hall of Fame Awards’— an offline platform for bakers to display and showcase their talents. Speaking on her business expansion plans, the young entrepreneur says she plans to become a force to reckon with in the Nigerian baking and confectionary industry in the long run. Also, she plans to give out ovens and mixers to at least 500 bakers during the periodic cake exhibition

programme. In the short run, she plans to get more influencing deals and sponsor bakers for short courses abroad. Speaking on the major hurdles limiting her business, she says lack of inadequate finance remains a major issue. She identifies price fluctuation and clients trust as challenges facing the business. Bukola urges the Federal Government to give grants to talented bakers as a way of supporting the multi-billion naira industry. She calls on the government to reduce tariffs on baking equipment brought into the country, adding that government at all levels should provide vital infrastructures to aid business growth and development. “There is a wide gap between the government and the baking industry in terms of policies,” she explains. “Import tariffs on baking equipment and products are high, and government levies taxes without considering the effects on baking items,” Bukola states. “When the government organises empowerment programms and decides to

support with equipment, and decides to give equipment to skill acquisition industries, you will see lots of hairdryers, motorcycles, sewing machines, but we rarely see oven, mixers and other baking equipment,” she laments. She says that most entrepreneurs are not mentally and academically prepared before venturing into a business, which is the main reason why start-ups fail. “Most people think entrepreneurship is a walk in the park. They are not mentally and academically prepared for the challenges ahead,” she notes. “They think once they birth their ideas, they ideas become automatic,” she says. On her advice to other young entrepreneurs, Bukola says, “Go for it. You are definitely on the right track, just remember it is not a magical world filled with wishes and wands. ”Being an entrepreneur is being African. Our forefathers owned their own lands and were farmers and fishermen. So, nothing should stop you. The future of Africa is now, so be intentional about it,” she adds.

LCCI signs MOU with Oxford Business Group First Bank raises capacity of 71,253 entrepreneurs GBEMI FAMINU

he Lagos Chamber of Commerce and Industry (LCCI) has signed a memorandum of understanding with the Oxford Business Group (OBG) which provides economic and business intelligence reports on global markets regarding its forthcoming publication themed ‘Nigeria 2020’. The agreement between the two groups will require the LCCI to help produce the report and as well provide a platform that will make it accessible to various groups in conjunction with the Nigerian Investment Promotion Council. The Nigeria 2020 report is the 8th edition of reports conducted and released by the OBG and will highlight the key role that an infrastructure drive planned for the agricultural, manufacturing and service industry is expected to play in attracting new investors and boosting inflows. It will also examine the country’s efforts to develop the green energy segment which is being primed to play a piv-

otal role in boosting power provision. Muda Yusuf, directorgeneral of the LCCI, said he was delighted to partner with the OBG on its forthcoming report, especially as it will keep investors informed of the latest development in Nigeria’s evolving economy. “Despite being a key regional player and the largest economy on Africa, Nigeria has historically struggled to provide investors with the up-to-date reliable business intelligence they need to make informed decisions. “As a market leader, Oxford Business Group has played a key role in filling this void since launching its operations here, furnishing representatives from both the private and public sectors with extensive accurate data and analysis on the rapidly changing domestic economic landscape.” Speaking on the country’s economic development, Yolanda Mureno, editorial manager for OBG Nigeria, said the country’s return to positive growth is reassuring for both the domestic and international business community. “Political stability followwww.businessday.ng

ing the re-election of the President Buhari in 2019 and his mandate to continue the fight against corruption are also positive signals for the business community,” Mureno said. Christophe Bonami, OBG’s country director for Nigeria, said that as the country is making plans to bridge infrastructure gaps, encourage innovation and galvanise growth outside the oil sector through economic diversification. This will mark the beginning of exciting times for the country. “The Lagos Chamber of Commerce and Industry has long been a driving force on the city’s business scene, with its efforts to promote trade and commerce, encourage investment and support entrepreneurial activity delivering positive results both locally and nationally.” Bonami also stated that the report is to be ready by the 3rd quarter of 2020. The report is a result of over 10 months of field research by a team of analyst from the OBG. It contains contributions from leading representatives across the public and private sector.

HARRISON EDEH, Abuja

irst Bank Nigeria has nurtured up to 71,253 Nigerian women under its First Gem initiative to skilfully manage their finances, engage in repaying investments as well as access structured capitals around Nigeria to grow their businesses, its chairman, Ibukun Awosika, has said. Speaking during a breakout session tagged ‘Empowering Nigerian Women’ at the just concluded 25th edition of the annual Nigerian Economic Summit (NES), Awosika, stated that through the First Gem, the bank has identified and is gradually removing challenges preventing women in Nigeria from becoming economically productive. Awosika’s disclosure of the impacts of the First Gem coincided with the recognition accorded the bank by the Nigerian Economic Summit Group (NESG) for fostering nation-building

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through its support for the summit. The NESG gave the bank its ‘Long Service Corporate Award’ for distinguished financial and technical support over 20 consecutive unbroken years, thus demonstrating loyalty, steadfastness, passion and partnership towards nation building and economic development. Awosika highlighted the need for Nigeria to bring the women folk into economic growth plan, saying that it is necessary to guarantee comprehensive development. “When we are talking about women, it is business and national development issue. It is not gender issue. We will have a balanced life when women get to deliver their share of what is required to build a nation,” said Awosika. According to her, for Nigeria to grow its economy, it must maximise the value of all her human resources, including its female popu@Businessdayng

lation, as well as find ways to take out the limitations that hold women back from actively participating in economic development. “There are lots of talk shops about funds that are provided and structured for women to access, but there are structural defects that make it impossible for women to effectively access those funds. If women don’t have clear property rights, it is a challenge, because for a structure where collateral is required, there is a challenge. “Part of what we have done in First Bank in the last three years is that we decided to build a project we called the First Gem to try and solve some of the critical issues that we identified, like women’s lack of ownership of personal assets for building wealth, and that also translated into the mindset of building wealth because a lot of women are brought up with the mindset of consuming wealth.”

Monday 14 October 2019

BUSINESS DAY

START-UP DIGEST

Why Nigerian MSMEs need committed risk funds ODINAKA ANUDU

igerian banks have been told to provide risk funds to small businesses to scale their operations. Risk funding means providing finance to enterprises considered as high-risk. Most risk funds are medium to long term and allow businesses time to repay. Experts say banks shy away from this type of funding because they feel it is risky and there is a possibility of loss of money. But entrepreneurs are asking financial institutions to begin to creatively fund the micro, small and medium enterprises (MSMEs) to enable them to scale. “There are not many people providingriskfunds,”OnyekaAkumah,founder and chief executive officer of Farmcrowdy, a digital agriculture platform. “In doing your due diligence, you still need to do risk-funding,” he said at an SMEs session at the just concluded Nigerian Economic Summit in Abuja. “All the big names started with just 10 people or below. I started Farm Crowdy with six people. Today, we have 75 staff and 75,000 farmers,” he said. Launched in 2016, Farmcrowdy empowers rural farmers by providing them with improved seeds, farm inputs, and training on modern farming techniques. It also provides a market for the sale of their farm produce, giving farmers the capacity to farm more acres and increase food production and security in Africa.

“This could not have happened if I did not have the first $60 million that came. This could not have happened if I could not access $1 million twice, and there could not have been a discussion with the Bank of Industry (BOI) if there was nobody who believed in me,” he said. Degun Agboade, chairman of the National Association of Small and Medium Enterprises (NASME), said someone needs to lead the pack in funding risks in the country. “The fact remains that somebody has to do the dirty job,” he said. “Government has to provide money to help our teeming MSMEs,” he further said. Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. Ethiopia’s is 7 percent; Kenya’s is 9 percent; South Africa is 6.75 percent; Zambia is 10.25 percent, and Cameroon is 4.25 percent. Similarly, Rwanda is 5 percent; Mauritius, 3.5 percent; Algeria is 8

percent, and Senegal is 4.5 percent. Most funds in Nigerian banks have short tenor of six to 12 months, meaning they are far from being growth funds. A 2019 report by the Small and Medium Enterprises Development Agency (SMEDAN) and the National Bureau of Statistics (NBS) shows that 85 percent of businesses could not have access to external financing within 2013 and 2017. Kayode Pitan, managing director of BOI, said the bank has been in the forefront of funding high-risk businesses, stressing that it is the biggest financier of the creative industry. “The BOI has been the biggest financier of that sector. Many of them came with us with only scripts, but we restructured their proposals and funded them,” he disclosed. “We lost some money in the process, but we also created winners,” he said. He explained that Nigeria needs

to revamp its education system to produce graduates with the right 21st century skills. “As a country, we need to look at our education system,” he noted. “Are the students trained for modern times and for the future?” he asked. He said technology has become critical for MSMEs, but it can become a liability if many graduates are illiterates. “Character is credit,” he said. “If you have character, most seed capital will come from your family. But sometimes, your family will not invest in you because they know you. So, why will someone else invest in you when people close to you do not trust you?” he queried. Nigeria’s 41.5 million MSMEs have thrived amid paucity of funds and poor infrastructure. Many are celebrated home and abroad owing to the solutions they have created. And many Nigerians are becoming entrepreneurs in large numbers. According to the report, the number of MSMEs grew from 37million in 2013 to 41.5million in 2017. The NBS and SMEDAN report, earlier quoted, said 2,877 medium businesses shut down between 2013 and 2017. According to Agboade , MSMEs must improve the quality of their products to be able to compete effectively. “Quality is key,” he said. “We need to address the issue of quality. The National Quality Infrastructure set up the Nigeria Na-

tional Accreditation Service, but this company is struggling because there is a document that needs to go to the Federal Executive Council, which is yet to get there,” he claimed. In July, the Central Bank of Nigeria (CBN) mandated deposit money banks in the country to give out 60 percent of their money as loans. The apex bank has increased that to 65 percent in a bid to improve lending for MSMEs. “Lack of adequate finance has been the major challenge limiting MSMEs growth in the country. The CBN’s compulsion on banks to lend more will oil MSMEs – which is the engine of growth,” Femi Egbesola, national president, Association of Small Business Owners of Nigeria (ASBON), said. “The problem with the directive is for the banks to comply. The policy has been on since July and we are yet to feel the impact,” Egbesola said. Ibrahim Maigari Ahmadu, chief executive of Liverstock247.com, Nigeria’s first livestock online marketing and listing platform, said interest rate is high just as there are many gridlocks to access to funds. “Nigerian commercial banks are risk-averse. They put so many bottlenecks on the way when you want to access funds,” he said. “Interest rate is very high, which is a major inhibiting factor. Collaterisation is structured to knock you out,” he said. He explained that the risk averseness of banks prevents them from funding the agriculture sector as they are not certain about what to get.

CBN , Greenwich ,others charge businesses to embrace big data for survival SUAVE Empire empowers 50 entrepreneurs, GBEMI FAMINU

de Shonubi, a deputy governor of the Central Bank of Nigeria (CBN) in charge of operations, has advised businesses in the country to leverage the power of big data and internet of things (IoT) to survive the competitions in the present and future business environment driven by digital technology. Shonubi gave the advice recently in Lagos while delivering his keynote address at the maiden ‘Thought Leadership Colloquium’ organised by Greenwich Registrars & Data Solutions Limited, with the theme: ‘Big Data in Nigeria: A Business Case in an Era of Digitalisation and Data Protection’ In Lagos. The deputy governor, who was represented at the occasion by Hajiya Rakiya Shuaibu Mohammed, a director at the Information Technology department of the CBN, said that with the fast pace of the present of technology, organisations who fail to meet up with the pace of change using the power of big data will go

out of business. “So to survive in this age, organisations need to have an agile data architecture that will enable them harness the power of big data and be able to play in their competitive ecosystem. So what I think we should do as an organisation is to have a very clear vision and a very clear strategy. When we have to look at data, we have to make a conscious decision to look at data as an asset, and to do that, we have to look at the entire organisation. “So, if for example, let’s say in Central Bank or as banks, we have our payment infrastructure and we are taking it as our critical information asset, we do everything we can to make sure we protect it, to make sure we make it better, to make sure we use it to drive revenue or even bring down cost. We have to think about data in that light as well even we want to harness the power. “The second thing is that we need to have tangible used cases. So when you understand the business drivers for harnessing the power of data in your organwww.businessday.ng

isation, you need to also ask yourself: What is it you want to use this data for? Is it that you want to increase revenue? Or is it that you want to use it to bring down cost? Or is it that you want to use it to improve the capability of your people so that they are more productive? Or is it that you want to increase customer loyalty?” Earlier, Obiageli ChikiIjegbulam, acting managing director of Greenwich Registrars &Data Solutions, who made reference to an IBM study, said that under-utilising data was a costly mistake for many organisations. She added that traditional institutions globally have keyed into the new development and that each of them was assiduously seeking means to leverage technology to provide their customers a better experience through the deployment of alternative engagement channels and platforms. Also, in his presentation, Steffen Damborg, keynote speaker and digital transformation strategist from Denmark, said that senior business leaders and chief

executive officers must create a strong digital culture in their organisations, stressing that a digital culture empowers people to deliver results faster. He affirmed that not every business will survive the disruptions caused by big data and the question is, ‘’Will your business evolve, or simply be buried?” However, Ade Bajemo, lead speaker, executive director, IT and operations, Access Bank Ltd, noted that big data is the new oil and it can help workers do wonders in their business. He stressed that every business organisation, small or big, needs valuable data and insights when it comes to understanding target audience and customers preferences. “Data is an asset to every business. Big data will enable companies to collect better market and customer intelligence and It will improve internal efficiency and operations and data will allow companies to improve the customer experience and build big data into their product offering,” he said.

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start-ups at NYFEW event IFEOMA OKEKE

n a bid to promote smallscale businesses and boost entrepreneurs in Nigeria, SUAVE Empire has empowered more than 50 youths in Ibadan at its annual Nigerian Youths and Fashion Empowerment Week, (NYFEW). NYFEW, an annual rebranded project known as ‘Showdown’, was established in 2013 in Ogun State to advance and contribute meaningfully to the socio-cultural style and growth of talented and intellectual abilities of skilled and professional youths in Nigeria. Ogunniyi Matthew Kehinde, founder of NYFEW and CEO of SUAVE Empire, said the organisation comprises young and vibrant team whose mission is to promote the development of an environment that optimises the potential of the youths, support, encourage and empower youths to develop their skills and expose youths to ways they can become financially independent with their various skills. Kehinde said this year’s event, which held from 7th to 12th of October, 2019, saw several youths empowered for seven days in Ibadan. He said at the end of the @Businessdayng

empowerment exercise, a platform was provided for the youths to showcase their talents in a ‘Runway Fashion Show’ at the grand finale tagged ‘NYFEW SHOWDOWN’. Best trainee in each field was given N500,000 worth of items to start up their business and a mentorship training offered to best trainees at SUAVE Empire for three months. The Grand finale event tagged ‘Showdown4.0’ featured runway fashion showcase, musical performance, dance and comedy. The event also showcased beneficiaries of the empowerment exercise, some recognised professionals in all the training fields and important dignitaries in Nigeria. A total of 28 youths were empowered in 2013, 35 youths in 2016 and a total of 44 youths in 2018. “The Nigerian Youth Fashion and Empowerment Week is a genuine opportunity to show love and put smiles on the faces of Nigerian youths. We strongly believe that people’s involvement in NYFEW 2019 would be greatly beneficial to the development of youths throughout the whole nation. “This will also have impact on the level of perception and understanding of sociocultural value, especially in our Youths,” Kehinde said.

Monday 14 Ootober 2019

BUSINESS DAY

REAL SECTOR WATCH

FG grants pioneer tax status to 11 companies on local production push …highest PSI since Q3’18 ENDURANCE OKAFOR

n a bid to boost local production and spur economic activities, the federal government has granted 11 companies pioneer tax status in the third quarter of 2019. According to the latest data by Nigerian Investment Promotion Commission (NIPC) released on Friday, 57.89 percent (11) of the 19 applicants were granted Pioneer Status Incentive (PSI), the highest since Q3 2018 when 18 companies were issued tax incentives. Established by the Industrial Development (Income Tax Relief ) Act, No 22 of 1971, PSI is designed by the federal government to reduce the cost of doing business in Nigeria by providing corporate income tax relief to qualifying companies, making investments in industries designated as ‘pioneer’. In effect, PSI seeks to enhance survival, profitability, and sustainability of beneficiary companies. According to the data by NIPC, the 11 companies that were granted the three years PSI in the review quarter were: Royal Mills and Foods Ltd, Gowus Nigeria Ltd, Triton Aqua Africa Ltd, Globus Resources Ltd, Crown Flour Mills Ltd, Dharul Hijra Fertilizer Company Ltd, and Olam Hatcheries Ltd. Others are Harvestfield Industries Ltd, Royal Pacific Group Ltd, Dan-

Hatcheries Limited, which has its location in Kaduna State. The company, which is into poultry, has invested 23.06 billion. Third on the list of companies that have invested the most amounts was Globus Resources Limited in Oyo State. The company is in the business of processing/preserving of meat/poultry production of table birds and has pumped about N18.74 billion investment into the industry. According to Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), the tax incentive is granted to sectors that strengthen the Nigerian economy in terms of growth and profitability on investment. Economic activities in Africa’s largest economy slowed to 1.94 (L-R) Olusegun Obasanjo, Nigeria’s former president, and Jean Bakole, the United Nations Industrial Development percent from a revised 2.01 perOrganization (UNIDO) representative to ECOWAS and regional director, Nigeria Regional Office Hub, , during the presentation cent reported in the second quarof the new UNIDO Country Programme to Obasanjo in Abeokuta last Thursday. ter of 2019, data from the National Bureau of Statistics show. gote Sinotrucks West Africa, and than the 32 reported in the previ- leakages. However, the federal Nigeria’s President MuhamMontego Upstream Services Ltd. ous quarter and 115.79 percent government in August 2017 lifted madu Buhari recently directed “It is to further support the sec- more than the 19 recorded in the the administrative suspension on the Central Bank of Nigeria (CBN) the scheme. tors amid the high operating cost, corresponding quarter in 2018. to stop providing foreign ex“Tax holiday to the compa“The PSI is a tax holiday which infrastructure, and unavailability change to food importers. This is of steady power supply. It is one grants qualifying industries and nies is an incentive for them in line with his plans to encourof the initiatives to encourage products relief from payment of who invested heavily in various age local production and spur the companies,” Ayo Akinwunmi, corporate income tax for an initial industries and also employ more growth in the country’s economy. head of research at FSDH Mer- period of three years, extendable labour,” Akinwunmi said. Since 2015, Nigeria’s economy Further analysis of the data for one or two additional years,” chant Bank, said. has maintained a slow expansion According to data from the the Federal Ministry of Industry, by NIPC revealed that, of the 11 pace that has remained lower companies, Crown Flour Mills Abuja-based commission, the Trade, and Investment said. than the country’s annual popuWhile the incentive has been Limited located in Kwara State, surge in the PSI granted in the lation growth rate. This means review quarter puts the current in place since 1971, it was sus- and into the production of anithat Africa’s largest economy number of beneficiaries at 41 pended in 2015 by Ngozi Iweala, mal feeds, had invested the most produces more people than it companies as of 30 September former minister of finance, based amount at N41.01 billion. can feed. This was followed by Olam 2019. This is 28.13 percent higher on perceived abuse and revenue

Data, infrastructure critical for raising food production ODINAKA ANUDU

xperts say Nigeria needs reliable data and efficient infrastructure to ramp up production of food to feed 200 million people. “In order for you to have food in the right price and quality, you must have the right infrastructure,” Paul Gbededo, CEO of Flour of Mills of Nigeria, told BusinessDay on the sidelines of the National Economic Summit in Abuja last week. “Power infrastructure is one of the biggest challenges in the food value chain, and it is increasing the cost of food. Road and rail infrastructures are important because we need route to market. If your

roads are bad, and there is no rail infrastructure, then your turnaround time with your logistics will be higher,” he said. Nigeria needs to feed 200 million mouths, which will grow to 410 million by 2050. Much of the production is subsistence and only little technology is employed in the industry dominated by rural farmers. Post-harvest losses are between 20 and 40 percent in many crops, according to experts. “ D o y o u k n ow h ow much banana, plantain and other crops that get rotten during their seasons? In Philippines, they dry mangoes and send to China, and China buys everything, but what do we do here?” Oyetunde Solaja, managing www.businessday.ng

director of Crestar Group, said. “First, we need to have enough data that shows what kind of products we have, the available markets, as well as the linkages between the farm and the markets,” he recommended. Nigeria’s food inflation is high at 13.17 percent in August 2019, with rice prices rising on border closure, despite being the highest beneficiary of CBN’s Anchor Borrowers Scheme. Data from Agriculture Ministry show that Nigeria is the largest producer of yam with 40 million metric tons per annum but yam demand in the country is 60 million metric tonnes per annum (MT), leaving a gap of 20 million MT.

Nigeria produces 42 million MT of cassava but has a demand of 53.8 million MT of the crop, leaving a gap of 11.8 million MT. National supply for Irish potato is put at 900,000 MT per annum but with a demand of 8million MT and a gap of 7.1 million MT. Similarly, local production of sweet potato is estimated at 1.2 million MT, while demand is 6million MT, leaving a gap of 4.8 million MT. More so, Nigeria produces 400,000 MT of wheat annually but with a demand of 4 million MT, which leaves a gap of 3.6million MT. Maize production in the country is put at 10.5 million MT but demand is 15 million MT, leaving a gap

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of 4.5 million MT. Ndidi Okonkwo Nwuneli, founder of Leap Africa and managing director of AACE Foods, said one important step is to have a platform to link everyone in the value chain together by providing the right kind of training and support. Nwuneli said she has already founded an online for millions of entrepreneurs who will transform this sector. Muda Yusuf, directorgeneral of the Lagos Chamber of Commerce and Industry (LCCI), suggested the need for reduction of production cost to encourage firms to export. But he said trade must be facilitated by agencies like the Customs, the CBN, Finance Ministry and other @Businessdayng

relevant agencies. “We should use technology to make things easy. Scanners have not worked for three years and even if you have 1,000 containers, they have to be inspected manually,” he said. Nigeria is one of the least mechanised farming countries in the world with the country’s tractor density put at 0.27 hp/ hectare which is far below the Food and Agriculture Organisation (FAO) recommended tractor density of 1.5 hp/ hectare. Nigeria is 132nd out of the 188 countries worldwide measured by FAO / United Nations in terms of the number of tractors in the country. This is one reason why farming has been mainly subsistence, rather than commercial.

Monday 14 Ootober 2019

BUSINESS DAY

REAL SECTOR WATCH

Exporters push for friendly policies as Afreximbank dangles $500m support …fault border closure ODINAKA ANUDU

a n u f a c t u ring exporters want friendly policies that will enable them to repatriate dollars into an economy in dire need of foreign exchange. Speaking at an annual general meeting held in Lagos last Thursday, Ede Dafinone, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), said the poor performance of exports called for export friendly policies that would enable players to raise production by expansing their factories. Dafinone said a 1.5 percent increase in non-oil receipts in 2018 from 2017 was a testament that the government needed to restart the Export Expansion Grant (EEG),which had been the most successful export incentive deployed by the Federal Government. Nigeria’s total non-oil export earnings from more than 25 commodities in 2018 amounted to $3.3 billion (N1.19 trillion), according to the National Bureau of Statistics (NBS). A country like Bangladesh earned ten times that from only one product — garment. According to Dafinone, some of the challenges faced by the sector included poor infrastructure, high energy costs and non-payment of the EEG claims. “I shall add the closure of

Ede Dafinone

Benedict Oramah

borders to the list of the challenges,” he said. “Our land borders have been closed and this is affecting export and import by our members,” he further said. A document seen by BusinessDay shows that the National Assembly committees approved the promissory notes of 269 companies worth N193.042 billion for the payment of EEG claims. Some of the companies approved were A&P Foods, African Glass Limited, African Textile Manufacturers Limited, Crown Flour Mills, Jebba Paper Mills, Deli Foods, Peugeot Automobiles, Procter & Gamble, Ajaokuta Steel Company, Olam Nigeria Limited and GZ Industries, among many others. But the Federal Government is yet

to start settling any of these claims. The EEG was originally established in 1986 to help Nigerian exporters to become competitive at the global market. It is a practice in many developing and developed countries such as China, India and Australia to provide concessions or cash rebates/grants to companies penetrating new markets or consolidating already established markets to enable them rival competitors. In Nigeria, companies that exported different kinds of products or commodities between 2006 and 2016 were owed billions of naira in claims as the federal government did not meet the obligation of settling them as promised. After suspension since 2013,

the current government says it will settle the claims, but is yet to do so. The National Assembly is yet to approve the remaining 38 companies, which include PZ Cussons, British American Tobacco, Okomu Oil, Lee Group (which has seven subsidiaries), and Sapele Integrated. Others are Nestlé Nigeria, De-United Foods, Beta Glass, Unilever, and Dangote Agrosacks, among many others “The Group, in collaboration with our parent body, MAN, is working assiduously to ensure the enlisting of the 38 exporters by the 8th Assembly,” he said. Kanayo Awani, managing director, Intra-African Trade Initiative at the African ExportImport Bank, who represented

Benedict Okey Orama, president and chairman of Afreximbank, said the forthcoming African Continental Free Trade Area (AfCFTA) would help a cotton yarn producer in Nigeria to become a supplier to a fabric manufacturer in Senegal, replacing yarn imports from Asia. Speaking on ‘Leveraging the African Continental Free Trade Area Agreement for Export Expansion in Nigeria’s Manufacturing Sector’, Awani said the bank had facilities available under both its IntraAfrican Trade strategy and its Industrialisation and Export Development Strategy that Nigerian exporters and manufacturers could leverage with AfCFTA coming. “These facilities are avail-

able through our US$ 1 billion Nigeria-Africa Trade and Investment Promotion Programme (NATIPP), being done in collaboration with the Nigerian Export Promotion Council and the Nigerian Export-Import Bank (NEXIM) and is aimed at promoting and expanding trade and investments between Nigeria and the rest of Africa,” she said. “Of this, the bank has allocated $500 million to support Nigerian manufacturers and exporters to take advantage of the opportunities offered by the AfCFTA,” she reiterated. Earlier at an annual general meeting held by MAN, Oramah, the bank’s president, had announced a $500 million funding support for Nigerian manufacturers. Awani reiterated her bank’s willingness to push exports from Nigeria through the fund. She further said Afreximbank also had a programme to support intra-African trade champions (Intra-Champs), which would identify main players in intra-African trade and support their operations through financing, enabling market access, technical assistance, trade information and advisory services, twinning services and other forms of support for competitive tenders. She said the bank was also working to eliminate nontariff barriers to trade by collaborating with the African Regional Standards Organisation (ARSO) to harmonise standards across the continent.

Manufacturers hit by low consumer demand GBEMI FAMINU

igerian manufacturers have raised concerns over the continuous decline in the demand for locally produced goods and services, fuelling a slump in production activities in the sector. Efe Odia, a small-scale manufacturer of footwear, complained that his company has not been making sales, unlike some months back when people still managed to buy items from him. “Sales have been very slow,” he said. “Some of my close clients who specially request for footwear have not patronised me in a whole month. They are all complaining that there

is no money even when I offered to sell below production price,” he further said. In order to survive, Odia has to compliment his footwear business with his tricycle transport business which he engages in during the day. Just like Odia, other manufacturers— both in the medium and small scale— complain about the drop in sales and product demand despite the large market the country offers, coupled with its teeming population. A sectoral report released recently by CSL research states that the demand for locally manufactured products has declined due to economic conditions constraining consumer purchasing power and is also a part of the reasons for www.businessday.ng

the drop in production level of the manufacturers. Members of the Manufacturers Association of Nigeria (MAN) recorded inventory of unsold finished goods totalling N375.42 billion in 2018 and N321.12 billion in 2018. “High inventory of unsold finished manufactured goods in the period was ascribed low consumption, smuggling, and counterfeiting of Nigerian manufactured products,” MAN said in its recent economic review. Major manufacturers are feeling the hit. Flour Mills of Nigeria’s revenue fell 3 percent to N527.4 billion in March 2019, as against N542.7 billion in March 2018. Profit from continuing operations slumped

by 71 percent to N4 billion, from N13.61 billion in the previous year. Guinness Nigeria recorded N131.5 billion in turnover in the year ended June 30, 2019, which was a decline of 8 percent when compared with N143 billion in the corresponding period of 2018. The decline cut across both the domestic and export sales. In the domestic market, Guinness realised N124.9 billion, a decline of 7.9 percent when compared with N135.7 billion it made in the same market during a corresponding period of 2018. McNichols, a producer of consumer goods, was hit by the economic headwinds as its revenue dropped by 17 percent to N355 million,

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from N430 million in the 2018 financial (full) year. The company’s profit before tax was N20.9 million in 2018 but it dropped to N15.4 million in 2019. The Nigerian Breweries is also hard hit by low consumer demand. The brewer’s sales fell by 5.9 percent. Local sales in the financial year ended stood at N324.20 billion, representing 5.9 percent decline. PZ Cussons is also facing tough times with series of losses caused by smuggling and low purchasing power made worse by intense competition in the soap and detergent sub-sectors. Adesola Sotande-Peters, vice president of finance at Unilever Nigeria, recently @Businessdayng

said during a breakfast meeting that the Fast Moving Consumer Goods (FMCG) firm is battling with low consumer purchase as the sector is highly dependent on foreign exchange for raw materials which increases its cost of production. Many Nigerians can no longer afford basic items. Poverty rate in Nigeria is highest in the world, with 98 million people falling below the line. Unemployment rate is 23.1 percent. Experts say that following the trends in previous years, the 4th quarter of the year, which is characterised by festive activities, could experience improved activities as well as risen sales which will boost margins.

Monday 14 October 2019

BUSINESS DAY

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Monday 14 October 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Establish expertise inside your company DORIE CLARK

n a competitive marketplace, developing a reputation as an expert is one of the best forms of career insurance. Here’s how you can become recognized for your expertise inside your company. It’s important to recognize that you don’t have to start out as a worldwide expert. You can coach others on writing better business memos even if you’re not Shakespeare. Michael Leckie was a vice president of human resources for a prominent research company when he developed an interest in coaching. Although the

subject was related to his job, it wasn’t part of his actual responsibilities. “You don’t need to be the best in the world; you just need to be the best one there,” he told me. In these early stages, it’s important to be clear about what you know and what

you don’t. If you try to prematurely position yourself as an expert who can compete with industry giants, you risk losing credibility when you’re faced with a question or challenge you’re unsure about. As your profile grows, it’s also important to en-

sure that your company understands the value of your public brand. This is especially important if, like Leckie, you’re cultivating expertise on a subject that isn’t part of your core responsibilities. He didn’t assume his boss’s boss would understand

why it was important for him to speak at a conference — Leckie explicitly articulated the keynote’s business benefits to him. Finally, it’s important to recognize when it’s time to expand what you’re known for strategically. “Sometimes your brand is more happenstance than thoughtful,” says Leckie. “It may be about things you like, but it’s not necessarily leading you where you want to be moving toward.” Leckie realized he’d been so successful at building his expert reputation around coaching and talent development that those skills were beginning to overshadow others deemed more critical inside his company.

That’s why he decided to make coaching a “sub brand.” He didn’t abandon it, but he started emphasizing it less in favor of talking about his ability to drive the bottom line. It’s important to balance the unique mix of your skills and interests with your company’s needs and sensibilities. But when done right, cultivating a brand as a “local expert” inside your company can enhance your professional reputation and ensure you’re valued the way you should be.

(Dorie Clark is a marketing strategist and professional speaker who teaches at Duke University.)

Technology is blurring the line between field sales and inside sales ANDRIS A. ZOLTNERS, PK SINHA AND SALLY E. LORIMER

ield sales and inside sales have traditionally had their own domains. Field salespeople did the heavy lifting, working with customers in person. Inside salespeople sold over the telephone and web, and were responsible for the uncomplicated products, remotely located customers and simpler sales tasks, such as lead generation and renewals. The blending of field and inside sales is driven by the digital revolution in three related ways. First, digital is powering freemium and subscription sales businesses, which steer customers to buy from digital and

inside sales channels, rather than from expensive field salespeople. Second, digital communication tools have become ubiquitous as the quality of technology continues to soar. Finally, data and analytics are informing more de-

cisions for salespeople, sales managers and sales leaders, for both field and inside sales. Sales managers should consider three changes to help their organizations deal with these changes: FLEXIBLE STRUC-

TURES. Structures are evolving to give customers flexibility to connect using field sales, inside sales, digital channels or all three simultaneously. The choice depends on each customer’s level of knowledge and the complexity of needs.

Waves of change in customer knowledge, markets and the digital landscape are colliding with the traditional rigidity of sales force structures. The number and mix of field and inside salespeople need to adapt almost continuously. NEW ENABLERS. As field salespeople become more data-driven, silos of field sales, inside sales and marketing are crumbling. Inside salespeople also need new tools to help them venture beyond scripted customer interactions and engage in more autonomous problemsolving. And as inside salespeople have a more direct hand in closing sales, their performance metrics and incentives must align.

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CHANGING SALES TALENT. Field salespeople still need face-toface interpersonal skills. But to win in the changing world, field salespeople must also excel at leveraging data-based insights and communicating virtually, using methods such as online video, email and social selling. At the same time, inside salespeople need new skills for succeeding in customer acquisition roles. Sales force hiring and training must adapt to these new success profiles.

(Andris A. Zoltners is a professor emeritus at Northwestern University. PK Sinha is a founder and co-chairman of ZS Associates. Sally E. Lorimer is a consultant and a business writer.)

Monday 14 October 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

Retraining workers is a corporate social responsibility ADAM MEDROS

t’s no secret that the age of automation is not just on its way; it’s here. Last year the World Economic Forum estimated that 1.4 million people would lose their jobs by 2026 as a result of technological change, with more than 70% of those job losses happening because the job type will cease to exist. I believe that the power to create immediate change and impact lies with corporations. Companies already implement corporate social responsibility (CSR) programs to give back to their communities and make a positive impact. They should now use these initiatives to join the fight against economic disparity and inequality by safeguarding the future labor force. More education has histori-

cally had a positive impact on both average earning potential and the unemployment rate — and the data proves that employees are not only willing to accept the help, but that it would be a game changer for

them. According to LinkedIn’s 2019 Workforce Learning Report, 94% of employees would stay at a company longer if it simply invested in helping them learn. Skeptics should look to com-

panies that are already tackling skills gaps by investing in education opportunities. For example, Amazon’s Career Choice program pays up to 95% of tuition and fees toward a professional certificate or diploma in

qualified fields of study, augmenting established skills and allowing recipients to apply for in-demand jobs. More than 10,000 employees have participated in this initiative so far. It is both a moral and economic imperative for companies to help protect the future labor force. This means focusing on removing the biggest barriers — time, cost and location — to high-quality education in popular fields. By viewing training and development as a CSR initiative and investing in flexible pathways that make it easier for individuals to pursue lifelong learning, corporations can win the talent war while also investing in their local communities.

(Adam Medros is president and chief operating officer of edX.)

How to improve your company’s net promoter score to ask users for referrals immediately after they’re told that they have received the cash deposited. This simple change was responsible for a 119% increase in the number of customers that referred the startup to acquaintances. It turns out that this approach to word-ofmouth referrals works well for all businesses we have tested it with.

THALES S. TEIXEIRA AND RENATO MENDES

here is a surefire way to increase your company’s Net Promoter Score (NPS), or the likelihood that customers will recommend you to others. There’s also a surefire way to learn about your operational vulnerabilities using customer surveys. The key in both cases is to give customers the chance to evaluate you at exactly the right moment. Most customer surveys, including NPS, are conducted at the very end of a purchase and consumption experience. But it can be instructive to think about what steps the customer goes through in the course of acquiring, using and disposing of products and services (what we call the customer value chain) and to consider asking them to fill out the form at a different point in their journey. Any business can — and should — classify their customers’ val-

ue chain into value-creating, monetizing and value-eroding activities. If you want your customers to do something positive on your behalf, like review your business online, make a recommendation, repurchase, subscribe or sign up for a mailing list, the ideal moment is just after their most positive experience. Why wait for the end of

the experience, particularly if something negative may occur? One of us tested this idea recently while consulting for a fintech startup that offers a cashback benefit for using its online peer-to-peer payment service. We started by mapping out the typical customer value chain and measuring satisfaction rates after each major activity. After users sign up, or link their

new account to their funding sources, they are indifferent. After paying someone online, they might be slightly more satisfied than when they started out, but not blown away. But when they receive funds from an acquaintance or as a cash-back deposit for a payment transaction, their satisfaction skyrockets. Having learned this, the author advised the fintech startup

Brought to you courtesy of First Bank Nigeria

(Thales S. Teixeira is the cofounder of Decoupling.co. Renato Mendes is a professor at Insper in Brazil and a founding partner of Organica.)

Monday 14 October 2019

BUSINESS DAY

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SHORT TAKES N10.33trn

BALA AUGIE

igeria’s currency will weaken to N375/$ on the back of continued pressure on external reserves, vagaries of crude oil price, and slowing global growth momentum, according to Renaissance Capital Limited. “Inflation of 10 percent pushes both numbers higher by roughly 7 percent a year – implying 500 or 410 as the average rate next year. A recession hitting oil prices would naturally justify weaker figures,” said Charles Robertson, Global Chief Economist at Renaissance Capital. “With no US recession … Nigeria can hold the current spot rate for some time – at least until mid2020 if it wants to,” said Robertson. Nigeria’s Naira has been under pressure due to outflow pressure as rising imports have resulted in current account deficit, and investors have dumped the country’s assets. In recent times, fresh concerns have emerged over the rate of decline in Nigeria’s foreign reserves. In the third quarter of (Q3 19 alone), the country’s external reserves declined by $3.2 billion to settle at $41.7 billion, no thanks to fall in oil prices that stoked capital outflow. The volatility in crude oil price has forced the Central Bank of Nigeria (CBN) to support the local unit at the expense of the reserve.

Nigeria’s import cover as of Jul19 stood at 10.2 months, lower than 15.8 months in Jan-19, according to analysts at United Capital Limited. Analysts at Chapel Hill Denham believe the CBN has some policy room to adjust to terms of trade shocks. “In our view, FX subsidy (PMS is priced at 285 and customs duty at 326) will likely be adjusted first before I&E peg collapses,” said analysts at Chapel Hill Denham Limited. Nigeria operates a multiple exchange rate system in a bid to stem demand for dollars but the International Monetary Fund (IMF) and investors have continually criticised this system as they prefer a unified foreign exchange

system. It created an investors and exporters window in 2017, in which the naira was allowed to weaken, and has been steady at 360 against the greenback. There’s also the Nafex rate, which references the interbank rate, and another set at regular auctions. The Nigerian Customs Service had told importers to pay for duties at a weaker rate of N326/$ from N306, but manufacturers bemoaned the new policy on the ground that it would disrupt their business. The adoption of market determined will be welcomed by market participates, who have blamed government for capital controls, a policy that contributed to the economic downturn of 2016.

P.E

Additionally, total deregulation of the downstream oil and gas industry will attract the desired investment to the sector while paving the way for government to save money and fund capital projects need to create an enabling environment for business to thrive. Inflation rate is at 11 percent, which is below the central bank range of 6 percent and 9 percent, and the World Bank expects the inflation rate to likely pick up on the back of increased Value added Tax (VAT) and hike in minimum wage. The Naira weakened 21bps wow against the US dollar to close at 362.77 in the I&E Window on Friday, but was unchanged at N358.13 and N360.00 at the I&E Window and parallel market respectively.

President Muhammadu Buhari’s administration proposes N10.33 trn as 2020 budget. The expenditure estimate includes statutory transfers of N556.7 billion, non-debt recurrent expenditure of N4.88 trillion and N2.14 trillion of capital expenditure (excluding the capital component of statutory transfers). Debt service is estimated at N2.45 trillion, and provision for Sinking Fund to retire maturing bonds issued to local contractors is N296 billion.

23% In the 2020 proposed budget, expenditure on capital project is N2.46 trn, 23 percent less than was budgeted last year. The government hopes that infrastructure tax credit scheme would help sustain its on-going capital projects.

History suggests investors may bleed further in October IFEANYI JOHN IFEANYI JOHN The month of October is typically a happy month for Nigeria due to celebration of the national Independence Day but for equity investors, October has hardly been a memorable month in recent years. Over the last five years, the Nigerian Stock Exchange All Share Index has declined in every single year (excluding 2017 where the stock market returned 3 percent) in the month of October. A review of the stock market performance over the past 5 years revealed that in 2014, the ASI

declined by -10% in the month of October and declined further by

-7% the following year. During the year of recession in 2016, the stock

market declined by -4% in October as the market continued a gradual improvement on performance although remaining negative through the 3 consecutive years. In 2017, the stock market returned 3%, marking its first positive October in 4 years. In 2013, the stock market also returned 3%. Investors are very concerned about how the stock market will perform in October as trillions of naira have already been lost in the stock market this year. As at market close on Friday, year to date return on the stock market was -15.58% while month to date the stock market had already declined 3.8%, ultimately

Continues on page 41

9 Nigeria’s stock market is seeing through its longest losing streak this year as market capitalisation slid below N13trn on Wednesday. The market has now lost as much as 15.58 percent of its market value since the year started.

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

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

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Monday 14 October 2019

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MARKETS INTELLIGENCE

Seplat’s benign assets to equity ratio validates healthy balance sheet IFEANYI JOHN

co mpa ny fi na n c e s its operations with a combination of debt ( m o n e y b o r ro w e d from financial institutions) and equity (money raised by owners or investors). While debt gives a company the leeway to finance future expansion plans that deliver a higher returns to shareholders in form of higher dividend and share appreciation, too much of it could threaten the existence of an entity. This is because profitability will be eroded as interest expense (interest on money borrowed) continues to eat into operating profit. A highly indebted (leveraged) firm is prone to be liquidated, and its assets shared among creditors who have a claim to its assets, but shareholders, being risk takers, will receive nothing. Seplat Petroleum Development Company Plc, an upstream oil and gas giant, is in a better position to replace oil fields to increase its share of the market than peer rivals because it has a benign total asset to equity ratio.

An asset to Shareholder Equity is a measurement of financial leverage. It shows the ratio between the total assets of the company to the amount on which equity holders have a claim. A ratio above 2 means that the company funds more assets by issuing debt than by equity, which could be a more risky investment. A low ratio could be seen as more conservative. Also, if a business has a high ratio, it is more susceptible to pric-

ing attacks by competitors, since it must maintain high prices in order to generate the cash flow to pay for its debt. As of June 2019, Seplat’s asset to equity ratio stood at 1.53 times, this compares with peer rival Oando Nigeria’s ratio of 3.67 times. Simply put, this means Seplat assets are 1.53 times equity. The chart below shows Seplat’s leverage position has been improving since 2017 after it surmounted the headwinds caused by a pre-

cipitous drop in crude oil prices. In 2016, the company’s production was disrupted due to attacks on Forcados Terminal by Niger Delta militants. Analysts attribute Seplat healthy balance sheet to the savvy management and board of directors, who ensured they cut down on capital expenditure spend at the zenith of a turbulent period. The upstream oil and gas giant is in a position to make acquisition and bid for assets when the need

Investors shift money out of stocks and into safer bonds Joe Rennison, New York

nvestors pulled cash from stocks and risky corporate debt over the past week, funnelling it into the perceived safety of higher quality bonds, as tit-for-tat trade negotiations damaged sentiment and whipsawed asset prices. Funds focused on buying US stocks suffered $6.2bn in outflows for the week ending October 9, the third straight week of withdrawals. US high-yield, or “junk”, bond funds also suffered outflows to the tune of $346m. It signals a shift out of the riskier corners of financial markets in a week in which the ongoing trade dispute between the US and China intensified.

On Tuesday the Trump administration blocked a group of Chinese technology companies from buying US-made goods, citing alleged human rights abuses. The move caused angst among investors, fearful that it could jeopardise trade talks that began on Thursday. Investors sought out safer corporate bonds and government debt. US investment grade bond funds took in $6.4bn over the past week, the third consecutive week of inflows. “In our accounts we are moving to an incrementally more defensive position,” said Matt Daly, head of corporate and municipal bonds at the fund manager Conning. “We are definitely more towards the end of the cycle.” The S&P 500 index has gyrated

higher and lower over the course of the week, with high-yield bond prices moving in line with the stock market. The benchmark stock index rose 0.6 per cent on Thursday on hopes of a deal. But Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said that even if the trade talks prove positive, what’s on the table — the potential to drop higher tariffs on $250bn of Chinese goods that kick in next week — is unlikely to offer much reprieve for investors and the global economy. The deal is not expected to release either country from existing tariffs that have been put in place. Weak manufacturing data released at the start of October have already compounded the

view that global trade uncertainty is weighing on activity. “You have a slowdown in manufacturing that is turning into a more noticeable contraction around the world,” Mr Christopher said. “What are you going to do to stop that? Out of these negotiations, not much.” Attention now turns to thirdquarter earnings, with current expectations for companies to report a year-over-year decline of 4.1 per cent, according to Factset, although some analysts note that with a typical number of earnings beats the contraction may not be as severe. “The warning signs are growing,” Mr Christopher said. “We are increasingly cautious and removing risk where we think it is appropriate.”

Apple faces China crunch as profits and values clash Patrick McGee, San Francisco

pple chief executive Tim Cook on Wednesday sent a letter to his staff explaining why the iPhone maker had banned a “benign” app in Hong Kong that enables users to crowdsource real-time information on police whereabouts, locations of traffic obstructions and protesters. “Technology can be used for good or for ill,” Mr Cook wrote, after HKMap.live was removed from its App Store. “The app was being used maliciously to target individual of-

ficers for violence and to victimise individuals and property where no police are present.” The incident was emblematic of the commercial bind Apple finds itself in the region: greater China — an area that includes mainland China, Hong Kong and Taiwan — accounts for a fifth of Apple revenues and 27 per cent of its profits. Critics accuse the company of self-censorship and sacrificing its values in the pursuit of profits. The company and Mr Cook have been at pains to convey that they had not kowtowed to Beijing, www.businessday.ng

even though the decision was announced a day after Chinese state media criticised the company. On Tuesday the People’s Daily, a mouthpiece for the Chinese Communist party, accused Apple of abetting “rioters” when it approved the crowdsourced mapping app for download. Apple said the move was about adhering to its own longstanding guidelines for building apps, which clearly state they “must comply with all legal requirements in any location” where they are available. The app was removed, the company added, because it violated

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Hong Kong’s laws — not Beijing’s. But it is not clear that Hong Kong authorities asked Apple to remove the app. Rather, its statement implies the iPhone maker played judge and jury on its own — in what critics see as an act of self-censorship. “I can’t recall an Apple memo or statement that crumbles so quickly under scrutiny. For a company that usually measures umpteen times before cutting anything, it’s both sad and startling,” wrote John Gruber, one of the best-known Apple commentators, on his blog Daring Fireball. @Businessdayng

arises, and banks will be willing to borrow the company money because of its excellent credit profile. “Those guys in Seplat are professionals who understand the metrics of the oil and gas business. They know the business. These guys were ex Shell and Chevron workers with vast experience in proven reserves,” said an industry expert, who doesn’t want his name mentioned. In 2015, Oando’s asset to equity ratio was as high as 118.36 times, and the company had to sell asset to keep down the ratio (See Chart). Seplat’s cash flows from operating activities for the first six months was $255.2million, up 4 percent compared to $245.40 million recorded in the corresponding period of 2018. Oil and gas firms in Africa’s largest economy will have to drill more oil when prices are low, as global macroeconomic uncertainties continue to spook investors. Oil prices spiked on Friday morning as trade war negotiations appeared to take a positive turn while Iran reported an oil tanker attack as tensions in the Middle East soar. Brent Crude Oil closed at $60.52 as of 12:00 pm on Friday while West Texas Intermediate (WTI) stood at $54.70.

History suggests investors may bleed... Continued from Page 40 moving in the direction it has 80% of the time in the last 5 years. “Some trends seem to repeat rather too often in the market. We have seen over the years that October is an unprofitable month in the market and we can assume that it stems from the fact that not many companies pay interim dividend during this period,” said Tochukwu Okafor, a finance lecturer at Covenant University. Some economists have pointed to the weakening economic fundamental as the reason to why they expect the decline in stock performance to continue in October. “Honestly overall economic fundamentals don’t support improvement in the stock market this month as declining economic growth accompanied by rising government budget deficits continue to put significant strain on consumer and investors pockets. While it is still possible for the stock market to end the month on a positive note, the most likely outcome is for the markets to continue to decline as we see company profitability take a strong hit in the last 2 quarters, ” said Obinna Uzoma, chief economist at EUA Intelligence. Investors will be watching the stock market very closely to see if they end the month in the red or in green over the next 2 weeks.

42 BUSINESS DAY

Monday 14 October 2019

news

States’ total revenue hits N1.89trn in H1 2019 Cynthia Egboboh, Abuja

otal revenue of the 36 states of the federation and Federal Capital Territory (FCT) stood at N1.89 trillion at first half 2019, National Bureau of Statistics (NBS) data reveal. According to the report, the total revenue consists of internally generated revenue of the 36 states and FCT, which stood at N691.11 billion and net FAAC allocation at N1.20 trillion. The total IGR at N691.11 billion represents a 15.78 percent increase from N596.91 billion recorded in H2 2018.

A study of the report shows that the value of foreign debt stands at $4.23 billion while domestic debt hits N3.85 trillion at the end of the year 2018, respectively. States with the highest total revenue for the period were Lagos, Rivers, Delta, Akwa Ibom and FCT with N263 billion, N151 billion, N145 billion, N106 billion and N72.85 billion. While states with the lowest revenue include Osun, Gombe, Taraba, Ekiti and Ebonyi states at N20.29 billion, N21.79 billion, N25.70 billion, N25.02 billion and N26.51 billion, respectively.

Dangote Cement consumers win N350m cars in extended promo

...35 cars given out of 43 GBEMI FAMINU

ot less than 35 saloon cars, worth N350 million, out of the 43 on offer in the extendedon-goingDangoteCement National Consumer Promotion tagged“BagofGoodies”havebeen won across the federation. JosephMakoju,groupmanaging director, Dangote Cement plc, made this disclosure in Makurdi while presenting the star prize to a mason, Clement James. The Benue State capital went agog as other prizes such as refrigerators, five television sets and hundreds of Goodies Pack of Dangote Products among other gifts were given out to the winners who besieged the company office in Makurdi to redeem their winnings. Expressingsatisfactionthatstar prize winner emerged in Benue State, Makoju explained that the hand-over of prizes was all the more remarkable because the first Dangote Cement plant began in nearby Gboko, before the cement manufacturing giant expanded to presently cover three major plants in Nigeria and to 10 other African nations. While collecting the keys to his brand-new car, 32-year-old star prize winner, Clement James, a mason by profession, could barely contain his joy, amidst his profound gratitude to Dangote, for dispelling his initial scepticism

about a promo which is geared towards empowering 21 million Nigerians. Handing over the keys, Makoju congratulated James and expressed his happiness to be in Benue Cement, the cradle of the Dangote Cement success story that it is today. “Iamhappytobeheretodayto meet our customers and distributors.Youaretheonesthatmadethis country grow. This is the capital of Benue State, a state that hosts one of our cement plants. Dangote first cement plant started from Gboko,” Makoju said. “Today,wehavecementplants in 10 countries. What started in Gboko has gone across Africa. Today’sprogrammeistosay‘thank you’.This promo is the largest ever, first in history. We appreciate your support. There is more. This is the firstinBenue,butitwon’tbethelast in Benue,” he said. FunmiSanni,marketingdirector, expressed appreciation to the consumers, distributors and those gathered at the event, and urged them to keep patronising Dangote Cement products. “We are the only company that can have a promo this size and deliver on our promises. We are doing this because we must appreciate our consumers. In this promo, we are reaching 21 million Nigerians.Alotofpeoplewantedto win, so we extended the promo till October ending,” she said.

FirstBank Georgian cup hits centenary mark, a possible world record in sports sponsorship

n furtherance of its commitment to the growth and development of sports, nation buildingandtheeconomyatlarge, First Bank of Nigeria Limited has announced its sponsorship of the Georgian Cup of the Kaduna Polo Tournament for the 100th consecutive year, possibly the longest running sports sponsorship in the world and a Guinness Book of Records potential. The 2019 edition of the epoch making sports championship runs from October 12 – 20, 2019 at the Kaduna Polo Club, Murtala Mohammed Square, Kaduna. The Kaduna Georgian Cup CentenaryPoloTournamentcommenced in 1919, with FirstBank sponsoringthesportstournament for 100 years. The Cup donated by the bank to the Kaduna Polo Club is the oldest and most respected

Polo trophy in West Africa. The 2018 edition of the tournament was won by team El-Amin, also billed to participate in the 2019 edition to defend its trophy, contestedbyotherteams;Rubicon, Imani, Malcomines, Lintex Agad. A total of 45 teams are billed for the 2019 tournament. Speaking on FirstBank’s unwavering centenary sponsorship of the Tournament, the President, Kaduna Polo Club, Suleman Abubakar said “the Georgian Cup Polo Tournament is indeed the Premier Polo Tournament in the country and it has proudly birthed many other sporting events across the country as well as the West African sub region as a whole. We are honoured to record such a milestone with FirstBank since the inception of the tournament 100 years ago. www.businessday.ng

Contrary to minister’s claim, Enugu airport unlikely to be ready December … hard times await Christmas travellers IFEOMA OKEKE

ontrary to the claim of Hadi Sirika, minister of aviation, the Akanu Ibiam International Airport, Enugu, may not be ready for operations by December. Sirika last month promised the airport would be ready for operations by December, but with the yet-to-be-approved special grant request of N10 billion from President Muhammadu Buhari for the completion of reconstruction of the runways, this may be a tall dream. John Ojikutu, a member of aviation industry think tank group, Aviation Round Table (ART) and CEO, Centurion Securities, raises the doubts as to whether the airport will be ready by December, especially as the proposed money is yet to be approved by the presidency. “With these additional constructions, which I believe

must include taxiways that the runway had none originally, the N10 billon is very reasonable. If Abuja that has taxiways and with no reason to extend the runway took six weeks to repair its runway, we should expect more weeks and possibly six months to reconstruct the Enugu runway, extend it and construct taxiways to bring it to a standard of global practice for an international airport,” Ojikutu says. However, he explains that the closure was about safety not politics, and pleads with the South Eastern governors to work closely with the minister in the interest of the regular air travellers from their states. “I have said it several times that the opening of the airport for regular flight operations to heavier aircraft than the runway was built for was political with no safety consideration by whoever in authority then. “Enugu runway was built for aircraft in the B737 catego-

ries and not for heavier ones like 767, 777 that the Ethiopian Airline is flying into the airport now; that explains why in four years of opening it to such operations, the runway has been repaired twice,” Ojikutu notes. The airport runway needs an upgrade to carry large or heavier aircraft not repairs like Abuja’s, and the runway will also need to be extended from some of the information available, which makes the expected work to be done to be completely different from the Abuja’s, he states. The airport closure has since seen airlines diverting traffic to the Sam Mbakwe International Cargo Airport, Owerri, Imo State, and Port Harcourt International Airport (PHIA), Rivers State, as alternative to the Akanu Ibiam Airport, Enugu, currently closed for repairs. However, frequent air travellers to the region who are already feeling the impact of the closure have expressed

worry over the delay of the airport repairs. “Since the airport closure, it has been very difficult to get to Enugu because of the bad condition of the roads, which will get worse by Christmas. Our fears have worsened since the silence of the Federal Government over the repair of the airport. “It is so bad that the repair of an airport very significant to the South East region is being neglected. Those responsible need to wake up to their responsibilities and stop playing politics,” Obi Amos, a frequent traveller, says. Already, ticket prices to Port Harcourt and Owerri during Christmas season are seeing a slight increase. A one-way ticket booked as at today for December 24 and 25 from Lagos-Owerri or Lagos-Port Harcourt flight is currently selling between N53,000 to N55,000, as against N30,000 to N35,000 average cost of air ticket.

Babatunde Fashola (2nd l), minister of works and housing; Abubakar Aliyu (3rd l), minister of state in the ministry; Mohammed Bukar (m), permanent secretary, works and housing, and others, during the first interactive session with the Senate Committee on Works at the Conference Room 231, New Senate Building, National Assembly Complex, Abuja, recently.

Nigeria is becoming a one-party state, APC mocks PDP, CUPP JAMES KWEN & SOLOMON AYADO, Abuja

igeria is becoming a one-party because the main opposition People’s Democratic Party (PDP) and Coalition of United Political Parties (CUPP) have failed in their responsibility of keeping the government on its toes, the ruling All Progressives Congress (APC) said on Sunday. The ruling party said Nigeria deserves a strong, vibrant opposition to play its conventional role in the polity to deepen democracy, but sadly, there is no political party to do that. Lanre Issa-Onilu, APC national publicity secretary, in a statement on Sunday observed that democracy cannot be said to be fully operational in a situation where the supposed ‘main’ opposition party (PDP) has

... opposition party not dead, PDP insists become a joke, irresponsible and rudderless. He stated that even as the ruling party, APC recognises the importance of rigorous and intelligent interrogation of its policies and programmes by the opposition. He noted that there is a lot to gain by Nigeria’s democracy and the country in an atmosphere of robust engagement by responsible and patriotic opposition as the political system practised in the country has important roles for the political parties outside of power. He said the system envisaged that such parties would provide alternative viewpoints and put the governing party on its toes. “Instead, the PDP and their minions have in the name of opposition continued to distract the govern-

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ment and Nigerians with their post-election delusions, salacious fictions, conjured rifts in government circle and of course the lowest of it all, the pathetic and senseless Jubril of Sudan malicious tale, among other fake news. Tragic!” Issa-Onilu said. “It is sad that PDP has finally proved incapable of filling this important democratic space. The other mushroom parties are even worse. Some of the smaller parties are filled with incurable charlatans issuing infantile weekly press statements on behalf of the PDP. Our democracy deserves better,” he said in the statement. But the PDP, in a swift reply, described as empty the claims by the APC that the main opposition party is @Businessdayng

dead, saying the party (PDP) is bastion of democracy. The PDP insisted that it is the consensus political party of the majority of Nigerians and after a long journey of overhauling, it has become the centre for seeking for power and good governance in the nation. Kola Ologbondiyan, PDP national publicity secretary, while briefing journalists in Abuja on Sunday, said the party does not have space to respond to the gimmicks of former democrats whom, he said, went around the nation and brought in a despot into a democratic order, neither does it have space to engage in verbal discussion with characters who are known to be pillaging and stealing directly from the patrimony of the nation.

Monday 14 October 2019

BUSINESS DAY

news

Banjo Adegbohungbe appointed DMD, Coronation Merchant Bank

oard of directors of CoronationMerchantBankLimited hasannouncedtheappointment of Banjo Adegbohungbe as the Deputy Managing Director of the bank. Prior to his elevation, Banjo was the executive director/ executive compliance officer responsible for the compliance; operations; information technology; digitalchannelsandadministrative divisions of the bank. Banjo began his career at CitibankNigeria(formerlyNigeriaInternationalBank)androsethrough the ranks to become an Assistant General Manager in charge of the bank’s Trade Operations – a position he occupied before joining Access Bank in March 2007 as aDeputyGeneralManager.During his time at Access Bank, he served in various leadership capacities as Group Head, Global Trade; Group Head,GlobalPaymentsandGroup Head, Corporate Operations. In 2011, he was promoted to General Manager before eventually joining CoronationMerchantBankin2018 as Executive Director/Executive Compliance Officer. He is a seasoned banker with over 26 years of banking experience, covering various aspects of banking including Technology, Payments, International Trade, Fixed Income, Loans, Process Improvement and Product Management. He holds an MBA from

theInternationalInstituteforManagement(IMD),Switzerlandandis an alumnus of Obafemi Awolowo University, Ife, where he earned a B.Sc. in Mechanical Engineering. He is an Honorary Senior Member of the Chartered Institute of Bankersandhasalsoattendedseveral executive management and banking specific developmental programs in leading educational institutions around the world. Announcingthenewappointment, the chairman of Coronation Merchant Bank, Babatunde Folawiyo stated, “During his time with us, Banjo has distinguished himself in service to the organization and contributed immensely to the overall growth of the Bank. I amconfidenthisappointmentwill furtherstrengthenandpositionthe Bank for improved performance.”

FG to ascertain actual volume of fuel consumed daily, stamp out smuggling Olusola Bello & Harrison Edeh

Adegbohungbe

SEC restates commitment to sustainable financing Iheanyi Nwachukwu

ecurities and Exchange Commission (SEC) remains a strong advocate for the promotion of infrastructural development through sustainable financing. This was restated by acting director-general, Mary Uduk at the formal launch of the Financial Centre for Sustainability, Lagos (FC4S Lagos). Uduk said the SEC believes, andverystronglytoo,thatthehuge budget deficit and infrastructural gapinthecountrycanbefinanced by harnessing resources available from sustainability finance investors and interest groups around the world. According to her, as Nigeria strives to build a diversified economy that harnesses the resources of non-oil sectors to anchor the transition to a more resilient economy, there is the urgent need to close the huge infrastructure gap with investments in sustainable finance initiatives driven primarily by complimentary efforts of the government, regulators and the financial services industry to direct financial capital to more sustainable economic activity. She said, “It is therefore my expectation that the launch of the Financial Centre for Sustainability, Lagos would serve as a rallying point for further discussions and engagement on ways of taking advantage of the enormous resources and potential of sustainable financing to address the infrastructure gap of our country, deepen the product offering in the Nigerian Capital Market and create greater prosperity for investors and our people. “There are tremendous op-

L-R: Tara Fela-Durotoye, founder/CEO, House of Tara International/speaker; Adeola Ogunmola Sowemimo, aircraft pilot, Qatar Airways/speaker; Kemi Ajumobi, editor, Women’s hub, BusinessDay/coordinator; Osayi Alile, CEO, Aspire Coronation Trust Foundation (ACT)/speaker; Owen Omogiafo, MD/CEO, Transcorp Hotels plc/speaker, and Chioma Akpotha, actress/brand ambassador/speaker, at the Inspiring Woman series 9, themed: ‘She Sees no Boundaries’ in Lagos. Pic by David Apara

portunities in the areas of power generation and transmission, rail transportation, housing, agriculture and water, among others, where sustainable financing can beanavenuefortheprivatesector to partner with government in the overall drive for prosperity and economic development. “The Federal Government through the Debt Management Office (DMO) has led the way in Africa in this regard by issuing the first sovereign green bond in December 2017. It has since followedupwithanotherN15billion issuance in June this year specificallytofundrenewableenergy, afforestation and transportation. The Acting DG disclosed that following the approval of the Commission’s Rules on Green Bonds in October 2018, two issuances have been made by North South Power Services Ltd and Access Bank plc worth N8.56 billion and N15 billion, respectively, to finance various infrastructural projects in the power, water and agriculture sectors of the Nigerian economy. She said the onus therefore lies with all in the financial services industry to work together and continue to expand these issuances by locating a need and fashioning appropriate sustainable financing products to meet them. “In addition, the Securities and Exchange Commission led the creation of sustainable finance guidelines and disclosure requirements for capital market operators. The guidelines which will be rolled out before the end of the year were developed in line with the Nigerian Sustainable Finance Principles (NSFP),as adopted by the Financial Services Regulatory Council Committee (FSRCC).”

he Federal Government has set up a taskforce to determine the actual volume of petrol being consumed on a daily basis in the country. This was disclosed at the launch of “Operation White,” which is meant to ensure transparency and accountability of petroleum products supply and distribution in the country. The taskforce, which has about five months to sanitise the industry and clear it of all illicit activities, also has the mandated to ensure that every molecule of petrol that is brought into the country, delivered and supplied to filling stations is accounted for. This is part of efforts to also ascertain the volume that is smuggled across the border with the aim of putting in place measures that would curb smuggling of the product to neighbouring countries. The minister of state for petroleum, Timipre Sylva, who was represented by the executive secretary of Petroleum Equalisation Fund (PEF), Ahmed Boboyi, at the launch

of “Operation White” in Lagos, weekend, said the strategic initiative was aimed at ensuring all molecule of petroleum products imported by NNPC was utilised within the border of this country. It behoves on industry players to ensure that petroleum product supply and distribution chain in the country is devoid of illicit practices, such as diversion and smuggling of petroleum products, he said. These illegal acts, he said, constitute economic sabotage. To do these certainly requires commitment and diligent and robust partnership among various downstream stakeholders, he said. The minister, who had earlier last Thursday visited the taskforce Command and Control Centre at the NNPC Towers, Abuja, observed that the initiative was long overdue for the country, even as he charged members of the taskforce to carry out the assignment with commitment, zeal and patriotism. He said he was optimistic that the operation would stem

the smuggling of petroleum products by some unscrupulous operators, stressing that the savings from the exercise would go a long way in supporting infrastructural development of the country. He recalled that few weeks after the closure of the nation’s land borders, daily Premium Motor Spirit (PMS) consumption had dropped from 60 million litres per day to 52 million litres per day. “I must say that I am very impressed with the calibre of the team members of ‘Operation White’ and am not surprised because every organisation that I know is as strong as its leadership. The NNPC under the leadership of Mele Kyari epitomises strong leadership. Am happy with the enthusiasm on the faces of the members and I am sure that we will succeed,” the minister enthused. Speaking on the initiative, Mele Kyari, group managing director of Nigerian National Petroleum Corporation (NNPC), who was also represented by the Chief Financial

Officer of the corporation, Umar Ajiya, said the NNPC would ensure that the initiative achieved it aims and objectives. He said the initiative would be fully funded and NNPC will ensure that its success even though it is an interim measure that would last six months. “We would provide necessary resources to make sure all depots are covered and i believe that one day we would have a global central data monitoring room where we can see the activities of everybody.” Bala Wunti, managing director of Petroleum and products Marketing Company in his opening remark said NNPC as national oil company has been given the singular responsibility to ensure energy security in the country. This means the company has to make energy available, accessible, affordable and it must be delivered in an acceptable way. He said until the industry is able to do these, it cannot be said to have lived up to its own responsibilities in respect of energy security.

Probe: Ambode’s commissioner ready to appear before House of Assembly JOSHUA BASSEY

igerians can look to some interesting revelations about the governance in Lagos State, as Olawale Oluwo, a former commissioner for energy and mineral resources in the immediate past Akinwumi Ambode’s administration, says he is ready to appear before the Lagos State House of Assembly probing the purchase of 820 buses by the Ambode’s administration. Oluwo resigned from the Ambode’s government, claiming he was joining the opposition Peoples Democratic Party (PDP) to wrestle power from the ruling All Progressives Congress (APC) after it became obvious that APC would not give a second term

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ticket to his boss (Ambode). Since the incumbent governor, Babajide Sanwo-Olu came on May 29, the House of Assembly has been hitching to probe Ambode over alleged misrule, especially with respect to the purchase of the buses. The House has continued to insist that the transaction was never approved by it as constitutionally required and linked Oluwo and other former commissioners to it. But in a letter addressed to Mudaishiru Obasa, the speaker of the House, dated October 11, 2019, Oluwo said the threat to issue warrant of arrest on Ambode, himself and others by the lawmakers was uncalled as he was waiting for the House to

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officially invite him. The letter reads in part: “I wish to state categorically that no invitation, oral or written, physical or virtual, was extended to me in person or through a third party, either directly or by substituted means, to any of my official and residential addresses, phone numbers or emails. “I wish to put it on record that I have proudly served my state with utmost diligence, integrity and in line with my oath of office. Let it be known that I have absolutely nothing to hide and I am willing and ready to appear before any committee of the House of Assembly, anytime I receive your invitation to that effect.” According to Oluwo, it was wrong for the lawmakers to @Businessdayng

pass a resolution seeking to arrest him, “as if I had wilfully or tacitly avoided appearing before the committees of the House of Assembly,” as no such invitation has been extended to him. On Thursday, two preliminary reports were presented by two different ad-hoc committees set up by the house to investigate the 820 buses purchased by Ambode and to appraise the 2019 mid-year budget. Chairman of the nine-man ad-hoc committee set up to probe the 820 buses purchased by the former governor, Fatai Mojeed, while presenting the preliminary report, said it was discovered that due process was not followed in the purchase of the buses.

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BUSINESS DAY

UNDERCOVER INVESTIGATION Bribery, bail for sale… Lagos police station where innocent From time to time, Maxwell would dip his right hand into his crotch, and scratch away the poor thing with mind-blowing absentmindedness. Then he would run the same hand over his tinted hair, down through the thin threads of his hairy chest and back to his crotch. He was impulsive, too, once declaring, without prompting, “It’s been a long time I had measles like right now”, and abruptly informing us another time: “The Police have set our bail at N10,000 each.” The father of the two girls shows up much later, upset, disappointed and threatening to let them rot in detention. He didn’t mean half of those things, though; the following day, he returns to settle the Police, and all five regain their freedom. It is unclear exactly how much he paid, but the Police had demanded N50,000 for all five.

Continued from page 8 sisted bail is free, but this has got to be the most barefaced lie of the century! In 2015, and again in 2017, the Police embarked on a nationwide bail-is-free campaign; apparently, it has been a futile experiment. Coincidentally, while I was in that cell, Zubairu Muazu, the Lagos State Police Commissioner, was busy saying “any policeman who collects money for bail is not different from a kidnapper; the only difference is that everyone knows where you keep the suspects”.

N50,000 BAIL FOR FIVE HEMP SMOKERS Five for the worth of one; that was the scenario on Tuesday when the phone-theft suspect was freed. Shortly before midday,

five new suspects — one male, the others female — join us. The quintet — two of them are sisters — had been arrested at a hemp-smoking joint in Gbagada. On arrival, they all look subdued, their faces sunken, their hairs dishevelled. Off they are marched to the female cell, situated adjacent the male cell but close enough for communication and exchange of items with their man, Maxwell. Unlike the male’s, the female cell is less punishing — just one room, bare but cemented, dry and generally habitable. Maxwell makes no claim at sanctimony. “They caught the girls in the act, but me,they should never have arrested me,” he laments. “I f**ked up big time.” Tall, fair and stunningly handsome, Maxwell had learnt of the arrest of his girls, and had sped to the scene only for residents to clandestinely signal the Police www.businessday.ng

‘

So, either bail or court, and at the very worst scenario, the Police have devised a means of collecting at least N5,000 from every suspect and another N5,000 from the complainant at the point of leaving the cell

‘

AN INNOCENT MAN IN POLICE CELL We continue our chit-chat without the knowledge that two young men, one imminently, are primed to join us. The first, Uchenna, was accused of attempting to dispossess a motorcycle rider of his property. But he fiercely denies, insisting a quarrel only broke out between the duo because the rider could not provide the balance of his fare for the ride. “How can anyone say I tried to snatch a motorcycle in broad daylight yet no weapon was found on me?” he argues, to the bemusement of all. “I had no knife, no gun, no spade. No cutlass or machete. Do you rob in daylight without any weapon?” Much later, sometime between 8pm and 9pm, another young man joins us. The accusation against him was that he stole a phone from a barbing salon. By his own admission, the CCTV had reportedly identified him as the culprit. Yet he denies any wrongdoing. “I swear I didn’t steal the phone,” he murmurs. “I swear!” Who’s this one fooling? The CCTV fingered you as the thief yet you say no? You think everyone here is a criminal? There’s a journalist here, you know? “Wait a minute,” I ask. “Didn’t they show you the CCTV footage? Didn’t the Police watch it before arresting you?” “I didn’t watch it, neither did the Police,” he answers. “The Police arrested me because the phone owner said I was the thief. They didn’t watch any CCTV footage.” I still do not believe him until the rest of us rouse from sleep the following morning to find out he was gone. The CCTV footage had finally been watched, and it turned out the wrong man had been arrested! An innocent man had spent a night in jail over a crime he knew nothing about.

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that he was one of them, in fact their ring leader. Maxwell was bullish in maintaining innocence as the Police tried to arrest him, but he would earn himself a succession of slaps after a strand of hemp was found in his wallet. “I no know say I get one tiny claro for my wallet,” he says. “I f**ked up, mehn.” When observed at close quarters, Maxwell cuts the picture of a man of two extremes. One minute he is mouthing obscenities, the next he is speaking with impeccable courtesy. Asked which of the girls is his girlfriend, he mutters: “None of them is my girlfriend but I f**k them all.” However, when any of the girls calls for his attention, his answers range from “yes, please” to “yes, darling” or “one minute, love.” And, usually, when he asks anything of anyone in the cell, it is hardly for himself but for one of his girls. @Businessdayng

HOWthe POLICE COOK UP CRIMES AGAINST SUSPECTS On Wednesday, I discover, in the crudest of ways, how the Police often exaggerate the allegations against suspects — to drive up their bail. It is evening and I have not had a bath all day, so I politely ask a policewoman, fresh from assuming duties, to open the cell so I can draw water from the tap servicing the cells. “What is your name?” she first asks me, before shifting her gaze to a whiteboard detailing the offences of each suspect in the cell. “Ojo Olajumoke? Your offence doesn’t warrant you having a bath. Cell no be for enjoyment, abeg.” Crestfallen and unable to read the board from afar, I beckon a cellmate over for help. “Your offence reads ‘stealing and hijacking of car,’” he tells me. “Did you actually hijack a car?” I hadn’t. The original complaint against me was that I’d bought a car worth N2.8million, paid only N300,000 and defaulted on the balance. Car hijacking? Stealing? By framing me, the Police violated Section 340 (f) of the Police Act 2004, which compels them to exhibit “strict truthfulness in the handling of investigations, and in the giving of evidence”. Maxwell and the girls were framed up, too. On the whiteboard, they were designated as “cultists”, but their real offence was that they smoked hemp. They were picked up smoking hemp, not while engaging in cultism-related activities. Are all hemp smokers cultists? “It’s the Police’s well-known way of bargaining for hefty bail sums from suspects,” Oto Omena, a lawyer with long-standing experience of dealing with policemen, would later tell me in late August. “They typically make suspected crimes bigger than they originally are; you know, the bigger the

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civilians are jailed and criminals are recycled crime, the bigger the bail sum.” INNOCENT DESTITUTE, DRUNKARD ARRESTED ON TRUMPED-UP CHARGES In the evening of Wednesday, Haruna joins us. He tells no lies about his offence: he and his brother were involved in a nasty fight during which he slashed his opponent’s neck with a knife. Brother landed in the hospital, Haruna ended up in the cell. Deserved maybe, but not for the next two suspects. In the wee small hours of Thursday, Japheth and Sunday arrive, both having been picked up while sleeping at unauthorised locations in Gbagada. The Police accused them of lurking around to break into shops. It’s a robbery-prone location, they insisted. But we all know it’s a false claim. It turns out Sunday is very known to many officers at the station. A chronic, foul-smelling, gibberish-spilling drunkard, this isn’t his first arrest and probably won’t be the last. Spirits and dry gins are his specialisation. His wife would show up at the break of dawn, cursing her luck at ending up with a man contributing no more than his manhood to the marriage, always disappearing for days on a drinking spree and reappearing, bearing no cash for her or the children. Japheth, meanwhile, is a destitute. He had naively relocated from Benue to Lagos weeks back in search of greener pasture, with no real plans for feeding, housing and accommodation. In daytime, he roamed the streets hunting for odd jobs; at night, he slept wherever the call of nature found him. The Police knew he was harmless. Not one weapon was found on him, much like his co-suspect. With neither Japheth nor Sunday able to afford the N10,000 bail set by the Police, night falls on them in the cell. Sunday’s innocence would become clear in the morning when a new batch of police officers takes over duty. “Mr. Sunday, they’ve picked you again!” one of them exclaims on sighting him. “What was your offence this time?” Apparently, the Police know Sunday as someone who lives in the neighbourhood; they know him as a harmless but indiscriminate drunkard; not the robber they had labelled him as. His arrest and detention was nothing more than a fundraising expedition. POLICEWOMAN DEFRAUDS HER BOSS In a matter of days, it becomes clear that all policewomen on duty at the counter are perpetually on the lookout for brisk business. Every visit to a suspect, even if it lasts no more than two minutes,

is impossible without the payment of a N500 bribe. Charging one’s phones also costs N500 per time. Since roughly two people visit me daily, the policewomen can sometimes make a minimum of N1,500 off me in a day. On Thursday morning, something interesting happens. Policewoman Angelina Abubakar’s voice rouses me from sleep. “Jumokeeeeeeeeee,” she bellows. “Do you have N500? I want to use it.” Does she really think I have an option? I let her have it: a deduction from the sum of money seized from me at point of detention and deposited at the counter. Few hours later, with my phone out of battery charge, I request her attention, expecting her to for once grant me a free favour. “You’ll have to drop something,” she affirms. I decline, which means no phone for the rest of the night. How can I give you N500 in the morning and www.businessday.ng

you can’t charge my phone for me in the afternoon for free? Less than half-an-hour later, her greed returns to haunt her. When Senami Kojah and Zainab Sodiq, my two visitors, brought breakfast in the morning, Angelina had collected N1,000 bribe from them. Apparently, she had lied to her boss she got only N500. Somehow suspicious that her boss doubted her and could ask my friends next morning, she begs me to appeal to them to insist they received N500 balance after parting with N1,000. Well! Well!!Well!! Your sins have found you out. “My phone is not charged, so no way I can reach them,” I tell her. She speedily charges the phone and fetches it for me afterwards. Without a dime. Angelina’s boss is just as guilty, though; Section 355 of the Police Act 2004 prohibits an officer from receiving “any token from a

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subordinate in rank…” THE EARLY-MORNING BAIL RITUAL Friday morning, neither the Crime Officer nor any other policeman asks me if I want to call anyone to process my bail — clear indication I probably will be arraigned in court. By then, I’d become all too familiar with the Police’s early-morning bail shenanigans. In each of the previous days, at least one police officer asked almost every inmate first thing in the morning if there was someone they wanted to phone — a relative, friend — just anyone who could potentially show up at the station with cash for bail. Those mornings were the only times every suspect had the immediate attention of the officers at the counter. Every other time was a struggle — but not that early-morning call. Meanwhile, in @Businessdayng

all those days, repeated pleas by one of my lawyers for bail were flatly rejected by the Police. The previous day, the CO had called out early in the morning to ask if I wanted to phone anyone. “Since you came here, we have not seen anyone mature come for your bail. Just those two small girls,” he had noted. Do you have any mature person you can phone? [Turning to the policewoman at the counter], please get him his phone so he can call anyone he wants to.” Sometime just before 10am, a policewoman unlocks the main cell and asks me to step out. “The DPO said you should go and meet your IPO. You must leave this cell today anyhow; [it’s] either they arraign you or they let you go,” she informs me with glee in a thank-me-forthe-information manner. Actually, it was big relief — because, by then, all my regular cell mates had been released, and I had become the longest-serving suspect. Austin was released on Thursday. Taofeek, a man who joined us on Tuesday after his involvement in a scuffle over land, had regained his freedom since Wednesday after parting with N5,000 for bail. The same day, Austin and his four ‘wives’ were freed. Only four of us — Uche, Japheth, Sunday and I — were left.For all of us, our detention for more than a day was illegal. Section 35 (5)(a) and(b) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) are explicit: detention should be for a period of one day “in the case of an arrest or detention in any place where there is a court of competent jurisdiction within a radius of 40km”; and “in any other case, a period of two days”. Detention can only be for a longer period if a court so decides. Meanwhile, a magistrate court is less than 15km from Pedro Police Station. Soon, I would find out how much the complainant paid the Police to get me to court: N2,000 for typing, N2,000 for fuel, N1,000 for photocopying. So, either bail or court, and at the very worst scenario, the Police have devised a means of collecting at least N5,000 from every suspect and another N5,000 from the complainant at the point of leaving the cell. Before long, a police van pulls over in the sweltering afternoon heat. The IPO handcuffs my hands and leads me into the van while the CO wheels it away, leaving behind a hail of dust, a station brimming with police officers filled with hate and a cell housing their preys. Watch out for pat two of this thrilling expose by investigative reporter FISAYO SOYOMBO inside BusinessDay and on www. businessday.ng on Wednesday

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news L-R: Soromidayo George, director, corporate affairs, Unilever Nigeria plc; Aigboje Aig-Imoukhuede, chairman, Coronation Capital; Omobolanle Victor-Laniyan, head, sustainability, Access Bank plc, and Olajobi Makinwa, chief, intergovernmental relations & Africa, United Nations Global Compact, launching the sustainability compendium at the United Nations Global Compact Breakfast Dialogue in Lagos.

Brazil’s $2bn oil blocs draw Shell, Chevron, 8 others …as Nigeria fails to hold bid rounds in 12 years DIPO OLADEHINDE

he Brazilian government last week confirmed 10 international oil companies had agreed to pay $2.2 billion for drilling rights in 12 of the 36 offshore blocs on sale at the country’s 16th bid round, with oil companies once again paying record signing bonuses for areas holding subsalt potential in the Campos Basin. Some of the world’s largest oil companies – ExxonMobil, Chevron, Shell, BP, Total and five others – won oil exploration blocks in what was the first of three bidding rounds this year. Brazil’s gain is Nigeria’s loss as Africa’s biggest oil producer has failed to hold bid rounds for over a decade. Stakeholders say Nigeria’s

delay in conducting the much-awaited oil licensing rounds has led to significant revenue loss, particularly estimated signature bonuses of N112 billion, at a time government is relying more on borrowing to finance key projects. Brazil’s crude and condensate output hit an alltime record high, rising by 214,000 bpd to average 2.99 million bpd in August. One the other hand, Nigeria boasts of an average of 1.8 million bpd, according to data from Organisation of Petroleum Exporting Countries (OPEC). Brazil has conducted 14 bidding rounds over a period of 18 years, earning over $5 billion from signature bonuses alone, while Africa’s biggest economy has been struggling to conduct a licensing round in the last 12 years. “Nigeria could have sold

stakes in its Joint Ventures and other oil assets and raised well over $5 billion. We’re still sitting on our hands now while other countries like Brazil, Uganda, and Dominican Rep are auctioning oil assets,” Dolapo Oni, an international oil and gas expert with an understanding of Nigeria’s energy industry, tweeted. According to Brazil’s National Petroleum Agency, the sale underscored oil companies’ confidence in Brazil’s Campos and Santos basins that cover most of the country’s current oil output, including the massive subsalt frontier. Brazil sold 10 of the 13 blocks on sale in the Campos Basin, while two of the Santos Basin’s 11 blocks further to the south were sold. Total led a consortium that edged out a rival bid from Brazilian state-led oil

company Petrobras and Norway’s Equinor for the Campos Basin’s C-M-541 block, which was considered the bid round’s most attractive acreage. According to the results of the bid rounds, French’s Total, Qatar Petroleum and Malaysia’s Petronas offered a signing bonus of $972 million for the block, which was less than Petrobras and Equinor’s $994 million signing bonus. The two signing bonus offers were the highest ever made for a single block, according to Brazil’s National Petroleum Agency. Total’s group, however, pledged to drill two wells in the block versus Petrobras and Equinor’s single-well commitment in a move that tipped the bidding in its favour.

•Continues online at www.businessday.ng

NSE reviews rules on pricing methodology IHEANYI NWACHUKWU

he Nigerian Stock Exchange (NSE) has amended the rules on pricing methodology, which is price movements of equity securities traded on the Exchange. The amendments, which became effective on Friday, October 11, 2019, are to Rules 15:29.2. C.2 of the Rulebook of the Exchange, 2015 (Dealing Members’ Rules). Specifically, the amendments relate to the minimum trade quantity required to change prices for equity securities traded on the Exchange. “The Exchange remains

committed to maintaining a platform that engenders a fair and efficient market. This change is born out of the need to ensure that all price improving (up/down) transactions are material, making the market more efficient and attractive,” Oscar Onyema, CEO of the NSE, said on the amendment. “We will continue to review our rules and rule-making processes to boost investor confidence in our market, while ensuring that NSE rules comply with international best practice,” he said. With this review, the minimum trade quantity required to change prices for equity securities traded on the Ex-

change will henceforth be 100,000 units for all securities groups. This implies that trades of fewer than 100,000 shares in any of the groups are small trades. Small trades in an equity security will not result in a change in the publicly reported price of such security. The revised pricing methodology is expected to ensure overall market stability, and efficiency and fairness in pricing NSE securities. On January 29, 2018, the Exchange implemented amendments to its pricing methodology and par value rules that saw the categorisation of quoted companies under three groups

with different pricing rules. Group A consists of largecap equities that are priced at N100 per share or above for at least four of the last six trading months, or new security listings that are priced at N100 or above at the time of listing on the Exchange. The second category, Group B, consists of medium-priced equities that are priced at N5 per share or above but less than N100 per share for at least four of the last six months, or new security listings that are priced at N5 per share or above but less than N100 per share at the time of listing on the Exchange.

•Continues online at www.businessday.ng

businessday market monitor NSE Biggest Gainer UCAP N2.15 7.50pc

Biggest Loser CUSTODIAN N5.65 -5.83pc 26,583.75

Bitcoin

Foreign Exchange

₦3,022,745.54 -1.13pc

FMDQ Close

Everdon Bureau De Change

Buy

$-N 357.00 £-N 448.00 €-N

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Sell

Market

360.00

I&E FX Window CBN Official Rate

455.00

Currency Futures

($/N)

fgn bonds

Treasury bills

Spot ($/N) 362.13 306.95

3M 0.10 11.92

NGUS DEC 24 2019 362.68

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6M 0.04 12.43

0.00

10 Y 0.03

20 Y -0.02

14.31

14.42

14.62

NGUS MAR 25 2020 NGUS OCT 28 2020 363.53

Insurers face tough time convincing minority shareholders of new recapitalisation plans …as boards promise stronger institutions Modestus Anaesoronye

ublic quoted insurance companies are having a tough time convincing their minority shareholders to align with their recapitalisation plans. A few meetings of the insurance companies with their shareholders saw board chairmen and directors sweating hard to convince the minority shareholders to approve their different capital raising proposals. At some of the AGMs held recently, which were rowdy, shareholders were hard on the boards, refusing to approve special businesses detailing on raising capital with plans to bring in new investors. The shareholders said carrying out such plans, like private placement and special arrangements, would neutralise their stakes and maybe cede the company to new owners. “We are not going to allow you sell off our stakes to people we don’t know,” Nona Awo, a prominent shareholder in many Nigerian public quoted companies, said at one of the AGMs. According to him, a plan that is going to give a new investor over 80 percent is already at the disadvantage of existing minority shareholders. But a board chairman of one of the insurance companies assured the shareholders that their interest would be adequately protected. “I am assuring you our shareholders that neither you nor myself or other board members will like to lose his or her stake, but we have to go this way to protect your company from regulatory hammer,” the board chairman. “It is better to be a member of a big group that is bringing value than to be a member of a small company that is struggling or dying.” He said neither the board nor anybody else has any idea who the investors would be. A lot of the insurance companies are currently pursuing their recapitalisation plans,

having secured no objection order from NAICOM after the review of plans. Rasaq Salami, head, Commissioner for Insurance Directorate, had in a statement notified all insurance stakeholders that NAICOM received plans of 47 insurers and two reinsurers. The statement was further to the circular issued by NAICOM on May 20, 2019 increasing the paid-up share capital of insurers and reinsurers in Nigeria and the subsequent directives to companies to submit their recapitalisation plans by August 20, 2019. In the statement titled ‘Update on Recapitalisation of Insurers and Reinsurers’, Salami said in keeping with the recapitalisation roadmap, the Commission had concluded review of the submissions and had communicated individual companies on their positions. According to the statement, 26 companies were granted “No Objection” to proceed with their plans, while the plans of 17 companies were corrected; the companies were advised to resubmit their new plans using paid-up capital and not shareholders fund. Four companies did not have the requisite 2018 financial statements and were, thus, advised to review their plans of using IPO, the statement said. It also noted that one company had litigation issues and was advised to resolve them as soon as possible to enable it to make progress, while one company’s submission was noted to have met the necessary requirements. “The review of submissions from two companies is ongoing, while three companies are yet to submit their recapitalisation plans,” the statement said. NAICOM had in a circular dated July 23, 2019 said the recapitalisation plan should include, among others, capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives, and detailed action plan on how the funds for the recapitalisation are to be sourced with timelines and deliverables.

Corrigendum

IFC, not Leapfrog, invested $66.8 in Hygeia

n our Friday, October 10, 2019 publication entitled ‘Impact Investing in Context’, we erroneously stated that Leapfrog Investment invested $66.8 million in Hygea. The error was due to an oversight as findings have shown that the actual investor was International Finance Corporation (IFC) and not Leapfrog. We regret all the inconveniences that publication might have caused to all the parties

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involved. In January 2016, IFC, a member of the World Bank Group, in conjunction with IFHA-II Cooperatief, a private equity fund focused on investing in the healthcare sector in subSaharan Africa, Swiss re and CEIL Healthcare Africa announced an investment of $66.8 million in Hygea Nigeria Limited, a leading private healthcare company in the country.

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BUSINESS DAY

news Sanwo-Olu launches Financial Centre .... Continued from page 1

well as other key stakeholders, to advance green and sustainable finance in the Nigerian financial markets, in line with the United Nations 2030 Agenda for Sustainable Development and the Paris Agreement. This launch, which officially kicked off the activities of the FC4S Lagos in a wellattended ceremony, bringing together key financial market stakeholders, regulators, subject-matter experts and other sustainability doyens, also attracted key government officials. They include Jumoke Oduwole, special adviser to the president on Ease of Doing Business; Mary Uduk, Ag. director-general, Securities and Exchange Commission; Doyin Salami, vice-chairman,

Governance Board, FC4S Lagos; Sam Egube, Commissioner for Budget and Planning, Lagos State; Rabiu Olowo Onaolapo, Commissioner for Finance, Lagos State; Solape Hammond, special adviser to lagos state governor on Sustainable Development Goals; Bolaji Balogun, CEO, Chapel Hill Denham, amongst others. According to the 2018 Nigerian Sustainable Finance Roadmap Report (the “Report”) developed by United Nations Environment Programme (“UNEP”) Inquiry, in collaboration with market stakeholders, Nigeria continues to grapple with a myriad of economic, social and infrastructure challenges on the back of growing rural-urban migration, lack of pipe-borne water, growing housing deficit, deteriorating environmental conditions, heightening security challeng-

es, increased social tension, and inaccessible health and education centres, signalling an annual estimated sustainable finance investment need of up to $92 billion green finance investment required between now and 2030. The Report highlights the fact that annual sustainable finance flow into Nigeria is estimated at just over $8 billion mainly from public sources. The Report states further that to achieve the Nationally Defined Contributions (“NDCs”) of the Paris Agreement and meet the Sustainable Development Goals (“SDGs”) by 2030, the opportunity for sustainable finance-related private capital in Nigeria could be roughly 20 times of current flows (i.e., $160 billion). Consequently, FMDQ Securities Exchange PLC (FMDQ Exchange or the Exchange), in line with its drive to promote sustainable finance in the Nigerian financial market, was challenged to rally other stakeholders in the financial market ecosystem to set up FC4S, Lagos. The aim is to accelerate the expansion of green/ sustainable finance in Nigeria, showcasing Lagos as a key financial centre working towards the implementation of the Sustainable Development Goals (SDGs), and afford Lagos an opportunity to draw lessons and insights from more developed financial centres that will aid its adaptation to climate change as well as provide an opportunity to harness the vast investment needs for the transition to a low-carbon and climate resilient economy that supports sustainable growth.

•Continues online at www.businessday.ng

With ambitious budget, FG needs more than tax... Continued from page 1

the government’s revenue target is at an all-time high, with up to 45.6 percent or N3.7 trillion expected to come from other income sources. Lagos-based Cardinal Stone reports that the segment has not yielded more than N500 billion per year in the last half-decade.

Meanwhile, funding to critical infrastructure is N2.46 trillion, 23 percent lower than in 2019. Similarly, N2.45 trillion is to be spent on servicing debt, while non-debt recurrent expenditure is N4.88 trillion. The government said it plans to leverage private sector funding through, for instance, on-going tax credit schemes and would not be starting any new projects. But it would take more than tax incentives to encourage the private sector in a country where overregulation, multiple taxation, and capital control on foreign exchange are part of critical challenges business-

es face – aside from everyday struggle with power and dilapidated roads, experts say. “The government needs to look beyond tax credit in quest for more complementary funding sources for infrastructure,” the Lagos Chamber of Commerce and Industry said in a comment on the budget. “We should be looking more in the direction of equity financing.” Critical aspects of the economy are still public sector-driven and deny the country gains from unbundling the sectors and opening up for private capital, while government’s unwillingness to allow marketdetermined rates continues to discourage private capital. “Fair pricing and a stable policy environment are crucial to encouraging the private sector,” said Omotola Abimbola, an analyst at Lagos-based Chapel Hill Denham. Abimbola also noted a need to improve ease of doing business in the country as a way to spur private sector participation.

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

L-R: Heather Kipnis, lead, women entrepreneurship, International Finance Corporation (IFC); Peeyush Garg, chairman, Daraju Industries Limited; Kaidi Eddie-Obiakor, gender specialist, IFC, and Eme Essien, Nigeria country manager, IFC, at the case study launch on promoting women’s entrepreneurship held in Lagos. Pic by Pius Okeosisi

Declining corporate profit margins could signal ... Continued from page 1

decline from Q1 levels. The Nigerian Stock Exchange which gives some representation of the performance of the economy as it houses some of the biggest companies in the country, offers a glance into the weakening economic fundamentals in the country. Seven (7) of the nine (9) m ajor sectors represented in the Exchange, recorded declines in their profit margins over the last 6 months, enabling economists to trace the potential source of weakening macroeconomic fundamentals. Healthcare and Consumer Goods sectors on the local bourse felt the greatest hit to their net profit margins. The average net profit margin of companies in the Health sector dipped to 2.88 percent in the first half of 2019 from 5.38 percent at the end of 2018. The healthcare sector contributes slightly over 6 tenths of a percent to the GDP of the country, so the decline in corporate margins in that sector is not as alarming as what was recorded in the consumer goods sector. Consumer goods companies are represented by the Manufacturing sector in terms of GDP contribution and the Manufacturing sector is the fourth largest contributor to the Nigerian economy. Profit margins of companies in the fast-moving consumer goods space are thinning as costs increase and revenues fail to grow as fast. The net profit margin in the FMCG sector on the NSE declined to 3.51 percent in the first six months of 2019 from 5.80 percent at the end of 2018. The average net profit margin of Industrial goods firms dipped by 137 basis points in the space of six months to close at 13.74 percent, while Construction

and Real Estate firms lost 98 basis points from last year’s margins. The expectation for future profit margins, which may be a better indication of what is to come, is bearish, according to recent surveys conducted by BusinessDay on the Chief Financial Officers (CFOs) of some of the biggest companies in the country. The CFOs, who were not authorised to share sensitive financial information publicly, hold little optimism for next year, as they analysed the implication of the government’s plan to increase taxes and lower infrastructure spending in 2020. These factors including the sustained pressure on consumer spending and the indefinite border closure by the President since August 30, will only heap more pressure on company profits, according to Muda Yusuf, the director-general of the Lagos Chamber of Commerce and Industry (LCCI), a private sector advocacy group that draws membership across various sectors of the economy and works with some 2,000 local companies. The border closure is having a ripple effect across West Africa, with factories and traders struggling to import key raw materials and having to use alternative routes for their exports. “Declining profit margins is a reflection of the struggling economy, costs are rising and consumer spending is weak and that is bound to affect economic growth and cause another recession,” Yusuf said. “The government’s nationalistic policies have not helped matters and unless there is a change of direction, it situation will get worse,” Yusuf added. A real-sector induced economic recession doesn’t only hurt the profit margins of businesses but also crimps the government’s tax reve-

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nues in the form of company income tax. Given that tax is a percentage of profit, lower profits will lead to reduced tax revenues for an already cash-strapped federal government. The Federal government missed its target for company income tax (CIT) in 2018, after raising N637 billion, 20 percent below the N794 billion budget, according to data by the Budget Office. The government has not provided details of CIT expectations for 2020 but expects to raise N1.7 trillion from non-oil revenue sources. CIT traditionally accounts for the largest chunk of non-oil revenues, followed by receipts from customs and Value Added Tax (VAT). Lower profit margins also have an implication for job creation in a country bedevilled by record high unemployment rate. As at the third quarter of 2018, the National Bureau of Statistics reported unemployment rate of 23 percent. But at the current pace, it could climb to as high as 40 percent next year. Obinna Uzoma, Chief Economist at EUA Intelligence, told BusinessDay that most companies seeking to protect their profit margins will be forced to look at ways to drive cost efficiency in the system which will include retrenching workers in order to reduce personnel cost and boost firm profitability. “The declining margins mean that corporate organizations would fail to retain enough income to reinvest in the business and employ more workers. Investors also have the option to pull out operations as the operating environment becomes more stringent. “This could lead to higher unemployment and weaker consumer spending which hurts output growth in the economy,” Uzoma said. “Such corporate strategy could trigger another recession next year, barely 3 years @Businessdayng

after exiting one. I see a lot of companies relying more on technology than people in the coming years to drive efficiency and this could make massive retrenching a scary reality,” Uzoma added. The outlook for the global economy over the past months has been gloomy and in line with this, the new Managing Director of the International Monetary Fund, Kristalina Georgieva forecasts a slowdown in global growth. However, this slowdown might hit the Nigerian economy faster than expected if margins of the companies that contribute the most to the Nigerian economy keep falling. The split of aggregate demand between the private sector and the public sector is now at 91.5 percent to 8.5 percent, meaning that largest contributor to GDP growth is private sector investments which has consistently lagged since 2012, according to official data. “The pace of economic recovery remains slow, as depressed private consumption and investors’ wait-andsee attitude kept growth in the first half of the year at 2 percent, a rate significantly below population growth,” the IMF said in a statement last week following a staff visit to Nigeria. The economy expanded a tepid 2.02 percent in the first half of 2019, below the population growth rate of 2.6 percent. This implies that on per-capita basis the economy contracted and has done so since 2016 when per capita GDP first shrank. Leading Nigerian economist, Ayo Teriba, said the government must act swiftly to attract huge private investments to avert another recession. “The liquidity glut has opened a window for Nigeria to attract investments which will serve as a buffer against another recession but the government must go for it,” Teriba said.

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news Homeownership window opens as Mixta Nigeria launches affordable housing project CHUKA UROKO

new home ownership opportunity has just opened for mid-low income earners as a new project that will deliver quality and affordable housing to the Lagos property market has been launched, which its promoters say is a game changer. Known as Beechwood Park Estate, the project, being developed by Mixta Real Estate plc (Mixta Nigeria), sits on 17 hectares of land and is the company’s latest venture into

the affordable housing market. It is coming on the heels of the completion of the first phase of Emotan Gardens in Benin City —a joint venture housing project by the company and Edo State government—where homes were offered at N5.2 million, an equivalent of $14,000. Beechwood Park Estate, officials of the company explained to BusinessDay, was conceived in response to the increasing demand for quality and affordable housing in Lagos. According to the officials,

the development is also part of their prospective Family Homes Fund (FHF) partnership which would ensure the development of over 5,000 affordable housing units on Mixta’s land bank in Lagos. Beechwood Park Estate is in close proximity to the already developed Beechwood Central and Adiva Plainfields Estates. It is only 5-minute drive from Lakowe Lakes Golf and Country Estate located off Km 35, along the Lekki Epe Expressway. Upon completion, the development will offer ex-

tensive infrastructure including paved access road, water supply, storm waste management as well as open air spaces and community leisure facilities. On offer currently are serviced plots as well as 2- and 3-bedroom bungalows. The first sets of units are currently under construction and will be completed in December 2019. “There is a significant deficit in quality and affordable housing options in Lagos; there are currently very few developers offering a 2-bedroom house

for sale with similar infrastructure for N13.5 million. For us, this is a game changer,” says Deji Alli, CEO, Mixta Africa. Mixta Africa is a leading and active player in the fastgrowing African Real Estate sector specialising in property development projects. The Company was established with the objective of responding to the existing housing deficit in the African continent and has long-term vision of becoming the foremost real estate developer in Africa. With offices in Nigeria, Morocco, Senegal, Tunisia,

Bassey Andah Foundation launches book, endows research chair to expedite development of teaching institute IFEOMA OKEKE

n a bid to contribute to the emergence of a world-class research and teaching institute, merged with deliverables that will add value to the productive activities of people in Nigeria and Africa atlarge,BasseyAndahFoundation (BAF) has launched a new book titled ‘A Call to Service,’ and also endowed its research chair. Donald Duke, chairman of the eventandformergovernorofCross River State, says the research chair will be endowed with N250 million, engendering self-sustenance that allows it carry out its activities with efficacy. “The BAF’s chair endowment will facilitate the development of a world-class research and teaching institute, which is geared towards adding value to the productive activities of people in Africa and beyond by focusing research on AfricanandAsiancultures,history, languages,indigenoustechnology, medicine and music,” Duke states. Emele Uka, senior professor, University of Calabar, also present at the occasion, says, “The book titled centres on many aspects and phases of Bassey Andah’s life and services. He was an astute researcher, scholar, convicted Christian, faithful servant, father, humanitarianteacherandmentor among other things. “The book further gives a vivid account of the unfolding and diverse nature of Bassey Andah’s successful research and teaching career as a pioneering African scholar in his field, and his impact on a whole generation of practitioners that emulated and followed after him.” Speakingattheevent,Tokunbo Wahab, special adviser for Education, Lagos State, who represented thedeputygovernorofLagosstate, laudstheBAFforitscontributionto researchinNigeriaandAfrica,stating the launch of the book marks another improvement in its continuous growth. The Foundation has also collaborated with University of Calabar to establish the Bassey Andah Centre for cultural studies in the university. The centre was conceived to carry out research within the field of cultural studies. www.businessday.ng

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Côte d’Ivoire, and Mauritania, as well as projects in Algeria and Egypt, Mixta Africa has a mission to create value for its clients by delivering innovative solutions. The company has a 20-year track record of successful real estate and infrastructure development and a strong management team with over 280 years of combined experience. As of July 2019, Mixta held around 15 million square metres of land bank across all territories and has successfully completed more than 11,000 units.

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news Old Mutual introduces ‘A Click Away’ campaign to help Nigerians achieve their dreams Daniel Obi

he Nigerian subsidiary of pan-African insurance firm, Old Mutual Limited, has introduced a new campaign tagged ‘Doing Great Things Is Now a Click Away,’ as part of its commitment to helping Nigerians achieve their dreams and plan a positive future. The launch of the new ecommerce website is in line with the brand’s commitment to increase insurance penetration in Nigeria by making it more accessible to customers across the country. Sporting a fresh look and feel, the new site affords users the opportunity to easily navigate through Old Mutual’s uniquely tailored product offerings and make instant purchase of solutions that align with their personal goals as well as existing customers to make claims Speaking on this development, Alero Ladipo, executive head, marketing, Old Mutual, in a statement notes that launching the revamped website is not only connected with the brand’s drive to deepen insurance penetration in Nigeria, but it is also intended to increase the accessibility of its insurance solutions to help Nigerians achieve a better and more fulfilling future. “This website speaks to ev-

ery Nigerian; we want them to think about the great plans they have for themselves and their families, and to seek the right partner to help them achieve those goals. A great future doesn’t just happen, it results when people make the right plans and have the right protection for those plans,” Ladipo says. She adds, “Buying insurance should be an activity that fits into our everyday life and we should be able to purchase insurance ‘on the go’ or make a claim. The claims functionality demystifies the illusion the ‘insurance companies don’t pay claims’. In Old Mutual we are about partnerships. On the new site you can initiate a claim and you will be updated on progress until payment. This website brings insurance to everyone either through their mobile or laptop. In addition we are just getting started.” Old Mutual began operations in Nigeria in 2013 after it acquired the majority stake in Oceanic Life Assurance Company, following which it also acquired majority stake in Oceanic General Insurance Limited in 2014, thereby offering a wide range of services for both life and general insurance solutions tailor-made to meet unique individual and corporate clients’ conditions. www.businessday.ng

Lancet, FT Commission appoints Ndili as Why Nigeria needs ICT laboratories in universities - Tranter IT commissioner on Digital Health, AI SEGUN ADAMS

ancet and Financial Times (FT) Commiss i o n o n G ove r n i ng Health Futures 2030 has appointed Njide Ndilias the commissioner for Digital Health and AI. The commission is set to run from October 2019 to December 2021, and will explore the impact of digital health, artificial intelligence (AI) and other frontier technologies on Universal Health Coverage (UHC), with a special focus on improving the health of children and young people. The commission w ill focus on examining integrative policies for digital health, AI and UHC that are being developed around the world, to identify which has the greatest potential to improve health outcomes and maximize health equity in resource-restricted settings, while ensuring human rights. According to Njide in a statement, “The Commission presents a platform for knowledge exchange, aiding the improvement of healthcare access in Africa using digital technology

and AI. “My experience in the sector has given me the privilege to contribute towards designing, testing and scaling of innovations that seek to improve access and efficiency. I am and remain passionate about this, as Mobile telephony will continue to play a crucial role in healthcare in Africa, especially for the young and underserved populations.” Ndili is the country dire ctor for Phar mAccess Nigeria, an organisation dedicated to facilitating affordable access to quality healthcare in Africa by stimulating investments in the healthcare industry through partnerships with the private sector and government institutions. PharmAccess prioritises a digital agenda, developing innovative digital solutions to enable seamless access and improvement in health outcomes. These solutions include the HealthConnect App, which leverages international remittances for health, a quality-improvement tool, a multi-system poverty screening tool, a mobile app for TB Screening and the CarePay digital insurance platform.

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TONY AILEMEN & FRANK ELEANYA

ith Nigeria’s internet penetration projected to peak at 86 percent of the population by 2023, there is a need for tertiary institutions in the country to prioritise Information and Communication Technology (ICT) education to meet up with 21 Century realities. One way this can be achieved is through the creation of ICT laboratories in the various institutions. Melania Ayoola, executive director, sales at Tranter IT, says her firm is already speaking with some collaborators to make this a reality. According to Ayoola, Nigeria’s young population represents an opportunity for harnessing talents that will help the country compete globally and also export to other parts of the world. Nigeria’s population is estimated at 200 million, according to the World Bank estimate. The country also has an annual Population growth rate of 2.6 percent with income per capita of $5,680, ranking 7th, globally and projected to hit 411 million people in 2050. The country has a youthful population of about 54 @Businessdayng

percent, which means the government must collaborate with existing institutions to fill in the gaps in the educational system if it must provide a sound education in the sector. “For example, we have a place for employment in every company, but what the companies are complaining about is that when the graduates come out, they don’t know anything,” Ayoola said. “But when they are properly exposed to practicals and experiments, it makes things simpler and creates better confidence in the graduates” Lare Ayoola, the chairman of the company, says the goal of the is to help organisations reduce the enormous cost of production they bear from running an IT unit. He also believes that Nigeria’s economic progress depends on its investment in IT development. “We have an army of the smartest people in the world, that resource is our strength and wealth,” he told BusinessDay at a summit the company held in Lagos and Abuja recently. “The people are easy to train, English speaking, hardworking, conscientious, crave to prosper, possessed with an innate ability to succeed.

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Nigeria lags peers in home ownership rate at 25% for 200m population … housing, construction sector accounts for only 3% of country’s GDP CHUKA UROKO

espite its large-size population and self-acclaimed biggest economy in Africa, Nigeria is literally crawling behind its peers in terms of homeownership level in the country. Whereas home ownership level is 84 percent in Indonesia, 75 percent in Kenya and 56 percent in South Africa, it is only 25 percent in Nigeria whose population is estimated at 200 million. Going by United Nations projection, the country’spopulationwillbeashigh as 400 million in 2050. This implies that the country’s current housing deficit estimated officially at 17 million units will be worse unless there are concerted efforts by all housing sector stakeholders to address identified obstacles to development and delivery. “The major issues that continue to affect housing delivery in Nigeria, which also account for the wide demand-supply gap, include constraints related to high cost of securing and registering securelandtitle,”saidNasirelRufai, Kaduna State governor. El Rufai, who was keynote speaker at a day conference organised in Lagos by the Royal Institution of Chartered Surveyors (RICS) Nigeria Group, also listed inadequate access to finance, slow administrative procedures and high cost of land as other major issues affecting housing in Nigeria. Kola Ashiru-Balogun, managing director, Mixta Nigeria, had in

an earlier interview, told BusinessDay that several intervention attempts have been made by private sector operators and agencies of government to improve housing inthecountry,butsucheffortswere not succeeding because they are not harmonised. This,hesaid,explainedwhythe contribution of the housing sector to GDP is so small and the impact so minimal when it is supposed to be more. El Rufai agreed, saying that in economies like the USA, Britain and Canada, the housing sector contributes between 30-70 percent of their GDP. “Investment in housing accounts for 15-35 percent of aggregate investment worldwide and the sector employs approximately 10 percent of the labour force worldwide,” he said. The governor said that the real estatesectorcouldplayamuchbigger role in the Nigerian economy. He explained that, carefully done, investments in the housing sector could drive economic vitality and create jobs. “In many developed nations, the property sector in general, and the housing segment in particular, is a bedrock of the economy and an important tool for stimulating growth.Housingconstructionindices are some of the most common measuresusedbyanalyststogauge economictrendsinOrganisationfor EconomicCo-operationandDevelopment(OECD)countries,”hesaid. In addition to growing mortgage finance where much of the economic opportunity in housing

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can be unleashed, El Rufai also canvassed the development of social housing that must be led by government. According to him, the federal housing budget was declining as only N30 billion was budgeted in 2019, from N35.4 billion and N141 billion in 2018, and 2017, respectively. “The World Bank estimated in 2016 that Nigeria will need over N59 trillion to close the housing deficit of over 23 million. “The Centre for Affordable Housing Finance in Africa reports thathousingproductioninNigeria is at approximately 100,000 units per year, while what is needed to bridge the deficit is a minimum of 1,000,000 units per annum,” he said. Paneldiscussantsattheconference with the theme, ‘Unravelling the Real Estate Sector Challenges in Nigeria’ said regulation as it relates to titling and documentation was also part of the major problems of housing as it places too much burden on developers. “To acquire land for development, an investor is faced with two critical issues which include the certaintyoflandtitleandtheprocess of obtaining the title,” said Hakeem Oguniran, CEO, Eximia Realty. Oguniran advised that state governments should do something around governor’s consent. He stated further that the states should also reduce their charges on land titles to make it businessfriendly and also attract more people who are presently scared by high charges.

Nigeria rallies African oil producing countries to advance maximum benefits of resources …South Sudan pledges compliance with OPEC’s agreement HARRISON EDEH, Abuja

he Nigerian government hasralliedAfricancountries oil producers in a move geared towards ensuring the continent benefits maximally from hydrocarbon deposits locked in its shelves. The strategic move by Nigeria was spearheaded by the minister of state for Petroleum Resources, Timipre Sylva, who, in a one fell swoop, peregrinated three nations of Angola, Gabon and South Sudan over the weekend. Sylva, who doubles as PresidentoftheAfricanPetroleumProducers Organisation (APPO), had toured the African oil producing nations that are also signatories to theOrganisationofthePetroleum Exporting Countries’ (OPEC) DeclarationofCooperation(DoC) Agreementtodiscusscompliance ahead of the next Joint Ministerial Meeting Committee (JMMC) of OPEC and non-OPEC countries in Vienna, Austria in December. SylvainastatementonSunday notedthatasamemberofinternational energy groups such as the OPEC and APPO, Nigeria needed tofurtherdeepenitscollaboration withfellowAfricannationssoasto grow the continent’s oil industry. Sylva, who was accompanied by the Group Managing Director of

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the Nigerian National Petroleum Corporation (NNPC), Mele Kyari and Nigeria’s OPEC Governor, Omar Farouk Ibrahim, explained that African oil producers needed to work together to judiciously utilize their abundant hydrocarbon resources for the benefit of their respective citizens. Speaking shortly after meeting the Gabonese Minister of Oil, Gas and Hydrocarbons, Noel Mboumba in Libreville, Sylva described his meeting with his counterpart on APPO and OPEC as “very fruitful”, saying that both countries had reached meaningful conclusions that would benefit their countries’ oil industry. “We believe that we can work together, which in the long run, will be good for our respective nations. Our interest in Nigeria is tofurtherdeepenourrelationship with Gabon going forward,” Sylva told journalists at the Headquarters of the Gabonese Oil Ministry during the meeting. On his part, Mboumba commended Sylva for the visit, noting that Gabon has a lot to benefit from Nigeria’s experience in the Oil and Gas Industry and leadership at APPO. While meeting the Angolan Minister of Mineral Resources and Petroleum, Diamantino Pedro Azevedo in Luanda, Sylva

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observed that Nigeria was committed to deepening its relationship with the Southern African nation even beyond the oil and gas business. “You will see a greater and deeper understanding between Nigeria and Angola going forward. We are the two biggest producers in Africa and therefore we need to stand together. If we don’t stand together, other producing African nations cannot come together,” Sylva said. Earlier on, Azevedo, lauded Sylva for the visit, noting that it was important for Nigeria and Angola to exchange views and share experiences so as to further strengthen their relations dating back to decades. During his visit to Juba in South Sudan, Sylva called on African Oil Producers to balance the lure of increasing crude oil production alongside the price of the black gold in the market, because “it is better for our economies if the price is fair and reasonable.” Responding, the South SudaneseMinisterofPetroleum,Awow Daniel Chuang, assured Nigeria – and by extension OPEC and non-OPEC countries in the DoC Agreement-ofitscommitmentto fully comply with the Agreement which he said was voluntarily entered into.

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FINANCIAL TIMES

World Business Newspaper LAUREN FEDOR IN WASHINGTON

or nearly six months, Joe Biden has been the undisputed frontrunner in the race among Democrats to take on Donald Trump in next year’s presidential election. Not any more. Elizabeth Warren, the senator from Massachusetts, is now neck and neck with the former vice-president in the average of national polls compiled by Real Clear Politics. The website also has Ms Warren leading the field in the crucial early voting state of Iowa. Earlier this month, Ms Warren’s campaign announced it had raised $24.6m in the third quarter, nearly as much as the $25.3m raised by rival Bernie Sanders — who has said he will “change the nature” of his campaign after suffering a heart attack — and significantly more than the $15.2m brought in by Mr Biden. At the same time, Ms Warren’s campaign events keep growing. Last month, she attracted her largest crowd, as about 20,000 people filled New York’s Washington Square Park to hear her speak. The senator stayed in the park for an extra four hours after the rally taking pictures with supporters. Ms Warren’s support among the left-leaning Democratic “base” has grown steadily over the summer and into the autumn. But recent polls have indicated she is now also appealing to more moderate voters. The latest Morning Consult poll shows that Ms Warren is the “second choice”

Elizabeth Warren gains momentum to lead Democratic field Presidential hopeful and her detailed plans will now face greater scrutiny

candidate for backers of Mr Biden, California senator Kamala Harris and South Bend, Indiana, mayor Pete Buttigieg. Ms Harris and Mr Buttigieg both enjoyed bursts of popularity but have fallen back to single-digits in most polls. “Her rise has not been a boom,

it’s been a build. It’s not been a surge, it’s been slow and steady,” said Jesse Ferguson, a Democratic strategist who was press secretary for Hillary Clinton’s 2016 presidential campaign. “She moved up in the polls because a growing number of people see her as an

authentic candidate with plans.” Mary Anne Marsh, a Bostonbased Democratic strategist, said: “Elizabeth Warren is a very methodical, disciplined candidate who has been able to inspire people with her plans, her message and her life story.

“She talks to people in a way that everybody understands because she shared those problems too.” Antonia Felix, who published a biography of Ms Warren last year, said that the Massachusetts senator told a compelling story. “She was not educated in the Ivy League, she is not a traditional East Coast liberal . . . she came up through the ranks on her own accomplishments.” Ms Warren’s recounting of her unorthodox path from Oklahoma schoolgirl to 19-year-old college dropout to Harvard Law School professor has been a pillar of her stump speech. But it has also opened her up to criticism. Last week, the conservative Washington Free Beacon website said there was no evidence to support Ms Warren’s claims that she was sacked as a public school teacher in the early 1970s for being pregnant. The senator stood her ground, saying on Twitter: “This was 1971, years before Congress outlawed pregnancy discrimination — but we know it still happens in subtle and not-so-subtle ways,” she added. “We can fight back by telling our stories. I tell mine on the campaign trail, and I hope to hear yours.”

Bill Gates expresses regret over Eliud Kipchoge breaks two-hour marathon barrier meetings with Jeffrey Epstein Kenyan runner completes distance on specially designed course in optimum conditions Microsoft founder admits ‘error of judgment’ after he met sex offender several times ALISTAIR GRAY IN NEW YORK

ill Gates has expressed regret over his contact with Jeffrey Epstein as the Microsoft co-founder acknowledged he met the nowdeceased sex offender on several occasions. The world’s second-richest man said in a statement through a spokesperson that he recognised it was “an error in judgment” ever to have met Epstein, who committed suicide two months ago while facing charges of trafficking underage girls. His comments came after Mr Gates, who is one of the world’s most prominent philanthropists, was reported to have had a closer relationship with the disgraced money manager than previously acknowledged. The statement said the Microsoft billionaire recognised he had “entertained Epstein’s ideas related to philanthropy”. This had given Epstein “an undeserved platform”. Mr Gates is among several prominent figures to have moved in recent weeks to distance themselves from Epstein, who cultivated a network of rich and powerful associates

from business, academia, politics and royalty. His meetings with Epstein included three at the financier’s Manhattan mansion, and he also considered a philanthropic fundraising partnership, according to the New York Times. It said meetings between the two began in 2011 — after Epstein had received a 13-month jail sentence in exchange for pleading guilty to soliciting prostitution. As he was trying to secure Mr Gates’ philanthropic support, Epstein told associates of his foundation that his offence had been no worse than “stealing a bagel”, the report said. The new details of the contact between the two men follow a report in the New Yorker magazine last month that said Mr Gates had made a $2m donation to the Massachusetts Institute of Technology’s prestigious Media Lab at Epstein’s behest. Mr Gates’ spokesperson said at the weekend that the Microsoft founder had initially met Epstein at the suggestion of several highprofile individuals who said the financier claimed to be able to raise hundreds of billions of dollars’ worth of philanthropic funds. www.businessday.ng

TOM WILSON IN LONDON

liud Kipchoge, the best marathon runner of his generation, etched his name in history on Saturday by pushing human endurance to new levels. On a specially designed course in Vienna’s Prater park, flanked by a rotating team of pacemakers, the Kenyan runner and world record holder became the first person to complete 26 miles, 385 yards, in under two hours. For decades, athletes and sport scientists have debated whether any human could ever run the marathon so fast. Two hours had become a mythical barrier. Mr Kipchoge ended the debate in emphatic style, accelerating down the final straight and crossing line, arms aloft, in 1 hour 59 minutes and 40 seconds. “He’s inspired all of us that we can stretch our limits in our lives,” said Patrick Sang, his long-term coach, as the celebrations started. The extent of Mr Kipchoge’s achievement has already been compared to Sir Edmund Hillary and Tenzing Norgay summiting Mt Everest in 1953 and to Roger Bannister running the first sub-

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four-minute mile in Oxford in 1954. Mr Kipchoge’s marathon world record, set in Berlin in 2018, is 2 hours 1 minute and 39 seconds. Only five men in history have ever run the distance in under 2 hours and 3 minutes. On Saturday in Austria Mr Kipchoge ran considerably quicker, completing each kilometre in a blistering 2 minutes and 50 seconds. The Kenyan’s time will not be a new world record. To achieve optimal conditions Mr Kipchoge was accompanied by five teams of seven pacemakers that rotated in and out of the time trial, contrary to the rules of the International Association of Athletics Federations. But the event was not about setting an official record, it was about pushing the limits of what is possible. Mr Kipchoge had already tried to break the two-hour barrier once before at a similar time trial in Monza, Italy in 2017. That time he missed the mark by 25 seconds. Speaking to the Financial Times before the race from his training camp in Kaptagat in western Kenya, Mr Kipchoge said he was confident that this time he would achieve his goal. “I trust that it is possible to @Businessdayng

run under two hours,” he said. “It is a barrier in the minds of many people but in Monza I only missed by a whisker,” he said. That day, like most days for the past five years, he had run 17 kilometres in the morning and would complete a further 10 kilometres in the afternoon — the daily rhythm of an athlete dedicated to his goal. “Marathon is life and if you enjoy life it is very easy to perform well,” he said. “Any step, any kilometre I am happy for it.” Like the attempt two years before, this event has been criticised by purists who question the merits of a choreographed time trial over a conventional race. During the time trial a pacing car drove 15 metres ahead of the pack projecting a laser line on to the road to keep the runners on schedule. But even the fiercest critic would struggle to find fault in Mr Kipchoge’s stunning physical performance. And for the philosophical Kenyan runner the objective was never in doubt. To break a mental barrier that would then encourage others to do the same. “No human is limited,” he said, after the race, as the sweat glistened on his forehead and a broad smile lit-up his face.

Monday 14 October 2019

BUSINESS DAY

NATIONAL NEWS

US pulls troops out of northeast Syria as Turkey assault intensifies Reports of executions and breakout from camp housing Isis families CHLOE CORNISH IN BEIRUT, LAURA PITEL IN ANKARA AND LAUREN FEDOR IN WASHINGTON

onald Trump has ordered all remaining US forces in north-east Syria to withdraw in the face of a growing Turkish military assault, risking an escalation of fighting as the region dissolves into chaos. Mark Esper, the US defence secretary, said the roughly 1,000 American troops stationed in northern Syria would be pulled out because the Turkish offensive would be broader than expected. Speaking to CBS News, he said that Washington was “preparing to evacuate” them “as safely and quickly as possible”. The decision, which came after the Pentagon claimed that a US base came under Turkish fire on Friday, followed reports of a mass breakout from a Syrian camp housing women and children believed to be linked to Isis. The escapes will exacerbate international fears that the offensive launched by Recep Tayyip Erdogan, the Turkish president, will foment a resurgence of the Sunni jihadi group as Kurdish fighters guarding them divert resources to fending off a Turkish assault. It also followed accusations that Syrian militias fighting alongside the Turkish armed forces conducted a string of roadside executions at the weekend, including the killing of a female Kurdish politician, fuelling concerns about human rights abuses. Under the onslaught by Turkey and its allied militant group, there were reports late on Sunday night that Kurdish forces had entered talks with the Syrian regime, which was said to have sent soldiers north. An official from Syrian Democratic Forces led by Kurdish fighters said no “official declaration” had yet been published, without denying that negotiations had begun. An analyst said a Syrian delegation had entered the long-contested town of Manbij to meet with Kurdish leaders. Meanwhile, Syrian state media said Syrian army units were heading north to “face Turkish aggression”, without giving details about the size or direction of the force. International anger at Ankara mounted at the weekend, as France and Germany halted arms sales to their Nato ally. Mr Trump, who has long sought to end US involvement in Syria, faced a backlash when he announced last week that a small number of American troops in the vicinity of a looming Turkish incursion would be redeployed. The move prompted accusations that he had betrayed Kurdish forces who spearheaded the campaign against Isis by leaving them vulnerable to a Turkish assault.

Sunday’s withdrawal announcement will see him all but fulfil a campaign trail pledge to extricate the US from “endless wars” in the Middle East, but amplified bipartisan criticism of the US president in Washington. Later, Mr Trump again threatened to impose “powerful sanctions” on Turkey after liaising with members of Congress. “There is great consensus on this,” he said. “ Turkey has asked that it not be done. Stay tuned!” The stretch of north-east Syria that is the focus of the Turkish campaign has descended into disarray since Mr Trump, in effect, gave the green light for the assault. The death toll is mounting, large numbers of civilians are being dieplaced and concerns are rising about the Syrian extremist groups that Ankara has deployed as proxies in the fight. Hundreds of people fled a camp housing almost 1,000 family members of Isis fighters on Sunday, according to rights monitors. Save the Children said foreign women and children allegedly connected to the Islamist group could now be “lost in the chaos”. Meanwhile, six people were executed in roadside killings by Turkish-backed forces on Saturday, the Syrian Observatory for Human Rights, a London-based war monitor, reported, adding that 38 civilians had been killed since the operation started. The dead included Hevrin Khalaf, the female secretary-general of the Syria Future Party. Pro-government Turkish media outlets labelled her a senior terrorist operative. The alleged murders were the first signs of ethno-sectarian bloodletting springing from clashes between rogue elements of Ankaraaligned Arab militias and fighters from the Kurdish-dominated forces, who the West armed and trained to fight Isis jihadis but who Turkey views as terrorists. Turkey has yet to respond to the claims. But Mustafa Yeneroglu, a rare voice of dissent within Mr Erdogan’s ruling party, criticised Ms Khalaf’s killing of as “horrendous”. “The groups that carried out this atrocity are barbarians” he said. Asked about the allegations, Mr Esper said that Washington — which has threatened Turkey with sanctions over the offensive without specifying its red lines — was “hearing the same reports”. He said they would amount to “war crimes”, if true. The incursion has seen almost the entire length of the border area between the two countries strafed with bombs and shelling since Wednesday. The ground offensive has focused on the towns of Ras al-Ayn, which Mr Erdogan said on Sunday that Turkey and its rebel allies had seized, and Tal Abyad, which he said was besieged. www.businessday.ng

Brussels baffled by UK’s ‘complex’ proposals to fix Brexit deadlock

Officials say Monday’s talks offer ‘one last chance’ to solve question of Irish border JIM BRUNSDEN, MEHREEN KHAN AND SAM FLEMING IN BRUSSELS AND JIM PICKARD IN LONDON

oris Johnson’s hopes of sealing a Brexit deal in time for a critical EU summit later this week were in jeopardy on Sunday evening after two days of intensive negotiations left Brussels baffled about the UK’s new customs proposals. Michel Barnier, EU chief Brexit negotiator, told diplomats on Sunday evening that British plans to keep Northern Ireland in the UK’s customs territory while avoiding a hard border on the island of Ireland were fiendishly complex and not yet properly worked out. There was “no breakthrough yet”, said one EU diplomat, while noting it was positive that talks would continue in Brussels on Monday. “If the British government wants a solution, it must move quickly now. The clock is ticking.” Another European official went

further, saying that talks on Monday would be “one last chance” for the two sides to bridge their differences or risk failing to agree a deal by the time of the EU leaders’ summit on Thursday. Diplomats said that the slow pace of progress in the talks has imperilled the possibility of a deal at the October 17-18 summit — a core priority for Mr Johnson — and increased the likelihood of an extra summit being held close to the end of the month. October 29 and 30 have been mooted as possible dates, just ahead of Britain’s scheduled EU departure date. The latest news will come as a blow to Mr Johnson after hopes rose of a deal following breakthrough talks with Leo Varadkar, the Irish prime minister, last week. Downing Street had hoped the negotiators would be on a glide path to an agreement at Thursday’s summit, with any deal put to a vote in the House of Commons on Saturday. In the talks over the weekend, the UK presented a plan that would involve tracking the destination of

all goods entering Northern Ireland and applying differential treatment depending on their final destination. The plan would legally leave Northern Ireland in the UK’s customs area, one of Mr Johnson’s political red lines, while — in theory — avoiding the need for a hard border in Ireland Mr Barnier told diplomats that there was “no precedent” for such a dual customs system to coexist in one territory given the near-impossibility of tracking where goods end up and the complexity of modern supply chains. In a statement, the European Commission warned that “a lot of work remains to be done”, adding that negotiations would continue on Monday. Talks had been “constructive”, it said. One EU diplomat said the UK’s blueprint would lead to the “dismantling of the EU’s customs code” and leave the bloc open to widespread fraud in the absence of hard data about whether goods end up in the single market or not.

Argentina’s economic woes spell doom for Macri’s election prospects Failure to lift living standards and campaign mis-steps set scene for leftwing return MICHAEL STOTT AND BENEDICT MANDER IN MENDOZA, ARGENTINA

rgentina’s president Mauricio Macri sounded almost apologetic as he addressed a crowd in the heart of the country’s Malbec wine-growing region, to make his case for another term. “We all know that recent times have been difficult, especially the last year and a half . . . but I want to tell you that I have listened to you and I have understood, I have taken note and I have comprehended.” “Now something different is coming,” he added, promising a changed approach. But everything suggests that the “something different” in store for Argentina is Mr Macri’s main opponent; Alberto Fernández, a leftwing

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Peronist running on a ticket with ex-president Cristina Fernández de Kirchner. He is the out-and-out favourite to win the election on October 27. A second consecutive year of recession, a sharp devaluation of the peso, a record-breaking $57bn IMF bailout, rising poverty and worsening unemployment would be dire for any candidate seeking re-election. But for a scion of one of the country’s wealthiest families, they are especially toxic. Hence Mr Macri’s contrition. The middle-class crowd of a few thousand gathered in a square in the city of Mendoza cheered dutifully and waved banners with the campaign slogan “Yes we can” as the president worked his way through a stump speech that lasted barely 20 minutes, his voice failing at times. His @Businessdayng

wife Juliana Awada, clad in designer black, laid a comforting hand on his shoulder, exuding the effortless millionaire elegance that won her a Vogue “best dressed” acclamation. A drone hovered overhead gathering images for use on social media. The warm-up act came courtesy of the son of a soy baron. Nothing at the rally was likely to dispel Mr Macri’s image as a very wealthy man who is out of touch with the economic hardship facing most of the population under his government. The coup de grâce to Mr Macri’s faltering campaign came with a nationwide primary election on August 11. Widely regarded as an accurate barometer of voting intentions, the results showed the president losing by a huge margin of 16 percentage points to Mr Fernández.

Monday 14 October 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Global economy enters period of ‘synchronised stagnation’ Research by Brookings and FT shows indicators at lowest levels since early 2016 CHRIS GILES IN LONDON

he global economy has entered a period of “synchronised stagnation” with weak growth in some countries and no growth or a mild contraction in others, according to research by the Brookings Institution think-tank and the Financial Times. Headline economic indicators have slipped to their lowest levels since the spring of 2016, with real activity in both advanced and emerging economies losing momentum, compounded by falling economic confidence, the latest update of the tracking index has found. Only relatively strong performance in financial markets stopped the index from falling further into negative territory. Although there are few signs yet of the poor performance turning into a global recession, policymakers have struggled in recent months to revive their economies, raising fears that they have limited scope to stimulate growth and little appetite for effective reform. The gloomier outlook in both sentiment indicators and in recent months’ hard data across the world will overshadow this week’s IMF and World Bank meetings, the first with Kristalina Georgieva as the fund’s new managing director. In a speech last week Ms Georgieva said the IMF would revise its economic forecasts downwards and “in 2019, we expect slower growth in nearly 90 per cent of the world”. All other leading forecasters have also been losing optimism about global economic trends, with the World Bank, the OECD and most private sector economists cutting their forecasts for global growth to the weakest levels

since the 2008-09 financial crisis. A graphic with no description Eswar Prasad of the Brookings Institution said: “Persistent trade tensions, political instability, geopolitical risks and concerns about the limited efficacy of monetary stimulus continue to erode business and consumer sentiment, holding back investment and productivity growth.” Despite the widespread weakness, Prof Prasad added, “fears of an imminent global recession seem premature” because employment is holding up around the world, strengthening incomes and maintaining robust household expenditure. The areas under the greatest pressure are those most exposed to global trade, which has been hard hit by the tit-for-tat trade war between the US and China. The World Trade Organization expects global trade volumes to increase by only 1.2 per cent this year. The Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) compares indicators of real activity, financial markets and investor confidence with their historical averages for the global economy and for individual countries. The headline indices have been falling since a peak in January 2018, when US president Donald Trump alerted the world that his rhetoric on tariffs would be put into action. The Tiger index for the US showed a mixed picture, with households and employment still robust but the manufacturing and services sectors slowing sharply. The trade wars had “sapped business confidence, hurt corporate profits, and led to a contraction of business investment”, Prof Prasad said.

Former FDIC head criticises financial company sold to Blackstone

Hunter Biden quits Chinese firm after Trump attacks Son of Democratic candidate breaks silence after president urged China to investigate LAUREN FEDOR IN WASHINGTON

unter Biden said he is stepping down from the board of BHR, a Chinese private equity firm, and will not work for foreign-owned companies if his father, one of the top Democratic 2020 candidates, is elected president. Mr Biden’s lawyer, George Mesires, said in a statement on Sunday that his client, the son of former US vice-president Joe Biden, would “readily comply with any and all guidelines or standards a President Biden may issue to address purported conflicts of interest, or the appearance of such conflicts, including any restrictions related to overseas business interests”. Mr Mesires added: “In any event, Hunter will agree not to serve on boards of, or work on behalf of, foreign owned companies.” The statement marked the first public comments from Hunter Biden since he found himself in the

Promontory’s business model ‘games’ deposit insurance rules, says Sheila Bair MARK VANDEVELDE IN NEW YORK

former top US financial regulator has struck a multibillion-dollar deal with Blackstone to sell a company that helps savers obtain extra deposit insurance, in what one former bank supervisor called a way of “gaming” financial rules. The sale of Promontory Interfinancial Network for about $2.5bn caps a lucrative private sector career for Eugene Ludwig, who completed a five-year term as comptroller of the currency in 1998. But it has drawn criticism from another former bank regulator, Sheila Bair, who played a pivotal role in the response to the financial crisis as chair of the Federal Deposit Insurance Corporation. Promontory’s business model, Ms Bair said, “is just gaming the FDIC rules. The FDIC takes all the

credit risk, and Promontory gets the profit.” Promontory strongly disputed that characterisation of its patented business methods, which involve parcelling large deposits into portions of $250,000 or less — under the cap for governmentbacked insurance. Each chunk is sent to a different FDIC-insured bank, which then sends the money straight back to the original institution where it can be used to finance loans. “The significant technology and infrastructure we’ve invested in building is a valuable service for depositors to more efficiently accomplish what they can otherwise already do . . . in a much more burdensome manner,” Promontory said. It added that its services promoted lending and growth, and were especially important to small businesses and local community banks. www.businessday.ng

middle of a scandal that has led to an impeachment inquiry against President Donald Trump. That inquiry has centred on Mr Trump’s July 25 phone call with his Ukrainian counterpart, Volodymyr Zelensky. A White House memorandum released last month showed that during the call, Mr Trump asked Mr Zelensky to investigate Joe and Hunter Biden, among other matters. Joe Biden has long been seen as a favourite among Democrats vying to take on Mr Trump in next year’s US presidential election. Hunter Biden took up a lucrative board position with Burisma Holdings, a Ukrainian energy company, in 2014, when his father was still vice-president in the Obama administration. Mr Trump has alleged that Joe Biden applied improper pressure on the Ukrainian government in 2016 to fire a top prosecutor who, the president claimed erroneously, had opened an investigation into Burisma in order to help his son. Mr Biden’s calls were part of a

wider effort involving US officials in Kiev, Western allies and international groups, including the IMF and the World Bank, to crack down on corruption in the country. Hunter Biden left Burisma’s board earlier this year. Mr Mesires said on Sunday: “Despite extensive scrutiny, at no time has any law enforcement agency, either domestic or foreign, alleged that Hunter engaged in wrongdoing at any point during his five-year term.” The younger Mr Biden has also been scrutinised for his unpaid board position with BHR. Mr Mesires said on Sunday that Mr Biden intended to resign from the role by the end of the month. Mr Trump and his personal lawyer, Rudy Giuliani, have made a range of unsubstantiated allegations against Hunter Biden in recent weeks. After Mr Mesires’s statement was published on Sunday, Mr Trump said on Twitter: “Where’s Hunter? He has totally disappeared! Now looks like he has raided and scammed even more countries!”

Goldman and Morgan Stanley expected to suffer IPO earnings hit WeWork’s failed listing and weak investment banking likely to weigh in third quarter LAURA NOONAN AND ROBERT ARMSTRONG IN NEW YORK

arnings expectations for Morgan Stanley and Goldman Sachs have been sharply pared back ahead of this week’s results, after a torrid run of stock market listings and a slowdown in M&A activity weighed on investment banking performance. Analysts surveyed by Bloomberg have slashed their third-quarter earnings estimates for Goldman by more than 15 per cent in the Past four weeks, while their forecasts for Morgan Stanley have come down by almost 10 per cent. Goldman’s revision, which equates to a 25 per cent fall in year-

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on-year profits, partly reflected the loss the bank is likely to take on its stake in WeWork. The shared office provider had been targeting a $47bn valuation before its initial public offering imploded last month. Goldman has not revealed the size of its stake in WeWork or the valuation method it uses, but Betsy Graseck, an analyst at Morgan Stanley, last week estimated the hit at $264m. Rival Jefferies has already taken a $146m writedown on its investment in the company. Goldman is also among those on Wall Street facing writedowns on its remaining shares in Tradeweb, the bank-backed electronic marketplace operator that listed in April. Its share price fell 16 per cent in third quarter. @Businessdayng

Jason Goldberg, banks analyst at Barclays, said investors “looked through” gains on Tradeweb across the banks at last quarter’s earnings season and would “likely look through it this quarter when it’s a drag”. The tough IPO market has broader implications, especially for banks such as Goldman and Morgan Stanley, who rely on investment banking for a higher percentage of their earnings than universal banks such as JPMorgan Chase and Citigroup. “Investment banking is quite bad, and when you think of some of the high profile issues that we ran into in the primary markets this year in particular . . . that’s not going to improve appetite [for IPOs],” said Brennan Hawken, analyst at UBS.

Monday 14 October 2019

BUSINESS DAY

ANALYSIS

FT What I learnt from my hellish long-haul flight

It takes very little to turn customer relations disaster into triumph PILITA CLARK

ot that long ago, I did something that friends in Australia had been telling me to do for ages: take the 17-hour nonstop flight from Heathrow to Perth. “It’s amazing,” gushed one, who had been among the first to try the route when Qantas started it last year and cannot wait for the even longer New York-Sydney service the airline is due to start testing this week. “It’s unbelievable,” said another, who turned out to be quite right. It was unbelievable. Unbelievably awful. So appalling that it should have turned me into a nonstop Qantas critic. Instead it did something quite different. The trouble began with one of the passengers who boarded in London. He was a tall, middle-aged man from Queensland who had been travelling around Britain by himself for a month but had just had a rotten time trying to check in his luggage at the self-service desk at Heathrow, which was in his view pretty much a disgrace. I discovered this because I was seated on his right and as we took off, he told me all about it. Then he told the man on his left. Then he pushed

the button to summon a flight attendant and told him about it as well. By this time I had twigged that I was about to spend 17 hours trapped in a window seat in economy beside a man who had, as they say in Brisbane, a few ‘roos loose in the top paddock. I did not take much notice at first because I had a more urgent problem: a tricky deadline that meant I would be working on holiday unless I used the flight to write. I fired up my laptop and began to type, until I became aware of an unpleasant vibration to my left. My neighbour was jiggling his leg so hard it was rubbing up against mine. He had also made a land grab for the space on the elbow rest between us that soon made typing impossible. “Would you mind moving your arm?” I asked. “What’s your problem?” he growled, clamping his arm in place. There were 16 hours to go. He was big. I gave up typing, jammed on my headphones, shrank as far from him as I could and prayed for sleep. He put his headphones on too and must have found a music channel because just as I was dozing off, he began to jab his hands in the air and sing, loudly, to AC/DC. “I’m on the high! Way! To hell!” he bawled, oblivious to the shocked faces around him and the flight path to hell he was creating.

Light at the end of the Brexit tunnel Ireland’s support of Boris Johnson’s deal will make shifting no-deal blame harder for both sides WOLFGANG MÜNCHAU

concluded last week that there was a deal to be done or a gamble to be lost. Boris Johnson and Leo Varadkar decided to go for a deal. The meeting on Thursday between the British and Irish prime ministers was the first serious Brexit development since the UK parliament rejected Theresa May’s withdrawal deal for the third and final time in March. These two politicians are the principal agents. If they agree, so will the other 26 leaders of the EU when they meet in the European Council on Thursday and Friday. While there is a deal to be done, it is not done yet. And accidents do happen. Malevolence might return. New stuff tends to intrude. But, on balance, I do think that this may well have been the big breakthrough. Brexit would then be playing out in exactly the same way as EU negotiations since time immemorial. The pundits declare that time has run out, that one side or the other is acting irresponsibly, and that agreement is now impossible. And then in the middle of the night, the contours of a deal start to appear. It is reminiscent of the European Council in Maastricht in December 1991. Helmut Kohl then faced strong domestic opposition to a monetary union. He was seeking guarantees other member states were reluctant to give. John Major threatened a veto because the UK did not want to be part of the single currency. In the end, the leaders agreed a compromise: they gave assurances to the German chancellor and an opt-out to the British prime minister. The

driving force then, as now, has been a joint interest by the main actors in a deal being agreed. So why do Mr Johnson and Mr Varadkar want to come to a deal now when they appeared to be so unwilling before? It has to do with the dawning reality of what a nodeal Brexit would entail. People say that Mr Varadkar would be fine with no deal because he could always blame it on Mr Johnson. Likewise, Mr Johnson could blame it on Mr Varadkar, the EU, House of Commons, or all three. I am not persuaded by this argument. Even if you can shift the blame, you do not necessarily win a postBrexit election. Irish voters will not blame Mr Varadkar personally for a no-deal Brexit, but they would blame him for a faltering economy. It is one thing to be at ease with no deal as an abstract concept. It is quite another to live through it. I spent a couple of days in Dublin last week, where I sensed nervousness about the economy. The Irish economy is doing fine right now but there is a lot of uncertainty ahead. Brexit is, of course, the great known unknown. Global trade is another problem. If US President Donald Trump were to extend tariffs to pharmaceuticals, a big Irish export market, the country’s economy would slump. In the same vein, I disagree with the notion that a no-deal Brexit would suit Mr Johnson. An opinion poll published last week claimed that no deal was the only scenario under which Conservatives could win the next election. But that poll, too, confuses the abstract idea of a no-deal Brexit with the multi-faceted reality. www.businessday.ng

Russia looks at alternatives to dollar for energy transactions Settling in roubles or euros would limit exposure to US, says economy minister MAX SEDDON AND HENRY FOY IN MOSCOW

ussia is exploring currency settlements in euros and roubles for its vast energy exports in an attempt to avoid the dollar and insulate Moscow from the US-led global financial system. Maxim Oreshkin, Russia’s economy minister, told the Financial Times that Russia wanted to minimise its exposure to the US by attracting more investors through rouble settlements. “We have a very good currency, it’s stable. Why not use it for global transactions?” Mr Oreshkin said in an interview. “We want [oil and gas sales] in roubles at some point,” he said. “The question here is not to have any excessive costs from doing it that way, but if the broad . . . financial infrastructure, is created, if the initial costs are very low, then why not?” Kremlin-controlled Gazprom exported $51bn worth of natural gas to Europe last year, while stateowned Rosneft exported 123.7m tonnes of oil. Moscow has looked to offset its exposure to US economic sanctions through a “de-dollarisation” scheme that has seen the finance ministry’s bond programme issue all new debtin euros and roubles. The central bank has reduced its holdings of US treasury debt from $96bn to just $8bn in the past 18 months. Mr Oreshkin said the popularity of Russia’s domestic bonds among foreign investors — who own 29 per cent of its rouble debt — suggested that Moscow would be able to sell its energy exports in local currency. “EU companies, investors are buying rouble assets. If you look at the popularity of the domestic bond market, it’s pretty huge.

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It means that rouble assets are already on the balance sheet of European investors,” Mr Oreshkin said. “So at one point in the future energy companies also could use rouble assets. “You have negative rates in euros and you have positive rates in roubles with stable and predictable inflation,” he added. “There’s no capital controls, it’s fully flexible, you can get in or get out at any time.” The state-owned oil and gas companies that dominate Russia’s economy are already exploring alternative currency settlements in the face of continued geopolitical tensions with the US. Rosneft has priced its September and October spot tenders in euros, while Gazprom in March sold its first ever cargo of natural gas priced in roubles to a western European company. Switching oil and gas revenues, which account for around half of Russia’s budget, away from the dollar would mark a sea change for the country, which is expected to record a 2019 budget surplus worth 1.5 per cent of gross domestic product, thanks partly to a favourable rouble exchange rate. Mr Oreshkin also said the government was prepared to spend a “limited amount” of the Rbs8.2tn National Wealth Fund, saved since 2017 by banking extra revenue on all oil sold at more than $40 per barrel, domestically. The Kremlin hopes the extra spending will kick-start Russia’s moribund growth, which is projected to fall below 1 per cent of GDP this year and has been propped up by an unsustainable consumer lending boom. “When oil prices come down, this means that there is insufficient foreign currency supply for the economy. You need to cover it with the foreign currency assets you have,” Mr Oreshkin said of @Businessdayng

the wealth fund, adding that any excess above a level sufficient to cover a fall in oil prices could be spent. Mr Oreshkin had originally called for the money to be invested overseas in a Norway-style sovereign wealth fund. The recent shift in policy towards domestic spending, he said, would be done in line with additional private investments and seek to mitigate the central bank’s concerns over a possible spike in inflation. Mr Oreshkin also said Russia intended to ramp up bilateral trade with the EU. In recent months, leaders such as Emmanuel Macron, the French president, have called for political rapprochement and the restoration of business ties with Moscow after five years of sanctions imposed over its 2014 annexation of Crimea. “When Mr Macron was [French] economy minister, he was heading the developmental commission between Russia and France. He knows now how to reach out and have joint projects,” Mr Oreshkin said. The EU wants to ensure companies such as Nokia and Ericsson can compete with China’s Huawei in Russia’s burgeoning market for 5G mobile communications, and food producers hope to return to Russian markets fenced off by protectionist measures in response to the European sanctions. But Russia is unlikely to readmit EU food exports unless Brussels eases Moscow’s access to the European market in return, Mr Oreshkin said. “There are also a lot of barriers on the European side with agricultural subsidies, technical regulation, which limits the access of Russian produce on the European market and so on,” he said. “If you are talking about free trade, it should be real free trade and not partly free trade.”

BD Money

Monday 14 October 2019

BUSINESS DAY

COMMODITIES

cover

Personal finance

Dubai’s $100m coffee trade shows Nigeria can tap greater value in agro-processing

There are 4 main paths to becoming a millionaire— and this is the easiest one, says money expert

4 ways the proposed 2020 budget could affect you

Growing coffee isn’t among the fortes of the toast of the United Arab Emirate, Dubai, yet the Dubai Multi Commodity Centre (DMCC) handles about 20,000 tons of green beans annually with an estimated annual trade value of $100 million.

Unless you were born into a rich family, building wealth can be very hard — depending on the path you choose. Many people look at multi-millionaires and desperately want to know: What’s their secret? How did they get there? What does it take?

Page 3

What Nigeria’s proposed VAT threshold means for your business

A budget is a plan that shows one’s expected income and how it would be spent (and saved). In households, it is important because the kind of goods and services, hence the quality of lives, members can afford would depend on how much the family earns and what portion is earmarked for expenditurethe same applies to our national budget

Page 4

www.businessday.ng

Personal finance

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During the presentation of the 2019 Budget to a joint session of the National Assembly on Tuesday, October 8, President Muhammadu Buhari announced the federal government’s plan to set a threshold for Value Added Tax (VAT) registration to N25 million in turnover per annum

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@Businessdayng

Monday 14 October 2019

BUSINESS DAY

BD Weekly Tenders Wrap-up

Market Review

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

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@Businessdayng

Monday 14 October 2019

BUSINESS DAY

Commodities Dubai’s $100m coffee trade shows Nigeria can tap greater value in agro-processing Temitayo Ayetoto

rowing coffee isn’t among the fortes of the toast of the United Arab Emirate, Dubai, yet the Dubai Multi Commodity Centre (DMCC) handles about 20,000 tons of green beans annually with an estimated annual trade value of $100 million. Building on the capacity of its functional trading framework, the Middle East’s love of coffee and the region’s historic trade links, the city is jostling for a seat right at the centre of the world’s leading coffee supply chains. It’s not expending excessive energy on racing with Brazil, Mexico, China or Ethiopia for a slice of global production of green beans; but it’s rooting for markets in roasting and extraction. And the structure of the DMCC enables this. The DMCC Coffee Centre parades a world-class infrastructure and services for green bean storage, processing and delivery to precise specifications, bringing fully dedicated, temperature-controlled coffee storage to the Middle East region for the first time. Coffee farmers, exporters, traders, roasters and retailers are no doubt beneficiaries of how the frameworks to facilitate trade links between the local market and the international community. In 2016, for instance, the DMCC signed a major agreement with Yunnan State Farms, which produces 90 percent of all coffee grown in China – and its trading partner Mega Capital Halal Group. It was a win-win. The trade and processing of green coffee in Dubai got boost, while opening a major new trade route to bring China’s coffee. Apart from the legal and regulatory frameworks entrenched, the Dubai authority led centre concerns itself with processing details of providing entrepreneurs with facilities with green coffee processing equipment for cleaning, de-stoning, blending and re-bagging of coffee. In terms of speciality and commercial roasting, its facility currently houses two Brambati production roasters to accom-

modate the volume. Coffee members have access to sample and small batch roasters to create profiles of coffees in small batches of 50 grams to one kilogram. Members can equally access support for both inbound and outbound shipping of coffee to and from the United Arab Emirates. As coffee, the DMCC is doing the same with tea, gold and diamond exchange, acting as a midway between producers and consumers. With a 60 percent share of the global market, the UAE is the world’s largest reexporter of tea. The Dubai Gold and Commodity Exchange is the region’s largest and leading derivatives exchange, allowing global participants to trade, clear and settle transactions within the Gulf region. Relying on its strong ties with producers in Africa, cutting centres in Asia and consumers in Europe, the Dubai Diamond Exchange trades seamlessly in diamond and coloured stones. www.businessday.ng

“That is a very interesting story because obviously we don’t grow a single kilogramme of coffee but we are the world’s largest re-exporter,” Sanjeev Dutta, executive director of Commodities and Financial Services, DMCC told BusinessDay during a recent visit to Dubai. “We have recently inaugurated our coffee centre in February of this year. It is the largest green bean facility in the region and we anticipate will handle over 20 million kilogrammes of coffee in the first few years of operation.” Nigeria has a handful of agricultural commodities which it has comparative advantage to produce but the government is yet to wake up to the reality of the greater value that could be tapped from devoting resources to develop processing and commercial trading centres. Sesame seeds, cashew nuts, fermented cocoa beans and superior quality raw cocoa beans had a combined total export

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value of N210.2 billion in 2018, marking 69.5 percent of total agriculture exports in 2018, according to PricewaterhouseCoopers analysis. Nigeria is the third largest producer of sesame seeds in the world after India and China and the largest in Africa with production capacity in excess of 1 500,000 metric tonnes as of 2017. According to the National Cashew Association of Nigeria (NCAN), Nigeria ranks as the sixth largest producer of cashew nuts in the world with an average production capacity of 120,000 metric tons per annum. Yet, the country has no centre dedicated to the trading of any of these commodities in particular. Whereas Dubai on the other is taking shots at commodities it does not even produce, building infrastructure for trade. The findings of the Nigeria Export Promotion Council report in July 2018 further underscores how the country appears comfortable losing out on opportunities. The report highlighted top 10 markets with the highest untapped potential for exports of cashew kernels from Nigeria. The largest potential was found in Germany, the Netherlands and the United Kingdom among others. The total amount of estimated untapped potential up to 2021 for Nigerian exports towards these countries reaches $3.4 million. For a government driving diversification of the economy away from oil to agriculture and other non-oil sectors, growing an efficient commodity exchange is crucial. The Dubai government established the DMCC in 2002, just a year after Nigeria’s Commodity Exchange came on stream. The DMCC’s example shows the government has a business with ease of doing business and that developing specialised centres for its commodities can significantly raise agricultural exports above less than two percent of the total exports and 25 percent of the gross domestic product (GDP) for Nigeria. Also the DMCC’s position as the world’s largest re-exporter of tea points to the fact importation is not entirely negative if the focus is on production for greater value.

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Monday 14 October 2019

BUSINESS DAY

Cover Story There are 4 main paths to becoming a millionaire— and this is the easiest one, says money expert

nless you were born into a rich family, building wealth can be very hard — depending on the path you choose. Many people look at multimillionaires and desperately want to know: What’s their secret? How did they get there? What does it take? Those are the things I wanted to know back in 2004, when I began my “Rich Habits” study, in which I spent five years interviewing and researching the daily activities, habits and traits of 233 wealthy individuals. All of them had at least $160,000 in annual gross income and $3.2 million in net assets. During my research, I found there are four predominant paths toward accumulating wealth. The “Savers-Investors” path is the easiest, while the other three involve much more risk. The Saver-Investors path Just less than 22% of the millionaires in my study chose to take the Saver-Investors path. Not only is it the easiest way to build wealth, but if you start early, it almost always guarantees a lot of money. The Saver-Investors in my group reached their first $1 million around their mid-tolate 30s, and accumulated an average net worth of $3.3 million by their mid-50s. They also had four things in common: They typically had a middle-class income (many reached a six-figure salary early in their career, and if they didn’t, they lived very frugally.) They had a low cost of living and preferred to save, rather than spend lavishly. They saved 20% or more of their income. They started investing their savings early in life and continued to do so prudently for many years. No matter what their day job was, this group made saving and investing part of their routine; they were constantly thinking about smart ways to grow their wealth. The Savers-Investors path isn’t for everyone. It requires enormous financial discipline and long-term commitment. The Dreamers path This is perhaps the hardest path to building wealth because it requires the pursuit of a dream, such as starting a business, becoming a successful actor, musician or author.

Approximately 28% of the folks in my study were Dreamers, and they accumulated an average net worth of $7.4 million — far more than any of the other groups — over a period of about 12 years. All of them told me that pursuing their dreams was one of the most rewarding things they had done in their lives. They loved what they did for a living, and their passion showed up in their bank accounts. Those who want to take this path, however, must be willing to work long hours and able to handle financial stress. The Dreamers in my study worked more than 61 hours per week before finally achieving their dreams. Weekends and vacations were almost non-existent. Trying to make ends meet was not easy. At first, getting a steady paycheck was “nearly impossible,” one Dreamer said. It was even harder for those who had families to support. To finance their dreams, some decided to put off buying a home, while others dipped into their retirement savings. If you’re risk-averse, this path may not be for you. www.businessday.ng

The Company Climbers path Climbers are individuals who work for a big company and devote all of their energy into climbing the corporate ladder until they land a senior ex-

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During my research, I found there are four predominant paths toward accumulating wealth. The “Savers-Investors” path is the easiest, while the other three involve much more risk

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ecutive position. This is the second-hardest path to becoming a millionaire, and about 31% of the rich people I studied fell into this group. It took them an average of 22 years to accumulate a net worth of $3.4 million or more. In most cases, their wealth came from either stock compensation or a partnership share of profits. To be a Climber, you must have strong relationship-building skills. Networking and making lasting connections with powerful people in your industry is essential. Like Dreamers, however, Climbers also have long work hours. The ones I interviewed all arrived at the office early and left late. Many were required to travel frequently and even had to sacrifice a lot of their vacation time. Profitability is a huge factor in determining a Climber’s success. If their company struggles financially, their time and investment there might not be rewarded to the extent they had expected. The Virtuosos path Roughly 19% of the participants in my study chose this path. Virtuosos are among the best at what they do in their profession. They are paid a high premium for their knowledge and expertise, which sets them apart from the competition. It took the Virtuosos in my study about 20 years to reach an average net worth of $4 million. Some worked in the medical field, while others worked in law. A handful either worked for large, publicly-held corporations, or they were small business owners with highly profitable enterprises. Of course, Virtuosos aren’t necessarily born with natural intelligence. They must spend many years continuously studying and learning. Formal education, such as advanced degrees, is usually a requirement. This means investing an enormous amount of money and time before seeing any payoff at all. Not everyone has the ability to devote significant hours every day practicing their skill or the financial resources to pursue advanced degrees. Written by Tom Corley, an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life” and ”Rich Habits: The Daily Success Habits of Wealthy Individuals.”, and culled from CNBC.

Monday 14 October 2019

BUSINESS DAY

Personal Finance These tips can help Millennials, Post-Millennials who have dependents manage finance better SEGUN ADAMS

ohn, 22, landed an entry-level role as a tax consultant the same month he completed his mandatory one year of national service in Lagos. The pay seemed good and has increased with each promotion he earned since joining the firm a year ago, but the problem is the young tax consultant’s finance are a mess; John is always in debt, and does not have any investment even though he is frugal. John has many people living off him; his parents are retired civil servants and his sister is still in high school. This means he shoulders a lot of responsibilities and needs help to iron out his finance. Not every millennial or post-millennial can relate but there are a good number of young Nigerians, just starting out their career, whose household depend on their income. Whether as a result of separated parents, parents’ retirement, job loss, or any other factor, several young folks have become breadwinners and for this category of people it is never easy planning for their future and fending for their dependents at the same time. A few tips can help young people in this category plan their finance better and ease the stress they face. Always work with a budget It is always a good idea to have a picture of all your income and regular expenses in a month to be able to gauge how you spend. In estimating your expenses you must take note of the needs of your dependents and not just yours so that your budget is accurate and you are not underestimating expenditure. Start your budget planning by setting a minimum percentage that must be saved or invested no matter what. To achieve this, just assume your income was lower by that percentage and make an effort to make do with the remainder. Typically some financial experts advise that 20 percent should be the minimum for saving or investing. If you can also create room for unforeseen circumstances it would help you to absorb shocks such events might

have on your finance. Essentials first Another thing to note when budgeting is to ensure all essentials go into the budget first. To achieve this ensure you have to draw a scale of preference to check out how important items you plan to spend on are. Get a list of what everyone needs in the month before you factor in what everyone wants; ordering what you plan to spend on in this manner would help you take care of critical needs without going into debt. Get side hustles Getting one or two side jobs could help reduce the burden on your bank account. In selecting your side hustles make sure it is one that would not affect your current employment or your health. It is usually better if the extra job is a hobby or something you already have the skills to do, this way it is less stressful for you. Income from your side job should also be budgeted for, and you can choose to invest the profit from this revenue stream. www.businessday.ng

Create separate accounts for saving As a rule, you should not keep your savings in your main account if you have people living off you otherwise the incentive to be consistent would be lacking. Putting your saving in an account that you can lock for a certain period is a good way to ensure you never tamper with it. You must, however, create an emergency fund that can easily be tapped into when the needs arise. Create income streams for your dependents One of the best ways to ease the burden on yourself is by helping your dependents achieve financial independence. You could enrol them in a skill acquisition class, professional course or program that could help them stand on their feet. Another option might be to create an investment for them that would generate income, either in dividend payment or interest, to reduce reliance on you. Another option might be setting up a business for them so they can earn money for themselves. Have honest conversations about your finance

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You must endeavour to be as honest as possible about your finance if the dependent is someone close to you (and mature enough to understand) Sometimes you might feel frustrated at the demand dependents make of you because you cannot meet them. The demands might not be based on needs but wants and the dependent seems inconsiderate of your wallet. But it might just be the case they genuinely believe you have enough resources to meet their essential need and fund their hobbies too. It is necessary to be on the same page so together you and your dependent(s) can plan to maximize the resources you can afford. Maximise transitionary income Transitionary income is income that is not regular; it could be a gift, bonus or from a one-off economic activity. It is can be exciting to have extra money especially when you did not expect such, and humans are not always rational when emotional hence, you must plan how to judiciously use any additional income you make.

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Monday 14 October 2019

BUSINESS DAY

Personal Finance

4 ways the proposed 2020 budget could affect you SEGUN ADAMS

budget is a plan that shows one’s expected income and how it would be spent (and saved). In households, it is important because the kind of goods and services, hence the quality of lives, members can afford would depend on how much the family earns and what portion is earmarked for expenditurethe same applies to our national budget. President Muhammadu Buhari has presented a budget of N10.33 trn to lawmakers, who would have to agree with the estimates before the president can sign the budget into effect. The process has been designed to give serious consideration to the document before it is adopted because the budget would affect every Nigerian-including you. Here are four ways the budget can affect you and your wallet. Higher borrowing cost could impact business performance, lower stock return It is no longer news Nigeria has been borrowing a lot in recent years to support the budget. Debt service as a percentage of actual government revenue in 2018 was 54.3 percent and the government plans to spend about 30 percent of an ambitious N8.155 trn revenue it estimates next year on debt servicing. While analysts fear the revenue target is too optimistic, meaning debt servicing to revenue may be even higher, they believe a shortfall in revenue would force the government to continue its borrowing spree. For the government to keep borrowing, it would have to offer attractive interest rates which could affect the cost of borrowing for businesses, and this could slow economic growth. For the bonds market, higher interest rate means higher yields on new debt instruments while for stock market it means companies stock would fall as business performance suffers. Rising debt cost means less investment in healthcare, education etc Another thing to note is that a high debt servicing means a trade-off on critical

investment as no economic agent has enough money to do absolutely everything it wants. In other words, the more the government spends on debt, the less it invests on things that can benefit you like education, health and social interventions. In the proposed budget, 23 percent less would be spent on capital expenditure, and no new projects would be embarked on. Sadly, virtually the same amount that would be spent on capital projects would be used to repay the national debt. N2.46 trillion has been earmarked for capital projects and N2.45 trillion would be spent on debt servicing; if you calculated how much would be allotted capital expenditure on the health and education of (200 million)Nigerians, it would amount to N470 for a whole year! Yes, N1.3 a day. Proposed consumption tax hike to exclude staple food items There has been a proposal to review of www.businessday.ng

Value Added Tax (VAT), a consumption tax, from 5 percent to 7.5 percent so the government can earn more money and reduce reliance on petrodollars. Consumers bear the burden on this kind of tax because the more they con-

“

While analysts fear the revenue target is too optimistic, meaning debt servicing to revenue may be even higher, they believe a shortfall in revenue would force the government to continue its borrowing spree

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sume the taxed products, the more they have to pay as tax but the government plans to exclude many basic food items from this tax, including pharmaceutical products, among others. The exclusion would benefit Nigerians who already have a squeezed wallet since the 2016 recession but VAT on other products could potentially slow demand and hamper corporate performance. More revenue could see the government pay new minimum wages Although it is unclear how the government hopes to rake in N3.7 trillion from ‘other revenues’, a boon in its wallet could enable it to pay N30,000 minimum wage that was signed into law earlier in the year. The cash-strapped government has not been able to keep its end of a bargain reached in April but the 2020 estimated revenue if realised could put more money in your pocket especially if you get your chequebook from the government.

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Monday 14 October 2019

BUSINESS DAY

Data

Federal government Eurobond Yields on Eurobonds rose 0.125 percent point week on week from an average of 6.56 percent when the market closed last week to 6.68 percent following sustained selloff in Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds.

Corporate Eurobond Yields on corporate Eurobonds saw dipped of 0.055 percent points across all tickers week-on-week with average yield rose slightly from 5.398 percent last week to 5.34 percent.

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Monday 14 October 2019

BUSINESS DAY

Personal Finance What Nigeria’s proposed VAT threshold means for your business OLUWASEGUN OLAKOYENIKAN

uring the presentation of the 2019 Budget to a joint session of the National Assembly on Tuesday, October 8, President Muhammadu Buhari announced the federal government’s plan to set a threshold for Value Added Tax (VAT) registration to N25 million in turnover per annum. The decision, which followed the government’s proposed 50 percent hike in the VAT rate from the current 5 percent to 7.5 percent, was taken in such a way that the revenue authorities can focus their compliance efforts on larger businesses thereby bringing relief for our Micro, Small and Medium-sized businesses, according to Buhari. To ensure this becomes a law, President Buhari presented the Finance Bill which pro-

poses the VAT increase alongside the 2020 Appropriation Bill. “It is absolutely essential to intensify our revenue generation efforts,” Buhari said, noting that the additional revenues derived from the new VAT regime would be used to fund health, education and infrastructure programmes. VAT is a consumption tax payable on goods and services purchased by individuals, government agencies and business organisations. The tax policy is one of the sources of generating revenue for the government and it is enshrined in the VAT Act Cap VI, LFN 2004 (as amended). According to Section 8 of the VAT Act, a taxable person, who could be an individual, body of individuals, companies, among others, is required under the law to register for VAT with the Federal Inland Revenue Service (FIRS) upon commencement of the business and charge VAT at 5 percent on the supply of their

goods or services to customers. The section of the law further stipulates that the VAT charged by the taxable person must be paid to the FIRS alongside a VAT form duly filled and submitted monthly or get financial penalties for failure to comply. The latest revelation on the VAT threshold of N25 million in turnover per annum, which was confirmed by Ben Akabueze, Director-General of Nigeria’s federal budget office, means the planned 7.5 percent VAT rate will only apply to businesses with turnover – revenue – of N25 million and above. In simple terms, if the Finance Bill becomes law, any business regarded as a taxable person with an annual turnover of less than N25 million is exempted from VAT registration and by implication does not have to charge VAT on its goods and services. However, this does not

Week Ahead (Monday, October 14 – October 18, 2019) Week Ahead

mean that such small businesses will not pay VAT when they buy goods and services that are liable to VAT, according to Taiwo Oyedele, Head of Tax and Corporate Advisory Services at PwC Nigeria. “It only means they won’t have to charge VAT when they sell to their customers.” Furthermore, the VAT threshold doesn’t imply customers who patronise the companies which with sales value below the threshold will not suffer any VAT indirectly. Oyedele explained that depending on the scenarios, they could suffer less, same, or even more hidden VAT should the proposed increase in VAT rate government comes to fruition. An example of this is the business of a Nigerian called Makun who buys non-alcoholic wines from a company and sells to his customers. Makun buys a bottle of the wines for N1,000 and pays an additional N50 VAT on each bottle with the current VAT rate of 5 per-

cent, this brings Makun’s total cost price on each bottle of wine to N1,050. Makun proceeds to sell the wines for N1,500 each to his customers with an extra N75 VAT charge to make N500 profit on every bottle. As a result, the amount payable by consumers for each bottle of wine is N1,575 with VAT inclusive. The N25 differential by which the VAT Makun received exceeds the VAT he paid on each bottle is remitted to the FIRS. However, with the introduction of the new threshold, if Makun’s total revenue in a year is below N25 million, then while his cost price will increase to N1,075 provided the company records over N25 million annual turnover, Makun will not charge VAT when he sells to his customer. But he would need to sell at N1,575 to maintain the same profit, meaning Makun’s customers will still pay the same amount as when a 5 percent VAT rate was charged.

Chart of the week

Rising cost of debt, lower capital expenditure mars 2020 budget

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

Oil: Brent prices traded a little above $60 per barrel in the previous week. The commodity gained 3.8 percent at $60.59 a barrel during the week supported by hopes that the U.S.-China trade negotiations might result in a limited breakthrough, another IEA’s cut in demand forecast to 1 mb/d in 2019 and 1.2 mb/d in 2020, and reports of two missiles which hit one of Iranian oil tankers 60 miles off the coast of Saudi Arabia. The missile attack could raise tensions once again between Iran and Saudi Arabia, and could positively impact the prices of crude oil in the global market. Currency The exchange rate was relatively stable across all market segments. It traded flat at N360/$ at the parallel market. At the interbank market, the currency hovered N306 to a dollar, and appreciated from $363.77/$ to N363.13/$ on the Investor and Exporter window. External reserves stood at US$41.39 billion as at 09 October 2019. Going forward, the naira is expected maintain stability across all windows given CBN’s continuous intervention in the currency market. Data Release On Monday, October 14, the National Bureau of Statistics will release the Automotive Gas Oil (DIESEL) Price Watch September 2019, CPI and Inflation Report September 2019, Liquefied Petroleum Gas (Cooking Gas) Price Watch September 2019, National Household Kerosene Price Watch September 2019 and Premium Motor Spirit (PETROL) Price Watch September 2019. On Wednesday, October 16, the National Bureau of Statistics will release the Selected Food prices September 2019, while States Nominal Gross Domestic Product (2nd phase 2018) and Transport Fare Watch (September 2019) will be released on Thursday, October 17. www.businessday.ng

The proposed 2020 budget could see Nigeria spend almost the same on debt servicing as it would on capital projects. The N10.33 trn budget earmarks N2.46 trillion for capital projects, all of which would be existing projects as new projects would not be embarked on, President Buhari said during the budget presentation last Tuesday. On the other hand, Debt servicing has steadily risen in the last three years covered in BusinessDay analysis and is now only about N10 billion less than capex. President Buhari said the government would be counting on the private sector to invest in infrastructure next year.

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Monday 14 October 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Thursday 10 October 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 261,257.41 7.35 -0.68 196 80,656,596 UNITED BANK FOR AFRICA PLC 201,776.59 5.90 -1.67 133 2,284,127 ZENITH BANK PLC 565,136.89 17.95 0.28 295 17,507,831 624 100,448,554 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 190,245.05 5.30 0.95 148 6,017,908 148 6,017,908 772 106,466,462 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,646,086.70 130.00 -0.31 81 2,320,625 81 2,320,625 81 2,320,625 BUILDING MATERIALS DANGOTE CEMENT PLC 2,470,873.57 145.00 -0.07 131 114,688,945 LAFARGE AFRICA PLC. 257,724.73 16.00 - 49 871,683 180 115,560,628 180 115,560,628 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 304,225.84 517.00 - 8 761 8 761 8 761 1,041 224,348,476 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 13,074.52 4.90 - 1 1,000 1 1,000 1 1,000 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 1 1,000 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 52,417.35 54.95 - 29 483,009 PRESCO PLC 38,400.00 38.40 - 4 4,575 33 487,584 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,410.00 0.47 9.30 12 455,066 12 455,066 45 942,650 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 688.30 0.26 - 1 6,000 JOHN HOLT PLC. 214.03 0.55 - 4 55,345 S C O A NIG. PLC. 1,903.99 2.93 - 1 3,759 TRANSNATIONAL CORPORATION OF NIGERIA PLC 40,241.51 0.99 -1.00 55 10,046,665 U A C N PLC. 20,601.27 7.15 - 61 927,690 122 11,039,459 122 11,039,459 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 24,486.00 18.55 - 6 11,897 ROADS NIG PLC. 165.00 6.60 - 0 0 6 11,897 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,884.22 1.11 - 4 10,077 4 10,077 10 21,974 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 8,142.68 1.04 - 2 19,098 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 65,711.48 30.00 - 73 112,249 INTERNATIONAL BREWERIES PLC. 108,307.86 12.60 - 13 135,503 NIGERIAN BREW. PLC. 383,851.30 48.00 - 62 8,032,766 150 8,299,616 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 111,000.00 22.20 0.23 68 1,221,283 DANGOTE SUGAR REFINERY PLC 122,400.00 10.20 - 35 278,956 FLOUR MILLS NIG. PLC. 60,480.60 14.75 -1.67 36 124,658 HONEYWELL FLOUR MILL PLC 7,533.69 0.95 -5.00 17 266,013 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,344.16 14.85 - 8 70,165 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 164 1,961,075 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 18,500.29 9.85 - 12 62,118 NESTLE NIGERIA PLC. 963,077.35 1,215.00 - 74 158,320 86 220,438 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,878.29 3.90 - 12 172,000 12 172,000 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 25,014.01 6.30 - 17 29,525 UNILEVER NIGERIA PLC. 153,391.64 26.70 - 18 14,387 35 43,912 447 10,697,041 BANKING ECOBANK TRANSNATIONAL INCORPORATED 135,786.68 7.40 -2.63 28 138,159 FIDELITY BANK PLC 47,228.92 1.63 -1.21 67 2,406,548 GUARANTY TRUST BANK PLC. 785,812.49 26.75 0.19 195 11,986,189 JAIZ BANK PLC 14,437.48 0.49 - 5 731,265 56,141.32 1.95 - 25 413,366 STERLING BANK PLC. UNION BANK NIG.PLC. 203,845.27 7.00 - 24 170,524 UNITY BANK PLC 7,364.28 0.63 - 2 3,000 WEMA BANK PLC. 23,144.68 0.60 3.45 52 6,637,022 398 22,486,073 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 3 16,708,226 AIICO INSURANCE PLC. 4,435.33 0.64 -1.54 12 344,374 AXAMANSARD INSURANCE PLC 17,010.00 1.62 - 12 283,466 CONSOLIDATED HALLMARK INSURANCE PLC 2,276.40 0.28 7.14 6 490,627 CONTINENTAL REINSURANCE PLC 23,649.86 2.28 -0.87 13 704,530 CORNERSTONE INSURANCE PLC 5,744.51 0.39 - 9 333,283 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 2,123.80 0.29 - 7 144,200 LAW UNION AND ROCK INS. PLC. 1,890.39 0.44 - 6 185,769 LINKAGE ASSURANCE PLC 3,760.00 0.47 -7.84 5 766,310 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 2 103,000 NEM INSURANCE PLC 12,145.16 2.30 - 6 103,500 NIGER INSURANCE PLC 1,702.69 0.22 - 1 1,000 PRESTIGE ASSURANCE PLC 2,637.45 0.49 - 0 0 REGENCY ASSURANCE PLC 1,333.75 0.20 - 1 300,000 SOVEREIGN TRUST INSURANCE PLC 1,668.16 0.20 - 1 100,000 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 1 1,050 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,282.48 0.32 -8.57 40 12,222,100 125 32,791,435

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Company IN FOCUS Aramco’s stalling IPO exposes oil market risks

BUSINESS DAY

Monday 14 October 2019 www.businessday.ng

OLUWASEGUN OLAKOYENIKAN

h e c o n s t a nt p o stponement of Saudi Aramco’s initial public offering (IPO) is exposing the risks in the international oil market, thereby casting a shadow on the future of Brent, the benchmark of Nigeria’s crude oil. Nigeria generates most of its revenue from crude oil, but the commodity has within the last few years faced some geopolitical risks in the Middle East, a development which impacted negatively on the prices of crude oil in the international market and triggered Nigerian government towards seeking alternative revenue sources. Drone attacks on Aramco’s oil processing facilities at Abqaiq and Khurais in September 2019, which wiped out more than half of the oil giant’s production output, were one of the recent of big hits on the commodity. The countr y is by far the largest oil producer, contributing almost one-third of total Organization of the Petroleum Exporting Countries (OPEC) oil production, giving it a great influence on the world’s supply. The attacks, which the United States alleged were launched by Iran, knocked dow n approximately 5.7 million barrels per day (bpd) of total Saudi oil output. That is over five percent of global crude supply, creating a deficit in the country’s crude production volume. Shortly after the incident, oil prices recorded their biggest percentage gain in record as oil jumped almost 15 percent to hit more than $69 per barrel while traders went scrambling to buy oil contracts, especially with Donald Trump warning that America is ready for war. In spite of this, reports say the incident would not deter the world’s most profitable company from going ahead with its much-anticipated IPO through which it plans to list a portion of its shares. An IPO refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. Potentially, the biggest equity sale in history, the IPO planned for 2018 is supposed to be the deal of all deals, as it was proposed to seed a $2 trillion sovereign wealth fund to carry the Middle East’s biggest economy through the end of the oil age and also funnel hundreds of millions of dollars in fees to Wall Street’s elite banks such as JPMorgan Chase & Co.

and Morgan Stanley. Aramco’s IPO process dates back more than three years a g o w h e n Mu h a m m a d b i n Salman, Saudi Arabia’s crown prince suggested floating up to 5 percent of Saudi Aramco at a valuation of $2 trillion. The company’s share sale could not materialise since then as a result of a combination of hubris on the valuation, an overambitious timetable, among others. A lot of preparations were made towards actualising the IPO since its 2016 announcement. However, issues such as governance and disclosure, the acquisition of a 70 per-

cent stake in petrochemicals maker Saudi Basic Industries Corporation (Sabic), disagreements among Saudi officials and advisers over the choice of an international listing venue, all combined to weigh on the offering in 2018. The 70 percent acquisition in Sabic to boost its dow nstream business was approved in September, while the dispute among the country’s officials led to the exit of some key members from the project. For instance, Abdullah bin Ibrahim al-Saadan, a 30-year veteran who as chief financial officer was the most senior

executive working on the IPO’s day-to-day preparations, left in June to become the chairman of the Royal Commission for Jubail; another key official Motassim al-Maashouq, who is vice president of IPO development, has been asked to take on new responsibilities. Buying part of Sabic, a giant in its own right, could make Saudi Aramco a more valuable company while the petrochemical industry is growing around the world. That, in turn, could help the oil company draw even more interest in a public offering. But skeptics of a Sabic trans-

action worry that Saudi Aramco would be taking on a financial burden by paying tens of billions of dollars for a stake in the chemical company and adding on a big petrochemical business might reduce the overall profitability of Aramco, which is believed to enjoy among the world’s lowest costs for extracting the oil it produces. While the valuation saga persists, investors were concerned in determining who is responsible for the company since it is wholly owned by the Saudi Arabian government. There were also concerns about how the decision-making processes within the company would become much more transparent after its IPO. Ademola Henry, team leader at FOSTER, said the problem of poor predetermined valuation armed with lack of political will and lack of clarity on how the process should be done have made the Saudi Aramco IPO a fiction which will never happen. “When they arrived at a valuation of $2 trillion, the market was shocked asking how they arrived at that,” Henr y told BusinessDay. Meanwhile, while the concerns around the Saudi oil attacks seem to be fading already, the Iranian government last Friday claimed two missiles hit one of its oil tankers 60 miles off the coast of Saudi Arabia as it headed to Syria on the Red Sea, a development that could further instability of Brent. Consequently, Brent crude, the global benchmark, was up 1.7 percent at $60.10 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures rose 1.9 percent to $54.58 a barrel. Aramco’s IPO plan on Saudi Arabia’s Tadawul exchange is part of Prince Mohammed’s economic reform plan to fund economic diversification away from oil and to shore up national finances. Should Saudi Aramco’s 5 percent become successful, it would mark a major shift in economic policy from the ruling House of Saud otherwise the government must consider lowering the $2 trillion valuation to something closer to what analysts currently estimate. Analysts say the international oil industry is currently not in a suitable condition for the original valuation to be realised due to a weak outlook for oil prices, rather it should review its valuation to around $1.5 trillion. Ahead of its IPO, Aramco recently released its earnings figures for the first time in recent memory, showing a net profit of $111 billion and revenue of about $356 billion for 2018.

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