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Unclaimed dividends rise despite e-dividend initiative OGHOGHO EDOSOMWAN & Endurance Okafor

L-R: Chandana Fernando, commercial manager, Nestle Nigeria; Chris Ogbechie, sub dean, Lagos Business School; Mauricio Alarcon, managing director, Nestle Nigeria, and Ogechi Adeola, director, sustainability centre, academic director, sales and marketing, Lagos Business School, during the Nestle Nigeria and Lagos Business School partnership on sales academy in Lagos.

Nigeria risks deeper financial crisis over new $2.8bn debt, minimum wage hike LOLADE AKINMURELE

igeria’s plan to raise a $2.86 billion Eurobond and simultaneously raise minimum wage could lead to a significant

deterioration in the country’s financial position unless it is able to raise revenues. The new external borrowing will take the country’s total external debt stock to $24.9 billion from the current $22.16 billion,

6 percent of the GDP of Africa’s largest economy. The proceeds are expected to fund the country’s N9.1 trillion ($29.8 billion) budget, which has a deficit of N2.4 trillion and could even widen

if ambitious revenue targets set out in the budget are not achieved, as has been the case for the past three years. “On President Buhari’s new Continues on page 46

hareholders are still not coming forward to claim dividend payments despite the introduction of an e-dividend initiative to make it easy for them to do so. The e-dividend initiative was introduced by the Securities and Exchange Commission (SEC) in 2008 to facilitate the ease of payment of dividends directly into the bank accounts of shareholders. SEC has been promoting awareness of the initiative in the last three years in a bid to stem the rise in unclaimed dividends in the country. But an analysis by BusinessDay Research and Intelligence Unit (BRIU) shows that the level Continues on page 46

Inside Eko Atlantic City plans to build West Africa’s largest P. 2 retail facility

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Eko Atlantic City plans to build West Africa’s largest retail facility ... city’s expected 500,000 residents to shop in 60,000-sqm mall CHUKA UROKO

outh Energyx Nigeria Limited, the planners and developers of the ambitious Eko Atlantic City sitting adjacent to Victoria Island, Lagos, say plans are at an advanced stage to build what is going to be the largest retail mall in West Africa. The retail facility which will be strategically located on the outer part of the city, close to Ahmadu Bello Way and Akin Adesola Street, both in Victoria Island, will be sitting on an initial 60,000 square metres (gross buildable area) of land to be developed further to 100,000 square metres. The facility, on completion, will be almost three times the size of Novare Lekki Mall which is currently the largest in the sub-region. Novare sits on 28,000 square metres gross buildable area (GBA) comprising 22,000 gross lettable area (GLA) and ample space that can park over 1,000 vehicles. Fabian Ajogwu, chairman, Novare Africa Real Estate, informed that the mall, from commencement till date, has empowered about 5,000 Nigerians through direct and indirect employment. The new Eko Atlantic mall could therefore result in the creation of over 150,000 direct and indirect jobs for Nigerians, especially Lagos residents. Analysts are of the view that Nigeria and particularly Lagos, the country’s commercial nerve centre, is underserved in terms of its retail needs. They explain that Lagos with an estimated 20 million people has only two formalised malls and a few others, whereas Johannesburg in South Africa has over 20 malls for a population that is less than 10 million people. Michael Ch’udi Ejekam, the CEO, Atreos (retail investment holding platform) explained to BusinessDay that in retail, if a country has 20 percent of the formalised retail market , that means the country has just an introduction into the market and Nigeria is way below the introduction stage. According to Ejekam, at the moment, Nigeria is still within five percent formalised retail and that is just the beginning of the introduction stage. It follows that Nigeria is still at the very early stage of retail development, meaning that there

is a huge opportunity in the market for investors. In the light of that, “a 60,000 square metre retail mall is not a big deal for a city that expects about 500,000 residents. This is what obtains in other major cities where you see 100,000 and even 120,000 squaremetre malls”, Ronald Chagoury Jnr, Vice Chairman, South Energyx, told BusinessDay during a tour of the city Thursday. Though Chagoury did not say when construction work would commence on the massive facility, he disclosed that interest has been encouraging from foreign and local investors. He observed that activity had been slow in the city in the last three years, reflecting the economic slowdown but has picked up dramatically in the last six months, with an average of three visits per day by potential investors. Chagoury , who conducted a media team around the entire city, remarked that Eko Atlantic represents what is possible in Nigeria’s economy, explaining that “all that the country needs is to get it right in the critical sectors of the economy, including oil and gas, health, education, housing and infrastructure and the country would see growth. “We have provided prime land and infrastructure at no cost to the government. All that developers and investors need is to come and start planting houses”, he added, pointing out that the city was designed as a mixed use development for residential, commercial and retail developments. The Eko Atlantic project began in 2003 as a joint venture between the developers and the Lagos State Government. It was aimed to provide a permanent solution to protect Bar Beach in Victoria Island from the effects of severe coastal erosion, and to safeguard Victoria Island from the threat of flooding. The city is, arguably, the single most ambitious and comprehensive mixed-use development plan to come on stream in the West-African sub-region in recent times. Modeled after the skyscraper District of Manhattan Island in New York City, it is expected that the new city will be home to no fewer than 500,000 residents, with commuter volume expected to exceed 300,000 people daily.

L-R: Thomas Awagu, past president, Nigerian British Chamber of Commerce; Oladipo Odujirin, past president, Nigerian British Chamber of Commerce; Paul Arkwright, British High Commissioner to Nigeria; Akin Olawore, president and chairman of council, Nigerian British Chamber of Commerce, and Michael Olawale-Cole, past president, Nigerian British Chamber of Commerce, during the outgoing High Commissioner’s farewell visit to the Nigerian British Chamber of Commerce’s Secretariat in Lagos, weekend.

Foreign investors uninterested in Nigeria’s weak banks CYNTHIA IKWUETOGHU

nternational investors are not eager to put their money into some of the country’s weak banks that have approached them, sources in the international investment community have told BusinessDay. Speaking to BusinessDay on the side lines of the FT Africa Conference in London on October 8, a source with an investment banking firm said he has been unsuccessfully trying to raise money for one of Nigeria’s troubled banks in the international capital markets but that investors have not shown any interest. Their fear is that the ‘troubled bank’s books may be worse than what is being shown to investors. “They do not want to put in their money and end up with surprises that they cannot deal with as soon as they take over the bank” said the source who does not want to be named because he is not authorised to speak for his investment fund. Another source who works with South Africa’s Absa, formerly Baclays Africa Group Limited, also told BusinessDay that they are still interested in getting a banking license in Nigeria

but that will be after the 2019 elections. He further said that Absa will not be interested in the acquisition of any of the country’s weak banks for fear that they may end up with more liabilities than they can deal with. The International Monetary Fund (IMF) in a 2018 Article IV report on Nigeria disclosed that the country had four small and medium-sized undercapitalised banks, one of which was insolvent. The IMF also that “some of these banks are kept afloat through continuous recourse to the CBN’s lending facilities.” Since the IMF published the report in March, the CBN has taken over the assets and liabilities of Skye Bank which is the bank the IMF described as insolvent in its report, even though it did not name it. The CBN has since set up Polaris Bank as a bridge bank to take over the assets and liabilities of Skye Bank and handed it over to the Asset Management Company of Nigeria (AMCON). AMCON has since said that it is looking at a quick sale of Polaris Bank to interested investors. Already, some local investors are said to have shown an interest in acquiring the new Polaris Bank, sources have told BusinessDay.

However, with Skye Bank out of the way, there are still at least three undercapitalised banks operating in the Nigerian financial system seeking to raise funds to boost their capital base. Analysts say one of the reasons that foreign investors are avoiding these banks is the experience of Nigerian banks that have had to acquire distressed banks in recent years. Skye Bank’s collapse has been linked to its acquisition of defunct Mainstreet Bank, at a valuation that was well above the bank’s book value. Skye Bank reportedly paid N126 billion for Mainstreet Bank in October 2014, when the bank’s true valuation was actually around N75 billion. Besides, when Skye Bank eventually took over the operations of the Mainstreet Bank, management found out that the bank was in a worse shape than initially thought. Heritage Bank is also said to have had a similar experience in its acquisition of then Enterprise Bank for N56 billion in 2015. Both acquisitions left the books of the acquirers weaker than before the acquisition which they have largely not recovered from.

•Continues online at www.businessdayonline.com

Relief for banks as British firm awaits ministerial consent for Seven Energy acquisition STEPHEN ONYEKWELU

ritish oil firm, Savannah Petroleum, has announced that the Department of Petroleum Resources (DPR) has completed its due diligence of plans to acquire Seven Energy. In a statement on its website on 11 October, Savannah Petroleum said that it is “pleased to confirm that the DPR has informed Savannah that it has now completed its due diligence in relation to, and is fully satisfied with the Transaction.”Thecompanysaiditisnowwaiting for ministerial approval to conclude the transaction of troubled Seven Energy. Savannah’s acquisition of Seven Energy will come as a huge relief to some Nigerian banks which have been forced to restructure a US$375 million facility to the company after

it ran into liquidity problems. A consortium of Nigerian banks thatincludedEcobankNigeriaLimited, FCMB, and Union Bank Plc had on July 15 2016, syndicated a $445 million SeniorDebtFacilitytoAccugasLimited, a wholly owned subsidiary of SENL, to refinance existing facilities and support medium-term capital requirements. Seven Energy ran into liquidity challenges, making it unable to meet its repayment obligations on both its loans and bond obligations. It had announced its inability to make the interest payment due 11 October, 2017 on two notes issued by Seven Energy Finance Limited. In April 2017, it said that it had requested a standstill from its lenders under the $385 million Accugas term facility dated June 23, 2015 and had not made payments of interest and

principal due March 31, 2017. However, Seven Energy in November 2017 announced a comprehensive restructuring of all its debt obligations. In the Agreed Transaction published on Seven Energy’s website on November 15, 2017, it outlined the terms of its capital restructuring. The key terms of the Agreed Transaction set out in the terms sheets said, “Savannah will acquire all of the valuable assets of the Group, including, at its option, the StrategicAllianceAgreement,whichare to be transferred to Savannah, its subsidiaries, or an entity to be nominated by Savannah, subject to completion of a financial restructuring of the Group, in accordance with the Term Sheets.” Some of these key terms included newcapitaltobeprovidedbySavannah with funding available, among other

things for operational working capital and the liquidity needs of the target Group; cash consideration to be paid to selected creditors, including senior securednotes(SSN)noteholdersandcost associatedwiththeAgreedTransaction. As part of the agreement, the SSN noteholders will receive their pro rata share of $52.5m in newly-issued equity in Savannah and an $87.5m cash payment, in consideration for the discharge of all $318.2m SSNs and release of claims against the entities being acquired by Savannah. It said in addition to the SSN consideration, the SSN noteholders shall also be offered the right to subscribe, on a pro rata basis to their holdings of the SSNs, for $25m worth of newlyissued equity in Savannah for a total cash consideration of $20m. Bankers say Seven Energy was

unable to meet its loan obligations for several reasons, chiefly because of the collapse in energy prices and its inability to secure dollar revenue streams for gas contracts. Stakeholders who have proper understanding of issues surrounding the loan said that unless Savannah Petroleum agrees to pay it off when the transaction is completed, the syndicate banks may need to make provisions in their books to recognise the non-performing status, as they cannot defer interest and principal repayment on the loan indefinitely. Analysis of Savannah’s financial position as at the year ended December 31 2016 showed that cash and cash equivalent stood at $23.06 million but fell to $14.90 as at the year ended December 31 2017 and down to $11.71 million the following year.

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Monday 15 October 2018

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Monday 15 October 2018

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Monday 15 October 2018

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FEATURES

Polaris Bank: Investing in Capacity Building through the Graduate Intensive Programme Wale Akinselure, Ibadan

quipping the workforce with the skills required for the modern workplace is a strategic concern in the overall growth and development of financial services sector and the macro economy. In order to bridge the gap in the capacity of the employees within the banking industry, one of the enabling instruments has been the Nigerian Sustainability Banking Principles (NSBPs) which was in 2012 constituted under the auspices of the Central Bank of Nigeria and the Bankers’ Committee to formulate sustainable banking initiatives with the sector. Principle seven of NSBPs acknowledges the role of capacity building in bridging the skill gap in the banking industry currently described as challenging. Polaris Bank, one of Nigeria’s Systematically Important Banks (SIBs) has demonstrated strong commitment in the training and retraining of its workforce as its strategic response to enhancing the knowledge base of its employees. According to information from the human capital management of the bank, over 20,000 candidates were filtered through a Computer Based Test (CBT), an electronic aptitude model. The 100 candidates who were declared successful were further pruned to 70 after post CBT interview sessions. In the end, 61 out of the 70 that commenced the nine weeks intensive Graduate Training, were adjudged good enough to work in Polaris Bank. The new hands; youthful, vibrant and energetic Nigerians from diverse academic background and disciplines were tutored for nine weeks at the Bank’s Business School, Polaris Business School which enjoys the full accreditation of the Chartered Institute of Bankers of Nigeria (CIBN) as a banking/finance, business and continuous human capital training academy. The fully residential Business School referred to as one of the best in Nigeria’s banking industry runs two campuses in Ilupeju, Lagos and Eleyele, Ibadan, both with state-of-the-art facilities and conducive learning environment running professional programs not limited to; Polaris Graduate Intensive Program (PGIT). They also offer: onboarding program for experienced hires; banking operations course; sales, marketing and relationship management course; Brand Development Managers (BDM) and Business Service Managers (BSM) Leadership Course; Polaris Credit Academy; Executive Education; Specialized Programs (Specific to Job functions) and Open Enrollment Programs (External). The school has so far graduated over 1,294 Graduates from 37 streams of its flagship Polaris Graduate Intensive Training (PGIT) program since its inception in 2006. The objective of the business school is to familiarize participants with Polaris Bank; give a firm background to the culture and expectations of the Bank from its staff; equip participants with the knowledge, skills and information needed to deliver excellent service to the Bank’s customers as well as provide a conducive environment for knowledge transfer, which positively impacts and improves the service delivery of participants. The recently graduated recruits, all numbering 61 attested to the state-of-the-art facilities and conducive learning environment which the training afforded them. While sharing their experiences at the intensive 9 weeks training at the business school, the two best graduating students made glowing submissions about the school and its faculty. Chinonso Nwakaudu, a graduate of Pure and Industrial Chemistry from University of Nigeria, Nsukka and best student of stream 43 admitted that although the training was intensive, it was worth the rigours considering that she did not have a background in banking and finance. According to Chinonso, “I can now boldly say that I know the rudiments of banking. The facilitators actually made it easy. They came down to our level since we had people from different backgrounds in

Mr. Tokunbo Abiru , Polaris Bank GMD

Mr. Godwin Emefiele , CBN Governor

the programme.” “In the next ten years I see myself in a position of influence in the bank,” She declared On the other hand, Sandra Onachukwu, a graduate of English and Literature from the University of Benin, who came tops in stream 44 found the nine weeks intensive training both interesting and challenging. In spite of the fact that they had to rise up early and close late, they still had to maintain a balanced life. According to Sandra, “I met a lot of people here— with different characters and different attributes. This has taught me the spirit of tolerance, resilience and how to manage people altogether. Also, the academic aspect was not left out, as we learnt a lot—ranging from accounting to risk management to operations. For me, it was been a total experience.” “In the next ten years, I should have grown on the job,” she affirmed.

achieved in terms of corporate governance which has laid a very strong foundation for us. “What we see in the future is a bank that in the next three to five years is one of the first in Nigeria; a fully-fledged retail bank which is digitally enabled. So our stakeholders will enjoy values different from what obtained in the past.” He also tasked the graduating students on commitment to service, problem solving, and economic development of the country and on the need to place premium on ethics and corporate governance. “We are building the foundation of our financial institution and the bedrock has to be training. We must let them know the values they should stand for and the kind of understanding that they must bring to bear when they are coming into the real world which is about inculcating our values in the new set of staff members,” the GMD added.

According to Chinonso, “I can now boldly say that I know the rudiments of banking. The facilitators actually made it easy. They came down to our level since we had people from different backgrounds in the programme.” Speaking at the graduation ceremony of the new bankers, the Group Managing Director (GMD), Mr. Tokunbo Abiru who exhibited infective humility and camaraderie with the new staff, expressed optimism that the bank would transform into one of the best five in the industry within the next five years. Mr. Abiru praised the regulatory authorities for their support to the Bank so far and reminded the graduands that Polaris Bank offers them a bold new beginning in their careers. He premised his resolve on the bank’s commitment to continued implementation of sound corporate governance and risk management practices which will aid the bank’s transformation into a full-fledged retail and commercial bank with strong digital play. He added that the Polaris bank boasted of a strong market share going by several transformative business initiatives and remained one of the most liquid and most capitalized banks in Nigeria. “We are a systemically important bank and we also currently rank number nine in the banking industry, so our emphasis will be on all the improvements we have

In his welcome address, the Group Head, Human Capital Management of the bank, Taiwo Olupeka, disclosed that Polaris Bank remains an employer of choice poised to create fair opportunities for young Nigerians to attain their career aspirations in one of Nigeria’s leading financial institutions. This step, he added “also enables us address in some measure, the menace of youth unemployment in Nigeria” The process began with online applications by interested persons and successful applicants were invited for the tests which held in six different locations across the country (Abuja, Enugu, Ibadan, Kano, Lagos and Port Harcourt). The candidates who performed well in the test were invited for the next phase of the process; assessment centre, held in Lagos. This phase tested candidates’ writing, observation and presentation skills. The assessment was followed by panel interviews of each candidate. Successful candidates were invited to meet with the GMD/CEO and then moved to the training school at Ibadan where they spent nine (9) weeks.

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Monday 15 October 2018

11 NEWS Peak oil forecasts shaky as global BEDC signs MoU on mini-grid consumption approaches 100mbpd project in franchise areas

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…Nigeria, Libya, others expected to shore-up supply STEPHEN ONYEKWELU

lobal oil consumption is set to hit a historical all time high of 100 million barrels per day (mbpd) despite forecasts 15 years ago that peak oil supply was imminent and possible production decline among non-OPEC (Organisation for Petroleum Exporting Countries) members. “Both global oil demand and supply are now close to new, historically significant peaks at 100mbpd, and neither show signs of ceasing to grow any time soon,” Oil Market Report published October 12 by Paris-based International Energy Agency, stated. According to the report, a lot of potential supply could come to the market from places like Iran, Iraq, Libya, Nigeria and Venezuela, if their various challenges can be overcome. There is no peak in sight for demand either. The drivers of demand remain powerful, with petrochemical being a major factor. Rising living standards,

particularly in developing countries, are already underpinning strong demand growth for plastics and this will continue for many years to come. Fatih Birol, the IEA’s executive director, said in a Bloomberg interview earlier last week that prices were “entering the red zone,” which signaled danger to consumption, and called on OPEC members with spare supplies to increase production. The latest report showed that Saudi Arabia and other key nations in the OPEC member states are already delivering to make up for fellow members - notably Iran and Venezuela - who are suffering losses. Producers in the so-called OPEC+ coalition, which also includes Russia, have added 1.6mbpd since May, the report showed. Nigeria does not have spare supplies and may not be able to help increase production and supply to the global market for a number of reasons. Since 2016, Africa’s biggest crude producer is yet to finalise bid round plans. Mean-

while, Madagascar, Algeria, Ghana are among African countries that have concluded plans to conduct oil licensing rounds before this year ends, which will boost their reserves, increase revenue as well as their capacity to take advantage of soaring oil prices. Nigeria’s active rig count contracted in August and its oil reserves replacement ratio has been abysmal in the last decade as OPEC peers strive to increase exploration and production. In July, Africa’s largest crude producer had seen its active rig count increase by 9.38 percent, from 32 oilrigs in June to 35 in July, according to OPEC’s August Monthly Oil Market Report (MOMR). But it fell by 5.71 percent, from 35 in July to 32 in August signalling reduction in exploration and production activities in the oil and gas sector. Rig count is a function of the level of exploration, development and production activities occurring in the oil and gas sector. A drop in active rig count means oil exploration and production

s a bold step towards connecting communities in its franchise states without electricity supply, BEDC Electricity plc (BEDC) has signed a memorandum of understanding with Rocky Mountain Institute, Colorado, USA (RMI) and Rubitec Nigeria Limited to provide minigrid electricity for customers. The tripartite MoU was agreed by the managing director/CEO, BEDC, Funke Osibodu, Rubitec CEO, Bolade Soremekun, and RMI manager, James Sherwood, at the BEDC head office in Benin City, last week. It is part of the moves by the power distribution company to boost power availability to customers in communities within its franchise area. Based on this, BEDC is expected to facilitate the choosing of locations for mini-grid solar power. According to the MoU, Rubitec is expected to construct solar mini-grid facilities within BEDC’s licensed area of coverage, while RMI will provide expertise in developing renewable electrical solutions and advise implementation of a pilot mini-grid in the chosen lo-

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cation. BEDC CEO, Osibodu in her remarks at the event said the initiative was aimed at bridging the service gaps for areas within the company’s network with an existing but poorly supplied or non-functional distribution system or those without an existing distribution system. While expressing delight at the partners based on their pedigree, the BEDC CEO said the mini-grid initiative was also necessitated by the need to reduce dependency for power supply to customers through the Transmission Company of Nigeria (TCN) source, saying that one community in Edo State would be used as a pilot for the project before it is extended to other locations. According to her, the project will entail an interconnected mini-grid using BEDC distribution lines in the selected locations to distribute solar power to the residents in the communities who are also expected to sign contract agreement with the suppliers. The agreement will be completed after the joint visitation by a combined team of BEDC staff and officials of

the partnering firms to assess the situation on ground at the locations and determine the feasibility and commencement date of the project. The MD of Rubitec, Bolade Soremekun, in his remarks said: Rubitec is very happy to sign this MOU to partner with BEDC and RMI to bring solar mini grid electricity to communities within the franchise area who are unserved or underserved. Collectively, Rubitec and our partners are proud to execute the pilot project to provide more knowledge and insight to the interconnected minigrid space so as to enable more rapid scaling of the concept and model all over Nigeria. RMI is excited to support BEDC and Rubitec in this effort, said Sherwood, and sees this as a tremendous opportunity to test a new model for delivering clean, reliable, and affordable power to customers. This will build on the mini-grid implementation work already being done by the Rural Electrification Agency and others across Nigeria, and can directly support development of local economies while providing insight that will benefit the entire industry.

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Ex-FBI agent makes more disclosures in ongoing $1.3bn Malabu trial DIPO OLADEHINDE

igeria’s former Attorney General, Bayo Ojo (2003 to 2007) and a Londonbased Arcadia Petroleum Limited have been named by ex-FBI agent, Debra LaPrevotte as being recipients of some of the money paid by Shell and Eni for OPL 245. BusinessDay is following the ongoing trial through a series of tweets by Barnaby Pace, an oil campaigner for NGO, Global witness, who is in

34m Nigerians have never been to school BUNMI BAILEY

ut of a population of 186.3 million as at 2016, 34.1 million Nigerians had no form of education, according to the recently released National Bureau of Statistics (NBS) computation of Human Development Indices (HDI) for the United Nation Development Plan (UNDP). BusinessDay analysis of the data showed that only 18.3 percent of the population as at 2016 had no form of education. Ayodele Shittu, a lecturer in the Department of Economics, University of Lagos said, “This shows that we are not doing much to improve the education sector in Nigeria and if we want to borrow from the experience of other developed economies, especially Asia, you will realise that education is their bedrock of development today, particularly that of South Korea and also China. “Unfortunately, today we seem to be making a lot of noise about entrepreneurship as an alternative to employment opportunities. We also forget that even for an entrepreneur to remain creative and to be able to take risks that will give birth to growth oriented business enterprises, education is important. “So, it is not surprising that we keep nurturing business enterprises with little or no education that are created out of necessity. And that is because we have failed as a nation to invest heavily in education,” Shittu concluded. From the report, the male population that had no education is less than the female category. The number of the male population was 11.9 million and the female population was 22.1 million.

court monitoring the trial and tweeting about it. According to Pace’s tweets, LaPrevotte told judges on Wednesday, October 12, in a court sitting in the city of Milan, Italy, of how an investigation carried out by the bureau showed $801 million from the OPL 245 deal flowed from JP Morgan in London through Nigerian bank accounts and into companies owned by Aliyu Abubakar popularly known as ‘AAA Oil’, ‘a person reported to be connected to members of the former president Goodluck Jonathan ad-

ministration.’ LaPrevotte also narrated to the court how Bayo Ojo, a former Nigerian Attorney General under former President Olusegun Obasanjo received $10 million and how over $10 million was sent to London based Arcadia Petroleum limited and $5 million to their former CEO who was being sued by the company’s owners for alleged embezzlement. He did not say what the payment to Bayo Ojo was for. Arcadia Petroleum limited is an independent trading company was founded

by Japan’s Mitsui & Co Ltd in 1998 and has trading desks in the United States, Britain, Switzerland, UAE, Singapore and Australia. The Company offers products such as gasoline, gasoil, kerosene, fuel oil, and liquefied petroleum gas, as well as operates a fleet of long term charter vessels, according to its website. It was once one of the top buyers of Nigerian oil, part of the group known collectively as the “magnificent seven”, but it did not appear on the official list of buyers of the OPEC member’s crude for 2011 to 2012.

LaPrevotte told the court how a Russian, Ednan Agaev hired by Dan Etete to find a buyer for the oil block, agreed to a voluntary interview as more testimonies revealed millions of dollars went to a Brazilian luxury property developer, Nigerian Interior Design Company and $1.6m was spent on one vehicle at a Dubai car sales company. He did not give the names of the Nigerian luxury property developer or the name of the interior design company. LaPrevotte is said to have narrated how the FBI tracked down the purchase

of an aircraft worth over $50 million from a US firm and Cadillac Escalades, a full size SUV engineered and manufactured by Cadillac Motor Car Division, a subsidiary of U.S based General motors’ bought in Texas through a broker. ENI and Casula’s lawyers challenged the FBI agent on the actions and funding of The Sentry, a Non-Governmental Organization (NGO) connected to the case that LaPrevotte now works for, but the trial Judge replied “…the funders are public…,” according to Pace in his tweets.

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Morality versus indifference BASHORUN J.K RANDLE Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

robably unknown to the generality of the public, the debate over the selection of auditors has been gaining momentum, even to the point of becoming a major controversy or crisis – but not on the scale of threatening to set off the Third World War. Actually, it has been simmering for several years. It was “The Times” which pulled the trigger with its front-page report on September 3, 2018. Headline: “Big four reforms fail to boost competition” “KPMG and Deloitte now audit as many of Britain’s largest companies as PWC, which has long held the top spot, after winning 14 new FTSE 100 clients between them in just over a decade. PWC audited 41 of Britain’s largest 100 companies in 2005. It has been losing such contracts since the introduction of European rules in June 2016 that required companies to put the job out to tender once every decade and to change auditor at least every 20 years. It now audits 27 of Britain’s top 100 firms, according to Adviser Rankings, a data provider. Meanwhile, since 2005 Deloitte

ADEDOYIN ADEWALE Adewale is a media and sustainability expert based in Lagos

uilding and maintaining trust in businesses and governments is fundamental to achieving a sustainable economy and world. Every day, decisions are made by businesses and governments which have direct impacts on their stakeholders, such as financial institutions, labour organisations, civil society and citizens, and the level of trust they have with them. These decisions are rarely based on financial information alone. They are based on an assessment of risk and opportunity using information on a wide variety of immediate and future issues. But what roles are Nigerian organisations playing in socio-economic developments and what positive impact do they have on the environment they operate in? In a bid to answer these questions, most organisation release annually a Sustainability Report, a document that details their corporate social responsibility activities. Sustainability Report enables organisations to consider their impacts of wide range of sustainability issues, enabling them to be more transparent about the risks and opportunities they face. Aptly defined, a sustainability report is a report published by an organisation about the economic, environmental and social impacts daily activities. The sustainability report usually tells of the organisation’s

has increased the number of FTSE 100 companies that it audits from 19 to 27, while KPMG also has 27 clients, up from 21 in 2005. The three-way split between PWC, KPMG and Deloitte suggests that European rules designed to improve competition and increase choice in the audit market have failed, as large companies required to change their auditors repeatedly have appointed another firm from the accounting industry’s big four. Companies have shifted between the same accounting firms despite them being dragged into scandals such as the collapse of Carillion, the public services contractor, and BHS, the department stores chain. PWC was fined a record £6.5million by the Financial Reporting Council over its audit for BHS in June, while in recent months KPMG was fined £3.2 million over its audit at Quindell, a technology company, and £3 million for work at Ted Baker, the fashion retailer. Deloitte is being taken to an enforcement tribunal by the FRC and could face a fine of up to £10 million over audits for Autonomy, the British software+business. EY, the other member of the Big Four elite audits 17 FTSE 100 companies, down from 19 in 2005, Last week the nine biggest accounting firms – the Big Four plus Grant Thorton, BDO, Mazars. RSM and Moore Stephens – handed a list of proposals to the Competition and Markets Authority to improve competition.” The “Financial Times” which had kept its powder dry, unleased a powerful salvo from Grant Thorton on its front page, ten days later on 13th September 2018.

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Companies have shifted between the same accounting firms despite them being dragged into scandals such as the collapse of Carillion, the public services contractor, and BHS, the department stores chain

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Headline: “Auditor selection for big companies should be nationalised, says grant thorton” “Grant Thornton has called for the nationalisation of auditor selection among Britain’s largest companies in an effort to break the oligopoly of the big four firms. The UK’s fifth largest accounting firm said the radical proposal would improve a swath of weaknesses in the audit market, including widespread conflicts of interest and poor audit quality, which have heavily undermined confidence in the profession. Jonathan Riley, head of quality and reputation at Grant Thornton, said

the firm wanted auditor selection for large listed companies and other public interest entities to be carried out by a public body such as a newly established commission or the national audit office. Mr Riley said placing responsibility for auditor procurement with an independent public body would address the “perennial issue that audit clients select and pay the auditor”. He added that this would help restore trust and integrity in the market at a time when there “seems to have been a loss in impartiality and independence”. Grant Thornton has floated the idea with Britain’s main political parties, the CBI, the competition watchdog and the ICAEW, an industry body. The firm said it expected companies and the big four to be resistant to the proposal, although it had received warmer than expected feedback from the CBI and the ICAEW. Gervase MacGregor, an audit partner at BDO, the sixth largest firm in the UK, said he was initially sceptical about the benefits of a national procurement body for auditor appointments, but said he has “come around to the idea”. But he added that BDO’s stated position of introducing market share caps to address competition concerns would be more effective. Grant Thornton additionally wants a ban on accounting firms offering any kind of consulting or advisory work to major audit clients — a measure also backed by BDO and privately by some partners within the big four. Nationalising auditor procurement would theoretically address two

significant concerns about the audit market. First, that auditors are overly beholden to company management and fail to flag problems at the companies they vet because they want to hold on to their fees at all costs. Second, that company management teams are biased towards selecting the big four firms, helping to entrench their already dominant position in the market. At present, EY, Deloitte, KPMG and PwC audit 98 per cent of the constituents in the FTSE 350 index of Britain’s largest listed companies. Grant Thornton believes that if the UK adopted the proposal, it would be the only country globally where auditor selection for privately owned companies would in effect be nationalised. The proposed system would mirror an existing framework for auditor appointments in Britain’s public sector, which have been overseen since 2014 by Public Sector Audit Appointments Limited. It appoints auditors and sets audit fees for local government and police bodies, helping to remove big four bias and enabling smaller firms such as Grant Thorton, which has an estimated 40 per cent market share in the public sector to compete.” As the steamy cauldron was threatening to boil over, it was the timely intervention of the president of the Institute of Chartered Accountants in England and Wales [ICAEW], Mr. Paul Aplin that provided some element of reassurance by exhorting chartered accountants to be morally energetic.

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Making impact: Sustainability reports and Nigerian corporate organisations values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy. Often, sustainability report helps organisations to measure, understand and communicate their economic, environmental, social and governance performance, and then set goals, and manage change more effectively. A sustainability report is the key platform for communicating sustainability performance and impacts, whether positive or negative. Sustainability reporting can be considered as synonymous with other terms for non-financial reporting; triple bottom line reporting, corporate social responsibility (CSR) reporting, and more. It is also an intrinsic element of integrated reporting; a more recent development that combines the analysis of financial and non-financial performance. Why is sustainability report necessary you may ask? The value of the sustainability reporting process is that it ensures organisations consider their impacts on these sustainability issues, and enables them to be transparent about the risks and opportunities they face. Stakeholders also play a crucial role in identifying these risks and opportunities for organizations, particularly those that are non-financial. This increased transparency leads to better decision making, which helps build and maintain trust in businesses and governments. For organisations, sustainability should mean more than finding new customers, or making profit. Sustain-

ability should encompass wider social and environmental systems. Organisations should be in active pursuit of the triple bottom line which must include the people, profit and the environment. They must understand that the cost of action and inaction could be grave. Hence, they should demonstrate a constant focus on making real change through social outcomes and creating a sustainable future for themselves and their clients. For an organisation to succeed with its sustainability, it must be able to consistently identify and create a roadmap that increasingly values long-term sustainable development in investment, financial transactions and environmental stewardship and its clients or customers. It must show commitment in poverty eradication in the environment it operates in. It must also seek to promote human rights, and advance human security and gender equality and support education for sustainable development which includes secondary and vocational education, and building the skills needed to address the challenges and capitalise on opportunities Furthermore, there are many Nigerian organisations and companies who have not reneged on their corporate social responsibility. A case in point is Access Bank. The bank has created many programmes as parts of its corporate social responsibility. One of such programmes is partnership for visually impaired persons (VIPs). Visually impaired persons face several problems in their daily life. They are excluded in society. In order to bring them into the main stream, both gov-

ernment and private institutions are introducing welfare measures and schemes. Access Bank embarked on a 3-year project to build a 40-room hostel at the Federal Nigeria Society for the Blind, a voluntary organisation with the aim to assist in promoting the general well-being of the blind and rehabilitate and integrate them into the society. This group’s project was aimed at providing the training centre with an opportunity to admit more VIPs though the provision of more hostel rooms/accommodation. Other activities this initiative provided included: seminars on empowerment of VIPs, mentorship, interactive sessions between Access Bank staff and VIPs. Others were provision of support to convert texts books to braille and audio/talking books. Impact was made as the hostel provided for an increase (40%) in the number of VIPs that can be accommodated at the centre from 60 students per session to 100 students per session. Employees encouraged the VIPs by purchasing most of the handmade items displayed during the seminars, e.g. adire, bags, beads, laundry baskets, brooms, stools and tables. Hands-on engagement of staff members in the seminars, the bonding sessions, conversion of their books to braille and audio books. Also, through its “The Take Tomorrow Initiative”, Access Bank takes a three-pronged approach namely education, health and entrepreneurship, to promote sustainable development in the society. In health, the

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group in June 2016, partnered with two non-governmental organisations – Hacey Health Initiative and Asha Initiative – in sensitization of the Dakece community on Vesicovaginal Fistula (VVF). The Group engaged community stakeholders on the importance of accessing antenatal care at registered clinics and delivering babies with the help of skilled midwives, to completely eradicate VVF. In entrepreneurship, the Group partnered with Junior Achievement Nigeria (JAN) on the selection of schools to train in line with the JA training module. The 20-week-long entrepreneurial training session involved mentoring of the students until they were able to birth their business ideas and execute them to maximize profit. Members of the group were distributed into six teams covering six schools to share their knowledge, expertise and experience on entrepreneurship. They volunteered two hours of their time in a week to train the JA students. Currently, the initiative is impacting over 200 students with business education and entrepreneurial skills, empowering them for a productive future. To this end, it is important that organisations renewed their commitment to be more ambitious with investments in their sustainability work. Their sustainability strategy must be designed to leverage their skills and experience to make a positive change to some crucial societal challenges.

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Our ‘irrelevant’ adults are growing up too

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

tanding on the edge of the knowledge intensive economy, Nigeria has 13.2 million children roaming the streets who have never tasted knowledge. The data, from a survey done in 2015, shows that these children who have never stepped into a classroom, are mainly between the ages of six to 14. At this age, it is expected that children should be in school acquiring the knowledge needed to survive in an adult world. Sadly, this is not the case for these children. Data from UNICEF says that about 69 percent of these out of school children are in the Northern part of the country. This means that an average of 7 of every 10 children that have never stepped into a school building to receive formal education lives in the Northern part of the country. Bauchi state is said to have the highest number of out of school children put at 1.1 million followed by Katsina state with about 781,000 children that are out of school. But the latest Human Development Index report published by

the National Bureau of Statistics (NBS) paints a glimmer picture of the education situation in the country. The report shows that 39.6 percent of the country’s population have not completed up to five years of schooling while child school attendance stands at just 23.8 percent of the population. To show how grim the situation the country is facing is, the NBS data shows that the country’s education index which measures the average number of years of school of an average 25-year adult against the expected number of years of schooling declined in 34 states as well as the Federal Capital Territory in the period between 2013 and 2016. This is an indication that the knowledge base of the country declined within the period in 34 states and the FCT. Interestingly, troubled Borno and Jigawa witnessed an increased in the educational index within the period. The only good news from the data is the fact that female education index actually outperformed the male education index within the period, a reflection of the increased focus being placed on female education in the country. However, there are still very grim statistics from the data. For every one male child that is out of school, there is at least two female children out of school. The NBS data shows that 34 million Nigerians have had zero schooling as at 2016. The number of males who have had zero schooling stood at 11.9 million while the number of females with zero schooling stood at 22.34 million. The number of Nigerians that have had no schooling at all is more than the

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The capacity for lifelong learning has become an essential survival strategy for those that will survive in the knowledge economy. The rapidity of the changes in the world around us means that if you cannot learn and relearn skills, then you rapidly become irrelevant

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population of Ghana. So this is like having a whole country of people that cannot read and write. In an age of knowledge, it is highly dangerous for any country to have a good chunk of its population unable to read and write. The World Bank defines the knowledge economy as one that ‘creates, disseminates, and uses knowledge to enhance its growth and development.’ And as the World Bank rightly notes, even though the concept of knowledge is not new, ‘the increased speed in the creation and dissemination of knowledge is making it an even more important ingredient in rapid economic development’ in recent years.

We have entered into a phase where rapid technological development is fast changing the way we do almost everything. But the scary part of the way technology is developing is the fact that it is taking away jobs at a very past pace. Anything that can be automated is being automated. As a popular advert on radio says, 70 percent of the jobs that will exist in future have not been created. Increasingly, it is being recognised that the capacity for lifelong learning has become an essential survival strategy for those that will survive in the knowledge economy. The rapidity of the changes in the world around us means that if you cannot learn and relearn skills, then you rapidly become irrelevant. And that is the huge risk faced by Nigeria’s huge and growing population of people of who have never stepped into a schooling environment. They face the risk of becoming irrelevant in the knowledge economy because of their lack of capacity to learn and relearn to survive in the knowledge economy. The rapidity of the changes in the world around us means that if you cannot learn and relearn skills, then you rapidly become irrelevant. And that is the huge risk faced by Nigeria’s huge and growing population of the people of who have never stepped into a schooling environment. They face the risk of becoming irrelevant in the knowledge economy because of their lack of capacity to learn. The internet of things, artificial intelligence are all ways in which technology is advancing so fast that even ‘sophisticated’ jobs are

now at risk of technology incursion. Menial jobs are even fading out faster. Who needs a gateman when from your phone, you can view almost everything that happens in your house, and around your house, open your gate, check the temperature of your fridge and even get your food warmed and ready before you get home. Even farming may not be an alternative profession for the uneducated in future. We are already witnesses to the difference in yields in between farms in Nigeria and farms in developed countries. There is a clear difference between the yield from an average herdsman in Nigeria and a Cowboy in the US. The rapid development in farming science and technology means that this yield gap will continue to widen in such a way that the average ‘illiterate’ farmer in the remote village naturally becomes uncompetitive. Sadly, the illiterate farmers’ lack of education will also mean that the ability to adopt modern farming techniques will be limited. Popular American author Yuval Noah Harari, notes in her book ‘21 lessons for the 21 st century’ which inspired this article that ‘artificial intelligence and biotechnology are giving humanity the power to reshape and reengineer life.’ Those without the knowledge to partake in this process would be left out and bear the outcome of that process.

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The imperative of driving research and innovation for industry

JULIUS ADELUSI-ADELUYI Adelusi-Adeluyi, OFR, is the President, Nigeria Academy of Pharmacy.

xperts have shown direct links between efficient health system governance and promising health workers outputs, which ultimately have positive effects on overall health outcomes. However access to poor investments in research and development, quality drugs, distrust, dissensions and recurring conflicts among different professional groups in the health sector are some issues that have conspired to ensure that poor health outcomes still persist throughout the country. As a collective that brings together distinguished pharmacists across different spheres of life, the Nigeria Academy of Pharmacy drives thought leadership and

provides expert opinion on matters pertaining to the pharmacy profession and health outcomes in general. The Academy has championed the cause of interdisciplinary, by working steadfastly to promote harmony and team spirit among all members of the health team and other relevant professions, so that every patient enjoys wholesome and beneficial health care. Our mentorship program in which we provide mentoring and support to young pharmacists is also progressing well, with several eminent pharmacists sacrificing their time to mentor and motivate these young professionals. As I stated at one of our Investiture ceremonies, the Nigeria Academy of Pharmacy owes a debt to society. We owe society a duty to help unravel better, safer, more convenient and more affordable medicines and treatment regimens for diseases that afflict mankind, especially those that are endemic to our region of the world. It is for this reason that research is central to our operations, one of the major reasons, indeed, that the Academy came to being. We want to complement local and international efforts that

support scientific research and research activities. Much of the work we have done in this regard has been in the area of advocacy, in engaging government and policy makers on the essence of scientific research and why it is critical to provide better funding and other moral support to scientific research focused institutions as well as individual researchers. We have also, by thought leadership, striven to bring these issues to the fore of public consciousness as a way of shoring up interest by the public and systematically pressurizing government to avail scientific research of more support. In championing the cause of transformational change and innovation by encouraging industry, Research and Development and seizing the several technology advancement opportunities open to Pharmacare, we have birthed the Olu Akinkugbe Research and Innovation Centre of the Nigeria Academy of Pharmacy. This is a vehicle we have created to give enduring impact to research and development in Nigeria’s Pharmaceutical space. Among other things, a pharmacy-driven Research and Innovation centre would serve as an enabling resource for Nigeria investigators

involved in lead discovery and development even as our desire is to see pharmacy professionals increasingly engage and lead at multi-disciplinary research forums with a view to generating high quality medicines related research that in turn will provide insight and inform key policy and operational decisions across a wide portfolio of medicines-related issues. It goes without saying that in a clime such as ours, the pharmaceutical sector has a special role as its products, safe and efficacious medicines are important in providing effective health care for the population. In pharmaceutical industries across the world, medicinal plants have now become an integral component of research as they represent an unparalleled source of molecular diversity for drug discovery and development. Our recent bestowal of a Lifetime Achievement Award by the Nigeria Academy of Pharmacy on Chief Oludolapo Ibukun Akinkugbe is a token of our appreciation of his enormous strides not only in the Pharmacy profession but indeed in all other aspects of human endeavor. As he turns 90 in December, it is only fitting and proper that his number one constituency, Pharmacy, kicks

off the celebration of an illustrious role model whose legacy of love, sacrifice and service would be forever etched in our hearts and minds. It is in the same vein that we induct General Theophilus Yakubu Danjuma as only the second ever Honorary Fellow of the Nigeria Academy of Pharmacy, following in the footsteps of another respected statesman and General, Dr. Yakubu Gowon. He remains one of the most passionate supporters of the Pharmacy profession and a most generous benefactor of scientific research. As an Academy, we will continuously create paradigms to elevate the relevance of the practice of the profession at all levels, particularly in the areas of improved patient care and international best practice. There has never been a more important time for pharmacy professionals to provide evidence of the contribution they make to the health and wellbeing of the nation than now. Whether we work in hospitals or the community, in academia or the high street, we’re all pharmacists and we need to work together to develop and enhance the standing of the profession.

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Frank Aigbogun EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

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GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

Monday 15 October 2018

On the march again in Nigeria’s democracy

ig eria’s larg e number of political parties ended their conventions October 7 in line with stipulations of the Independent National Electoral Commission. The political temperature has since gone up several notches as the parties announce their candidates. Nigeria is thus on the march again on the political hustings, the fifth time since the return to representative democracy in 1999. Politicking leading to elections is one of the hallmarks of democracy. Elections are the main channels through which the people play a role in the famed government of the people for the people and by the people. It starts at the party conventions and then involves the broad electorate at the general elections. The march to the February 2019 general elections would involve the exercise of the adult franchise in selecting representation at various levels, notably positions in the legislature and executive offices of State Governors and their deputies as well as the President and his Vice. It is imperative that the parties and the contestants observe basic

ground rules as they prepare for the hustings. Issues must be the basis for the campaigns. We decry the resort to abuse, name calling and demarketing that has characterised the announcement of a presidential candidate by the leading opposition party and the consequent resort to brickbats. It will not suffice. There are many requiring the intellection and articulation of the parties and the candidates. The economy is primary. Economic matters drive most electoral contests across the world unless there is a national emergency in other areas. In Nigeria, the economy itself is in emergency mode, making it the most critical issue of this election. The parties need to speak to the issues of jobs, health, education and infrastructure. Jobs have become a top-burner issue given the job losses of the last three years. Who has a programme for reclaiming the jobs and creating new ones? What is the plan to improve performance in the various sectors of our economy and the newly emerging fields of technology including artificial intelligence? Reports from relevant authorities globally decry our performance in health and education. What is the plan to improve on these areas?

Nigeria continues also to lag in infrastructure. The Federal Government speaks of an estimate of at least a trillion Naira to bring Nigeria up to par in infrastructure. Where is the route map to the promised land of sufficient infrastructure for the country’s needs? The other is the avoidance of violence in all its forms. We congratulate the parties for the relatively smooth conduct of the primaries across the land. Violence did not feature as a major characteristic of the primaries, unlike in the past. The actual competition must also be free of rancour and violence. Finally, we hope to see vibrant and spirited debates across the spectrum. All persons contesting for offices at various levels should present programmes and policies, canvass and debate them in public forums. We expect such debates to apply for all positions from the State Houses of Assembly through those seeking places in the Red and Green Chambers to persons desiring the Governor’s Offices up to the Presidency. The electorate has a role to play. Social groups, clubs, professional associations, development bodies at all levels should get involved. It is about our communities, our states and our na-

tions. Groups and professional associations should organise Town Hall meetings and other activities where the candidates would present themselves for assessment. It is standard practice in developed democracies and existed here in our salad days of democracy before the military interrupted the growing practice. Let us return to it. Political parties are at the centre of the process leading up to the February 2019 General Elections. They are critical in the leadership recruitment process, so we assume that they are presenting to the electorate those they consider to be the best for the various offices. Nigeria requires that they play a role in the education of the electorate and the formation of public opinion concerning the various offices for which they are presenting candidates. The parties should be pushing for particular public policies in various areas. The quality of the campaigns going forward would be a reflection of the party secretariats. Do the parties have thinktanks to formulate programmes and policies on various issues. To the grind then, one and all, as we take steps to consolidate democratic practice in Nigeria on the march to February 2019 General Elections.

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Monday 15 October 2018

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Monday 15 October 2018 In Association With

Too open for business?

Unwanted Unwanted redred notice

The way China arrested Interpol’s boss has harmed the country’s image

Israel’s ties with China are raising security concerns Oversight is not keeping up with the pace of commerce

HE chief of one of Israel’s intelligence agencies was recently surprised to discover that Chinese construction workers on a major building project might be able to see into a sensitive installation. But it is in keeping with a trend. Israeli security officials are growing increasingly uneasy with China’s expanding role in the economy, particularly its involvement in several big infrastructure projects and its purchase of cutting-edge technology. The concern falls into two broad categories. The first is over Chinese control of strategic infrastructure and the possibility of espionage. Officials are reluctant to go on the record, but many point to the new commercial-shipping facility in Haifa as an example of what is at stake. It is run by the Shanghai International Port Group, which won the tender in 2015 and began working on the site in June. Haifa is Israel’s busiest port and the base of its main naval fleets. Israeli submarines, widely reported to be capable of launching nuclear missiles, are docked there. Yet the deal with the Chinese firm was never discussed by the cabinet or the national security council, a situation one minister described as astonishing. The other concern is over the transfer of weapons technology to the Chinese. Gone are the days when Israel would sell them military hardware. After numerous complaints from America, Israel agreed to cut off arms sales to China in 2005. But a grey area has sprung up around dual-use technology, such as artificial intelligence and cyber-security products, which could be used for surveillance and intelli-

Murky politics could be involved

HEN in 2016 a senior Chinese policeman was elected president of Interpol—an international agency that helps police to co-ordinate across borders—state media portrayed the event as a vote of confidence in China’s justice system and a milestone in the country’s rise. Yet less than two years after he took office, the presidency of Meng Hongwei (pictured, left, at an Interpol meet-

gence purposes. This worries Israel and its allies alike. Security officials note that China is the biggest trading partner of Iran, Israel’s mortal enemy. China has helped modernise Iran’s armed forces and sold it civil nuclear technology. The Chinese are always trying to find ways to buy dual-use products, say Israeli businessmen. Security officials fear more of it is making its way to China. Israel’s commercial ties with China have flourished under Binyamin Netanyahu, the prime minister, who met President Xi Jinping in Beijing last year (see picture). In the first eight months of 2018 Israel sold $3.5bn-worth of goods and services to China, up 63% compared with the same period last year. China accounts for a third of the investment in Israel’s im-

pressive technology sector, said Mr Netanyahu last year. The prime minister will host Wang Qishan, China’s vicepresident, for an “innovation summit” in Jerusalem on October 24th. Mr Wang, the most senior Chinese official to visit Israel, will be accompanied by a large delegation of Chinese investors, including Jack Ma, China’s bestknown e-commerce tycoon. But Israel’s oversight of its trade with China does not appear to be keeping up with the pace of commerce or technology. Special export licences are needed to sell some dualuse technologies, but there are plenty of loopholes, say Israeli businessmen. In his zeal to improve commercial ties, Mr Netanyahu has dragged his feet on plans to form a government agency that would regulate deals with China—and, he

fears, slow down trade. “Israel has to do business with China, of course, but there is no serious mechanism to make sure that we don’t sell off key economic assets and valuable technological knowledge,” says Efraim Halevy, a former head of Mossad, Israel’s foreignintelligence service. With oversight lacking, Israeli firms are often left to police themselves. “Ultimately Israeli companies want to be able to work both in China and in the West,” says an Israeli businessman with nearly two decades of experience selling high-tech products to the Chinese. “It means we have to regulate ourselves and learn how to say no to the Chinese when they want to buy or invest in some of our products.” Unsurprisingly, security officials are not satisfied with that set-up.

ing in Beijing last year) has come to a chilling end. Chinese officials took the 64-yearold into custody in late September, after he flew back to China for what was supposed to be a short trip away from Interpol’s headquarters in the French city of Lyon. They did not admit that they had done so until October 7th, and only after Interpol had issued a statement saying that its president’s whereabouts were unknown. It had been a strange few days, during which all that was known was that Mr Meng’s wife, Grace, had reported him missing to French police. On October 7th she appeared before reporters in Lyon, keeping her back to the cameras in order to hide her face. She showed the journalists an emoji of a knife that had been sent from her husband’s WhatsApp account shortly after he arrived in China. She said she had understood the message as a sign that he was in danger, and that she had heard nothing from him since. French officials said Ms Meng and her two children were under police protection, having received a threatening call. Interpol said Mr Meng had resigned. It will probably never be known how long China would have waited before announcing Mr Meng’s arrest had not his wife and employer Continues on page 19

Monday 15 October 2018

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In Association With

The world economy

The way China arrested...

The next recession

Continued from page 18

Toxic politics and constrained central banks could make the next downturn hard to escape

UST a year ago the world was enjoying a synchronised economic acceleration. In 2017 growth rose in every big advanced economy except Britain, and in most emerging ones. Global trade was surging and America booming; China’s slide into deflation had been quelled; even the euro zone was thriving. In 2018 the story is very different. This week stockmarkets tumbled across the globe as investors worried, for the second time this year, about slowing growth and the effects of tighter American monetary policy. Those fears are well-founded. The world economy’s problem in 2018 has been uneven momentum (see article). In America President Donald Trump’s tax cuts have helped lift annualised quarterly growth above 4%. Unemployment is at its lowest since 1969. Yet the IMF thinks growth will slow this year in every other big advanced economy. And emerging markets are in trouble. This divergence between America and the rest means divergent monetary policies, too. The Federal Reserve has raised interest rates eight times since December 2015. The European Central Bank (ECB) is still a long way from its first increase. In Japan rates are negative. China, the principal target of Mr Trump’s trade war, relaxed monetary policy this week in response to a weakening economy. When interest rates rise in America but nowhere else, the dollar strengthens. That makes it harder for emerging markets to repay their dollar debts. A rising greenback has already helped propel Argentina and Turkey into trouble; this week Pakistan asked the IMF for a bail-out (see article). Emerging markets account for 59% of the world’s output (measured by purchasing power), up from 43% just two decades ago, when the Asian financial crisis hit. Their problems could soon wash back onto America’s shores, just as Uncle Sam’s domestic boom starts to peter out. The rest of the world could be in a worse state by then, too, if Italy’s budget difficulties do not abate or China suffers a sharp slowdown.

Cutting-room floors The good news is that banking systems are more resilient than a decade ago, when the crisis struck. The chance of a downturn as severe as the one

that struck then is low. Emerging markets are inflicting losses on investors, but in the main their real economies seem to be holding up. The trade war has yet to cause serious harm, even in China. If America’s boom gives way to a shallow recession as fiscal stimulus diminishes and rates rise, that would not be unusual after a decade of growth. Yet this is where the bad news comes in. As our special report this week sets out, the rich world in particular is ill-prepared to deal with even a mild recession. That is partly because the policy arsenal is still depleted from fighting the last downturn. In the past half-century, the Fed has typically cut interest rates by five or so percentage points in a downturn. Today it has less than half that room before it reaches zero; the euro zone and Japan have no room at all. Policymakers have other options, of course. Central banks could use the now-familiar policy of quantitative easing (QE), the purchase of securities with newly created central-bank reserves. The efficacy of QE is debated, but if that does not work, they could try more radical, untested approaches, such as giving money directly to individuals. Governments can boost spending, too. Even countries with large debt burdens can benefit from fiscal stimulus during recessions. The question is whether using these weapons is politically acceptable. Central banks

will enter the next recession with balance-sheets that are already swollen by historical standards—the Fed’s is worth 20% of GDP. Opponents of QE say that it distorts markets and inflates asset bubbles, among other things. No matter that these views are largely misguided; fresh bouts of QE would attract even closer scrutiny than last time. The constraints are particularly tight in the euro zone, where the ECB is limited to buying 33% of any country’s public debt. Spending ceilings Fiscal stimulus would also attract political opposition, regardless of the economic arguments. The euro zone is again the most worrying case, if only because Germans and other northern Europeans fear that they will be left with unpaid debts if a country defaults. Its restrictions on borrowing are designed to restrain profligacy, but they also curb the potential for stimulus. America is more willing to spend, but it has recently increased its deficit to over 4% of GDP with the economy already running hot. If it needs to widen the deficit still further to counter a recession, expect a political fight. Politics is an even greater obstacle to international action. Unprecedented cross-border co-operation was needed to fend off the crisis in 2008. But the rise of populists will complicate the task of working together. The Fed’s swap lines

with other central banks, which let them borrow dollars from America, might be a flashpoint. And falling currencies may feed trade tensions. This week Steve Mnuchin, the treasury secretary, warned China against “competitive devaluations”. Mr Trump’s belief in the harm caused by trade deficits is mistaken when growth is strong. But when demand is short, protectionism is a more tempting way to stimulate the economy. Timely action could avert some of these dangers. Central banks could have new targets that make it harder to oppose action during and after a crisis. If they established a commitment ahead of time to make up lost ground when inflation undershoots or growth disappoints, expectations of a catch-up boom could provide an automatic stimulus in any downturn. Alternatively, raising the inflation target today could over time push up interest rates, giving more room for rate cuts. Future fiscal stimulus could be baked in now by increasing the potency of “automatic stabilisers”—spending on unemployment insurance, say, which goes up as economies sag. The euro zone could relax its fiscal rules to allow for more stimulus. Pre-emptive action calls for initiative from politicians, which is conspicuously absent. This week’s market volatility suggests time could be short. The world should start preparing now for the next recession, while it still can.

expressed their concerns about him in public. On October 8th China’s Ministry of Public Security released a report of a pre-dawn meeting that day of its Communist Party committee. It quoted participants as saying that Mr Meng was being investigated for allegedly taking bribes and for other unspecified wrongdoing. They said that Mr Meng’s detention was evidence that no one was above the law, and that Mr Meng had “only himself to blame” for his difficulties. Attendees agreed on the need to “maintain a high level of conformity with the political stance, the political direction and the political principles of the party centre” with the country’s leader, Xi Jinping (pictured, right) at the centre’s “core”. Such emphatic language suggests that the case may involve allegations of political misbehaviour, not just of graft. “This is political ruin and fall!” Ms Meng said in a text message to the Associated Press, a news agency. The hugger-mugger of Mr Meng’s arrest seemed a snub to an organisation that is supposed to respect and promote due process—and to the delegates whom China had persuaded to elect its man as Interpol’s president (he was the first Chinese citizen to hold the post). Yet in the context of Mr Xi’s long-running campaign against corruption, Mr Meng’s treatment is not peculiar. Interpol’s chiefs retain their old government jobs while on secondment to Lyon. As a serving vice-minister of public security, Mr Meng is not immune to proceedings instigated by superiors in his home country. Since Mr Xi took over as China’s leader in 2012 hundreds of thousands of officials have been jailed or otherwise punished, ostensibly for their involvement in graft. In some cases the charges have appeared aimed at neutering political rivals as much as cleaning up the party. Until recently, the usual practice was to detain suspects using a system known as shuanggui, an extra-legal form of arrest that allowed party members to be held in secret for months. At the start of this year shuanggui was replaced with an alternative investigatory process managed by a new branch of government, the National Supervision Commission (NSC). Mr Meng is the most senior official known to have been detained by this body.

BUSINESS DAY

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In Association With

An ugly beauty contest

Nigeria’s presidential election pits a wheeler-dealer against a soldier Oddly, both candidates are Muslim and from the same northern ethnic group

ND then there were two. After a long night of intrigue and counting in primary elections in Port Harcourt, the People’s Democratic Party (PDP), Nigeria’s main opposition, chose Atiku Abubakar as its presidential candidate for the elections in February. At the same time, the ruling All Progressives Congress (APC), more predictably, unanimously backed the incumbent, Muhammadu Buhari, for a second term. Both candidates are boringly familiar to voters. Mr Abubakar has been in every election since 1999; Mr Buhari every one since 2003. Oddly for a country where half the population is younger than 18, both candidates are in their 70s. Both face the challenge of energising an electorate that is growing disenchanted by extravagant promises that bring little change. Equally striking is that both are northerners, Muslim and belong to the Fulani ethnic

group. That ought to be of little consequence. But it counts for much in a country where people often vote along ethnic and religious lines, and where parties usually ensure that candidates from the north and south take turns standing. For all their outward similarities, the two are quite different characters. Mr Abubakar, a wealthy former vice-president and customs-service chief, is a politicians’ politician, a gregarious character who mas-

terfully outflanked his rivals in Port Harcourt. He campaigns as a business-friendly candidate who will get Nigeria’s economy going. By contrast President Buhari, austere and introverted, is a former military ruler who does not hurry to make decisions and is suspicious of Nigeria’s corrupt political and business elite. Mr Buhari’s aides say his administration can claim successes in the fight against jihadists in the north-east and in diversifying

the economy away from its dependence on oil, which once accounted for 90% of government revenues. Corruption is likely to be a prominent issue. Mr Abubakar was singled out by America’s Senate in 2010 in a report on money laundering. It said he had channelled substantial funds of uncertain origin into America through proxy accounts. Mr Abubakar is backed by Goodluck Jonathan, a former president under whose chaotic rule between 2010 and 2015 corruption proliferated. Mr Abubakar’s supporters note that their candidate is the most investigated politician in Nigeria’s history, and that no charges have ever stuck. Mr Buhari’s extraordinary victory in 2015 challenged the long-held view that it was impossible to unseat an incumbent in Nigeria. A key to his success was his ability to hold together an awkward coalition of parties to defeat Mr

Jonathan. To repeat the trick, Mr Abubakar will need to win the full-throated support (and financial resources) of rivals he has just trounced for the nomination. Mr Buhari’s challenge is different. Although his nomination was uncontested, the party has been tearing itself apart over which candidates will run for state governorships and seats in the senate. The first lady, Aisha Buhari, said on Twitter that some of the APC’s primaries had been rigged. She criticised party managers for sanctioning a culture of “impunity”. Her husband will need to impose discipline on the party. Turnout in 2015 was just 43%. In more recent state elections it dropped to 20%. In a system where the party machinery is needed to turn potential support into actual votes, it is the battle within that may determine the outcome of the presidential election.

The temperature rises

Why the IPCC’s report on global warming matters A new report produces an odd mixture of alarm and apathy

OR decades scientists have warned that rising atmospheric concentrations of greenhouse gases from the burning of fossil fuels risk adversely affecting the climate, increasing ocean acidity, the frequency of freak weather and other symptoms of planetary ill-health. But it seemed that keeping the temperature within 2°C of pre-industrial levels, although disruptive, would probably leave Earth in a chronic but stable condition. A report unveiled this week from the Intergovernmental Panel on Climate Change (IPCC), a UNbacked body that musters the science needed to inform policy, shows how optimistic that was. The survey was commissioned in 2015 by the then 195 signatories of the Paris climate agreement— which commits them to keep warming “well below” 2°C and to “pursue efforts towards 1.5°C”. The effects and technical feasibility of keeping warming within this tighter limit were the report’s focus (see article). How it was put together, the message it contains and the reaction it elicited all matter. First, the way it was assembled. Although the report presents no

new science of its own, its survey of more than 6,000 studies is meticulous. With every passing year scientists amass more data about how the climate has already changed. And, as many people battered in Florida this week by Hurricane Michael will attest, it is changing faster than anyone foresaw even two decades ago. This new knowledge, together with improved understanding of the complex climate system, makes projections like those the IPCC has compiled more compelling. Uncertainties remain; individual research contained within the report may yet be challenged. But in

study after study, page after page, fact after fact, the evidence for anthropogenic climate change, long clear, is harder than ever to ignore. The report’s message is also beyond doubt: the extra half a degree makes a big difference. Arctic summers could be ice-free once a decade in a two-degree world, but once a century in a one-anda-half-degree one. Virtually all the ocean’s coral might be irreversibly wiped out in a two-degree world, rather than 70-90% if temperatures rise by less. Sea levels may rise an extra 10cm, washing away the livelihoods of millions more people. Permitting a rise of two degrees

could also see an extra 420m people exposed to record heat. The 2°C target has been baked into climate policy for years—the number was first put forward by William Nordhaus, who shared the Nobel economics prize this week (see Free exchange). It is too lax. Hitting either target would entail transforming economies at a breakneck pace. To achieve 1.5°C, the world would by 2050 need to eliminate all 42bn tonnes of carbon-dioxide in annual emissions. Renewables, including hydropower, would have at least to treble their share of electricity generation from today’s 25%. Internal-combustion engines, which power 499 out of 500 cars on the road today, would have to all but vanish. Progress is being made. The number of electric cars on the road is rising fast; green finance is gathering momentum; zero-carbon technologies are being developed. But the scale of the effort required is unprecedented. That is why reaction to the IPCC’s report matters. Some European Union environment ministers want to adopt 1.5°C as a guide to policy before a UN summit in Poland in December. Their Aus-

tralian counterpart called it “irresponsible” to phase out coal by 2050. Donald Trump, who plans to withdraw America from the Paris deal, has not read it. A mix of alarm and apathy has both galvanised efforts to secure a 2°C future, and also bedevilled them. A target of 1.5°C is no more likely to be met, but may nonetheless encourage the world to try harder.

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Pension stakeholders call for increased compliance to ensure sustainability of the CPS ...want FG to pay over one-year accrued rights ....as industry invests over N709bn in capital market MODESTUS ANAESORONYE in Calabar

takeholders in the nation’s pension industry weekend in Calabar, the Cross River State Capital called for increased compliance, particularly by the Federal Government to ensure sustainabilityofthecountry’sContributory Pension Scheme (CPS), now in its 14 years, after reform of the sector in 2004. They said that the biggest challenge facing the scheme today is the non payment of pension accrued rights of Federal Government employees who transited to the CPS from the old Defined Benefit Scheme, stating that this is robbing off negatively on the achievements recorded with the new scheme. According to them, pension accrued rights was last paid in August 2017, meaning that federal government employees that retired from that time till now will not have access to their pensions being managed by Pension Fund Administrators(PFAs) because the accrued rights and their new accumulations with PFAs have to be joined together before commencementofpensionpayments. The Stakeholders including Legislators, the National Pension Commission (PenCom) executives and the Pension Fund Op-

Akintunde Oyebode, executive secretary, LSETF (l), with Dipo Faulkner, country general manager, IBM West Africa, at the partnership signing of the Digital - Nation Africa (D-NA) Initiative in Lagos State.

erators (PenOp) made the call at the Maiden Retreat organised by PenOpforNationalAssemblyJoint Committee for Establishment and Public Service of the Senate and House of Representatives CommitteeonPensionsheldinCalabar. EmmanuelPaulker,chairman, Senate Committee on Establishment and Public Service of the Senate joined by other legisla-

tors emphasised on the need for PenCom to work closely with the executive arm of government towards ensuring that pension is not undermined in this country. He said that the non provision orunderprovision offundinginthe budget remains the responsibility of the executive government, and shouldnotbeallowedtohappenas pension takes greater priority over

whomigratedfromtheoldscheme tothisschemeasitleadstodelaysin pension payments. “ This casts a pall on the otherwise efficient structure put in place under the CPS and robs it of its effectivenessvis-a-vistimelypayment ofpensionsofpublicsectorretirees. Adedeji said despite various engagementswiththegovernment on the need to provide adequate funding to pay up the backlog of accrued rights and pensions; it is still an ongoing challenge. She said the aim of the Retreat is to discuss and compare notes on how best to forge a long lasting collaborationbetweenthepension industry and the legislature and to move the industry forward as we support our joint efforts to secure the future of our people. AishaDahir-Umar,actingdirector general of the National Pension Commission in her keynote address solicited the cooperation of legislators in handling the issue of delayedpaymentofaccruedrights,

which she noted has brought untold hardships to retirees. “While budgetary provisions had improved there is still a gap with our projected number of employeesthatwillberetiringthat the budget has not provided for.” Speakingontheachievements of the CPS, Dahir-Umar, represented by Mohammed Datti said it is now fourteen years since the introduction of the CPS and i am pleased to note that appreciable progress has been made. Dahir-Umar stated that as at August,2018,thePensionIndustry membership has grown to 8.31 million participants, while the size ofthePensionFundAssetsstoodat N833 trillion. “Thenumberofretireesreceiving benefits under the CPS as at August 2018 was 245,657. Out of that number, 89.308 retirees are on programmed withdrawal and 56,349 have opted for annuity. In the same vein death benefits had been paid to 52,468 beneficiaries”,

many any other things, because you cannot allow workers who have retired not to access their pensions atthepointofretirement. Ronke Adedeji, president of PenOp said the lack of sufficient funding for accrued rights and pension contributions by the State and Federal government is a main concern for all stakeholders in the CPS and more so for contributors

AIICO boosts sector capacity to underwrite risk in agriculture business MODESTUS ANAESORONYE

he nation’s underwriting capacity for agric insurance and allied businesses in the agricultural sector has received a boost with the formal launch of AIICO Insurance agric insurance policy. AIICO is a major player in the nation’s insurance industry with strong financial capacity to support growth in the agricultural sector, where only a few players have delved into, particularly now that flood risks is ravaging the farms lands across the country. AIICO Insurance, in response to the dire need for adequate insurance in protecting investments in agricultural sector, last week in Lagos launched its Agriculture Insurance policy.

To achieve optimal result, the underwriting firm has partnered with NIRSAL, an agency of government helping to increase finance accessibility to holder farmers across the country. Edwin Igbiti, managing director/CEO who spoke during the official launch ceremony held in Lagos said the firm is taking strategic position to be a major player in offering Agriculture Insurance in order to deliver the much needed protection to the different players in the agricultural value chain. He stated that insurance coverage in the country is still at its lowest ebb when compared the number of small holders farmers. He said it is obvious that active participation of insurance companies are required to deliver much needed protection to farmers and other stake-

holders in Agricultural sector in terms of risk exposure. He said AIICO has decided to come in, as one of insurance leaders in the industry in taking this strategic position to be major player in offering agriculture insurance in order to deliver the much needed protection in different players in agricultural value. Having recently obtained approval of our regulator NAICOM as an agricultural insurance underwriter, he said the company is uniquely positioned to offer both indemnity and index based agricultural products to farmers at all levels. He said: “As investors, we are looking to tap the good potential of the sector through its value based insurance proposition. It is our believe that our courage to introduce full array of ag-

ricultural insurance product offerings to the market will go a long way to support the initiative and intervention of government in job creation and diversification of the economic towards economic development and empowerment. “With an average contribution of 24 per cent, agriculture has remained a significant contributor to Nigeria’s GDP. Being the provider of employment for over 60 per cent of the population, agriculture is pivotal to economic development, and more of the efforts to revive the economy, and reduce significantly the level of poverty, should be devoted to energizing the agricultural sector. The agricultural sector is exposed to extremely high degree of risk arising from natural factors like weather conditions, pests and diseases and other

environmental forces. “Having recently obtained approval from the National Insurance Commission (NAICOM) as an agriculture underwriter, AIICO is uniquely positioned to offer Agriculture Insurance to Nigerian farmers at all levels, as well as investors looking to tap into the huge potentials of the sector, through its valuebased insurance propositions. The company’s competitive edge is hinged on its understanding of the exact needs of farmers through the application of knowledge and expertise in this line of insurance business.” Babajide Arowosafe, executive director, NIRSA on his part said agriculture is permeating every sector especially the financial sector of the economy He lauded AIICO for taking the giant stride to provide

insurance cover for farmers and partnering with NIRSAL. He explained that NIRSAL is one of the institutions that was established by the Central Bank of Nigeria (CBN) to permeate the agricultural sector and we have a major player that we hear towards having insurance. He observed that one of the major issues that is being raised by farmers about insurance is that there is no clarity, noting that with the major intervention by institutions like AIICO, he believes that they will get clarity and appreciate insurance more than ever before. He said it is good that the two Organisation are partnering and hopes that it will bring proper agenda that will lay the foundation for them to contribute immensely to the growth insurance and agricultural sectors.

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COMPANIES & MARKETS LASACO Assurance moves to raise N10b new capital ...targets Tier 1 level

L-R: Gbolahan Awonuga, executive secretary, ALTON; Oluwaseun Omotosho, head mobile financial service, 9Mobile; Esaie Diei, head of mobile money, Globacom; Johnson Oyewo, senior manger, regulatory affairs, MTN; Jane Amadi, MFS manager, MTN; Ismaila Suhailu, revenue assurance manager, ntel, and Samuel Akinsola, manager, sales support & performance analysis, ntel, during the inaugural meeting of the Telecommunications Financial Committee to discuss deepening financial inclusion and literacy in Lagos.

MODESTUS ANAESORONYE

nder writing firm, L ASACO Assurance Plc has announced plans to raise additional capital to the tune of N10 billion from its existing and new shareholders, as part of efforts to position the company for Tier 1 risks in the new industry ecosystem. The insurer having secured the approval of its shareholders will in the weeks ahead unf o l d st rate g i e s to ra i s e t h e n e w f u n d t hat w i l l enable it play big in t h e nat i o n ’s i n s u ra n c e industr y, under the curre nt Ti e r Ba s e d Mi n i mu m S o l v e n c y Ca p i t a l re cently introduced by the National Insurance Commission (NAICOM). At the Company’s Extra Ordinary General Meeting held in Lagos, t h e B o a rd o f D i re c t o r s a m o n g o t h e r s s e c u re d the approval of the shareholders, that subject to the approval of the relevant regulator y authorities, to raise additional capital through the issuance of up to

10,000,000,000 (Ten Billion Naira) ordinar y shares of 50k each at 50k per share either by way of Public Offer, Special placement or Rights issue and /or up to 10,000,000 (Ten million) Preference Shares of 1,000 each at N500 per share’’ . Aderinola Disu, chairman of the Company said the Tierb a s e d re c a p i t a l i s a t i o n exercise being initiated by the NAICOM, the re g u l a t o r w a s re s p o n -

sible for the move by the company to upgrade its capital base to enable it play in the top echelon of the insurance sector of the economy. To this end, she said, the insurer is planning to raise addition capital through issuance of up to 10 billion ordinar y shares of 50 kobo per share and of 10 million preferential shares of N500 per share, subject to the rele vant re gula tor y approvals.

Mikano International unveils special promo to celebrate 25th anniversary IFEOMA OKEKE

n a bid to celebrate its 25years of operations in Nigeria, Mikano International Limited has unveiled its latest sales promotion which is scheduled to start on October 15th 2018 and end January 2019 targeted at rewarding its loyal customers. The sales promotion which covers Mikano’s products for the steel factory, lighting solution, power generation, heavy equipment and spear parts, promises to reward customers instantly after purchase of the products. Speaking during a press conference to announce activities to celebrate its 25years anniversary, Carol Chukwura, assistant marketing manager, Mikano said customers who purchase products in the value of N125,000 or more stand the chance of winning several prizes. Chukwura further explained that each time customers purchase products within the range of N125,000 or more, they get a ticket and once customers get up to three tickets as a result of the purchases, they automatically win a voucher, which can be used to buy anything within the value of voucher from

Mikano. She disclosed that the company is also unveiling a CRS initiation focusing on Science, Technology, Engineering and Mathematics (STEM) for undergraduate students of Nigeria. According to her, “STEM is a Mikano’s 25th anniversary CSR initiative aimed at promoting education and creating opportunities for young technical students to gain skills in their technical field of education. This creates a competitive environment for young Nigerian students to show their skills. “This unique is developed to identify, promote and reward creative university students in Nigeria. It is strictly for university students from ages of 17 to 25.” Also speaking at the occasion, Loukman Jouni, sales director, Mikano stated that part of the future plan of the company is to ensure that Nigeria and Africa as a whole get the best of the power back-up needed for its growth and development. Jouni assured that Mikano has taken a credible step by signing a partnership agreement with the renowned German Power generator company, MTU Onsite Energy to deliver a more reliable Independent Power Plant (IPP) gas power

project in higher engine capacities, delivering over 450 megawatts for industrial use. He added that this is already been delivered and commissioned in some of its customers manufacturing industries. Speaking on some of the activities been rolled out to celebrate its anniversary, Maysaa Hermes, head, marketing and communication, Mikano said the company has implemented series of activities and CSR initiatives that support the cause of underprivileged and disadvantaged members of the Nigeria society by donating to school of the blinds and orphanage homes through Mikano community outreach, giving scholarships to undergraduates and introducing promo for customers to benefit from. Others activities carried out by Mikano she mentioned include organising Russia 2018 world cup bar activation for football fans in Lagos and fully supporting Balmoral/ Russia in Lagos Fan Festival as the official power partner. Mikano is a solution provider with an extensive portfolio in power generation, steel fabrication, electrical and lighting infrastructures, Hyundai construction equipment and forklifts; and real construction business in Nigeria.

Speaking on behalf of shareholders, the Fo u n d e r, In d e p e n d e n t S h a re h o l d e r s A s s o c i a tion of Nigeria (ISAN ), Su n ny Nw o su , a d v i s e d the company adopt the option of preferential shares, while re ducing its ordinar y shareholders, a decision, he said, would allow shareholders get good returns on investments, especially, through the preferential shares. Other resolutions

reached at the meeting includes, “ That the Authorized Share Capit a l o f t h e C o mp a ny b e and is hereby increased from 10,000,000,000 ( Te n Bi l l i o n ) t o 20,000,000,000 (Twenty Billion) by the creation and addition thereto of 10,000,000,000 (Ten Billion) Ordinar y Shares of (fifty) 50kobo each, such new shares to rank paripassu in all respects w i t h t h e e x i s t i n g O rdinary Shares in the

capital of the Company’’. Also agreed was “That Clause 6 of the Me m o ra n d u m o f A s s ociation and Article 43 of the Articles of Association respectively be and are hereby amended to re f l e c t t h e n e w Au t h o rized Share Capital of N 1 0 , 0 0 0 , 0 0 0 , 0 0 0 ( Te n Billion Naira) divide d i nt o 2 0 , 0 0 0 , 0 0 0 , 0 0 0 ( Tw e n t y Bi l l i o n ) O rd i nar y shares of 50kobo each’’.

Emerging Africa Capital Group appoints Nike Akande group chairman MICHEAL ANI

merging Africa Capital Group has appointed Nike Akande, a former Minister of Industry and immediate Past President of Lagos Chambers of Commerce and Industry (LCCI), as group chairman to pilot and to professionally drive the vision of the group. The Emerging Africa Capital Group (EAC) group is a provider of financial services aimed at facilitating investment processes for African entities, individuals and investors who are interested in Africa’s attractive investment opportunities. Akande is a seasoned industrialist and a believer of strong and virile private sector as the engine and catalyst of economic growth. She is a founding member and a Director Board Member of the Group as well as a foundation member of the Nigeria Economic Summit Group (NESG) and Member of the African Business Roundtable (ABR). “It is going to be a lot of im-

provement judging from the fact the people in the board are experienced and professional and I have experience as well. Thus, we are going to use our experience and professional capabilities for the benefit of the company,” Akande said. The EAC has three arms, including Emerging Africa Capital Limited, which is its parent company and provides wealth management, investment facilitation, business and governance consulting and investor representation services. It also has the EAC advisory, its core investment banking business chaired by Mahmood Bello. The last arm of the firm is the EAC Trustee, which is chaired by Cecilia Madueke and provides trust services with specifics to Asset holding, investor representation and fiduciary services to corporate and institutional investors. However, Akande was appointed group chairman and chairman of the board comprising 11 members across the emerging Africa group.

Apart from the appointment of the board members, EAC also celebrated a ground-breaking event with the launch of a book written by its group Chief Executive Office, Toyin Sanni. The book which aims to deepen the Nigerian capital market, examines the Nigerian socio-political background and history. It also features the Nigerian economy including the demography, political structure, the states of reforms and the different sector that investor would want to invest in. “I feel fulfilled and grateful to continue to have an opportunity to give to a market, industry, society that over the years gave me opportunities. I welcome more opportunities to give back; this is the third of my books and by God’s grace is far from the last”. Sanni said. Mahmood Bello, chairman of EAC advisory said he considers it as a green book for investors in Africa that are interested in investment. “It is a book for the timing population of the youth who are unemployed as it is going to give them hope”, he added.

Monday 15 October 2018

COMPANIES & MARKETS Business Event

L-R: Olawale Adebiyi, chief executive officer, Wecyclers Nigeria Ltd; Bruno Witvoet, Unilever Africa president, and Bawo Ayeseminikan, proprietor, Ken Ade Private School, Makoko, during Brunoâ&#x20AC;&#x2122;s visit to Makoko Community, Lagos.

L-R: Ebisan Akisanya, trustee, Boys to Men Foundation; Achenyo Obaro, chief executive officer, Mitimeth; John Obaro, MD, SystemSpecs Limited, and Ifeoma Idiobe, founder/executive vice chairman, Boys to Men, at the October 2018 conversation in Lagos. Pic by Olawale Amoo

L-R: Issac Adewole, minister of health; Edward Ihejirka, special adviser, health affairs, Imo State; Anari De West, busness marketng manager, Phllips West Africa, and Jide Idris, commissioner for health, Lagos State, at the official launch of Philips Lumify, First App-Based Portable Ultrasound System in Nigeria, in Lagos.

L-R: Umar Pate, guest speaker; Udeme Ufot, group managing director, SO&U Group; Grace Ekpe, representative of the minister of information and culture, and Garba Kankarofi, Former Registrar, Advertising Practitioners Council of Nigeria (APCON), during the APCON stakeholders forum on Political advertising in Abuja.

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Managing

24 BUSINESS DAY

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Monday 15 October 2018

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GOVERNMENT

BUSINESS DAY

MOJI ADEYEYE

BUSINESS

Director General, NAFDAC

Interview with Public Sector Leaders

‘Nigeria needs incentives to attract pharmaceutical investment’ The concept of ‘fake drugs’ is quite popular in Nigeria. Millions of people who fall sick become victims of these medicines, and some could be so unlucky when it costs them their lives. At the forefront of this ‘war against fake drugs’ is Nigeria’s regulatory body; National Agency for Food and Drug Administration and Control (NAFDAC). MOJI ADEYEYE, a professor of pharmacy who practised in the United States for 30 years before taking up the appointment as NAFDAC’s Director General, discussed a range of issues bedevilling the sector with CALEB OJEWALE, with inputs from ANTHONIA OBOKOH, in an interview conducted during the Medicine Quality and Public Health Conference in Oxford, UK. She spoke about countries notorious for exporting substandard and falsified medicines to Nigeria, and the need for Nigeria to encourage investments in the local pharmaceutical industry. This way, Nigeria would reduce importation of medicines, estimated around 80 percent of total usage by the country of 190 million people. Excerpts:

niversal Health Coverage is often discussed in Nigeria, in the context of deepening health insurance, but you have hinted at another dimension. So, what is the nexus between UHC and access to medicines? Actually when it comes to Universal Health Coverage, the quality of medicine is extremely important. First, the medicine has to be of good quality in order for it to work. Secondly, if it is substandard, you have inherent problems; antimicrobial resistance, treatment failure, lack of confidence in the distribution system generally, and trade problems. In Nigeria, most of our sub standards are from outside the country. Sometimes there are clones of already existing locally manufactured products. Therefore, it is not just the fact that it has health implications, but also trade implications. This is because, the companies that are supposed to be supplying medicine to the population are now competing against the clones, whereas those clones are substandard. Therefore, it is linked together in a way, and the outcomes are not good in terms of Universal Health Coverage. The costs of the medicines have to be considered, as that should be factored into the Universal Health Coverage. It should also be emphasized that we cannot sacrifice quality for cost. Therefore, we need to ensure a balance for quality medicines and at reasonable costs. This is partly where the government comes in, by providing incentives to local manufacturers. Because, bear in mind that in Nigeria we import most of our raw materials, it is only water that we do not import. As this is the situation, the government has to come alongside local manufacturers in order to create an environment that is conducive for manufacturing locally, selling locally and not just selling locally, but of course regionally and continentally. Few weeks ago we were in China; the minister of health, myself and some other people, talking about partnership between Chinese government and entrepreneurs with Nigerians. We do not want people to just come and sell; we want companies to come, set up and partner with local manufacturers. Right now, we import 70 to 80 percent of our medicines and what we need is the opposite. We need to start manufacturing up to 80 percent locally because that is the way we can ensure easy

access to medicines, and how it can become affordable. At the beginning, it may not be as cheap as we would want, but part of our discussion with the Chinese government is also attracting manufacturers of the APIs (Active Pharmaceutical Ingredients) and manufacturers of non-actives to come and start manufacturing in Nigeria. That way, the products (that is, medicines) will become cheaper later. Aside from Universal Health Coverage, we also have to strengthen the economy. If the economy is weak then it does not matter how much rebate you give and ask people to pay in getting cheaper medicines, since they may not be able to afford it. So, everything is kind of linked in terms of trade, Universal Health Coverage, the quality of medicine and the cost. One area of global health concern where Nigeria has been falling behind is Malaria. In terms of improving the malaria mortality rate, why don’t we seem to be there yet, and what are you currently doing to improve Nigeria’s indices in this regard? Actually, we have a lot of anti malaria drugs in Nigeria already. Some of them are manufactured outside Nigeria, but we want those people to come and manufacture for us (here) in Nigeria. But it is not just the medicine, it is also making sure they have (the right) quality. We have essential medicines; anti-malarias, antibiotics, and antiretroviral. And as a way of ensuring quality supplies, there is the mobile authentication scheme where you put a code on the package and the patient will dial the number to know whether it is authentic or not. It is a data gathering initiative. Sometimes patients do not get a reply because of disconnect between the vendors that

The government has to come alongside local manufacturers in order to create an environment that is conducive for manufacturing locally, selling locally and not just selling locally, but of course regionally and continentally

with the professionals; the pharmacists, PCN to be sure that we are on the same page. Currently, that is working out very well and we hope that January 1st is going to be at least a phase taking off.

manufacture the codes and the manufacturer of medicines. To address this, we have a guideline now, and the deadline is almost over for people to make comments so that we have a robust, better guideline in terms of use of this mobile authentication system. This system is focused on anti-malarias, antibiotics and anti-retroviral drugs because those are the ones that are falsified the most. So is it compulsory for every anti-malarial drug and other essential medicines to have it?

Yes And whichever one that does not have it? They will be violating our rule The second major area of health concern Nigeria is lagging the rest of the world is in Maternal Mortality. Some drugs used in Nigeria when women go into labour appear to have equality issues, and I understand it is not so much about the drug having the right quality, but the handling also matters. Is there anything NAFDAC has to do in this regard? Actually yes, NAFDAC is doing a lot. First of all NAFDAC and USP joined together to do a research, which revealed about 70 percent of the Oxytocin in the (Nigerian) market or in the hospitals have degraded because of climatic condition in storage. However, our advocacy now is in enlightenment; going to the different hospitals and health institutions to talk with nurses and doctors. Nurses especially and pharmacists of course, because they think that they can put the drug (Oxytocin) in room temperature and it is okay. No, there has to be a cold chain storage. Juhel in Awka is a local manufacturer of Oxytocin now. The

Right now, we import 70 to 80 percent of our medicines and what we need is the opposite company is one of the biggest parenteral (or injection) companies in Nigeria, and what they are going to do is actually supply Oxytocin in cold packs or cooler packs so to say. That way, it starts ringing the bell that this is not just any other product; it is a special product that has to be handled differently. That word is going out but we are going to be doing a lot of advocacy through the media. Apart from Oxytocin, what of general knowledge on handling of medicines which affects their efficacy in the end? That is something the Pharmaceutical Council of Nigeria (PCN) has to really get on with because, it is the pharmacist, the patent medicine dealer that handle medicine. PCN is the one that overseas that group. So it is a good question that you asked and it is a good opportunity for PCN to have enlighten-

ment and education for their members. On open markets sale of drugs, it seems we still have quite a number of them, what is being done to address this? The minister (of health) has said that they need to be controlled. Take for example, patent medicine dealers, before there was no control, now they have to be licensed and it is subject to maintenance and quality of their products. This is because; we will go there to do sampling as part of our own pharmaco-vigilance since we have the lab and other tools. For this, it is both NAFDAC and PCN working together to make sure that there is quality. By January 1, 2019, the minister of health has given a deadline for all the open market, patent medicine dealers to come under the umbrella of a supervising pharmacist in a medicine mall. The malls, (located in different cities) will be huge; one each in Lagos, Onitsha, Kano and I believe, one in Aba. They are being built in phases as we speak because it is huge so they may just start small and then they scale it up. Also, there is a law that is being done. I have had two sessions with the open market people and the patent medicine dealers because we have to talk with them. Before, there was an impasse so I, first of all, brought together the open market traders and let them know that we need them. We cannot get rid of them, if you cannot get rid of a group, then you have to accommodate them. In the second meeting, we had all the open market people coming together

There is this growing concern about drug abuse, especially among young people. What are your views on this trend as a regulator, also as a mother who will be concerned about young people getting involved in this habit, how can the country effectively tackle the problem? We are trying to tackle the problem as we speak. First, NAFDAC was removed from the ports in 2011 and if you remove the people that are supposed to control import from the port then you get the answer that drugs will flow; bad drugs will flow into the country. Fortunately, after advocating for about four months, they listened, and now they have returned us back to the ports. May 16th they officially gave us a notice that we are back at the ports. That is one problem, which has precipitated a lot. When a country has no control of narcotics for about seven years, you can imagine the wrong that has taken place. Boko Haram has gone haywire because it trades in narcotics and they give it to our children before they tie bomb to them so that they will not know what they are doing. The Tramadol, Codeine and others are being shipped from South-East Asia under “For Exports Only” and their regulatory authorities do not have control over what is labelled “For exports Only”. I have challenged them, I said exports only to where? To Nigeria? We are working now to make sure that the regulatory authorities have control of all drugs leaving their port. They told me that all shipment should have Certificate of Pharmaceutical Products (COPP), which is a WHO document. That is good but they should internally work on their regulatory controls. WHO, should also strengthen their global monitoring system because people know that most of our bad drugs come from South-East Asia; from India and China. If that has been narrowed down then the light should be shone on those places so that they will know that the world is watching them and that will reduce influx. Aside from all the regulatory belt tightening, we also believe that we have to interact with the communities, so, NAFDAC has a nationwide community advocacy against

drug abuse. We will be going to secondary schools and actually conducting a scientific study. We will give questionnaires to students from JS1 to SS3 about drug abuse and by that, we will know the scope. We do not know the scope of the problem right now so our activities in this regard entail community advocacy, regulatory tightening, and social

Few weeks ago we were in China, talking about partnership between Chinese government and entrepreneurs with Nigerians. We do not want people to just come and sell; we want companies to come, set up and partner with local manufacturers enlightenment. Do you have any data on convictions of people who have been involved in importation of bad medicines? We have data, but it is not in one place unfortunately. I am now just trying to improve our documentation so that the legal department and investigation enforcement department will have their own folders in an intranet type of place so that every data will be available at a glance. However, there have been many prosecutions but unfortunately, they have been weak. This is because; somebody

brings in Tramadol and you fine the person N200,000 or One year in jail or someone brings in falsified Augmentin, and gets fined N200,000, N500,000 or One year in jail. Of course, they will bring out N500,000. So the punishments are not deterrent? It does not create deterrent, and that is the problem we have. There is a bill in the National Assembly that aims at giving stiffer penalties but again we have the Nigerian factor, and I hope that we will be able to get there. I have found six bills currently trying to make amendments to NAFDAC, why so much duplicity? The problem is part of corruption because; it depends on who you know. It is not what is of the country’s interest because I cannot understand why we will have so many bills. Even some of those, I may not be aware of it and if I’m not aware of it, it’s not likely to end well. If I don’t know what they’re talking about and nobody involves NAFDAC, not just me but also our Legal services don’t have input, then it cannot scale through. What do you think are the limitations possibly hindering you from achieving the objectives of NAFDAC and even doing more? Actually, I will not call them limitations, but ignorance on the part of government. Ignorance generally on what it takes to establish and monitor quality of a drug. It takes machines and they are very costly. One equipment can cost up to USD$500 thousand. We have about Seven Labs in Nigeria in the different geographical zones and we are supposed to be testing quality of medicine. To re-equip, update this pieces of equipment cost

money but people do not understand that. Perhaps we have not let people understand in the past that it costs a lot of money to ensure quality of medicines. Bear in mind, NAFDAC is also responsible for food. We have to check the pesticide residue, whether there is mould, aflatoxin, and microtoxin in foods and to achieve this, we use sophisticated equipments. That is one ignorance (or lack of understanding) of the cost of maintaining a lab. For instance, to analyse Paracetamol you have to compare it with a standard, which we get from USP. One hundred milligram can cost up to USD$500, and that is for 0.1 of a gram. It is that costly because they synthesized it under very strict conditions. It is in its purest version which you want to reference to, so it is very costly and even our own stakeholders have to understand that it is costly to do quality monitoring. It also costs us a lot of money to inspect because when you are doing inspection or pharmacovigilance, you have to use vehicles. Up until the time I came, we did not have good vehicles so that is another component. Everything is almost gearing towards money or things that we can use money to buy; equipments, vehicles, and other things but I think the word is going out slowly that this is the reality. In terms of tariff, we have the lowest tariffs in the whole of Africa, yet we are the biggest Medicine Regulatory Authority. Now we are reviewing our tariffs because it is tariffs that enable us afford to buy equipments, vehicles etc. The government does not support us as such. They give us support for salaries but they do not support us as you would think in terms of infrastructure whether it is equipment, building, vehicle or anything else. We have to generate our own Internally Generated Revenue (IGR), which is why we need money from tariffs and the other administrative running that we do.

BUSINESS DAY

Monday 15 October 2018

BUSINESS DAY

Monday 15 October 2018

BUSINESS DAY

30 BUSINESS DAY

C002D5556

Monday 15 October 2018

Access Bank Rateswatch Market Analysis and Outlook: October 12 - October 19, 2018

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.50

Q2 2018 — lower by 0.45% compared to 1.95% in Q1 2018

Broad Money Supply (M2) (N’ trillion)

24.86

Decreased by 0.45% in Aug’ 2018 from N24.97 trillion in July’ 2018

Credit to Private Sector (N’ trillion)

22.47

Increased by 0.94% in Aug’ 2018 from N22.26 trillion in July’ 2018

Currency in Circulation (N’ trillion)

1.93

Increased by 5.69% in Aug’ 2018 from N1.82 trillion in July’ 2018

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

11.23

Increased to 11.23% in August’ 2018 from 11.14% in July’ 2018

Monetary Policy Rate (%)

Raised to 14% in July ’2016 from 12%

Interest Rate (Asymmetrical Corridor)

14 (+2/-5)

Lending rate changed to 16% & Deposit rate 9%

External Reserves (US$ million)

43.35

October 11, 2018 figure — a decrease of 1.53% from October start

Oil Price (US$/Barrel)

85.83

October 12, 2018 figure— an increase of 3.85% from the prior week

Oil Production mbpd (OPEC)

1.73

August 2018 figure — an increase of 4.48% from July 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

12/10/18

5/10/18

32,456.98 11.85

32,383.15 11.82

Volume (bn)

0.16

0.17

(2.54)

Value (N’bn)

2.24

1.49

50.74

NSE ASI Market Cap(N’tr)

Change(%)

NIBOR Friday Rate

12/10/18

1-week Change

YTD Change

(%) 0.23 0.23

MONEY MARKET Tenor

Indicators

Friday Rate

Change (Basis Point)

Energy Crude Oil (Bonny light$/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Gold ($/t oz.) Silver ($/t oz.) Copper ($/lb.)

(%)

85.83 3.18

3.85 (1.24)

33.15 4.06

2157.00 115.85 78.43 13.11 518.00

6.47 7.67 3.20 5.64 (0.48)

11.42 (11.02) 1.20 (14.48) 19.49

1221.12 14.63 279.90

1.60 0.00 (0.30)

(7.32) (14.89) (14.61)

(%)

12/10/18

5/10/18

OBB

19.17

20.86

(169)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

19.75 9.38 13.78

22.50 10.00 13.46

(275) (63) 32

Tenor

90 Days

14.08

13.79

1 Mnth 3 Mnths

12.83 12.68

12.35 12.44

48 24

Friday

1 Month

(N/$)

Rate (N/$)

6 Mnths 9 Mnths 12 Mnths

13.11 14.22 15.18

13.19 14.22 14.78

(8) 0 40

12/10/18

5/10/18

12/09/18

FOREIGN EXCHANGE MARKET Market

Friday

Official (N) Inter-Bank (N)

306.35 361.05

306.30 360.37

306.15 355.78

BDC (N) Parallel (N)

362.99 361.00

362.50 361.00

360.00 361.00

Friday

Change

(%)

(Basis Point)

12/10/18

5/10/18

3-Year 5-Year

0.00 14.52

0.00 14.48

0 4

7-Year 10-Year 20-Year

14.96 14.88 15.12

14.92 14.79 15.02

4 8 10

Indicators

Index

5/10/18

Friday

Change

(%)

(Basis Point)

12/10/18

5/10/18

2,679.30

2679.79

(0.02)

8.66 5.46

8.66 5.48

(0.01) (0.31)

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

9.07 -46.49

9.09 -46.44

(0.02) (0.05)

TREASURY BILLS (MATURITIES) Tenor

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

(Basis Point)

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

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

Change

(%)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

AVERAGE YIELDS Friday

Friday

(%) 12/10/18

BOND MARKET Tenor

Friday

91 Day 182 Day 364 Day

Amount (N' million) 9,520.12 17,600.58 106,370.50

Rate (%) 10.9 12.098 13.33

Date 3-Oct-2018 3-Oct-2018 3-Oct-2018

Global In the US, inflation rate slowed to 2.3% in September 2018 from 2.7% in the previous month. This was spurred by a drop in the prices of gas, fuel, used car and shelter. It is the lowest rate seen since February 2018 according to the Bureau of Labour Statistics. This might signal that price gains may remain close to where Federal Reserve policy makers want them amid an outlook for continued gradual interest-rate hikes. Core inflation (excludes food and energy) was steady at 2.2 percent, the same as in August. In a separate development, UK trade deficit expanded by £0.7 billion to £1.27 billion in August 2018 from a revised £0.57 billion in July. The office of National Statistics reported that it is the biggest trade gap since May 2018 as imports climbed faster than exports. Imports widened by 2.4% to £56.35 billion in August from £55.02 billion the preceding month driven majorly by importation of chemicals, fuels, crude materials, beverages and tobacco. While exports rose 1.1% to £55.07 billion in August mostly due to sales of miscellaneous manufactures, fuels, food and live animals, machinery and transport equipment and beverages and tobacco. Elsewhere in China, the National Bureau of Statistics revealed that China trade surplus advanced to $31.60 billion in September 2018 from $27.38 billion in the same period of 2017. It is the largest trade surplus since June, as exports grew at a faster 14.5 percent year-on-year to $226.5 billion, while imports increased by 14.3 percent to $189.49 billion. Surprisingly, China recorded a record trade surplus of $34.13 billion with the U.S. in September amid intense trade tensions between the world's two largest economies. This is probably due to exporters benefiting from increased orders before U.S. tariffs hit, but the figures are likely to show stress in the months ahead. Over the first nine months of the year, the trade surplus fell to $225.7 billion from $303.43 billion in the same period 2017. Domestic The Nigerian Stock Exchange (NSE) in its monthly Domestic & Foreign Portfolio Investment report for the month of August 2018 revealed that transactions at the nation's bourse shrank by 8.37% to N133.84 billion from N146.07 billion recorded in July 2018. Total foreign transactions increased by a significant 96.21% to N70.97 billion from N36.71 billion the prior month. However, total domestic transactions moved in the opposite direction, dwindling by 42.79% to N62.87 billion from N109.9 billion in July. A breakdown of foreign transactions showed that there was an increase in foreign inflows in the reference month by 84.87% to N36.66 billion from N19.83 billion in the prior month. Similarly, foreign outflows grew by 109.97% to N34.31 billion in August from N16.34billion in the preceding month. The cumulative transactions from January 2018 to August 2018 increased by 22.99% to N1.877 trillion compared to the same period in 2017 (N1.526 trillion). In a separate development, the Central Bank of Nigeria's (CBN) Business Expectations Survey report for the month of September showed an increase in the respondents' overall confidence index (CI) on the macro economy. According to the report the CI climbed to 24.8 index points relative to 21.5 points in August, driven by increase in the volume of total order, business activity, and financial conditions. The businesses outlook for September 2018 also showed greater confidence in the macro economy at 64.5 index points compared to 61.6 points previously. Stock Market Trading on the Nigeria Stock Exchange closed on a bullish note as hunt for bargain in bellwether counters halted the bearish performance seen last week. Accordingly, the All share Index (ASI) increased slightly by 0.23% to 32,456.98 points from 32,383.15 points the preceding week. Similarly, Market Capitalization increased by a similar rate at 0.23% to N11.85 trillion from N11.82 trillion the previous week. We expect

increased bargain hunting in the midst of volatility and profit taking ahead of the Q3 earnings scorecards. Money Market Cost of borrowing at the money market posted differing directional performances in various segments. Longer tenured interbank rates, such as the 30-day and 90-day NIBOR finished higher at 13.78% and 14.08% from 13.46% and 13.79% respectively while the call rates slid to 9.38% from 10%. In contrast, short-dated placements such as Open Buy Back (OBB) and the Over Night (O/N) rate declined to 19.17% and 19.75% from 20.86% and 22.5% respectively the previous week. This was as a result of the Retail Secondary Market Intervention Sales (SMIS) that took place on the last trading day of the week and triggered a spike in interbank rates. This week, we expect rates to decline due to inflow from expected treasury bill maturity of N494 billion. Foreign Exchange Market The naira-dollar exchange rate depreciated across most market segments last week. At the official window, it retreated by 5 kobo to settle at N306.45/$ from N306.40/$ the preceding week. Similarly, at the Interbank market the local unit weakened by 60 kobo to close at N362.29/$ from N361.68/$. Meanwhile, at the parallel market the currency closed flat at N361. The weakening seen in the official and interbank markets comes amidst sustained intervention in the FX market by the monetary regulator. This week, the naira is expected to be stable on the back of sustained interventions by the apex bank. Bond Market Bond yields closed on a bearish note for the week ended October 12th 2018 driven by sell-offs on the February 2028 bond. The February 2028 bond is the only trading bond that will be reopened at the October auction, so investors are selling off in order to buy at a higher yield at the auction. Yields on the five-, seven-, ten- and twenty- year debt papers closed higher at 14.52%, 14.96%, 14.88% and 15.12% from 14.48%, 14.92%, 14.79% and 15.02% respectively the previous week. The Access Bank Bond index declined marginally by 0.49 points or 0.02% to close at 2,679.30 points from 2,679.79 points the previous week. This week, weak sentiments is expected to persist as we continue to see improved offers from investors towards the long dated maturities. Commodities Oil prices edged downwards as stock market selloff had investors offloading risk assets, knocking oil prices back from nearly four-year highs struck last week. In addition, the U.S. Energy Information Administration (EIA) reported a build in commercial crude oil inventories of 6 million barrels which drove prices downwards. Accordingly, OPEC basket price, dropped $3.95 or 5% to $80.14 per barrel. In contrast, the traditional haven asset is beginning to regain some of its old glimmer as prices rose for the second consecutive week as the U.S. and international stock market continue to plummet. A lower U.S dollar index and tame U.S. inflation figure also worked in favour of the precious metals. Gold rose 1.60% to $1221.12 an ounce, silver remained unchanged at $14.63 an ounce. This week, oil prices are likely to decline further as the international energy agency and OPEC slashed their forecast for global oil demand. For bullions, they might continue to benefit from the global stock market decline as investors move into safer territories.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Oct’18 Nov’18

Dec’18

Exchange Rate (Official) (N/$)

362

365

Inflation Rate (%)

11.30

11.32

11.45

Crude Oil Price (US$/Barrel)

77.00

78.00

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

Monday 15 October 2018

BUSINESS DAY

Monday 15 October 2018

BUSINESS DAY

Monday 15 October 2018

Start-Up Digest

In association with

How Akinlofa grew Luztow into multi-million naira logistics firm ODINAKA ANUDU

oung entrepreneurs are taking different sectors of the Nigerian economy by the storm. They are everywhere, tapping into opportunities provided by the economy. One of the entrepreneurs leveraging opportunities in the Nigerian economy is Tosin Akinlofa, who decided to go into the logistics industry after leaving a paid employment in 2013. He started this business with N100, 000, using 70 percent of the money to register it at the Corporate Affairs Commission (CAC). Left with just N30,000, the entrepreneur endured hard times and worked hard to woo customers. Five years after, Akinlofa is the chief executive of Luztow Logistics International Limited, situated at Idimu Road, Ejigbo, Lagos, a firm that has become a multi-million naira entity. Luztow provides logistics and delivery services for Nigerians, serving ecommerce firms. It also clears goods from the ports. “We are still growing. When we started, throughout that year, we did almost nothing in terms of business. We started doing business in 2014. Today, monthly turnover is in millions,” Akinlofa tells Start-up Digest. “I have always wanted to employ people, to create avenues for people to showcase their potential. There was no way I could do that while in paid employment. So, I took the bull by the horns and tendered my resignation letter. I then registered this company. It was very challenging when I registered the company because capital was not there. I launched out into the deep and

Tosin Akinlofa

started networking, telling people what I could do. Initially, people did not believe me because there were big players in the industry. But as time went on, people started seeing what I could do,” he narrates. The entrepreneur says that one major challenge he faced at the earlier stage of his business was trust. Akinlofa says that Nigerians have issues with trusting others owing to the bad experiences they might have had in the past. “It is not easy for someone to

entrust you with his or her goods. I didn’t try to convince them to give me, but I showed them what I could do. Some persons trusted me and today, I am happy,” he recalls. Why did he go into the logistics industry? He explains that logistics is a business that is broad and with a bright future. “If we can tap into logistics, we will forget about oil. Logistics creates employment and generates revenue for government. If the ports are put in proper shape, if the roads

are in proper shape, a lot of revenue would be created. I saw that light in logistics, which was why I decided to go into it,” he explains. Today, the entrepreneur employs three permanent staff members and has five persons on contract. The entrepreneur says that he runs his business in a different way. “You can get to me directly. I do same-day delivery service. Once I pick your order, I deliver it immediately. I don’t do stories. You don’t have to know anybody before you can reach me.” His business is on the social media, and he puts measures in place to protect the integrity of parcels and goods through insurance. “We have insurance policies. We have fire and burglary insurance, among others that cover the goods we collect from our customers,” he says. It is not all rosy for the entrepreneur, given the poor state of link roads to Apapa ports. “It is part of the challenge that we face in this part of the world. But somehow, we have found a way to navigate through it. As Nigerians, we have developed a thick skin so we find alternative routes. So, instead of going through Tin Can, we go through Ajegunle, to Amukoko, and to Mile 2,” he states. Contrary to the belief of many young entrepreneurs, Akinofa says that funding is not the biggest challenge facing entrepreneurs. “Really, funding is not the biggest problem because if you have funds but don’t have the requisite knowledge, the funds will disappear,” he says. “If you are given N10 million and you don’t have necessary knowledge of how to utilise the money, it will disappear in two years. “The biggest problem entrepre-

neurs have is lack of training. I am happy that universities are including entrepreneurship in their curricula. Years ago, it was not there, but now it is being included. If you are not trained on how to manage funds, you can hardly run a successful business. I came to LCCI Mentoring Programme to learn how to manage funds and it has been quite helpful.” In 10 years’ time, Akinlofa expects to have presence in all the major cities in Nigeria. “By next year, we will have two more branches in Lagos. Towards the end of next year, we want to be in the FCT, Abuja,” he discloses. The entrepreneur also explains why many small businesses fail in Nigeria. “In every five years, a new business fails. One reason is lack of proper knowledge. Two is lack of patience and perseverance. We had our own rough edges when we started. Some of our clients that used our services before would often call and ask, ‘Are you still doing delivery service?’ I will just answer them jocularly, ‘If I am not doing it, what else should I be doing?’ “This leads to the issue of consistency. Most entrepreneurs are not consistent and dogged. Once many entrepreneurs start their business, they will immediately want to drive cars from the proceeds of the business, build houses from the business and do flashy things from there. Business is just like a baby. Do you expect a baby to start making money for you? No, but you have to nurture the baby and allow the baby to grow. You have to invest in the baby. The baby goes to school and matures. Until we begin to see businesses like this in Nigeria, entrepreneurs will be failing,” he says.

Experts want business leaders to fund, mentor young entrepreneurs JOSEPHINE OKOJIE

xperts at the Afr ican Green Revolution Forum (AGRF) in Kigali, Rwanda, recently charged African leaders to finance and mentor entrepreneurs to scale up the continent’s agriculture and achieve food security. “Africa has a short time to create jobs for its fast growing youth population. Governments on the continent must give commitment in terms of investments and provide mentorship for youths to scale up agriculture,” Fred Swaniker, co-founder and Trustee, African Leadership Academy, said. “Africa has an unusual advantage but it is yet to capture them. The opportunities we have as a continent is how to let the youths think differently about agriculture and move beyond raw material production by making them see

opportunities in value addition,” Swaniker said. He stated that Africa can only attract youths into through a holistic approach that looks at the entire entrepreneurial ecosystem. He added that ideas, team and capital are important in the entire entrepreneurial ecosystem. “The mixture of ideas, a team and capital brings about entrepreneur-

ship. We need to identify people with innovative ideas and bring venture capital to unlock the vast potentials on the continent.” With a population 1.2 billion and potential to reach 2.5 billion by 2025— where youths will account for 60 percent the population— experts foresee danger in Africa if nothing is done to stem youth unemployment.

Agriculture is the sector that creates jobs for over 80 percent of the workforce in Africa, but youths have found it less attractive owing to the drudgery involved and the lack of innovation and technology in the sector. “Employment trends in Africa are not only a problem to Africa but globally. The continent’s labour force growth rate is 3 percent per annum and 60 percent of working poverty youths with a per capital income of $3.10,” Carla Henry, senior technical specialist, International Labour Organisation (ILO) said. “Africa has to invest in human capital development,” Henry said. Similarly, Alex Ariho, CEO, African Agribusiness Incubators Network (AAIN), said, “Our solutions have to start at home and our leaders must start believing in the young people. This has to start at the leadership level if we really want to take agriculture to the next level.

“The response model must be able to speak to each category of youths on the African continent. We need to create assemblies of mentors to nurture the emerging start-ups coming out of the continent agricultural space,” he added.

Start-Up Digest Team ODINAKA ANUDU Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Angel James Joel Samson Graphics

BUSINESS DAY

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Monday 15 October 2018

Start-Up Digest

Sunday Eze: The shrewd furniture maker JOSEPHINE OKOJIE

n 2016, Sunday Stephen Eze quit his pharmaceutical job to start a furniture business. Today, he runs a firm that designs, produces and installs furniture for clients across the country. Sunday’s Pasich Furniture was inspired by love for drawings and creativity as well as desire for entrepreneurship. “I was inspired by my urge for creativity and the mere fact that I have always wanted to be entrepreneur, designing and creating things that will be used for interior furnishing,” he says. To further broaden his desig n s a n d c reat iv it y skills, Sunday took up a job in a furniture firm. The pharmacistturned-furniture maker started small from his personal savings. His start-up capital was spent on registration and purchase of basic carpentry tools. Through the profit he got from his first contract, h e w a s a b l e p u rc h a s e more carpentry tools for the business.

Sunday Eze

“Well, as shocking as it may sound, our initial start-up capital was basically the money used in registering the company b a ck t h e n a n d bu y i ng some carpentr y tools,” Sunday says. “After the first job we did, the profit made was used to buy the first set of handle- held tools for

carpentry and from there came other equipment and tools. Our modus operandi till date is, make money and put it right back into business,” he explains. The young entrepreneur says the business has grown well since starting, as its client base keeps expanding. “The business

Diamond Bank makes MSME strides, gets global recognition as top retail bank ODINAKA ANUDU

igeria’s leading retail bank Diamond Bank plc has been rated 4-stars and ranked as one of the best retail banks globally by the Lafferty Banking 500 Index 2018. According to Lafferty, Diamond bank was selected as one of the top banks globally after credible information gathering process adopted by the Lafferty Research and Development division, using key financial parameters like Financial Position, Strategy, Corporate Culture, Living the Brand, Digital Advancement, Management Experience and Customer Satisfaction of the bank to their customers. Commenting on the rating and recognition, Uzoma Dozie, CEO, Diamond Bank Plc said, “Through our ‘Beyond Banking’ strategy, we have refocused our business on delivering positive outcomes for our customers and be relevant at their point of need. Our goal is to

deliver inclusiveness to all sectors of society, promoting business and entrepreneurship as well as solving the gender and financial inclusion gap that holds us back in Nigeria. We have made great progress through a mixture of strong technological innovation a strong internal culture led by a diverse and experienced management team who live the core values of the bank. This recognition by the Lafferty Group helps validate our strategy and we are honoured to receive the rating as one of the top global banks”. In his address, Robert Giles, head of retail banking, Diamond Bank plc, said “Through our digitallydriven strategy we have been able to reach more customers than ever before and at the same time deliver consistent customer experiences. In the last few years over 10 million customers have been able to open and operate a bank account without needing to go to a bank branch, helping to close the financial

inclusion gap and bringing financial solutions closer to customers’ homes or places of work. We are delighted to be recognised as one of the top banks globally by Lafferty Group and to receive the highest rating in Nigeria”. Michael Lafferty, chairman, Lafferty Group, London, in his speech, commended Diamond bank for a job well done. Meanwhile the bank has continued to make strides in the area of the micro, small and medium business. In a recent interview, Ayodele Olojede, head of emerging businesses at Diamond Bank, said the bank has supported MSMEs in different ways. “We lent up to N1 billion to 560 MSMEs in eight to 10 months’ period. Our officers are trained to be able to help you put together your financial statement and your books, while taking care of issues relating to collaterals and succession plans. Outside of that, this year alone we have been able to lend N20 billion to over 5,000

has grown well. We have worked in over 18 states in Nigeria and our client base keeps expanding.” Currently, Pasich Furniture has 19 permanent employees and 10 contract staff members. “We have 19 permanent staff and about 10 contract staff. The contract staff members are mostly made up of

carpenters who help us in carrying out installations of already produced furniture in situations when we have clashing deliveries to make,” the young entrepreneur says. He tells Start-Up Digest that the company sources the majority of its raw materials overseas. Sunday says that Pasich Furniture plans to expand the size of its factory by almost five times its current size before the end of 2019. A l s o, t h e c o m p a n y plans to open a showroom in Abuja and subsequently other cities in Nigeria and Africa at large. “Presently our factory is a 400 square metre size. We have plans to move into a 1,900 square metersized factory sometime next year. Next year, as we move into a bigger factory, we plan to open up our first showroom in Abuja, from where we can gradually open other branches across Nigeria, and later Africa,” he says. Sunday states that poor power supply has remained the major challenge facing his business and has continued to increase cost of production.

He identifies lack of employees’ dedication to job as another problem facing the business, adding that this has led to continuous engagement and disengagement of staff members. He calls on the Federal Government to create an enabling environment for indigenous businesses to thrive and grow the economy of the country. He also wants removal of stringent requirements to access government finances. “The Bank of Industries (BoI) will ask you to get a reference from your village chief and a guarantor that is a director in a government ministry and other near impossible things,” he says. He says the Nigerian furniture industry has the potential to be a foreign exchange earner for the country if the government can provide the right environment for the industry to grow. When asked what he would tell his younger self, Sunday says, “I will tell my younger self not to ever give up, to be always positive, hardworking and to prove anyone wrong when they say you cannot achieve this or that.”

Skills acquisition: Rector calls for improved female vocational training SIKIRAT SHEHU, Ilorin

n order to build a stronger and sustainable economy for Nigeria, the need to train more females on skills acquisition and technical education has been stressed. Mashood Elelu, rector, Kwara State Polytechnic, who stated this at the opening ceremony of Women in Technical Education and Employment (WITED), National Coordinating Committee (NCC) meeting in Ilorin, the state capital, said women play a versatile role in the labour economy, which is why they need to have quality education so as to function properly in the society. “We cannot have a strong economy without good labour force, and good labour force is made up of both men and women. “Irrespective of your qualification, without skill, you cannot survive. The population of women in

Nigeria is more than men and it keeps increasing. Therefore, I want charge members of WITED to keep organising vocational training for young generation particularly girl – child and use the opportunity available to them to improve the welfare of women in terms of providing adequate information that would be useful to their career.” The rector, who is also the chairman ofd Committee of Heads of Polytechnics and Colleges of Technology (CHEADS), said the Federal Government has set up a committee for skills competition for girl-child across the country to build the capacity of women to manage their home properly. In her address of welcome, Adijat Bukola Aiyelabegan, WITED coordinator at the state polytechnic, explained that WITED is an organisation started in 1988 by Commonwealth Association of Polytechnics in Africa (CAPA) to oper-

ate in African polytechnics and colleges of technology with the mandate to identify and confront those factors which inhibit the significant participation of the girl -child in science, technical and vocational education training (STVET) programmes at all levels. She noted that in Nigeria, the Council of Heads of Polytechnics and Colleges of Technology (COHEADS), since inauguration in October 1997, has collaborated with and has tremendously been of assistance to WITED to enhance the noble goals. “Today, WITED exists in about 50 Polytechnics and Colleges of Technology across Nigeria.” In her submission, Regina Ada Amadi, the national coordinator of WITED, pointed out that the association was formed majorly to better the lots of women in technical education subsector to contribute to the National growth.

BUSINESS DAY

Monday 15 October 2018

Start-Up Digest

Funding sources for start-ups in Nigeria

here is no business without finance. The required level of funding might be small, but there must be some level of funding. Since funding is of critical importance to the development of an idea into a business, there is definitely a need to look at the possibilities. In the Nigerian business environment, it is very uncommon to get a bank loan to start up a business. Yes, I know that we all dream of a N1 billion bank loan being granted for our different start-up businesses. Yes, that can only happen in Nollywood movies. So, lets take a look at some nonbanking sources of funding for our start-up businesses. Personal investment Personal investment will come in handy at the launch stage of a business, as sales are low but steadily increasing. Start-up entrepreneurs convert their existing assets (buildings, cars, shares, etc.) into cash for investments in their start-up businesses. Profits usually lag behind sales due to the initial start-up costs already incurred. There is no urgency to repay the investments because it is the seed money from the entrepreneur. This is one of the reasons why people with day jobs are able to better survive the initial cash-flow crunch in the early tears of a new start-up business, as they have a fallback position to draw form. Any start-up that is deprived of cash inflows whenever it is critically necessary will face an early death. In fact, many start-ups will sacrifice extra profitability in favour of immediate cash-flow when faced with such do-or-die positions. Personal investments in a business tend to give an indication of the entrepreneur’s long-term commitment and belief in the business opportunity. Apart from the fact that there is a limitation as to the level of cash that the entrepreneur can invest in the business, there is usually a risk that such funds might not be efficiently utilised as a result of the one-man syndrome – the entrepreneur spends as he wishes since he is not accountable to anyone. Due to our egocentric nature as

dependent evaluation of the legal, accounting, and operational position of the targeted business at the discretion of the venture capitalist. This is one of the reasons why it takes a while for venture capitalists to decide whether to invest or not. In this type of arrangements, there is usually a loss of control and diminished ownership. The venture capitalist might also demand special rights in the business and could bring in a member of their team to join the management team. It must be noted that venture capitalists usually have a wealth of experience and network which could assist the business on its journey to growth. However, each venture capitalist might have preferences as to the types of business it supports. RSG Funding Program is an example of a SME-focussed financing group, backed by young professionals in oil and gas, telecom and professional services sector. The Lagos State Employment Trust Fund (LSETF) also provides cheap loans to entrepreneurs in Lagos. There are several others as well. Nigerians, personal investments is sometimes the only source of investments as it is an automatic ticket to the chairman/managing director or the MD/CEO titles, which we covet so much. The other sources of funding, however, will require that the start-up entrepreneur relinquish some level of control and share of profit (or loss) to the other financiers. But the $1 million question is this, do you prefer to be a big fish in a small river, or an average-size fish in a large ocean? Family, friends and networks Once start-up entrepreneurs are willing to consider external sources of funds, their immediate community – family, friends and networks – are the immediate targets for consideration. It is important to note that a business relationship with friends or family members should not be taken lightly and may also involve relinquishing some equity in your company. At the launch stage of a start-up business, it is easier to source funds from family and friends rather than debt finance due to its unproven

business model and uncertain ability to repay debt. However, as the business begins to show signs of growth, entrepreneurs can begin to expand the their scope to networks of colleagues and business associates. The funding at this stage could be either equity or debt. Entrepreneurs must be clear as to their expectations, and must ensure that there is a clear communication of their preferences and intentions to these potential investors. Once agreements are reached, there must be detailed agreements that clearly spell out the terms of the relationship – such as type of funding being provided, tenor and interest rate for the loan (where applicable) and loan payment schedule, share of equity being purchased, profit sharing ratio, process for raising additional funding, transfer of equity ownership, responsibilities of all the parties in the business in addition to the exit clause. The agreement doesn’t need to be fanciful - it must just be workable. The absence of such a signed agreement will lead to disagreements, sorrows, tears and maybe, not

blood. The agreements could be made to reflect the informal nature of the transaction, but it must be documented. Venture & private capital This involves giving up some ownership or equity in your business to an external party – sometimes experienced individual investors or investor groups or institutional investors. Usually, the start-up entrepreneur might not necessarily have any prior relationship with such venture capitalists. They are in it primarily for the money. No permanent friends, just permanent mutual (but sometimes exclusive) interest. Venture capitalists take an equity position and, at times, a hybrid of equity and debt in a company to help it carry out a promising but higher risk project. They, of course, expect a healthy return on their investment. It is important to state here that venture capital is not necessarily for all entrepreneurs. Due to the structured decisionmaking process of the venture capitalists, they may require the entrepreneur to engage a firm like Roedl & Partner to perform an in-

Conclusion: Banks and venture capitalists will look for you when you have demonstrated that your business truly has a valid and real business case. Individual private investors might also not be willing to risk their investments until they are certain that there will be returns on their investments. It is always easier to get funding for growth and expansion. But until then, let’s continue to focus on the nonbanking sources of funding. Whatever source you opt for, you need to source for finance from sources that work for you. The above article was co-authoured by Wole Oluyemi and Sandra Ejikonye. Wole Oluyemi is a chartered accountant and business advisor, with special interests in SME businesses, strategy, finance and tax. He is also a doctoral researcher at Cranfield University (UK) with research focus on corporate political strategy. He can be reached at @WoleOluyemiCo on Instagram, Twitter and FaceBook. Sandra Ejikonye, the co-authour, is an Associate at the Lagos office of Roedl & Partner.

SMEs in Alaba International seek government presence ...As Ugochukwu emerges chairman, IMA electronics section

aulinus Ugochukwu, new chairman, International Market Association, Electronic section, Alaba International Market, has called on both federal and state governments to boost infrastructure in the area to help businesses, especially small and medium enterprises, to grow. Ugochukwu, who made the call at the inauguration ceremony of his administration, lamented that in spite of the revenues the government generates from the market, the traders are yet to feel government’s presence.

He said that roads leading to the market are sorry sight, making them lose most of their customers who now opt to source their goods elsewhere, rather than get trapped on the Badagry Expressway and other connecting roads to the market. “Apart from that, to bring in our goods from the port to Alaba is now problematic as most truck drivers don’t want to ply the road and those that will agree charge us as high as N600,000 to N700,000 ,” he said. The new President, therefore, called on the government to find

solution to Badagry Expressway traffic gridlock and also provide the market with infrastructure like uninterrupted power supply, good pipe borne water, amongst others. He thanked all that voted him into the office and promised to work with its executive assiduously to bring more and improved infrastructure in the market. He also promised to decongest traffic on the streets of the market by eliminating streets trading, adding that Alaba would be returned to its lost glory. Ugochukwu hinted that his

administration would stop the unnecessary extortion and touting going on in Alaba. Also speaking at the event, Uchenna Nnadozie, former chairman, IMA, Electronic Section, charged the new executives on hard work even as he tasked members of the association to give the new excos all the support as he and his cabinet enjoyed. He also called for government involvement on the affairs of traders emphasising that traders need to be involve in formulation of policies that affect them, as their involvement would give

better result. Mmaduabuchi Alaowerri Adiukwu, new public relations officer, IMA, Electronic Section, said his department would concentrate on image-building of the market to return it to its lost glory. “Alaba used to be a market to reckon with, but today, most people see it as a market where substandard products are sold. This is very bad assumption on the market because most of the brands (Genesis, Polystar etc) they go outside to buy emanate from Alaba. So, we need to change that thinking,” he said.

BUSINESS DAY

Monday 15 October 2018

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Currencies

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Economics

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Week Ahead

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Watchlist

ECONOMY

Drug makers are burning cash and investors like it

rug makers a re s p e n d ing more and more cash and investors seem to like the strategy because it has added impetus to earnings. In business school, you are taught that the value of a business is the present value of all future cash flow. But for both May and Baker’s Nigeria Plc and Fidson Healthcare’s Nigeria Plc third quarter earnings releases, these companies recorded negative free cash

SHORT TAKES 15 pct Nigeria’s central bank is asking a Lagos court to make South Africa’s MTN pay 15 percent annual interest on the $8.1 billion it claims was illegally moved abroad, according to court documents seen by Reuters. The bank also asked the court to dismiss MTN’s case seeking to stop the monetary authority’s order for the telecoms firm to repatriate the funds back to Nigeria, the documents showed.

N3.9trn

licit Financial Flow from Africa in Abuja on Thursday, said the generated revenue is higher than the N2.9 trillion realised in the same period of 2017. According to the FIRS boss, the improvement was due to the organisation efforts at recovering all monies due to the government and the insurance of tax notification to companies not complying with Company Income Tax. So far, a total of 2,672 demand notices have been issued, out of which 653 of the companies are now filing their returns and paid N2.98 billion already.

Fidson Healthcare: Six Quarters Net Margin

Third quarter US earnings: 5 things to watch

P.E

flow (FCF). Fidson Healthcare has no free cash flow as at period ended June 30 2018, this compares to a record free cash flow of N709.0 million in the first quarter of 2017, according to data gathered from the Bloomberg Terminal. This is not surprising because the company’s capital expenditure spending was nil in the period The Federal Government has under review. generated N3.9 trillion in tax May and Baker recorded a neg- revenue this year, according ative free cash flow of N169.50 mil- to Tunde Fowler, the Chairlion in June 2018, this compares man, Federal Inland Revenue with the fourth quarter of 2016 Service. and fourth of 2014 when the firm The Chairman, who spoke was awash with cash of N733 mil- at the meeting of the African lion and N1.21 billion respectively. Union High Level Panel on Il-

BALA AUGIE

o r p o rate ta x cut s, strength in the US economy, rising oil prices and share buybacks are expected to fuel doubledigit earnings growth for corporate America in the third quarter. The reporting season unofficially gets under way when JPMorgan reports before the market open on Friday and comes on the heels of a back-up in interest rates and a sell-off on Wall Street. Here are a few key things to watch for this earning season. Headline The S&P 500 is expected to post earnings growth of 19.2 per cent on revenue gains of 7.3 per cent, according to data provider FactSet. That follows a 25 per cent jump in earnings and a 10.1 per cent rise in revenues in the second quarter.

It’s worth noting that actual earnings by S&P 500 companies have on average exceeded estimated earnings by 4.6 per cent over the past five years, according to FactSet. If this average increase is applied to the current estimate that suggests earnings growth of 22.7 per cent. If the S&P 500 were to report growth of 22.7 per cent it would make it the third consecutive quarter of earnings growth above 20 per cent — marking the strongest three quarter stretch since 2010. Energy The energy sector is expected to post the highest earnings and revenue growth of the 11 major sectors on the S&P 500. Fuelled by higher oil prices and easier year-on-year comparisons, the sector is expected to post a 94.9 per

cent year-on-year increase in earnings and an 18.7 per cent rise in revenues. That comes as the average price of oil in the third quarter of 2018 came in at $69.43 a barrel — 44 per cent higher than the average price in the year ago quarter. The weakest link Consumer staples look to be the biggest laggard this quarter with earnings growth of just 5.4 per cent, on revenue growth of about 2.8 per cent. However, some analysts argue that packaged food groups could post a modest beat on the back of higher consumer spending and a boost to profits from acquisitions. Moreover, FactSet notes that three quarters of the companies on the S&P 500 consumer staples sectors have seen their

EPS forecasts slashed since the start of the quarter. At the beginning of Q3, the sector was expected to report 9.7 per cent earnings growth and that the cuts to earnings estimates were led by Coty, Tyson Foods and Philip Morris. Commentary on trade, wages While an eleventh hour deal seems to have salvaged trade relations between Canada, the US and Mexico, Washington’s trade spat with China continues. Investors will watch for updates from companies on the extent to which the ongoing tariff war will raise costs and impact top and bottom lines. Companies could also provide updates on whether they are sourcing raw materials from elsewhere and if they have made changes to

36%

their supply chains as a result The Nigerian National Petroof the uncertainty on trade. leum Corporation on Thursday Investors will also be announced total crude oil and scanning for comments gas export sale of $416.07m for on the impact the tight US June 2018, which was 35.78 per labour market and higher cent higher than what was reminimum wages will have corded in the previous month. corporate profitability. Ama- Details of the figures contained zon announced plans this in the just released June 2018 month to raise its minimum edition of the NNPC Financial wage in the US to $15 an and Operations Report also hour, ramping up pressure indicated that the crude export on rivals to step up their sale contributed $274.95m, compensation practices. In which translated to 66.08 per particular, updates to mar- cent of the dollar transactions gin or EPS forecasts going compared with $244.72m forward could impact stocks. contribution in the previous month.

Buybacks The gas export sale for the 2018 has been a good year month was $141.12m, the for buybacks. Share repurreport stated. chases — one of the ways It added that the corporation companies return capital to recorded some ruptured pipeshareholders — have pro- lines that supply gas to thermal vided an added boosted to electricity generating plants corporate earnings by reducacross the country. ing a stock’s share count.

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

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

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Markets Intelligence ECONOMY

Banks’ NDIC Premium Charge up 7.55 percent to N33.0 billion in HI BALA AUGIE

welve largest banks in Nigeria paid N33.07 billion National Depositor Insurance Corporation charge (NDIC premium charge) for period ended June 2018; this represents a 7.55 percent increase from the figure recorded last year. The charge is an insurance cover should a lender is unable to cover its liabilities as at when due. NDIC has been reducing the insurance premium paid by Deposit Money Banks. It first reduced the premium to 0.40 percent in 2011 from 0.50 percent in 2014, with a view to encouraging banks to contributing more to the Financial Stability Fund. A breakdown of the figure shows Zenith Bank’s NDIC premium charge increased by 20.33 percent to N8.63 billion in the period under review from N7.17 billion the previous year. Access Bank’s NDIC premium charge was up 41.33 percent to N3.92 billion in the period under review from N2.77 billion the previous year. GTBank’s NDIC premium charge was up 1.96 percent to N3.94 billion in June 2018 from N3.87 billion the previous year. UBA’s NDIC Premium charge was up 14.57 percent to N3.81 billion in June 2018 from N3.33 billion the previous year. However, First Bank Holdings’ NDIC Premium charge fell by 43.97 percent to N1.77 billion in June 2018 from N3.16 billion as at June 2017. The regulatory body underwrites deposi-

Three traders charged in connection to alleged $60m commodities fraud

h re e t ra d e r s have b e e n charged with spoofing in connection to an alleged $60m commodities fraud, the US Department of Justice announced on Friday. Yuchun Mao, 39, a Chinese citizen, was indicted along with Kamaldeep Gandhi, 36, and Krishna Mohan, 33. Mr Gandhi and Mr Mohan have agreed to plead guilty, the justice department said. All three were accused of conspiring to manipulate futures contracts traded on the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT) between March 2012 and March 2014. The case is the latest brought by US authorities in an attempt to crack down on spoofing, a practice where traders place fake orders to create the appearance of supply or demand. “As alleged in today’s charges, these individuals engaged in a sophisticated scheme to distort the futures market for their own advantage by placing large ‘spoofed’ trading orders that they never intended to execute,” said Brian Benczkowski, chief of the justice department’s criminal division, in a statement. The traders previously worked for a New York-based financial services firm, prosecutors said. Mr Mao worked at Tower Research Capital from 2011 onwards, according to his LinkedIn. He did not immediately return a request for comment sent via LinkedIn. An attorney for Mr Mao could not be immediately identified.

tor’s money against any loss and banks are expected to a pool, according to Robert Omotosho, “For instance, the regulator was able to protect depositors money in the case of

SkyeBank Nigeria Plc,” said Omotisho The Central Bank of Nigeria (CBN) had revoked the licence of Skyebank and transferred its assets and liabilities to a newly licenced bridge bank Polaris.

NDIC sold Polaris Bank to the Asset Management Corporation of Nigeria (AMCON) with the mandate to stabilise the bank as well as return it to profitability for the purpose of selling it to interested Investors.

Corporate week in review, October 13 Airbus names new CEO; Tesla, Sony, KPMG and Burger King also in the news

round-up of some of the week’s most significant corporate events and news stories. Airbus names Guillaume Faury as chief executive Airbus has chosen the recently appointed head of its flagship commercial aircraft division as its new chief executive, reaching deep into its talent pool for a new leader after losing a number of senior executives to a management purge. Guillaume Faury, who took over as head of an aircraft unit plagued by production problems only eight months ago after spending most of his career in Airbus’ helicopter division, will take over from Tom Enders next April, the aerospace group announced earlier this week. “With his strong values and international mindset, Guillaume stands for the new generation of leaders that Airbus needs for the coming decade,” said Mr Enders in a statement. The president of Sony has confirmed that the company is working on a successor to the PlayStation 4, as speculation intensifies over whether traditional gaming consoles have a future. “At this point, what I can say is it’s necessary to have a next-generation hardware,” said Kenichiro Yoshida, in an interview with the Financial Times. He declined to formally name Sony’s future console the “PlayStation 5”. His comments came after mounting debate over how Sony

should address the spectacular rise of the $70bn global smartphone gaming market and the shifting habits among its customers as it readies games studios and the global market for a successor to the PS4. James Murdoch has become the favourite to succeed Elon Musk as the chairman of Tesla, which must replace the electric carmaker’s founder in the role by the middle of next month. Mr Musk agreed to leave the role as part of a settlement with the Securities and Exchange Commission lawsuit over claims he broke securities laws in August with a tweet saying he had “funding secured” to take Tesla private. He will stay on as chief executive. Two people briefed on the discussions said Mr Murdoch, a nonexecutive director of Tesla, was the lead candidate for the role, which is required by the SEC to be an independent chairman. Another person said external options were still being considered. KPMG has come under fresh attack in South Africa from prominent politicians and campaigners following the publication of a damning central bank-sponsored report on a corruption scandal at mutual lender VBS. There has been an angry response to the report, as some campaigners questioned whether KPMG — which has since last year battled a separate corruption scandal involving its work for the

billionaire Gupta family — should be allowed to continue to operate in South Africa. VBS was given a clean bill of health by KPMG in 2017, months before it collapsed in March with holes in its reported deposits and evidence of fraudulent transactions. Amazon will give an extra boost in pay to some longtime workers amid concerns over changes to its compensation policies as part of a minimum-wage increase. The online retailer announced last week it would raise the minimum wage it paid US workers to $15 an hour on November 1, and in the UK to £9.50 an hour. As part of that change, Amazon said it was eliminating monthly bonuses and

stock grants to hourly workers. That move sparked a backlash among some longtime workers in its warehouses, who said they feared their total compensation would decrease following the pay changes. Burger King is in talks to open restaurants in sub-Saharan African countries, including Nigeria, as the US fast-food group accelerates its international expansion to better compete with rival McDonald’s. Daniel Schwartz, chief executive of parent company Restaurant Brands International, told the Financial Times that the world’s second-biggest hamburger chain was “significantly under penetrated” in the continent.

REAL SECTOR WATCH C002D5556

Monday 15 October 2018

BUSINESS DAY

Why National Assembly must expedite approval of over N1.2trn EEG claims

in 2017. Exporters are owed approximately N350 billion between 2007 and 2016, though the Nigerian Export Promotion Council (NEPC) told Real Sector Watch last week that processed claims on promissory notes have exceeded N1.2 trillion. “The EEG has been what many of the exporters leveraged on to expand their export. In the absence of that very important incentive, you discover there was dwindle in the non-oil export data. We are agitating and canvassing that the EEG should be revitalised and exporters should be given access to it because it will expand non-oil export activities,” Olusegun Awolowo, CEO of NEPC, who was represented by Abdullahi SidiAliyu, director in charge of

policy and strategy, said at the annual general meeting of the Manufacturers Association of Nigeria Export Promotion Group (MANEG) in Lagos. The EEG claims of non-oil exporters were processed and approved at a series of meetings of the EEG Implementation Committee (EEGICM) made up of the Federal Ministry of Finance (FMF), Federal Ministry of Industry, Trade and Investment (FMITI); Central Bank of Nigeria (CBN), Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), Federal Ministry of Budget & Planning, and the NEPC. The EEG claims were also audited by the Presidential Initiative on Continuous Audit (PICA) team between March and July 2018. PICA called for comprehensive documentary submissions from the individual exporters and also embarked on extensive field visits to their export facilities. Baseline data were based upon audited financial results of the exporting companies and on the audited results of the companies filed at the Corporate Affairs Commission (CAC). It was gathered that the NEPC verified the baseline data before processing EEG applications. Real Sector Watch gathered that all the due diligence has been done, given that the Federal Ministry of Finance has forwarded the request for payment of promissory notes for EEG to the National Assembly. This means that as soon as the legislators approve, the ministry will proceed with is-

suance of promissory notes. “Government has done all that is necessary for the take-off of the programme. Right now, we are waiting for the National Assembly to grant approval to the use of promissory notes. Hopefully, if the National Assembly can grant approval, the government will definitely implement the decision,” Awolowo said. Exports say that absence of the EEG has hurt them, making their products uncompetitive in a fiercely competitive export market. A senior manager in a multinational export company told Real Sector Watch that exporters have taken on debts to service receivables, saying that the debts are incurring further interest with the continuing delay, pushing exporters into greater financial distress with their banks and financiers. “This is why the Senate / National Assembly should expeditiously clear the payment of promissory notes so that the non-oil exporters can get the much needed relief and succour and rededicate themselves to growing the export sector, thereby contributing to the creation of jobs and livelihoods and growing the valuable foreign exchange reserves of Nigeria,” the manager, who craved anonymity, said. Another exporter said it is important for the legislators to approve these notes which have the capacity to boost export and strengthen the naira. Ede Dafinone, chairman, MANEG, said, “I would like to see more incentives from the government. We need to improve our competitiveness.”

in 2012. He led the commission to win the Africa Investor PPP Champion of the Year 2010. He was at a time the director-general of the Nigeria Economic Summit Group (NESG), where he led the conceptualisation and development of the PPP policy framework for Nigeria. He had a successful career at the Nigerian National Petroleum Corporation (NNPC), where he served in various capacities including managing director and chief executive. In addition, he served, at various times, on many national committees including the Nigerian Vision 2010 and Vision 2020

Committees; the Technical Committee of the National Privatisation Council; and the Committee on the Assessment and Monitoring of the Millennium Development Goals (MDGs). He was also part of the National Economic Management Team that conceptualised, developed, and implemented policies and strategies to attract longterm finance for infrastructure development in Nigeria. Earlier in his illustrious career, he had managed quite a number manufacturing companies, including Bagauda Textiles Mills in Kano and Kaduna Textiles in

Kaduna. He has also served on the boards of notable and diverse business concerns, including Union Bank of Nigeria, GlaxoSmithKline Plc and Savanah Sugar Company Limited. He belongs to several professional associations including the Nigerian Society of Engineers, Nigerian Institute of Management, and the Institute of Directors of Nigeria. He has written many articles (published and unpublished) on a wide range of issues including economic reform, deregulation in the energy sector, corporate governance and other development issues.

ODINAKA ANUDU

eveloped and developing countries earn billions of dollars each year from exporting what they produce or have in abundance. Since 2012, China’s annual export has been exceeding $2 trillion. It is public knowledge that the country exports virtually everything from toothpick to soybeans, from copper to alloys. Global estimates show that Bangladesh, once among the poorest countries in the world, rakes in $28 billion just from textile export of textiles each year. India exported textiles and clothing valued at $37.4 billion in 2017. This is a rise from $35.5 billion recorded in 2016, according to the Southern India Mills’ Association (SIMA). Brazil’s sugar production is about 30 million metric tonnes at today’s price of $280 to $310 per ton. This shows that the country earns about $9 billion each year from sugar. But Nigeria is a different case. Using the Nigerian Export Promotion Council (NEPC)’s data, non-oil export has fallen from about $3 billion in 2013 to less than $1.4 billion in 2017. Even if a more comprehensive data from the National Bureau of Statistics (NBS) are used, the number is still comparatively low—from N577 billion in the first quarter of 2018 to N218.98 billion in the second quarter (if you factor out Other Oil Exports). This is about $2.20 billion for the half-year of 2018, less than what many countries

(L-R) Ademola Abas, special adviser to Lagos State governor on overseas affairs and investment; Jean Bakole, United Nations Industrial Development Organisation (UNIDO) representative to ECOWAS and regional director, Nigeria Regional Office Hub, and Richard Young, deputy head of delegation, European Union to Nigeria and ECOWAS, at the 7th EU-Nigeria Business Forum in Lagos recently.

earn from just one product, experts say. One big reason for the continuous growth of the non-oil export sector in these countries is the support given to firms in the form of subventions and budgetary allocations. The United States government has four grant programmes to help firms test foreign markets, orient themselves in new markets, train US or foreign representatives, and overcome incountry obstacles to trade. Similarly, Australia has an effective Export Market Development Grants (EMDG) scheme which assists aspiring and current exporters. China and other smaller/ developing countries also have various forms of export assistance. The essence of these

grants is to enable export firms to compete effectively and be able to repatriate huge foreign exchange that will serve as bulwarks against internal or external shocks. Nigeria has an Export Expansion Grant (EEG) that has survived a string of suspensions— halted nine times between 2005 and 2013. The last suspension lasted till the new government of Muhammadu Buhari came to power in May 2015. The government proposed to replace the use of the Negotiable Duty Credit Certificates (NDCCs) with promissory notes. The proposal to issue promissory notes in lieu of EEG claims for the legacy EEG claims of non –oil exporters was approved by the Federal Executive Council

Ahmed now president of MAN

ansur Ahmed, an engineer, has emerged as the 10th president of the Manufacturers Association of Nigeria (MAN). He was elected at the 46th annual general meeting of the association held on 26th September 2018 in Lagos. Ahmed takes over from Frank Udemba Jacobs, following the expiration of the latter’s four-year tenure (2014-2018). The National Council and members of MAN at the 46th AGM elected Ahmed to steer the affairs of the association for the next four years.

A statement signed by Segun Ajayi-Kadir, directorgeneral of MAN, says that Ahmed is the group executive director, government and strategic relations and chief executive officer of Dangote Granite Mining Co. Ltd. He has a first degree in Mechanical Engineering from Nottingham University (1972) and a master’s degree in Industrial Engineering and Administration from Cranfield Institute of Technology (now Cranfield University 1975). He also has a post-graduate certificate in Investment Appraisal and Management of the Harvard Institute of International

Development. Ahmed was the pioneer director-general and chief executive officer of the Infrastructure Concession Regulatory Commission of Nigeria (ICRC), until his retirement

Ahmed

BUSINESS DAY

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Monday 15 October 2018

REAL SECTOR WATCH We have developed first indigenous switches, sockets, says Tranos MD Stories by ODINAKA ANUDU

ranos Contracting Limited, a manufacturing and engineering giant, says it has developed a new line of switches and sockets, which will be launched in Nigeria by the end of October. According to the company, this makes Tranos the first Nigerian company to venture into the switch and socket market. Jude Abalaka, managing director of Tranos, who disclosed this while speaking at the recent Power Nigeria Conference and Exhibition in Lagos, said the switches and sockets being introduced by Tranos have been designed to meet the demands of any form of device connection— whether UK or US standards. “Looking at what is unique about our switches and sockets, I have personally realised that a lot of my devices, including phones and laptops, come from the US and for me to charge

them, I need an adaptor. So, we have decided to build something that can work without an adaptor, both for the US-made devices and UK devices. “G enerally, what w e have now are the typical

UK connection standard of three-pin plugs. But the US standard is the two-pin flat that goes in. So, we have designed our socket in such way that it can accommodate both forms of connections and you do

not need an adaptor before you charge your device,” Abalaka said. He added that the company has been developing the products for a number of years, saying that “it took such a long time because

Industries, businesses to gain as LCCI readies for 2018 Lagos fair

ndustries are set to reduce their ballooning inventories as the Lagos Chamber of Commerce and Industry (LCCI) prepares for the 2018 Lagos International Trade Fair The 2018 Lagos International Trade Fair will start on 2nd November and end on the 11th at Tafawa Balewa Square (TBS) in the state. There are high expectations as registration and booking of places close today. The fair, which is organised by Lagos State Chamber of Commerce and Industry (LCCI), is noted for its huge economic contribution through exhibitions by local and foreign businesses, deliberations on economic and investment opportunities by business leaders, as well as one-on-one, business-tobusiness engagements. The LCCI expects 500,000 visitors over the 10-day period and exhibitors have an average space of 40,000 square metres. Similarly, 2,000 exhibitors are expected this year, with over 200 foreign exhibitors from 16 countries including China,

India, Japan, Indonesia, Turkey, Egypt, South Africa and the Uropean Union. As earlier highlighted by Real Sector Watch, there will big changes to this year’s fair. First, the fair’s brand theme year after year will now be, ‘Connecting Businesses, Creating Value’ This is a departure from the past when themes were developed each year to reflect relevant economic situations. So far, exhibitors have taken advantage of fair’s automated website to register, pay and book for the space of their choices. As of today, almost all the available spaces

Gabriel Idahosa

have been booked, Gabriel Idahosa, chairman of the Trade Promotion Board of LCCI, said at a press conference in Lagos. Idahosa said no noise would be tolerated at the fair, as ban has been placed on the use of public address system and music gadgets. He said a special team would be deployed to ensure compliance. “We have created ‘LITF Radio’ for exhibitors who want to place adverts by spot announcement of jingles during the fair. It will also be used to entertain visitors,” he said. He said exhibitors would display their wares in the sector they registered within the portal, adding that the newly created ‘Exhibitors Service Centre’ would serve as a one-stop shop to attend to exhibitors, to interact with officials and have their matters sorted out in few minutes. Idahosa said the chamber has improved the quality of its pallets, air conditioning and other facilities to guarantee a better customer experience.

He explained that the chamber has stepped up its security apparatus this year and would work with the Nigeria police and a private security consultant to oversee and coordinate all security activities. The private security outfit is expected to deploy a 24-hout CCTV coverage of the entire fair ground. “There will be dedicated industrial power generating sets to complement public power supply. This will ensure uninterrupted power supply to all our exhibitors,” he said. He further stated that the chamber has encouraged exhibitors to use marque tents instead of wooden booths in line with international standards. “Many of our exhibitors have Special Days. A Special Day is a unique opportunity for exhibitors to take the centre stage at the Banquet Hall. For a minimum of one hour or more, organisations can take advantage of the Special Day to promote their products, services and facilities to existing and potential clients and customers.”

of the uniqueness of the design, and to develop the moulds for the production and other stuffs”. “It’s interesting for us because it is our first foray into this type of market,” he noted.

Abalaka said Tranos has developed the products to compete favourably in the market especially with products of same quality. “First, we have incurred a lot of cost in developing the product. In the process, we have done quite extensive market research and we believe that we should compete favourably with existing products in the market. “Of course, we still have products coming in from China with lower quality, but we are not competing with them in terms of price since we are not selling the same quality. We have designed our products to be competitive with anyone you have in the world with regard to quality,” he said. The product, he said, will hit the market by the end of October, noting that Tranos was inspired to venture into that segment of the market to challenge itself by solving a problem locally. “We could have gone to China and asked to produce what we want, but we said let’s challenge ourselves and come up with it”.

Bakole commends EU for partnering UNIDO to boost Nigeria’s industrial growth

ean Bakole, the United Nations Industrial Development Organisation (UNIDO) representative to ECOWAS and regional director, Nigeria Regional Office Hub, has commended the European Union (EU) for partnering UNIDO to promote inclusive and sustainable economic and industrial development in Nigeria and the ECOWAS sub-region. Bakole gave the commendation at the 7th EU-Nigeria Business Forum in Lagos, themed ‘Building Partnerships for Growth and Job Creation’. “I want to commend the EU for building and sustaining an excellent relationship and partnership with UNIDO and the ECOWAS sub-region. As the specialised agency of the United Nations that promotes industrial development in developing countries and economies in transition for poverty reduction, inclusive globalisation and environmental sustainability, UNIDO achieves its mandate by creating shared prosperity, advancing economic competitiveness, safeguarding the environment, and strengthening knowledge and institutions.

“UNIDO promotes Inclusive and Sustainable Industrial Development (ISID) which contributes to the achievement of regional and global initiatives such as the Agenda 2063 of the African Union Commission and the 2030 Agenda of the United Nations with the associated Sustainable Development Goals (SDGs), in particular the Goal 9, which aims at building resilient infrastructure, promoting inclusive and sustainable industrialisation and fostering innovation. In our on-going efforts towards achieving our mandate, UNIDO has enjoyed the strong partnership and support of the EU both at the global level and in Nigeria,” Bakole said. “We have raised consumers’ awareness on their rights to demand for quality in their consumption of goods and services. In the same vein, we are working with the private sector to promote quality and build capacity for high quality manufacturing in Nigeria. At the ECOWAS Sub-regional level, the EU is also funding the West Africa Competitiveness Programme, of which UNIDO is an implementing agency,” he said.

Monday 15 October 2018

Harvard Business Review

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MondayMorning

BUSINESS DAY

In association with

Great employees want to learn. Great managers know how to teach DANIEL DOBRYGOWSKI

s workers get more used to a fluid workplace, where longevity in one firm isn’t the goal and developing a portfolio of skills is more important, managers who can offer learning opportunities will be in high demand. Having started my working life as a high school teacher, I’ve continued to find success when I use my teaching style to lead teams. Reflecting on how I’ve managed cases and projects, there are three traits which all good teachers share and managers in any field can learn: 1. DEFINE GOALS AND COMMUNICATE THEM

CLEARLY. Every year, a teacher has to develop a plan for where the class will be at the end of the year with concrete steps for how to get there. The same is true for any organization — you need to have clearly articulated goals that serve a greater mission. Just as it’s the manager’s responsibility to communicate organizational goals clearly, it’s also the boss’s obligation to listen to employee’s personal goals and, where they align with the overall mission, support them and help build the skills necessary to achieve those shared goals. 2. IDENTIFY AND BUILD YOUR TEAM’S SKILLS. The ability to understand

ensure that they have opportunities. 3. CREATE OPPORTUNITIES FOR GROWTH.

and build skills is the core of effective teaching and a key management responsibility. A manager can’t lead a team if she doesn’t know what skills are needed to accomplish a goal and if

she doesn’t know what the team is good at. It is vital to discuss the skills and knowledge necessary to achieve success with your team and to understand, through discussion

or through past experience what skills team members have and what skills they need to develop. It’s also important, if employees are looking to build their own portfolio of skills, to

When an employee says she is looking for a manager she can learn from, the employee is implicitly saying that she values opportunities for growth. No one wants to feel stagnant or like they’re not achieving anything. Good teachers, and effective leaders, help those under them grow by giving effective constructive feedback and by fostering a growth mindset. (Daniel Dobrygowski is the head of governance and policy at the World Economic Forum’s Center for Cybersecurity.)

Where are the Male Allies in U.S. Politics? DAVID G. SMITH AND W. BRAD JOHNSON

he problem of the silent — and therefore tacitly complicit — man festers at the root of America’s ubiquitous workplace sexual harassment and gender exclusion issues. Reasons for male silence are legion, but most often relate to a lack of awareness about the experiences of women at work, ignorance concerning the rarity of false accusations from women about sexual assault, flat-out apathy or cowardice about backlash from other men. Publicly supporting a woman in this situation can feel risky, particularly among men with a fragile sense of masculinity. Where should we begin

efforts to break the cycle of male silence and collusion? Start with a few good men. Marine Corps Gen. Glenn Walters recently testified before the Defense Advisory Committee on Women in the Services and observed, “What I’m encouraged

by is that some of the [harassment] reports are being generated by male Marines who are seeing another [male] Marine doing something wrong.” He added: “It’s not a significant number. It’s probably in the 8% range. But that’s 8% that we didn’t

have.” This small core group of men actively promote gender fairness and equity in the workplace through supportive and collaborative personal relationships with women. They also demonstrate

allyship through public acts of sponsorship and advocacy. These are men who appear to have an awareness of how gender bias creates workplace inequities. They act with conviction and in the face of real social and political backlash. Male-to-male peer pressure is often a powerful — and persistently neglected — source of influence. When a cohort of male allies call out sexist or harassing behaviors, both men and women are more likely to report sexual harassment or check sexist behavior. Women also report more self-confidence, higher self-esteem and less sex stereotyping when male allies are present in the workplace. Perhaps Congress can

take a lesson from the Marine Corps’s “8 percenters.” Let’s identify the fledgling cohort of male allies on Capitol Hill, and recognize and honor these insiders who can leverage their understanding to redefine norms.

(David G. Smith is a professor of sociology at the United States Naval War College. W. Brad Johnson is a professor of psychology at the United States Naval Academy, and a faculty associate at Johns Hopkins University.)

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This is M NEY A daily guide to your Personal Finance

Monday 15 October 2018

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

Enhanced Pensions cushioning the effect of non Implementation of GMP

Pius Apere

igerian Pensioners have two basic expectations under the Defined Contributory Scheme (CPS), namely“to have sustainable standard of living in retirement and their benefits paid as at when due”. The above expectations cannotbe fully met for all pensioners without the implementation of the guaranteed minimum pension (GMP) as stated in section 84(1) of Pension Reform Act (PRA) 2014.This is true particularly for thoseretirees with small Retirement Savings Account (RSA) balances because they have not accumulated enough as at the date of retirement to have a decent standard of living in retirement. The delay in the implementation of GMP(by PENCOM for more than 10 years after the CPS was established in 2004) have resulted in growing sense of disenchantment among current pensioners with relatively small RSA balances at retirement. This is because of the small monthly pension they have been receiving over the years relative to the huge gains (from investment returns and/or dividends) the Pension Fund Administrators (PFAs) are currently making.The GMP (if implemented) would have eliminated the disenchantment among the current pensioners. The recent implementation of Enhanced Pension (EP)programmeby PENCOM effective from December 2017 is aimed at providing sustainable standard of living in retirement forthe Programmed Withdrawal (PW) pensioners and therefore it could be seen as cushioning the effect of the non-implementation of GMP for

thesePW pensioners. This paper highlights the rationale and implications for introducing the Enhanced Pension (EP) programmefor only the Programmed Withdrawal (PW) pensioners. The Rationale for Enhanced Pension(EP) Programme Theguaranteed minimum pension (GMP) is usually to protect the RSA holders against some of the risks of low investment returns and the erosion of pensioners’ incomes by inflationduring a period of economic down turn leading tohaving a low standard of living in retirement. Thus, it could be seen as a redistribution of resources to act as a safety net for pensioners. The delay in the implementation of GMP could be considered to be the main reason for PENCOM’s attention being drawn to the “clamouring for periodic enhancement of the pension for retirees on Programmed Withdrawal (PW)under the CPS”. The grumblingmay arise mainly due to the contributors and/or new retirees demanding for huge initial lump sum payment, leaving them with reduced RSA balances for investment which in turn has reduced the monthly income to live on in retirement. The PENCOM’s framework on Enhanced Pension (EP) provides that “only retirees on Programmed Withdrawal (PW) under the CPS with appreciable growth in their RSAs are entitled to receive enhanced pensions”. Furthermore, the framework also stated that:(a)“PFAs shall continue paying current pensions to retirees that have insufficient growth to be considered for enhancement”.(b) “PFAs shall

continue paying pensions to retirees that have fully exhausted their RSAs from their statutory reserve pending implementation of Minimum Pension Guarantee (MPG)”. The implementation of EP is a welcome development but the fact that it is applicable to only Programmed Withdrawal (PW) pensioners hasgreat concerns and far-reaching implications to other stakeholders. The Funding of Enhanced Pension (EP) Programme Indeed, the funding of Enhanced Pension (EP) is the responsibility of the PFAs, as stated in PENCOM’s framework on EP that “PFA shall use the surplus [generated from Return on interest (ROI)]”and/or“statutory reserve Fund” to enhance the pensions of eligible retirees. Section 81 of PRA 2014required that “every PFA shall maintain a Statutory Reserve Fund as contingency fund to meet any claim for which the PFA may be liable as determined by the Commission. The Statutory Reserve Fund shall be credited annually with 12.5 percent of the net profit after tax or such other percentage of the net profit as the Commission may, from time to time, stipulate”. The Implications for Enhanced Pension(EP) Programme Pension Products - Basically there are two main pension products being used at the de-accumulation phase to provide retirement benefits for the RSA holders in the CPS(as stated in section 7(1) of PRA 2014), namelyLife Annuity(LA) and Programmed Withdrawal (PW)products.Briefly, life annuity provides a regular income for life with a minimum guaranteed period of 10 years. Where the retiree dies within the guaranteed period the income for the unexpired period is paid in lump sum to the estate of the retiree or named beneficiary. On the other hand, the retiree underProgrammed Withdrawal (PW) receives a regular income from his/ her RSA (with the balance being invested continuously) over an expected lifespan until the RSA balance runs out.

The framework on Enhanced Pension (EP)applies to only the Programmed Withdrawal (PW) product and PW pensioners being regulated by PENCOM. It is obvious that the pensioners under Life Annuity product are also clamouring for either guaranteed minimum pension (GMP) or Enhanced Pension (EP), having considered the economic hardship facing Nigeria pensioners. The Programmed Withdrawal (PW) and Life Annuity (LA) products are being marketed separately by PFAs and Life Insurance Companies (Life Insurers) respectively. On the other hand, the marketers of these products (PFAs and Life Insurers) are regulated separately by PENCOM and NAICOM respectively. However, the guidelines for Life Annuity (LA) product are jointly issued by the two regulatory bodies (as specified in section 7(1) (c) of PRA 2014). The framework on Enhanced Pension (EP)applies to only the Programmed Withdrawal (PW)product and PW pensioners being regulated by PENCOM. It is obvious that the pensioners under Life Annuity product are also clamouring for either guaranteed minimum pension (GMP) or Enhanced Pension (EP), having considered the economic hardship facing Nigeria pensioners. New Retirees’ Preferred Choice of Pension Benefit Options– The PFAs (being the first point of contact with new retirees) and

Life Insurershad been demarketing each other in the past in order to gain undue business patronage under the CPS. The lack of professional advice (i.e. not based on individual circumstances and/or risk profile) had been given to new retirees to freely choose suitable pension products (i.e. pension benefit options) at retirement. The abovehas led to more retirees still opting for Programmed Withdrawal (PW)product (142,742retirees) thanLife Annuity (LA) product (34,876 retirees), showingthat 80.36% and 19.64% of the retirees were under PW and LA products respectively in December 2016. The recent implementation of Enhanced Pension (EP) for only Programmed Withdrawal (PW) pensioners would no doubt create a natural tendency for more new retirees to choose Programmed Withdrawal (PW)product rather than the life annuity (LA) product in the future without the PFAs deliberately demarketing the Life Insurers. Thus,the number of retirees under Programmed Withdrawal (PW) is likely to increase exponentially over time than those retiring as annuitants. The Statutory Reserve Fund - The Statutory Reserve Fund (SRF) of PFAs (i.e. an annual accumulation of a percentage of net profit after tax of PFAs over the time) used in the funding of Enhanced Pension (EP)do not arise only from the management of RSAs of current Programmed Withdrawal (PW) pensioners over the years but also from the management of RSAs of currentand past contributors (who have actually or may eventually become annuitants at retirement). Thus, annuitants whose RSAs have contributed to the Statutory Reserve Fund (SRF) of PFAs in the past should have (a lien in EP) been considered in the implementation of Enhanced Pension (EP).The implementation of Enhanced Pension (EP) using the SRF suggests that a claim has arisen for which a PFA is liable as determined by PENCOM (section 81(1) of PRA 2014). The above also suggests that the clamouringfor

Enhanced Pension (EP) that cut the attention of PENCOM would not cease until the guaranteed minimum pension (GMP)is implemented for the benefit of all eligible pensioners (both Programmed Withdrawaland Life Annuity retirees) living in poverty. Forthe Programmed Withdrawal (PW)Pensioners, the Enhanced Pension (EP)is akin to the guaranteed minimum pension (GMP)as the principle and concept of payment are more or less the same. The implementation of Enhanced Pension (EP) would put an undue strain on a PFA’s Statutory Reserve Fund and hence on the PFA’s cash-flows. This will be the casewhen the number ofProgrammed Withdrawal (PW)pensioners would increase significantly sincethe PW product is more likely to be the new retirees’ preferred choice thanthe Life Annuity (LA) product, as explained above. The original aim of maintaining the Statutory Reserve Fund would not be met as the Fund is likely to be depleted to a level below the acceptable threshold already set by PENCOM. Pension Protection Fund– PFAs has been contributing towards the Pension Protection Fund (as required by section 82 of PRA 2014) to be utilized for any purpose deserving protection as determined by PECOM including the funding of GMP. Thus, the implementation of Enhanced Pension (EP) using Statutory Reserve Fund maintained by PFAs is an extra burden placed on PFAs. Conclusion It is clear that Enhanced Pension (EP) is not a substitute of guaranteed minimum pension (GMP) and therefore,there is an urgent need to implement the GMP for the benefit of all eligible pensioners (not only the Programmed Withdrawal (PW)pensioners) in order to have a decent standard of living in retirement, particularly in this period of serious economic hardship facing the country. Pius Apere hold a (PhD/FCII) in Actuarial Scientist and also Chartered Insurer. Email: p_ apere@hotmail.com Tel: +234(0)8090747971

Monday 15 October 2018

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BUSINESS DAY

Live @ The Exchanges Stocks gain N27bn as investor see opportunity in bear market IHEANYI NWACHUKWU

igeria’s listed stocks garnered approximately N27billion in the trading week to Friday October 12 as more investors rushed to buy into recent dip in recognition that the market holds value for long-term buyers. Recall that a record weak performance of the Nigerian equity market so far in 2018 are attributed to pullback of some foreign investors from the market due to uncertainty ahead of next year’s general elections and the rising global yields which are leading to reallocation of portfolio funds away from the equity market. Though the Nigerian economy has shown signs of fragility lately as Gross Domestic Product (GDP) grew by 1.50 percent in the second quarter (Q2), a downturn from 1.95 percent in the first quar-

ter (Q1), but investors are still holding stocks that are known for delivering good scorecards. As its season beckons, stock buyers are expecting impressive third-quarter (Q3) earnings to help the Nigerian equity market which had already shown signs of oversold position. Due to the sell-offs witnessed in the preceding week, Lagos-based Afrinvest research analysts had anticipated bargain hunting in bellwethers. “As the Q3 2018 earnings season gains momentum, investors want to know if markets would blow off good Q3 earnings, especially with oil prices above $80/barrel and some level of clarity in the political space (Atiku versus Buhari) ahead of the 2019 election. “Markets can ignore earnings but not for long. That being so, we expect market sentiment to start reverting to fundamentals,” research analysts at United Capital Plc said in

L–R: Seyi Osunkeye, national council member, Nigerian Stock Exchange (NSE); Adeola Mojisola, council secretary, NSE; Patrick Adebayo Ajayi, national council member, NSE; Abimbola Ogunbanjo, president, national council, NSE; Patience Nohuoma Alile, wife of Apostle Alile; Oscar N. Onyema, CEO, NSE, and Yomi Adeyemi, national council member, NSE, during a condolence visit to the family of erstwhile director-general Hayford Alile,

their October 12 note. Ahead of expected release of Q3 financials on Custom Street, stock traders were seen taking positions in bellwether stocks

as evidenced in stocks that spurred extended uptrend recorded in the later trading days of the review week. The Nigerian Stock Ex-

change (NSE) All Share Index (ASI) increased by 0.22percent weekon-week (wow), from 32,383.15 points recorded the preceding trading

week to 32,456.98points, while the value of listed stocks increased from N11.822trillion to N11.849trillion. At the sound of closing gong for the review week’s trading session, the record negative returns seen year-to-date (ytd) at the Nigerian Bourse moderated to -15.13percent. The expectations of higher crude oil prices on the international market in the short-term and that of crude oil production in Nigeria are positive for stock investors. Meanwhile as at close of trade week under review, the market Capitalisation of securities trading on the NASD OTC Securities Exchange dropped to N478.73billion from preceding week’s level of N486.17 billion, which shows a 1.53percent decrease in Capitalisation. Also the Unlisted Securities Index (USI) for the week ended October 12 decrease from 699.50 points to 688.80 points.

ASHON unfolds new initiatives for advocacy CONOIL Q3 turnover soars

ssociation of Stockbroking Houses of Nigeria (ASHON) has initiated new measures to reposition its advocacy roles for enhanced brand positioning. This development is a systematic move to impact the Nigerian financial market and entire economy positively. Besides, the registered Trade Group has strengthened its secretariat by appointing an Executive Secretary and Research Officer to support the management in driving its corporate vision, mission and core values. Addressing ASHON’s 9th Annual General Meeting (AGM) in Lagos recently, the chairman Patrick Ezeagu explained that the Association had come of age and some initiatives have been put in place to strengthen its advocacy functions in line with the operational philosophy. According to him, ASHON recruited the Executive Secretary, Athan Ogbozor to run the secretariat as part of the strategic plan to leverage on human capital to drive the new initiatives which are also designed to enhance service delivery to the members. Ezeagu identified some of the initiatives as new recruitment of strategic staff, Registration with the a Securities and Exchange

Commission (SEC) as a Trade Group, promotion of Commodities and Futures Exchange, negotiation of members’ interest on the on-going demutualization of The Nigerian Stock Exchange and strengthening relationship with other trading platforms to expand income generation of the members beyond the Nigerian Stock Exchange. ‘’We have recruited an Executive Secretary and Research Officer to effectively operationalize the decision of Executive Members in the service to our members. We have formally registered our Association as a Trade Group with Securities and Exchange Commission (SEC). We are also working towards providing alternative or widening the scope of income generating activities for our members outside the Nigerian Stock Exchange and NASD platform by promoting Commodities and Futures Exchange which was accelerated by a successful completion of a private placement exercise and submission of application for registration of the Exchange to SEC. “We have also had a successful election into the Council of the NSE which held during the year. Our representation on the De-

mutualization Advisory Council was strengthened and has resulted in the favourable negotiation of members’ interest in the Demutualized Exchange.”, said Ezeagu. According to him, ASHON has also successfully handled the tension raised by the pressure mounted on the members by the FIRS and NIPOST with regards to the payment of contract stamp duty. “We are advocating for the abolition of contract stamp in our market and negotiating a new regime of fees for brokers and also discussing Back Office and Cloud hosting. We shall engage with the NSE and other third parties in the proposed e-IPO Platform, harmonization of fees for ancillary services, and formation of Competency Framework for the Capital Market and engage SEC on the use of BVN as an acceptable and adequate means of KYC, Sub-broker model, dwindling income of our members and the preponderance of compulsory courses, penalties and charges. “We shall engage and sign a Service Level Agreement with NIBSS to deliver a payment system (E-Bills Pay) that will enable seamless payment to and from our members’ customers. We are in discussion

with the NSE and SEC on the introduction of a common insurance product to replace the current Fidelity Bond and provide other benefits to our members”, Ezeagu said. Speaking on the current challenges facing the Capital Market, Ezeagu who noted that the operating environment was tough however expressed optimism that the fundamentals of the market remained strong with good prospects for investors. “ We are convinced that there is positive outlook for the market in the near term given the sustained rise in oil prices, stable foreign exchange rate and availability of FX “, he said. Speaking at the AGM, the Chief Executive Officer, Signet Investment and Securites, Oladipo Aina commended ASHON’s Executive Members on the series of initiatives embarked upon to boost the fortunes of its members and the entire financial market. Aina noted that ASHON had come a long way and had raised the bar in the area of visibility, urging the Executives to work more closely with the members in the area of internal communication. Many stockbrokers corroborated Aina by showering encomiums on the Executives for repositioning ASHON for global competitiveness.

ajor petroleum products marketer, Conoil Plc has reported growths in its unaudited third quarter results for the current financial year. Aided by a strong growth in sales volume and a significant reduction in cost of funds, the results, which was released to The Nigerian Stock Exchange (NSE) over the weekend, showed that Conoil continued to weather the stormy operating environment in the country by posting an increase in its post-tax profit from N1.4 billion recorded last year, to N1.6 billion in 2018. The company’s turnover rose from N70.2 billion in 2017, to N75.8 billion this year, while its profit before tax rose from N2.02 billion in 2017, to N2.27 billion in 2018. A further analysis showed that its earnings per share increased from 196 kobo to 229 kobo, further raising the capacity of the company to increase dividend payment by the end of the 2018 financial year and placing it in a good stead to fulfilling its promise to build a stronger financial position and creating higher values for its shareholders. The leading fuel marketer also made significant improvement in

its financial results by recording a 27 per cent decrease in cost of operations while also reducing cost of funds by 22 per cent to bolster sales and profit. It would be recalled that the company’s chairman, Dr. Mike Adenuga (Jr), promised shareholders at its last annual general meeting, that conscious efforts would be directed at achieving better execution of valueadded products and services to grow its business, while also assuring them that the company’s longterm future was guaranteed. “We would continue to explore opportunities to deliver solid financial results and increase competitive returns on our shares. Our focus would be to further consolidate our competitiveness in the industry, remain committed to explore and develop emerging markets while holding our grounds in areas where we have competitive advantage,” he said. “Greater attention would be devoted to cutting operational costs in the different segments of our business, while still maintaining and improving the quality of our products and services,” the Chairman added.

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Mixed reaction from Southeast over Atiku choice of Obi as deputy JOSEPH MAURICE OGU & OWEDE AGBAJILEKE

he Ohanaeze Ndigbo has come out in support of Atiku Abubakar’s decision to pick Peter Obi as his vice presidential candidate for the 2019 national elections. This is even as governors of the People’s Democratic Party (PDP), South East, claiming they were not consulted in the decision and withheld their support. Arising from a meeting in Enugu on Saturday, the PDP leaders argued that even though Obi was an

NCAA lifts suspension on Ilorin International Aviation College IFEOMA OKEKE

igerian Civil Aviation Authority (NCAA) has partially lifted the suspension on International Aviation College, Ilorin, Approved Training Organisation (ATO) certificate. This was conveyed in a letter dated October 8, 2018, signed by Cletus Umeh, the director of Licensing, on behalf of Muhtar Usman, the director-general, NCAA. The partial lifting of the suspension was as a result of the closure of a good number of the findings and the remarkable commitment demonstrated in closing the remaining findings as verified during the recent re-certification audit of the College. Consequently, the partial lifting, according to NCAA, ‘’is only applicable to the Fixed Wing Pilot (Aeroplane) and Flight Dispatchers Courses.’’ In a statement issued by NCAA and signed by Sam Adurogboye, stated, “It follows therefore that the helicopter flight training segment of the approved courses is still on suspension until the necessary corrective actions are undertaken. “The College is therefore directed to take necessary the steps to close all open items after which the Authority would carry out another round of re-certification exercise for total lifting or otherwise.” Earlier, the NCAA had suspended the ATO of the International Aviation College, Ilorin, due to the deficiencies found during an audit of the institution. The authority reaffirmed its commitment to enforcement of compliance to safety regulations at all times so as to continue to guarantee safer skies in Nigeria.

Igbo son, Atiku could not had picked him without the knowledge of the leaders of the zone whom he had bargained with for the vice president slot, describing his unilateral action as an insult to the entire Igbo leaders. However, chairman of the South East Senate Caucus, Enyinnaya Abaribe (PDP, Abia State), has hailed the choice of former governor of Anambra State, Peter Obi. Abaribe, who chairs the Senate Committee on Power and Meturlugy, described the PDP vice presidential candidate as

an embodiment of fiscal discipline. In a statement on Sunday in Abuja, Abaribe, stressed that with the choice of the former Chairman of Fidelity Bank, the PDP has ultimately rapped up their victory in the 2019 general elections. “Obi’s widely acknowledged good track record in infrastructural development and economic reforms as governor of Anambra State, remains an eloquent testimony of what service delivery and good governance is all about. “The ticket of the duo of former Vice President Atiku

Abubakar and Obi represents the finest choice available and one that reflects the high pitch push by Nigerians for total economic and political reforms. “The present hopeless situation of fear, despondency and hunger in the land, which is occasioned by a seemingly rudderless and clueless government requires experienced and steady hands in the saddle. Of course the Atiku/Obi ticket presents that radical choice capable of pulling the country out of her present horrendous predica-

ment,” he said. Abaribe who congratulated Obi also thanked Atiku Abubakar for being meticulous in the pick and for looking the way of one of the best from South East and Nigeria as a whole. The PDP lawmaker urged Nigerians to rally behind the PDP and the Atiku/Obi candidacy in the march towards restoring Nigeria to the part of unity and progress again. Atiku picked Obi barely 24 hours after visiting his former president Olusegun Obasanjo and reconciling

with him. Analysts say the decision could not have come without some considerations, political calculations and consultations, knowing that the choice of the vice president usually, most often, shapes the outcome of presidential elections in Nigeria. As a successful businessman and banker who demonstrated his prowess in ruling Anambra State, Atiku would have considered Obi a perfect choice to run the business of Nigeria together.

Monday 15 October 2018

LegalPerspectives

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With

BUSINESS DAY

Odunayo Oyasiji

Case Review

Thomas Chukwuma Makwe V. Chief Obanua Nwukor & Anor (2001) LPELR-SC.100/1996

What to note: his is a matter that was concluded at the Supreme Court. The matter deals extensively with the issue of privity of contract- i.e. the relationship between parties in a contract which gives them the right to sue each other but precludes a third party from suing. It operates on the basis that a contract cannot confer right or impose an obligation on someone who is not a party to it. Facts The 1st defendant (borrower) applied to the 2nd defendant (bank) for a loan of N200,000. The plaintiff guaranteed the loan with his property covered by Statutory Certificate of Occupancy No. BDSR 5273 registered at No. 9 at page 9 in volume B.69 at the Lands Registry in the office at Benin City. The Certificate of Occupancy was deposited with the bank. It must be noted that the 1st defendant also deposited his Customary Certificate of Occupancy No. BDCR 54 registered as No. 54 at Page 54 in Volume 3 at Oshimili Local Government Council, Asaba and now converted into a Statutory Certificate of Occupancy No. BDSR 8493 registered as No. 40 at Page 40 in Volume B.115 at the Lands Registry in the office at Benin City as security for the same loan. The bank drafted a tripartite deed of legal mortgage and same was executed by the parties. The plaintiff also signed a guarantee form which the bank gave to him to sign. The plaintiff and the first defendant also entered into an agreement on how the 1st defendant will operate the account with the bank. The said agreement was deposited with the bank. The bank allowed the 1st defendant to have access to the loan after all the necessary documentations have been concluded. The 1st defendant defaulted in the repayment of the loan facility and the bank made several demands on both the plaintiff and the 1st defendant for them to repay the loan and the interest. The plaintiff instead of taking steps to repay the loan instituted an action against both the bank (2nd defendant) and the 1st defendant (borrower/the person he guaranteed). The trial court entered judgement in favour of the plaintiff in October, 1989. The court stated that the bank is bound by the agreement that was made between the plaintiff and the 1st defendant stating how he is to run his account with the bank. The basis for this is because the said agreement was deposited with the bank. The bank being dissatisfied with the decision of the lower

court lodged an appeal at the Court of Appeal, Benin Division. The Court of Appeal in 1994 held that the decision of the lower court was an error in law as the bank was not a party to the agreement that was lodged with it. Therefore, it cannot be bound by the terms of the agreement. The court pronounced on the effect of deposit of the agreement with the bank that “the mere fact of the appellant receiving an agreement entered into by the plaintiff/respondent and the 1st defendant does not ipso facto discharge the plaintiff/ respondent from the obligations he entered into with the appellant Bank in Exhibits D and E.” The plaintiff (the guarantor) filed an appeal at the Supreme Court to challenge the decision of the Court of Appeal. Issues for determination The plaintiff/appellant identified one issue for determination. The sole issue identified is “Were the learned Justices right in holding that the bank was not bound to comply with the conditions for disbursement of the loan as stated in Exhibit A or, put in another way, having accepted Exhibit A from two of the parties to the mortgage in the loan transaction, can the bank deny its duty to disburse the loan as provided in Exhibit A on the ground that it is not a party to Exh. A?” The respondent submitted that the sole issue for determination is “Whether the learned Justices of the Court of Appeal were right to hold that the bank was not bound by the contents of Exhibit A, an agreement be-

tween the appellant and the 1st defendant because the bank was not a party to the said agreement.” The court adopted the issue formulated by the respondent as same is more direct and straight. Submissions/Arguments The plaintiff/appellant’s counsel submitted that the Court of Appeal was wrong to have based its judgement on the doctrine of privity of contract i.e. on whether or not the bank was bound by the agreement between the plaintiff and 1st defendant that was deposited with it. The learned counsel stated that the case is more of breach of duty of care owed by the bank to the appellant by reason of the agreement that was deposited with the bank along with the appellant’s title documents. Therefore, there is negligence on the part of the bank. The counsel to the bank argued that the claims of the appellant were based on contract. He stated that the contract in question is the agreement between the plaintiff/appellant and the 1st defendant (borrower) which was deposited with the bank. He noted that the said contract was made after the loan transaction/agreement was sealed. He explained that based on the loan agreement the only ground for release of title documents is after the full repayment of the loan. Also, the agreement deposited with the bank was only aimed at ensuring that the 1st defendant uses the loan for the right purpose. He stated that for negligence to

arise there must be evidence of corresponding damage and that nothing of such was proved by the appellant. The bank’s counsel further argued that “it is trite law that as a general rule, a contract affects only the parties thereto and cannot be enforced by or against a person who is not a party to it. In other words, only the parties to a contract can sue or be sued on the contract and, generally, a stranger to a contract can neither sue nor be sued on the contract even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it. In the same vein, the fact that a person who is a stranger to the consideration of a contract stands in such near relationship to the party from whom the consideration proceeds that he may be considered a party to the consideration does not entitle him to sue or to be sued upon the contract.” Judgment/Decision of Court The court held that the appellant’s action against the respondent cannot be that of negligence because the appellant never pleaded that it suffered any form of damage. The Supreme Court agreed with the Court of Appeal that the appellant’s claim was grounded on breach of contract. The Supreme Court held with regards to whether the bank is bound by the terms of the agreement deposited with it that “it is indisputable from the pleadings that the respondent was not a party to Exhibit A which is a contract between the appellant

and the 1st respondent. This is clearly pleaded in paragraphs 9 and 10 of the appellant’s amended Statement of Claim set out earlier on in this judgment. The appellant also testified to that effect. Similarly, the respondent bank, both in its pleadings and evidence stated that it was not a party to Exhibit A and could not therefore be bound by it. It is thus clear, having regard to the facts that as a general rule, a contract affects only the parties thereto and cannot be enforced by or against strangers and that the circumstances and facts of this case do not fit into any of the recognised exceptions to the said general rule, that the respondent bank, not being a party to Exhibit A, cannot be bound by it. The Court of Appeal was therefore right to hold that the respondent bank could not be bound by Exhibit A to which it was not a party.” The Supreme Court found the appeal to be without substance and therefore dismissed the appeal. Conclusion For a party to be bound by terms of a written contract he must be made a party to it. Without this, such a party is precluded from claiming under the contract and cannot be under any form of obligations with regards to the contract. A clear exception to this principle of privity of contract is where a contract is made by an agent on behalf of an undisclosed principal, who as a general rule is entitled to sue and can be sued on such a contract. The present case does not fall within this category.

46 BUSINESS DAY NEWS Nigeria risks deeper financial crisis over new... Continued from page 1

bond request, going forward,

we do not believe that Nigeria should enter into any loan agreements without conditions for fiscal discipline attached, not with a N22.3 trillion debt profile as at 30 June,” Lagos-based economic intelligence firm, SBM intelligence said in a tweet Friday. “Nigeria is now in a precarious situation where it is inevitable that it will be forced to make the hard decisions of cutting cost that it is shying away from. “Government revenues can no longer pay all wages, not to talk of executing much-needed infrastructure projects,” SBM analysts said. In 2017, the budget implementation report of the Federal Government shows that it only realised actual revenues of N2.7 trillion, which was about half its projected revenues for the year and 36 percent or one third of its projected expenditure of N7.44 trillion. Faced with the sharp revenue shortfall, the Federal Government spent almost N1 trillion less than it planned to spend in 2017 but the final N6.5 trillion spent was still N3.8 trillion more than its total revenues for the year and had to borrow N2.5 trillion to help fund its financial obligations for the year. The government in 2017, borrowed N1.2 trillion from the international capital markets and borrowed the balance of N1.3 trillion from the

domestic capital markets. However, it left another N1.3 trillion of the total deficit unfunded in 2017. President Muhammadu Buhari on Tuesday sent a new request to the National Assembly seeking to raise $2.8 billion Eurobond, Nigeria’s fifth in the last two years, despite concerns that debt service to revenue ratios is already hitting unsustainable levels. While the country’s low debt to GDP ratio suggests there is still room for more borrowing, it is its debt service as a percentage of revenue that has drawn widespread concerns. In 2017, Nigeria’s debt service to revenue ratio ballooned to a record high of 69 percent which implies that for every naira earned, the country spends 69 kobo servicing debt, leaving just 31 kobo to spend on infrastructure or educate its rising population. The new US$2.8 billion borrowing, which is expected to come at a higher yield than previous borrowings, will put further pressure on the already high debt service to revenue ratio. The yield on the Eurobond issued in February 2018 has climbed to 8.5 percent (as at October 11) from 7.625 percent at issuance, which hints at what it may cost to raise fresh debt. In the second quarter of 2018, Nigeria spent a total of $202 million servicing debt raised from a mix of multilateral borrowers and private investors, according to DMO data.

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That takes the amount spent servicing external debt this year to $427 million, having spent $225 million in the first quarter. Forecasting with the half year trend, external debt service payments could hit $854 million by year-end, 84 percent higher than the $464 million spent in 2017. The estimated debt service costs for 2018 is 19 percent of the Federal Government’s oil earnings in 2017. The second quarter debt service cost of $202 million represents a 248 percent increase from the comparable period of 2017 when $58 million was spent servicing foreign debt. The amount is $109 million shy of the $331 million spent servicing external debt in the whole of 2015. Commercial bonds soaked up the largest chunk of the payment in Q2 2018, with 56.5 percent, while multilateral loans and bilateral loans accounted for 25 percent and 7.9 percent respectively. Agency fees and oil warrant accounted for 10.3 percent. This has dire implications for an economy still suffering from the effects of a painful recession in 2016. The Federal Government earned N2.7 trillion in oil and non-oil revenue in 2017, the lowest since 2011 when the government earned N2.56 trillion. That implies revenue to GDP ratio of 2.3 percent, the lowest in at least a decade. Already, the Federal Government’s total non-debt recurrent expenditure of N2.8 trillion in 2017 was more than its total 2017 rev-

•This analysis is based on 2017 revenue figures. Revenues could go up in 2018 on the back of higher oil prices

Unclaimed dividends rise despite... Continued from page 1

of unclaimed dividends in the country has continued to rise. From just N8 billion in 2008 when the initiative was launched, the amount of dividends that investors in the country’s equity market have left unclaimed now stands at N129.6 billion.

Ayodeji Ebo, Managing Director of Afrinvest Securities Limited said the rising unclaimed dividends is mainly as a result of the inability of Nigerians in diaspora to submit their

original documents. “I feel the major reason why we will continue to have increase in unclaimed dividend despite the Eplatform, is that the registrars insist on getting original copies of the mandate form, that is the document required for the E-dividend process, so for most of the clients that are in the diaspora, it cost them more to send most of those documents,” A Nigerian diaspora, who replied BusinessDay via an email, confirmed Ebo’s point, saying he has not been able to send his documents.

“I am required to submit my original documents, but my family and I are far away from Nigeria, how do I possibly get that done? There is not even a medium to assist Nigerians abroad to go through with all the necessary requirements, the shareholder who pleaded anonymity said. Ebo suggested that “they should encourage scanned copies of the documents, so that those that are outside the country will also be able to get some of the requirements sorted.” Meanwhile, the Company and Allied Matters (CAM) Commission definesunclaimeddividendsasreturns on investment that were not claimed

Monday 15 October 2018

enue. An exit from recession in 2017 and higher petrodollars have failed to translate to improved earnings for the government, as revenue earned in 2017 is a 9.6 perecnt decline from the N2.939 trillion earned in 2016. Despite the obvious acute revenue challenge, the government has engaged in advanced discussions with labour unions to raise the monthly minimum wage of N18, 000 ($USD 58), and has already proposed a 33 percent hike to N24, 000 while the Nigerian Labour Congress, an advocacy group for government workers, is pushing for a 67 percent increase to N30, 000. There are three possible scenarios from this. If the Federal Government gets its way, that would push its wage bill by N615 billion from N1.866 trillion in 2017 to N2.4 trillion, 90 percent of the government’s total revenues in 2017. If the NLC succeeds, then personnel costs will rise by N1.25 trillion, taking personnel costs to N3.1 trillion, 14 percent higher than the government’s 2017 revenue and 34 percent of the 2018 budget. That could leave the government no choice but to borrow, just to meet personnel expenses, without adding statutory transfers, overhead costs, debt service and capital expenditure. If both parties meet each other half way, then they could settle at N27, 000, a 50 percent increase from the current minimum wage. That then implies a wage bill of N2.7 trillion, equivalent of the government 2017 total revenues. “This is not just a minimum wage hike,” said Andrew Alli, former CEO of the Africa Finance Corporation and now a director at private-equity firm, CDC Group. “After it is done there will be agitation that differentials will need to be maintained, meaning that virtually all govt employees will have a pay rise. “This is part of our habit of not adjusting things continuously meaning that we then have to adjust through economy-crushing massive hikes (think exchange rates, fuel prices, government salaries), to name but a few,” Alli said in a tweet response to Business Day. Already, the International Monetary Fund (IMF) has warned the country about the unsustainability of its rising foreign debt stock, which has failed to translate to economic growth. The Federal Government’s domestic and external debt (excluding states) is up 73 percent to N18.9 trillion as at June 2018 from N10.9 trillion in 2015, according to the Debt Management Office (DMO). In the same period, GDP growth has declined from 2.5 percent in 2015 to 1.5 percent in the second quarter of 2018 with expectations for 1.9 percent full-year growth. But Udoma Udo Udoma, minister for budget and national planning, speaking at the IMF meetings in Indonesia last week, dismissed

claims made by the IMF of a possible debt crisis. He however, admitted more needed to be done to boost revenues. Ayo Teriba, one of the country’s leading economists, also lent his weight to warnings that the country is headed in the wrong direction by amassing expensive debt when there are alternatives that won’t cost as much. “The shortfall in government revenue is a fall in income, if the fall is temporary, then you can borrow but you can’t solve a lingering revenue slide with short-term debt,” Teriba said. “We need fresh sources of income, the government wants to boost tax receipts to make up for the revenue shortfall, but that is a mirage because the private sector is also hit by weak economic activity. “This is the time to raise equity not debt and we can learn from countries like Saudi Arabia which plans to raise about $200 billion by privatising about 16 sectors of its economy. Ethiopia is doing same,” Teriba added. So far, the government has been lukewarm to privatisation. The country’s privatisation agency had said it would raise N289 billion ($797 million) selling 10 stateowned assets to bridge an appalling revenue shortfall and meet up with key projects in its budget. But it hasn’t happened as the government has clearly shown a preference for debt over equity. Between 2016 and 2017, the Federal Government borrowed N3.2 trillion, according to a budget implementation report published on the website of the national Budget Office. In those two years, the government raised N5 billion ($16 million) in privatisation proceeds, 14 times less than it made from selling only one company in 2006, following the $225 million sale of Port-harcourt based olefins and polyolefin’s maker, Eleme Petrochemical to Indorama Group. Though provision was made for N10 billion (USD$ 32 million) in privatisation proceeds in the 2017 budget, not a kobo was raised, an indication that the government does not really look at privatisation as a good option to boost revenues. To drive debt service to revenue ratio below a more accommodating 50 percent, based on 2017 debt levels, the government would have to almost double revenues. This means raising an additional N2.7 trillion in revenues while ensuring that debt levels do not spike further. Achieving this for now, looks like a steep call, unless the government moves to take some difficult economic decisions to cut down expenditure through ‘unpopular’ economic reforms that will include labour cuts and privatisation of key assets and introduce an appropriate pricing mechanism for petrol and power.

by investors within three months after declaration at the annual general meetings. Shareholders cannot claim any unclaimed dividends after 12 years. Unclaimed dividends have been on a sharp increase in the last six years from N50.1 billion in March 2012 to N102 billion in June 2015 and then to N129.6 billion at the end of December 2017, data from SEC shows. This shows a159percentincreasefrom2012to2017 despite the increased push by SEC to encourage shareholders to come forward and claim their dividends. Babatunde Oladosu, a Lagosbased shareholder said the movement to the e-dividend platform has

been very difficult. “I think the problem is between the banks and the registrars, because last year, I moved all of my 20 different stocks to the platform, but less than five have been successful,” Oladosu said. He explained that most times when issues like this happen, it is not usually technologyproblem,ratheritisapeople problem,“becausetheformsaresubmitted at the banks and so, the exchange between the banks and the registrars have not been as smooth as it should be. “For instance, when I submitted one, I know how long it took to process.”

•Continues online at www.businessdayonline.com

Monday 15 October 2018

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BUSINESS DAY

Explainer

What CBN’s Payment Service Banks mean for Nigeria financial inclusion ENDURANCE OKAFOR

he Central Bank of Nigeria (CBN) on the 5th of October 2018 released an exposure draft guideline in which it proposed Payment Service Banks (PSB), aimed at deepening financial inclusion in a country where only half of its total adult population is included into the financial cycle. What is PSB? PSBs is a payment service initiative proposed by CBN in which Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) who are able to present an initial capital of N5 billion will be given license to operate under the structures and guideline specified by the apex bank, with the motive but not limited to ensuring access to financial services for the unbanked rural segments of the society.

Financial inclusion The CBN in collaboration with stakeholders launched the National Financial Inclusion Strategy on October 23, 2012 aimed at further reducing the financial exclusion rate of adult population from about 53 percent in 2008 to 20 percent by 2020. Several policies and initiatives have been introduced by Nigeria’s apex bank to ensure that the target is met. The CBN introduced the cash-less policy in 2012 as part of efforts to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach. In collaboration with other key financial sector regulators, the CBN in 2006 conceptualized the Financial System Strategy 2020. Also to further ensure that the financial inclusion target is met, the CBN, in 2017, inaugurated the Financial Inclusion State Steering

Woji explodes in businesses from Trans-Amadi overflow IGNATIUS CHUKWU & KELECHI ANOZIE

oji, a town near Trans-Amadi Industrial Estate in Port Harcourt, is now the new receptacle for businesses, as Trans-Amadi seems to overflow. Trans-Amadi has been the industrial zone for Port Harcourt since the 1960s, when it was built by the Eastern Nigeria government to boost industrial growth of the Port Harcourt zone of the region, the way Emene Industrial Zone was expected to boost Enugu town. Now, with a resurgence of Trans-Amadi with new road network, Woji is said to be the new spill over. The oilrich state is seen to grow on a daily basis, receiving new companies such as ALCON, leading to a centre of attraction. Alcon, formerly Med Construction, has its head offices at Trans Amadi, but has a fabrication yard located at Woji. Woji is a town in Obio/ Akpor local government area in Rivers state. The company, Hollified Industries Limited on Alcon Road 2, JDP Bridge off YKC, Woji in Port Harcourt, has attracted investors and construction. According to traders

along the route, businesses now move faster on the route. It is now a busy area. According to Kevewe Egedegbe, a worker of ELTotuoma International Limited, a construction company in Alcon into construction of marine vessel, he said the community has a cordial relationship with the company. He said influx of companies in the area had helped to bring safety and improve upon the environment with an established quality assurance system to plan and control all activities affecting the quality of their product or services provided. He added that the company aimed at fostering technological progress has the potential to boast economic growth. A resident in Woji Alcon, Emeka John, however said the environment was merely bushy without signs of modernisation, adding that he was however happy for the new wave of reconstruction. According to a local transporter, Peter Emmanuel, the traffic along Woji Road has become something else due to higher population coming in. He said by 8am, the road is very busy these days, but observed that the expansion of the road has helped to safe the situation.

Godwin Emefiele, governor, Central Bank of Nigeria

Committee ( FISSCO) as well as the Financial Inclusion State Steering Committee (FISSCO). Despite several initiatives including the introduction of Microfinance banking, Agents

Banking, Tiered KnowYour-Customer requirement and Mobile Money Operation (MMO) in pursuit of this objective, financial inclusion rate remains below expectation, hence the proposed

IMF warns African nations over public debt spiralling levels MIKE OCHONMA

nternational Monetary Fund (IMF) has warned African countries that their increasing indebtedness and failure to service their public debts was creating poverty for its citizens. According to Montfort Mlachila, senior resident representative for IMF in South Africa, “One of the key challenges African countries face is the rapid increase in public debt levels, which in turn mean that, they are spending more and more money on servicing the debt at the expense of more socially and economically useful activities such as investment in infrastructure.” So, to address this challenge, the official believes that, there is a need for countries to create the necessary space notably by increasing the domestic resource mobilisation, in other words, broadening their tax base so that they can capture a lot more revenues that are needed to address this challenge. Also, governments need to invest in better management of their own investments because a significant proportion of money is wasted through all kinds of inefficiencies due to bad management. Mlachila was speaking on the sidelines on the last day of the Infrastructure Africa Business Investment Forum

in Sandton. He said if African countries did not find “creative ways” of managing their debt, this could result in poverty levels being prolonged longer than necessary. “There are quite a few countries facing high levels of debt, they are either in debt distress or they are already having serious problems of managing their debt.” He lamented that some African countries like Zimbabwe and Eritrea were obvious examples where the debt was distress and they were spending more money on day-to-day management of the country on recurrent expenditure rather than spending money on investment. “Mozambique right now is facing problems because a lot of the debt has become unsustainable and they will need to restructure the debt so that they can create the fiscal space to invest more in infrastructure,” he said. The country is facing an economic woe as public hospitals have no medicines and the situation getting more and more serious as a result of the $2 billion secret loans from Credit Suisse and Russian lender VTB for the purchase of naval equipment and a fishing fleet that were backed by Mozambique’s financial minister without parliamentary approval.

PSBs. Why the proposed PS Banks The proposed initiative allows banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) to leverage on their already existing customer base to include more Nigeria adults, specifically those in the remote areas to have access to financial products and services, considering the lack of proximity to, and availability of, financial service points (FSPs) — bank branches or agents which are meant to provide account opening and other customer service activities are the major barriers preventing rural inhabitants from accessing financial services. The project seeks to deepen financial inclusion in Nigeria through an integrated ecosystem with strong regulatory oversight, consumer protection and interoperable payment systems

with limited concentration risk. The various agents that will be given the license will therefore have the right to carry out the following services; maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including crossboarder personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse. What Nigerians stands to benefit from the proposed PSBs It has the likelihood of increasing the country’s financial inclusion rate, as it will help include more Nigerians into the financial cycle; owing to the fact that it will be able to provide financial services to the grass root communities, who have in the past spent a lot of time and money to travel out of the town in search of financial services.

FG seeks world leaders help in tackling 70% illicit financial flow HOPE MOSES-ASHIKE, in Bali, Indonesia

he Federal Government weekend sought the help of world leaders and foreign investors in tackling 70 percent illicit financial flows, particularly through the extractive industries in the country, and Africa. At the G24 meeting held on the sideline of the ongoing International Monetary Fund (IMF)/World Bank Group annual meetings in Bali, Indonesia, Nigeria also sought the support these leaders with the right instruments that would enable it tax large corporations. Zainab Ahmed, minister of finance, who disclosed the outcome of their meetings with journalists in Bali, said they had series of meetings that included meetings with Commonwealth minister, G24 as well as meetings with investors. “Essentially, that meeting was for us to ask them question and for them to better provide support for us. So, for us in Nigeria, what we ask is how can they help us in fashioning out support instrument that can help us pursue taxes, especially from very large companies, like the international oil companies. In Nigeria, our greatest tax potentials are from the IOU that operates from the oil and gas

sector,” she said. Continuing, she said, “Yet, this is an industry that forms the report of Tabor Mbeki, shows that about 70 percent of illicit financial flows, flows from Africa, Nigeria included, about 70 percent of that is related to the extractive industry. “We did ask them to look at how we can prevent transfer pricing and how we can stop the flow that goes out of that sector, because these are revenues that we can use to enhance or development it.” At the meeting with investors, she told the investors that Nigeria was a very good place to do business, while assuring them of 13 - 14 percent return on investment. “It was very well received. There was a lot of interest, and because of that we are confident that the next Eurobond that we are trying to raise will have good outing,” she said. Responding to questions on natural disaster, she said, “We are lucky in Nigeria. We have not had extremely devastating natural disasters. We have had some flood, but you look at what happened in Indonesia recently, a lot of lives lost as well as property. What we discussed is how we can be ready because these are things that are not in our control, but we should be able to respond very quickly to minimise the damage.”

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CBN, CIBN urge risk managers to intensify vigilance on Fintech risks … to release fintech regulatory framework soon IFEOMA OKEKE

Kachickwu, NNPC, PPPRA give conflicting figures on Nigeria’s petrol consumption OLUSOLA BELLO

… as agencies lack synergy

he controversy surrounding the daily average volume of petrol consumed in Nigeria is yet to be over as there is clear 10 million litres difference between the figures reported by the Petroleum Products Pricing Regulator (PPPRA) and the Nigerian National Petroleum Corporation (NNPC). Even the official report from the office of the minister of state for petroleum is at variance with the ones above. The figure contained in Petroleum Periscope, which is released monthly from the office of the minster, indicates that the daily average consumption of petrol is 52.80 million litres, 2 million litres higher than that of PPPRA. BusinessDay’s investigation reveals that while the PPPRA in its daily report indicates that the average daily consumption figure is approximately 50 (49,500,000) million litres. The NNPC on

the other hand stated 40.5 million litres in its most recent report. The discrepancy, according to industry operators, may be connected with the obvious lack of synergy between the two government agencies and under the same ministry to reconcile the figures they collate from the various sources of import of petrol into the country. An industry operator that spoke with BusinessDay on the condition of anonymity said the figure given by PPPRA might be more accurate than what NNPC had. According to him, PPPRA captures all the volume of petrol brought into the country while NNPC most the time loses track of what various companies bring into the country because its concentration is on the Pipeline and Products Marketing Company (PPMC). The PPPRA report further showed that the country’s consumption of other

products is in this order: Automotive gas oil (AGO) 11 million litres, dual purpose Kerosene (DPK), also called Household Kerosene (HHK) 2.5 million litres, and Aviation Turbine Kerosene (ATK) 1.4 million litres. These figures are based on what is evacuated or trucked out from the various depots across the country. Again, these figures contradict what was obtained from the office of the minister of state for petroleum, which are as follow: AGO-10.34 million litres, ATK 2.4 million litres, and DPK 1.54 million litres. The NNPC stated in its report that in the downstream sector, it had continued to ensure increased of petrol supply and effective distribution across the country. In May 2018, 1.19 billion litres of petrol were supplied by it and this translated to 40.59 million litres/day to sustain seamless distribution of petroleum products and

Rig operators plead for upward spending limit from 40% cut as oil price surges to $80 IGNATIUS CHUKWU & FORTUNE OKORIE

ig operators serving in the Nigerian oil industry want the Federal Government through the Nigerian National Petroleum Corporation (NNPC), which had slammed a 40 percent cost cut when oil went down to $40 per barrel, to move up the cut limit now that oil is doing 100 percent of that. The call was made in Port Harcourt, Rivers State, at the 2018 general meeting between the Department of Petroleum Resources (DPR) and rig owners/operators at Jevnik Place on Tombia Street in the GRA II section. The call came from Ote Enaike, chairman, International Association of Drilling Contractors (IADC), who

said the Federal Government through the NNPC slammed the cut on oil corporations who passed same to drillers. The order was for operators to cut down expenses by 40 percent when oil prices came down as low as $40 per barrel. During this period, he said, it was difficult for drillers, as they had to reduce workers and still maintained oil industry standards in terms of rig efficiency. He said the over 30 drillers in Nigeria and several drilling operators were surprised that despite the increase of oil prices to about $80 per barrel, no order has come to raise the spending limits. The danger, he said, is that the drillers are struggling to up their game with the old spending. He said it makes it difficult to get quality personnel and to

upgrade equipment. According to Enaike, it is also difficult to convince those laid off to return to an industry that caused them pains. To recruit new workers has been tough due to the cost of training them to required standards. So far, the number of rigs in Nigeria which fell to as low as 12 in 2016 when oil prices fell badly has surged to 32, the 2015 level. He said the number fell from 50 at the rosy levels. The early upward review of the operating costs, he said, was important to give cost flexibility to the drilling sector of the oil industry and allow the drillers meet the demands of the industry instead of being forced to operate with an obsolete budget. “When oil prices fell, the cost of equipment from manufacturers did not drop.

zero fuel queues across the nation. “The Corporation continued to monitor petrol evacuation figures from depots across the nation, and engaged where necessary the Nigerian Customs Service (NCS) through existing Joint Monitoring Team. In May 2018, pipeline break stood at 82, of which 20 pipeline points, either failed to be welded or ruptured/clamped. Thus 62 pipeline points were vandalised as against 125 recorded last month”. NNPC in collaboration with the Nigerian Ports Authority is working towards ensuring seamless reception of petroleum products into the various ports across the country. The Corporation has proposed the establishment of a one-stop-shop at the ports with all agencies relevant to the clearing of petroleum products vessels to reduce delay and demurrage that usually result in under-recovery for the Corporation.

s fintech continues to transform financial services in Nigeria and around the world, the Central Bank of Nigeria (CBN) and the Chartered Institute of Banker (CIBN) have both urged risk managers to enhance their risk management techniques to avert risks that may arise from technology. This call was made at the Risk Management Association of Nigeria (RIMAN) mandatory seminar for certified risk managers, at the weekend in Lagos. Speaking, Aishah Ahmed, deputy governor, CBN, while delivering her paper titled ‘Regulatory perspective on the future of risk management in Nigeria,’ noted that risk functions of banks would have to be up to date to cater to new and arising risks from technology. Ahmad, who was represented by Christian Okoye, the director, Banking Supervision, CBN, said: “The outlook of risk functions in banks and financial services firms would be fundamentally different from where they are today and as such, calls for timely action to guide against banks being overwhelmed by the new requirements. “This is consequent upon the new technology that ushered in complex security challenges, cybercrime and various other forms of risks. “For instance, the emergence of new competitors, there would be increased customer expectations which would cause massive alteration in banking as the

future of banking is entirely encapsulated in technology mostly offered by Fintechs.” She said further: “While a variety of organisations are exposed to cybercrimes, the financial sector is particularly vulnerable given its crucial role of financial intermediation. “With the presence of Nigerian banks in Africa and other parts of the world, there is an increasing demand for compliance with our domestic regulations such as the Nigerian Cybercrime Act, anti-money laundering regulation, foreign regulations such as the European Union central data protection regulation and the framework on cyber security that was released yesterday.” However, at the time of this report, the framework was yet to be posted on the apex bank’s website. “The future risks functions in Nigeria would entail that risk function would likely be integrated in every bank process, irrespective of their contribution to business,” she said. Also, on regulatory measures taken by CBN, she said: “It is evident that fintech firms are profoundly revolutionising the way financial services are provided. Its important areas such as asset management through robot advisors, capital raising through crowd funding platforms and payment systems through virtual currencies. “These changes are irreversible and in some cases desirable as fintech firms have the potential to provide great benefits to customers in terms of lower cost and financial inclusion.

Nigeria’s online shoppers may hit 100m in 2030 from 17m - RSU researcher IGNATIUS CHUKWU & FAVOUR ICHEMATI

ocial media shoppers in Nigeria may hit 100 million from the present figure of 17 million, according to a researcher and professor of Marketing in the Rivers State University, Njobuenwu Gladson Nwokah. This would represent 53 percent of Nigeria’s population. Delivering his inaugural lecture at the Law Faculty Auditorium last week, the marketing expert said facebook dominated the platform patronised by Nigerians for sourcing product information, saying by 2030, some 100 million Nigerians would rely on facebook and other internet sources for adverts and shopping. In the lecture titled ‘From Brick and Mortar to Click and Mortar,’ Nwokah predicted that most successful retailers

would be those that innovate by unifying their growing online presence with an experiential physical environment. “Brick and mortar will remain a major force in retail’s future, but regardless of how consumers travel to their preferred destination, the instore experience that awaits them will be dramatically different from the present paradigm,” he said. He said customers in 2030 would expect retailers to leverage personal information (data they willingly hand over, no less) to deliver more customised products and offers, adding that online adverts in 2030 would be more dominant through the facebook than any other social media. “In 2030, Nigeria internet usage statistics will increase to 53 percent or more. Presumably, 50 percent of urban

dwellers in Nigeria will shop more wears and electronics from online retailers,” he said. The professor therefore recommended what he called performance measurement systems in place to detect the impact of investment in market orientation with the aim of learning how a firm works. The chairman of the lecture series, I.K.E Ekweozor, commended Nwokah, saying he had made marketing to be above all other courses and professions by showing how to overcome poor performance and offer more services to clients. The vice chancellor, Blessing Didia, described the inaugural lecturer as a gifted person who turned in a brilliant and voluminous lecture on short notice soon after conferment as professor.

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Financial inclusion: Growth in e-payment channels slows in 2018 CYNTHIA IKWUETOGHU

fforts to include the financially excluded segments of the society into formal financial system in Nigeria saw a slow growth in electronic payment channels this year, especially in mobile transfer and Point of Sale (POS). An analysis carried out by BusinessDay from the data compiled on E-payments channels from Nigeria InterBank Settlement System plc (NIBSS) using Compound Annual Growth Rate (CAGR) for the period of nine months - January to September 2018 and 2017 - to determine an annual growth rate, showed that the volume and value of mobile transfer grew at 5 percent and 3 percent in 2017, whereas it grew at an annual growth rate of 3 percent and 2 percent, respectively in 2018. Only 6.50 percent (i.e. 3.84m) of customers out of 59 million active account holders used the mobile money transfer in 2017. This compares with 9.08 percent (i.e. 5.54m) of customers out of the 61 million active account holders that used mobile money transfer in 2016. The growth in the volume

and value of POS was also higher at 6 percent and 3.4 percent last year from January to September, as compared with 5 percent and 3.1 percent in the same period this year. NIBSS Instant Pay (NIP) had a growth of 5.4 percent in the previous year and 5.3 percent this year in its volume while its value had a positive growth of 2 percent in 2018 and a negative growth rate of -2 percent in 2018. Likewise, E-bills had a higher growth in both volume and value this year than last year. “Reform the regulatory framework to allow subsidiaries of mobile network operators (MNOs) to apply for mobile money operator’s licence,” World Bank suggested in a blog ‘Five ways Nigeria can realise mobile technology potential for the unbanked.’ However, government has prevented network operators from applying for mobile licences that will enable consumers make cash transfers without having a bank account. This has led to more people in the country becoming unbanked. “Expand the agent network,” World Bank further

suggested. Agents are small shops that offer basic services to mobile money users like deposits, withdrawals and transfer. Also, digitise routine cash payments as data from World Bank Global Findex 2017 showed that nearly one in 10 unbanked adults in Nigeria worked in the private sector and received wage in cash, including about 4 million who had a mobile phone. The country also needs to adopt inclusive enrolment methods such as the acceptance of less formal proof of identity and the use of both male and female enrollers to encourage marginalized populations to participate. Currently, the country has 21 mobile money operators licensed by the CBN with over 70,000 new financial access points created, nine operators currently party to SANEF, six super agents; Interswitch; Capricorn; Innovectives; Inlaks; Unified Payments and Xpress Payment Limited. The country has a target of about 100,000 agents for third quarter and 150,000 targets for fourth quarter.

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Nigeria’s burgeoning digital economy prompts increased investments in tech incubation hubs JUMOKE AKIYODE-LAWANSON

apid transition to a digital economy has created a rise in start-ups that are leveraging technology to offer innovative products and services to a wider array of consumers in Nigeria, experts say. In the last five years, Nigeria has seen a huge growth in tech investments from deep pocket individuals and foreigners who have a strong conviction about the untapped potentials of Information and Communication Technology (ICT). This sector has been acknowledged as the largest generator of Foreign Direct Investment (FDI) after the oil and gas industry, recording over $32 billion in foreign investments in 2018. More so, research has proven that one of the ways of growing start-ups to improve the culture of entrepreneurship in an economy is through developing clusters of communities that can serve as catalysts for entrepreneurship development. A number of privately run local and global technology accelerator programs are succeeding in Nigeria. These include LeadPath Nigeria, a technology start-up accelerator, which began operations in Nigeria with a $1.5 million fund. The technology accelerator at the launch

engaged key stakeholders in the Lagos technology ecosystem, including other deep pocket investors, entrepreneurs and developers. Co-creation Hub “CcHUB, founded by Bosun Tijani, benefitted from the Tony Elumelu Foundation (TEF) and boosted its incubation program with the launch of a $500,000 seed investment fund. According to a report by GSMA (an originallyEuropean trade body that represents the interests of mobile network operators worldwide), 128 tech hubs were opened across Africa within the last two years. In perspective, there were 442 active hubs by March 2018. Hubs continue to spring up across several cities in Nigeria including Abuja, Ibadan, Enugu, Kaduna and other states. Industry watchers say that the success of these incubation hubs is as a result of the massive population of budding tech entrepreneurs in the country who ride on the back of significantly improved broadband penetration and technology infrastructure enhancement over the years. In 2016, Disrupt Africa released a report, which revealed that Nigerian start-ups received over $49,404,000 direct investments. According to the report, African technology startups received direct

investments to the tune of about $185,785,500. Of all the countries featured in the report, 24 percent of the start-ups are based in Nigeria. Apart from venture capitalists and fortune 500 global technology companies trooping in to explore and benefit from the immense talent in the hubs and startup companies, influential tech business enthusiasts like Mark Zukerberg, founder of the global brand, Facebook have expressed interest in Nigeria’s technology space, evidenced in his visit to the hub. The Nigerian start-up ecosystem witnessed the addition of GoDo.ng to its folds, with a promise to ensure that more young people are given the necessary platforms and opportunities to grow. GoDo.ng was publicly unveiled on Monday, October 1, 2018, by John Obaro, MD of SystemSpecs, who expressed delight at the thought of the co-founders of GoDo.ng, for commencing such a project for the benefit of available talents in the country. The platform was established and made available for the use of creative and innovative minds as they converge to share co-working space, with state-of-the-artfacilities, connect and collaborate with one another.

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Ganduje denies being person in video stuffing dollars in ‘agbada’

he Kano State governor has come out to strong deny being the person in a video trending online on Sunday, October 14, stuffing wads of dollar notes into his flowing agbada. Salihu Tanko Yakasai, special assistant, media to the Kano State governor, Abdullahi Ganduje, issued a statement on Sunday evening claiming that the video widely shared online was cloned. “The attention of Kano State Government has been drawn to malicious report by an online media platform, alleging that the Governor of Kano State His Excellency Abdullahi Umar Ganduje OFR was involved in an inappropriate conduct. “We wish to state that there is no iota of truth to these allegations and if indeed there is any such alleged video, it is at best

cloned. More so, in this era of technological advancements, some evil-minded people often take advantage to blackmail and extort and assassinate the character of people that do not “ patronise them.” The video shows the Governor of Kano State, Abdullahi Ganduje receiving money in dollars alleged to be bribe amounting to about $5 million. The money was given by persons believed to be contractors to the state government. The video, which was released by online media, Daily Nigerian, was a sting operation that captured the governor on camera collecting the money at different occasions, a report by Premium Times show. PRNigeria, a PR firm that works with the Nigerian security agencies claim that security and forensic experts

have screened and verified the authenticity of a trove of video clips of the bribery before the online media decided to release it to the public on Sunday. The publisher of Daily Nigerian, Jaafar Jaafar, who had gone underground due to alleged threat to his life, said the sting operation to capture the governor on camera began two years ago when one of the contractors agreed to a request by the media outfit to plant spy camera on his kaftan lapel while offering the governor bribes. The publisher said: “During about 10 months’ efforts to capture the bribe giving/ taking scenes, the governor’s face and body were clearly captured in nine clips, while six others did not clearly reveal the governor’s face. About $5 million were delivered to the governor during the sting operation.

NCC names Nwokike public affairs director JUMOKE AKIYODE-LAWANSON

namdi Nwokike has been appointed as the director, public affairs, by the Nigerian Communications Commission (NCC). His appointment, which is in line with the NCC management’s realignment of roles and redeployment, follows the retirement of Tony Ojobo at the mandatory age of 60 years. Prior to this new position, Nwokike was the director, corporate strategy planning and risk management of the NCC. Nwokike’s expedition in NCC began in 2001 when he became the deputy director and pioneer head, consumer affairs department. A department he started and renamed Consumer Affairs Bureau (CAB). At CAB, he created the

consumer parliament, consumer outreach Programmes, consumer bill of rights and consumer factsheets which have remained veritable channels for handling consumer complaints, consumer education and general dissonance in the market. In 2004, Nwokike was transferred to business development, a department vested with responsibilities of de-

veloping new business vistas, negotiating business contracts and managing international collaborations with agencies such as World Bank, United States Telecommunication Training Institute (USTTI), USAID. With his team in the business development unit, they worked assiduously with consultants from World Bank, USAID towards the setting up of the Universal Service Provision Fund in the Commission. In 2007, Nigeria through the NCC, supported the candidature of Nnamdi Nwokike for the executive secretary position to head the West Africa Telecommunications Regulatory Assembly (WATRA). Having contested and won the election, Nwokike served as executive secretary of WATRA for two terms of a three-year tenure from 2007 to 2013.

Complaints Commission seeks NCC collaboration to boost ICT platforms JUMOKE AKIYODE-LAWANSON

he Public Complaints Commission (PCC) recently met with the Nigerian Communications Commission (NCC) seeking collaboration and cooperation of the regulator in its drive to boost the ICT platforms of the complaints commission. Chile Igbawa, chief commissioner of PCC, who paid a courtesy visit to Umar Garba Danbatta, executive vice chairman, NCC, said the ICT platforms including telecommunication lines of the complaints commission needed to be improved upon. This is to ensure the promotion of social justice for individual citizens and seamlessly provide a viable option for Nigerian or any-

one resident in Nigeria, seeking redress against injustice arising from administrative bureaucratic errors, omission or abuse by government officials, or limited liability companies in the country. Igbawa said the ties of both commissions needed to be strengthened. According to Igbawa, the emergency call number assigned to the PCC by the regulator is yet to be configured, so he is soliciting cooperation in that regard. “PCC is also requesting NCC to assist by helping to set up and equip their emergency call centres nationwide as this will enhance their services to protect the interest of the public,” he said. According to Danbatta, in his response, the commission holds its consumer in

high esteem and it is the reason why 2017 was declared year of consumer during, which so many consumer related programmes were initiated and implemented. These include Do-NotDisturb (DND) short code 4224, which affords a consumer an option to solicit for messages or opt out of it, thereby taken care of unwanted text messages and 622 short code for customers seeking redress. “NCC has Emergency Call Centres in the six geographical zones and Abuja using short code 112 to reach the Police, Federal Road Safety (FRSC) Corps, Fire Service, Ambulance Services and the National Emergency Management Agency (NEMA) in emergency situations,” he said.

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Naira stable at N360/$ at parallel market … as capital market indices up by 0.12%

aira remained stable against the dollar at the parallel market in Lagos weekend, still exchanging at N360 to the dollar. The naira was, however, traded against Pound Sterling and the Euro at N478 and N417, respectively. At the Bureau De Change (BDC), the naira was sold at N360 to the dollar, while its rates against the Pound Sterling and the Euro were N478 and N417, respectively. At the investors’ window, the naira closed at N364.12

against the dollar where a market turnover of $295.08 million was achieved. The naira closed at N306.45 to the dollar at the official CBN window. Traders said the market had remained active, as political activities had begun gradually across the country. However, trading activities on the Nigerian Stock Exchange (NSE) sustained a positive growth weekend, with Nigerian Breweries leading the gainers’ table. The News Agency of Nigeria reports that Nigerian

Breweries grew by N3 per share to close at N88 per share. International Breweries followed with a gain of N1.50 to close at N32, while Unilever appreciated by N1 to close at N43.50 per share. Zenith Bank added 15k to close at N22.20, while Access Bank advanced by 10k to close at N8 per share. Consequently, the AllShare Index rose by 39.18 points or 0.12 percent to close at 32,456.98 against 32, 417.82. Also, the market capitalisation, which opened at N11.835 trillion, grew by N14 billion or 0.12 percent to close at N11. 849 trillion.

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FX trading activity slumps to September low LOLADE AKINMURELE

rading activity in the spot FX market between commercial banks and their clients declined 14 percent to $1.59 billion for the week ended September 28, from $1.87 billion the week before, according to data compiled by local trading platform, FMDQ. Activity that week was the lowest for the month, with an average daily turnover of $319 million compared with $373 million for the week-ended September 21, $454 million in the week through September 14 and $363 million in the week through September 7. The trend mirrors a draw-back in foreign portfolio inflows into the country, amid political uncertainty ahead of the 2019 elections and a general sell-off in emerging markets on the back of rising interest rates in the United States. Meanwhile, the banks

traded more foreign exchange among themselves in the week under review, following a 24.55 percent increase to $411.54 million (average daily turnover of $82.31 million) from $330.42 million (average daily turnover of $66.09 million) reported the week-ended September 21, 2018. In the Investors’ & Exporters’ (I&E) FX Window, the total value of trades recorded for the week-ended September 28, 2018 stood at $1.15 billion, representing a decrease of 24.84% ($0.38bn) when compared to the $1.53 billion traded in the previous week, and bringing the total value traded at the window yearto-date to $45.48 billion. That’s at par with the current level of the CBN’s external reserves. For the reporting weekended October 5, 2018, the CBN official rate rose by N0.05 to close at $/ N306.40, indicating a 0.02% depreciation when compared to $/N306.35 recorded the previous week-ended September

28, 2018. In the Bureau de Change (BDC) market, still at the end of the reporting week, the exchange rate remained unchanged to close at $/ N361.00. Also for the week-ended October 5, 2018, the naira appreciated at the I&E FX Window, gaining N0.10 to close at $/N363.82 when compared to $/N363.92 recorded the previous week, resulting in a spread of $/ N2.82 between the BDC market rate and I&E FX Window rate. On the other hand, the spread between the BDC market rate and the CBN official exchange rate fell by N0.05 to close at $/N54.60, indicating a 0.09% decrease from the $/N54.65 recorded in the previous week In the FX Futures market, $93.99 million worth of OTC FX Futures contracts were traded in nine deals, compared to the total for the previous weekended September 28, 2018 of $236.49 million traded in 14 deals.

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Friends of the Earth accuses ethical index provider of ‘greenwashing

US growth is approaching ‘inflection point’, warns Bridgewater

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UK’s Brexit minister heads to Brussels for surprise talks Dominic Raab will meet EU negotiator Michel Barnier on Sunday afternoon GEORGE PARKER AND ALEX BARKER

ominic Raab, UK Brexit secretary, travelled to Brussels on Sunday afternoon for a hastilyarranged meeting with EU chief negotiator Michel Barnier, as talks over an exit deal reach a climax ahead of Wednesday’s European Council summit. Mr Raab’s trip — and news that ambassadors from the EU’s 27 remaining member states had been summoned to a separate meeting in Brussels — raised speculation that a deal could be close. However, Downing Street insisted that “two big issues” remained unresolved, both of which are highly sensitive at Westminster. The first is the question of how to reassure Conservative Eurosceptics that a “temporary” extension of Britain’s EU customs union membership — part of a backstop guarantee against a physical border in Ireland — will not become semi-permanent. The second concerns Prime Minister Theresa May’s acceptance of the EU’s demand that Northern Ireland should remain part of the single market in any backstop arrangement, creating a regulatory border between Northern Ireland and the rest of the UK. The Democratic Unionist party, which props up Mrs May’s minority government, has said it will not accept any deal that treats Northern Ireland differently to the rest of the UK. Both issues appear intractable, but Mr Raab’s involvement in negotiations will signal an intensification of efforts to find a legal fix. Until now, the British negotiating effort in Brussels

Dominic Raab’s trip will raise speculation that a deal could be close © Reuters in recent days has been led by Olly Robbins, Mrs May’s Europe adviser. The government said: “Brexit secretary Dominic Raab will be in Brussels this afternoon to meet with Michel Barnier. With several big issues still to resolve, including the Northern Ireland backstop, it was jointly agreed that face-to-face talks were necessary ahead of this week’s October European Council.” Talks are due to begin at 4.30pm local time. Officials said it was unclear how long they would last or if there would be any announcements afterwards. Meanwhile David Davis, the former Brexit secretary, has urged the

cabinet to rise up against Mrs May and “reset our negotiating strategy”, as exit talks go down to the wire in Brussels. Mr Davis claimed in an article for the Sunday Times that a tentative deal taking shape in Brussels would leave Britain “trapped in the customs union for the foreseeable future”. About 10 cabinet ministers have warned they would oppose any deal that did not give Britain a clear exit route from a “temporary” customs union after Brexit; they insist that the EU must not have a lock on such a process. Some ministers want a firm end date for such an arrangement, including Andrea Leadsom, leader of

the Commons; Esther McVey, work and pensions secretary; and Penny Mordaunt, international development secretary. On Sunday health secretary Matt Hancock said any customs union extension would be “temporary and time limited” but declined to say whether there would be a firm end date. However, he said: “There are different ways to make sure something is credibly time limited. You can set conditions under which arrangements come to an end.” Mr Hancock told the BBC’s Andrew Marr Show that negotiations on a EU withdrawal agreement were “ongoing as we speak”, adding: “We

are in the final days and weeks of these negotiations.” Meanwhile, Mr Davis warned against any solution that saw an extension of a post-Brexit transition deal — currently scheduled to expire in December 2020 — to allow more time for Britain to agree a final trade deal with the EU. “This has all the drawbacks of staying within the customs union, plus several more,” he wrote. “It would cost large amounts of money. It would keep us under the remit of the European Court, It would keep us in the single market. It would deny us control of our own border and our own immigration policy.”

Zimbabwe’s attempt to tackle ‘bad’ currency deepens economic woes

Geopolitical tension casts pall over IMF meeting

Finance minister’s move to end parallel system leads to dollar shortage and panic buying

CHRIS GILES, JAMES POLITI AND STEFANIA PALMA

DAVID PILLING AND JOSEPH COTTERILL

imbabwe is in the grip of a new economic crisis as the value of the country’s local currency collapses and shop shelves are stripped bare after a panic-buying spree last week. Attempts to resolve the country’s complex currency system — in which non-dollar-backed electronic money and local “bond notes” are rapidly losing value — have been undermined by mixed messages from the government. The latest crisis is reviving memories of hyperinflation and undermining the new administration’s message that the country is “open for business”. Amid a desperate shortage of dollars, even local KFC outlets were forced to shut up shop, unable to access the funds to buy chicken. The problems began this month when Mthuli Ncube, Zimbabwe’s finance minister, said he was dividing bank ac-

counts into two types — ones containing “good” and “bad” dollars. The “good” accounts are those backed by real inflows of dollars, remitted by millions of Zimbabweans in the diaspora. The “bad” accounts are those holding electronic money, known as RTGS, or real-time gross settlement. Zimbabwe has been a dollarised economy for almost a decade since the government scrapped the local currency after a hyperinflationary meltdown. Zimbabweans have lost faith in two surrogate currencies that circulate alongside dollars. These are the “bond notes”, introduced in 2016 and supposedly backed by real dollars, and the electronic money with which people pay for things in the absence of physical notes. In reality, neither trade at anything like parity. Last week, bond notes were worth as little as 20 cents on the dollar. Mr Ncube has won praise for Continues on page A14

Financial leaders fear unity to tackle escalating emerging market woes is lacking

inance ministers and central bank governors brushed aside the global rout in stock markets this week at the annual IMF meetings in Bali, Indonesia, but the event was overshadowed by geopolitical tension and few were confident of calmer waters ahead. Although the global economy is strong, there were fears that financing problems in emerging markets were spreading from specific countries to become generalised capital flight and that global institutions did not have the cohesiveness to deal with problems as they arise. Christine Lagarde, managing director of the IMF pleaded for nations to “sail together” to keep the global economy on track, but there were many signs that co-ordinated action is becoming more difficult. Joko Widodo, Indonesia’s president, warned that “relations between the major economies are looking more and more like the Game of Thrones” with a “tragic price” ready to be paid by all. One shock this week was that the US president was willing to publicly

criticise an “out of control” Federal Reserve for the falls in equity prices, but there was also concern that many other possible triggers existed for what Mario Draghi, president of the European Central Bank, said could be a “snap back” in asset prices and a sharp increase in interest rates. With the world’s two largest economies slapping tariffs on $360bn of goods so far this year, and more to possibly come in the next few months, IMF and World Bank officials, as well as senior officials from many countries, pleaded for Washington and Beijing to deescalate and reach a truce. There was little concrete progress made, but the noises from both sides were more soothing than they have been of late. Speaking to reporters on Saturday, Steven Mnuchin, US Treasury secretary, sought to dismiss the trade tensions. He had received assurances from Yi Gang, the governor of China’s central bank, that Beijing would not engineer a competitive devaluation of the renminbi to offset the tariffs, which Mr Yi had pledged in a statement to the IMF’s governing body. Mr Mnuchin also dismissed the prospect of China dumping its US

Treasury holdings, another retaliatory tool Beijing could unleash, saying he was not “losing any sleep” over the issue and US debt had plenty of buyers. But Mr Mnuchin did not offer any evidence that a breakthrough was close. There had been “no decision” on a possible meeting between US president Donald Trump and Xi Jinping, China’s president, at the G20 summit in Argentina next month, even though talks were continuing. “Our objective with China is very clear, it’s to have a more balanced trading relationship,” Mr Mnuchin said. Tension between Italy and the EU authorities was in plain sight, although both sides urged calm. Mr Draghi, an Italian, said, “this discussion which is naturally complex — because we’re talking about a budgetary expansion in a high debt country — becomes much more complicated if people started in our country to put in question the euro”. “I think these statements have created real damage and there is plenty of evidence that spreads have increased in connection with these statements,” he added.

A14 BUSINESS DAY

NATIONAL NEWS

Zimbabwe’s attempt to tackle ‘bad’ currency...

Saudi Arabia hits back at Trump’s ‘punishment’ warning

Continued from page A1 admitting that the root cause is unsustainable government borrowing that has effectively entailed printing billions of electronic dollars without real-world backing. But the finance ministry’s attempt to end the parallel currency system triggered rumours that the administration was preparing to wipe out savings through a savage devaluation. Last week in London, Mr Ncube appeared to confirm that by admitting: “The market has said these currencies are not at par. I don’t want to argue with the market. The bond notes will, at some point, have to be demonetised.” Tw o d ay s l at e r, a s p a n i c spread, Mr Ncube — by this time in Bali for the IMF’s annual meetings — backtracked. The government, he announced, would honour the parity of RTGS balances with dollars, after obtaining a financial guarantee from Afreximbank, a Cairo-based lender. In a tweet, he said. “Afreximbank has offered Zimbabwe a facility to guarantee 1:1 Convertibility of RTGS balances into US$.” Afreximbank could not be reached for comment. The brewing sense of crisis has negated efforts by the new administration of President Emmerson Mnangagwa to normalise the economy and repair relations with multilateral institutions. Harare has been in arrears with the IMF since 2001. The appointment last month of Mr Ncube, a visiting professor at Oxford university and a former chief economist with the African Development Bank, had been intended to reassure international investors that Zimbabwe was serious about reform. But doubts persist about whether he enjoys the full backing of the government. Mr Mnangagwa was installed as president after the military ousted Robert Mugabe in November last year. Elections this July were marred by allegations of vote rigging and by the shooting of protesters days after polling. Mr Mnangagwa narrowly avoided a run-off after it was declared he had won 50.8 per cent of the vote. At the FT Africa Summit in London last week, Mr Ncube outlined his plans, declaring that the “winds of change” were blowing in Zimbabwe. Among planned reforms, he said, the government was ready to scrap controversial “indigenisation” laws requiring local ownership of platinum and diamond mines. The new finance minister denied suggestions that Mr Mnangagwa’s administration was a military government in disguise. “I am a civilian; I am leading the reforms,” he said. But back at home, Zimbabweans were reeling from the dollar shortage and protesting against a new 2 per cent tax Mr Ncube has levied on electronic payments, a measure he said was necessary to close the yawning fiscal deficit. Tendai Biti, an opposition leader, told the BBC that the new finance minister would not be able to fix an economic crisis born of years of reckless mismanagement. “You can rig an election, but you cannot rig an economy,” he said.

Monday 15 October 2018

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Kingdom vows to use its economic muscle to counter Khashoggi backlash ANDREW ENGLAND AND DEMETRI SEVASTOPULO

Bob Prince: ‘We are at a potential inflection point where the economy is moving from hot to mediocre

US growth is approaching ‘inflection point’, warns Bridgewater World’s largest hedge fund expects market turbulence as economy begins to cool ROBIN WIGGLESWORTH

he US economy faces a looming deceleration as tighter monetary policy starts to weigh on activity and ratchets up pressure on financial markets, according to the world’s biggest hedge fund. Bob Prince, co-chief investment officer at Bridgewater, believes the recent market turmoil was triggered by investors realising that this year’s strong economic growth and robust corporate earnings were likely peaking, as interest rates rise and the boost from tax cuts fades. “A lot of optimism about future earnings growth has been baked into equity valuations. But we are at a potential inflection point where the economy is moving from hot to mediocre,” Mr Prince said in an interview. Mr Prince, who manages Bridgewater’s $160bn of assets alongside founder Ray Dalio and co-CIO Greg Jensen, said: “We are now approaching the stage where monetary tightening could produce, perhaps not a big downturn, but more pressure.” Treasury yields started climbing sharply earlier this month, as a string of healthy US economic data and hawkish comments by Federal Reserve officials forced investors to reassess their sanguine view of how

far and how fast the central bank would be able to raise interest rates. Although the bond market reversal was triggered by good economic news, the jump in Treasury yields was so abrupt that it last week spilled over into the US stock market, sending the S&P 500 tumbling by the most in more than half a year — a drop so severe it reverberated across global markets. Most bourses regained their footing on Friday, and US Treasury yields have fallen from the sevenyear highs they touched at the peak of the bond rout. But Mr Prince cautioned that more turbulence was likely, given how major central banks, led by the Fed, were turning the screws on monetary policy. “This week could fade into history and we won’t remember it, but we are clearly shifting from an era of monetary easing to monetary tightening,” he said. “If that [a growth inflection point] is what is happening, then this won’t be a one-week event.” Tax cuts have invigorated the US economy this year, pushing the jobless rate to its lowest since 1969, consumer confidence to its highest since 2000, and service sector activity to its greatest since 1997. Even the Fed now predicts that growth will surpass 3 per cent in 2018. But that has led it to pencil in

a fourth rate increase for the year in December, and another three in 2019, to cool the economy. At the same time, the Fed is shrinking its balance sheet of bonds acquired in the crisis. President Donald Trump last week voiced his concerns about rising interest rates, saying the Fed was “out of control” and describing its current policies as “crazy”. “I think they’re making a big mistake,” Mr Trump said. With rates now expected to rise sooner than previously thought, growth forecasts for next year are more muted, and some analysts are even predicting another downturn by 2019 or 2020. Mr Prince said that the dangers were mitigated by the financial system’s improved resilience, but fretted about the implications of more limited monetary and fiscal firepower. Swelling budget deficits limited the US government’s flexibility to stimulate the economy, and the Fed’s interest rates remain low. At the same time, the political resistance to a new dose of quantitative easing is likely to be severe, the hedge fund manager noted. “The risks of a sharp downturn are somewhat mitigated by the fact that we’re not overleveraged, but the risks of a prolonged downturn are greater,” Mr Prince said. “What will pull us out of it?”

Bavarians deliver stunning rebuke to conservative Merkel allies CSU vote collapses to 35.5% while Greens surge to 18.5%, according to exit poll GUY CHAZAN

oters in Germany’s powerful southern state of Bavaria on Sunday delivered a stunning rebuke to the ruling Christian Social Union, in an election that underscored the evaporation of support for the parties in Angela Merkel’s grand coalition in Berlin. The CSU, which has ruled Bavaria continuously since 1957, saw its share of the vote collapse from 47.7 per cent in the last election five years ago to 35.5 per cent, according to exit polls, as voters defected in their droves to the Greens and the far-right Alternative for Germany. The campaign was dominated by the divisive issue of immigration, in a sign of how the shockwaves from Ms Merkel’s fateful decision to let in more than a million refugees in 2015-16 are continuing to reverberate through German politics and to reshape the party landscape. Alarmed by the rise of the antiIslam AfD, the CSU tried to outflank them by talking tough on immigration and picking fights with Ms

Merkel over asylum policy. But the strategy appeared to have backfired spectacularly by alienating tens of thousands of moderate CSU voters and driving them into the arms of the Greens. The result confirmed the Greens’ status as the rising force in German politics. Running on a platform of open borders, liberal social values and the fight against climate change the party saw its support surge to 18.5 per cent, from 8.4 per cent in 2013. Meanwhile the AfD won 11 per cent. “This is an earthquake for Bavaria,” said Jürgen Falter, a political scientist at the University of Mainz. The CSU had governed the state with an absolute majority for most of the last 60 years. “It was Bavaria and Bavaria was the CSU. That is now no longer the case.” It was a dismal result not only for the CSU but also for the left-of-centre Social Democrats (SPD), whose share of the vote collapsed to 10 per cent, from 20.6 per cent five years ago. That in turn highlights the shaky ground the grand coalition in Berlin is now resting on. All three parties in the alliance, Ms Merkel’s Christian Demo-

cratic Union, the CSU and the SPD, are haemorrhaging support. Some are now questioning whether the coalition, already frayed by personal rivalries and near constant bickering over policy, can survive a full term in office. “This outcome throws ever more doubt on the future of the grand coalition,” said Heinrich Oberreuter, head of the Passau Journalism Institute and an expert on the CSU. “Based on current polls, if an election were held now, the CDU, CSU and SPD would not even command a majority in the Bundestag.” The result could also lead to a shake-up of Ms Merkel’s cabinet. Horst Seehofer, the CSU party chairman and interior minister, could come under pressure to resign both posts, triggering a government reshuffle. Mr Seehofer was the leader of the CSU rebellion against Ms Merkel over the summer which brought the government to the brink of collapse and which many in the CSU blame for the slump in the party’s fortunes. But he has no clear successor as party chairman, and his resignation could set off an intense power struggle between pretenders to the CSU throne.

audi Arabia has threatened to use its economic muscle to respond to any punitive measure taken against the kingdom in the wake of the disappearance of a prominent journalist. In a statement released after President Donald Trump warned that Saudi Arabia would face “ severe punishment” if the government had killed Jamal Khashoggi, the world’s top oil exporter said “if it receives any action, it will respond with greater action”. “The kingdom affirms its total rejection of any threats and attempts to undermine it, whether by threatening to impose economic sanctions, using political pressures, or repeating false accusations,” the Saudi state news agency quoted an unnamed official as saying. “The kingdom’s economy has an influential and vital role in the global economy”. The response underlines the mounting international pressure on Saudi Arabia and its de facto ruler Crown Prince Mohammed bin Salman since Mr Khashoggi disappeared after entering its consulate in Istanbul earlier this month. Turkish officials have said they believe the journalist, who is a US resident, was killed inside the consulate. Mevlut Cavusoglu, Turkey’s foreign minister, said Saudi Arabia had not cooperated in the investigation, despite proposing to create a “joint working group” with Turkish authorities. In an unusual move for countries that have tended to prioritise bilateral ties with Riyadh, Britain, France and Germany issued a joint statement saying they were treating the incident “with the utmost seriousness” and “expect the Saudi government to provide a complete and detailed response”. The Saudi stock market plunged as much as 7 per cent on Sunday before closing down 3.5 per cent. Riyadh has repeatedly denied any involvement. But the case of Mr Khashoggi, who wrote a regular column for the Washington Post and was critical of Saudi authorities, threatens to trigger the biggest diplomatic dispute with its western allies in years. In an interview with CBS News’ 60 Minutes on Saturday, Mr Trump said the US was investigating the disappearance of Mr Khashoggi, which he called “really terrible and disgusting”. “We’re going to get to the bottom of it, and there will be severe punishment,” he said. Larry Kudlow, the top White House economic official, on Sunday stressed that Saudi Arabia should not dismiss the warnings from Mr Trump. “If the Saudis are involved, if Khashoggi was killed or harmed … he will take action,” Mr Kudlow told Fox News. “We will take stern action with the Saudis if necessary. Take the president at his word.” Saudi Arabia is the top American ally in the Arab world. It has forged strong relations with a Trump administration that has embraced the region’s strongmen leaders and taken an increasingly belligerent stance against Iran. Mr Trump has rejected suggestions that the US should punish Riyadh by cancelling a vaunted $110bn in weapons sales over the Khashoggi case. He said there were other ways to punish Saudi Arabia if necessary, without providing any details.

Monday 15 October 2018

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BUSINESS DAY

FINANCIAL TIMES

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COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Friends of the Earth accuses ethical index provider of ‘greenwashing Dow Jones Sustainability Indices criticised for including company linked to ‘problematic’ palm oil group JENNIFER THOMPSON

n influential provider of sustainability indices, used to guide ethical investments, has been accused of greenwashing. Dow Jones Sustainability Indices has been criticised by environmental charity Friends of the Earth for including Golden Agri-Resources, a Singapore-listed palm oil company, in its Asia Pacific index for a second year. DJSI is part of S&P Dow Jones Indices, one of the leading index providers. Such indices influence how trillions of dollars of assets are invested. Palm oil is used in products from ice cream to soap and cosmetics. Its production requires a lot of land, which can result in deforestation and the displacement of indigenous communities. The dispute involving DJSI concerns the inclusion of a palm oil company whose Liberian venture was censured for its conduct on disputed lands. FoE’s criticism stems primarily from GAR’s relationship with Golden Veroleum Liberia, a palm oil company in west Africa. GVL was censured in February by the Roundtable on Sustainable Palm Oil, the industry body, for serious shortcomings in how it handled community relations. The roundtable found that GVL failed to consult adequately with community members before agreements were signed and that the company had operated on disputed lands. Some community members said they “felt intimidated and coerced” into signing agreements. GAR is the sole investor in the Verdant Fund. GVL is a subsidiary of Verdant. GVL lost an appeal against the roundtable’s findings and subsequently withdrew from the body. In July, GVL announced measures to improve sustainability, including better monitoring and dispute resolution. It said it would work with GAR to

comply with its investor’s social and environmental policies. FoE said it had raised its concerns with DJSI and Robeco-SAM, the Swiss sustainable investing group that assesses companies for the index. “The DJSI should not greenwash such a problematic company [as GAR],” said Gaurav Madan, senior forests and lands campaigner at FoE in the US. “It should instead recognise the inherent risks of rampant deforestation, human rights violations and land grabbing — otherwise the DJSI is betraying its mission of sustainable investing.” S&P Dow Jones Indices said: “RobecoSAM is an independent publisher of company scores, which are used by S&P DJI to determine the eligibility and/or weights of companies in the DJSI. “S&P DJI is following this situation and RobecoSAM is in contact with FoE and GAR.” RobecoSAM said describing the inclusion of GAR in the index as “greenwashing” was inaccurate. It defended its methodology as “robust and rules-based” and said GAR qualified for inclusion. It added: “We have been in constructive dialogue with [GAR] on several controversial topics since 2011. We have been constantly engaging with GAR, the Roundtable on Sustainable Palm Oil and NGOs such as FoE. We are closely monitoring the steps GAR is taking.” GAR said it disputed FoE’s allegation as it had disclosed the information requested by RobecoSAM and DJSI when they compiled the index. It said its scoring was adjusted because of the issues at GVL. GVL told the Financial Times that it had “acknowledged shortcomings in its sustainability efforts to date” and that it was confident its action plan “will rebuild confidence in the company’s sustainability commitment and performance”.

Unilever U-turn shows how angry shareholders are securing change Investors find their voice after years of criticism for not holding companies to account ATTRACTA MOONEY

t took just a few days after Unilever made public its proposal to move its headquarters to the Netherlands for the company to be faced with its first obstacle. Iain Richards, head of responsible investment at Columbia Threadneedle and one of the consumer goods company’s biggest shareholders, lambasted Unilever in a rare public statement in March, accusing the maker of Dove soap of not engaging with investors ahead of its decision. In the months that followed, a parade of shareholders, from well-regarded fund manager Nick Train to big asset management houses Legal & General Investment Management and Aviva Investors, condemned Unilever’s plans in private and in public. The company was forced to ditch its proposal earlier this month.

Unilever’s about-turn was the latest example of how disgruntled shareholders are successfully pushing for change at the companies they invest in, after years of being criticised for not holding businesses to account. Andy Griffiths, executive director at the Investor Forum, a group that lobbies UK companies on behalf of big investors, said that a decade ago asset managers had been accused of being asleep at the wheel as business after business struggled. “The industry got a real battering during the financial crisis. It was very popular for the government to say ‘where were the shareholders?’ . . . The shareholders were definitely on the field this time [on Unilever].” He added: “We are in an environment where shareholders are being much more active about their ownership of companies than they have been in recent years.”

The farming of oil palm fruit can lead to deforestation and the displacement of indigenous communities © Munshi Ahmed/Bloomberg

Bank of America’s misfiring investment bankers brace for shake-up Executives at US lender ‘hunker down’ after missing out on booming M&A market STEPHEN MORRIS AND ARASH MASSOUDI AND LAURA NOONAN

hen 20 of Bank of America’s top executives met in the US last month to discuss the company’s strategy, the burning issue high on the agenda was how to turn round its stuttering investment banking operation. During a record M&A boom that has lifted most of Wall Street’s biggest names, BofA has lost market share, missed out on millions of dollars in fees and watched on as more thinly staffed rivals vaulted it in industry league table rankings this year. The drop-off in performance is stark. In 2017, BofA’s US and Canada M&A team brought in $939m of revenues, putting them in fourth position with a 6.1 per cent market share, according to internal bank data seen by the Financial Times. So far this year, the team has generated less than half that amount and is on track to finish in seventh place with

a 4 per cent share, below the other four big Wall Street banks as well as two smaller rivals, Jefferies and Barclays. The decline has attracted the attention of Brian Moynihan, the bank’s chairman and chief executive, who has spent the past few months urging his M&A department to improve, according to four insiders who spoke to the Financial Times. Mr Moynihan has charged Matthew Koder, an intense Australian who previously ran BofA’s Asia-Pacific operations, with turning around the unit, prompting insiders to predict a significant shake-up after he takes over in January. Fond of military-style “boot camp” workouts and boxing, Mr Koder has been known to perform one-armed push-ups for colleagues when out socially, people who’ve worked with him said. “It’s about upping the intensity and winning more deals, frankly we should be top three in everything, that’s what Matthew’s thrust will be,” said a person

familiar with the decision. “The team knows they can do a better job and are after it,” Mr Moynihan, who has typically concentrated on other divisions, said on a call with investors in July. The unit’s performance will again be under scrutiny when BofA reports results on Monday. The criticism goes to the heart of a decade-long conundrum for BofA — following its crisis-era takeover of Merrill Lynch — over how heavily to build on its core Main Street business of lending to corporates and consumers by expanding into more aggressive Wall Street activities, such as investment banking and dealmaking. That dilemma came into sharper focus last month as BofA parted ways with its corporate and investment banking chief, Christian Meissner, who had held the role since 2010 — the same year Mr Moynihan took over. People close to Mr Meissner have blamed the bank’s increased caution for the decline that sparked to his departure.

TP ICAP looks to overhaul management incentive scheme Disagreements over bonus plan at interdealer broker led to ousting of chief executive in July PHILIP STAFFORD

P ICAP, the interdealer broker, is assessing whether to overhaul its controversial incentive scheme for senior executives following the sacking of former chief John Phizackerley. The London-based group is considering an alternative bonus plan for its new chief executive, Nicolas Breteau, and other senior managers, according to two people briefed on the plans, as it tries to put months of executive turmoil behind it. Tensions at TP ICAP became public in July when it removed Mr Phizackerley, the former Lehman Brothers banker, and issued a profits warning, saying it would not meet an ambitious cost savings targets. Mr Phizackerley was dismissed by departing chairman Rupert Robson amid deteriorating relations between the two over the viability of the incentive scheme, designed to ensure the company got maximum value from its £1.3bn acquisition of rival broker ICAP. Mr Phizackerley argued the targets on which the payouts were based were not feasible and therefore the scheme would pay out relatively little.

The ICAP deal in late 2016 was the largest ever for Tullett Prebon, and doubled the number of brokers it employed to more than 3,000. It left the broker needing to consolidate jobs, office space and duplicate IT systems. But it also faced higher compliance costs to meet new Mifid II markets rules, and spending on preparations for Brexit. TP ICAP had to abandon the £100m cost savings targets in July and its shares slumped 40 per cent. Executive pay will be the first priority of Lorraine Trainer, who begins as the new head of TP ICAP’s remuneration committee early next year. The incentive scheme initially covered 20 executives and was approved by almost 90 per cent of shareholders. It is based on executives increasing TP ICAP’s share price, dividends and earnings per share over a three-year period to 2019. In return for a lower base salary, executives work for a higher bonus payout. The total amount on offer is £60m, with a quarter of the total going to the chief executive. That would make Mr Breteau and new finance director Robin Stewart — appointed on the same day — in line for the award. The broker has yet to publicly confirm that both men will be on

the same package. It has also yet to announce a final settlement with Mr Phizackerley. A revised incentive package would have to be approved by shareholders. “In the normal course of business the remuneration committee looks at all aspects of executive pay,” TP ICAP said in a statement. “Any proposed changes would be made in consultation with shareholders and disclosed in the remuneration report in our annual report and accounts.” It comes as TP ICAP is set to announce a successor in coming weeks to Mr Robson, who has been chairman for the past five years. Amid the turmoil of recent months, many senior brokers and executives have departed, with some going to rival BGC Partners. Earnings at TP ICAP are also likely to be affected next year by more Mifid II rules that will push more trading of swaps and bonds on to cheaper, transparent electronic venues. The company’s brokers charge different commissions for customers when negotiating deals in energy, commodities and interest rate derivatives markets. Mr Breteau has already said he would use new performance targets for his key brokers as the ones that TP ICAP used could result in slower growth or loss of revenues.

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Monday 15 October 2018

BUSINESS DAY

CityFile

2 arraigned over psychotropic substance

wo suspected drug traffickers, Taibat Bello (female) and Idris Alhassan were on Friday arraigned by the National Drug Law Enforcement Agency, (NDLEA) at the Federal High Court, Abuja, presided over by Justice John Tsoho for possession of 76 kilogrammes of ephedrine. Both defendants pleaded not guilty to possessing the substance which is said to be psychotropic. The dictionary defines psychotropic as having an effect on how the mind works. The two-count amended charge read in part: “that you, Taibat Bello, female, on or about May 9, at Ekeson Motors, Utako, within the jurisdiction of this court, had in your possession 51kg of Ephedrine a psychotropic substance. “(You) thereby committed an offence contrary to Section 20(1) (e) and punishable under section 20 (2) (a) of the NDLEA Act. “That you, Bello, Idris Alhassan, and one man known as uncle B, now at large, on or about May 9, at Madalla within the jurisdiction of this court, conspired to conceal 25kg of Ephedrine. “This was by moving same from a restaurant owned by you, Bello in Madalla to a tailoring shop to prevent detection and thereby committed an offence contrary to and punishable under Section 14 of NDLEA Act.” Following the “not guilty” plea entered by the defendants, the prosecuting counsel, Mike Kassa asked the court for a date to assemble witnesses and commence trial. Counsel to one of the defendants, D.A. Ariyoosu, prayed the court to allow the defendants continue to enjoy the bail they were granted by Justice B.O. Quadri when they were arraigned before him during vacation. Justice Tsoho, in a short ruling granted the request of the defence and adjourned the matter until January 14, 2019. NAN

4,000 flood victims benefit from NAF medical outreach

he Nigerian Air Force (NAF) has begun a medical outreach for some 4,000 Internally Displaced Persons (IDPs) in Bayelsa. IbikunleDaramola,NAFdirectorofpublicrelations and information, made this known in Abuja. Daramola said the medical intervention ongoing at Igbogene community in Yenagoa local government area was an initiative of the Chief of Air Staff (CAS), Sadiq Abubakar. He said that Abubakar had directed the NAF medical services unit to take necessary steps toward ameliorating the suffering of the victims of the flood disaster. The director quoted Abubakar as saying that NAF would always be ready to deploy its resources in alleviating the hardship faced by Nigerians. CAS urged the IDPs to take advantage of the high quality and free medical services that would be provided for them, saying that eye surgeries would be carried out at the NAF Medical Centre in Yenagoa. The director said that the chief of air staff was represented at the opening ceremony by the Air Officer Commanding Mobility Command (AOC MC), Napoleon Bali. He said that some of the beneficiaries of the outreach, which also had officials from the Bayelsa State emergency management agency, state ministry of health and Nigerian Red Cross Society who were in attendance, expressed appreciation to the NAF for coming to their aid. He said that the medical outreach would also cater for the medical needs of women, children and the aged affected by flooding. Daramola said that services that would be provided during the five- day medical outreach include free medical consultations and drugs, laboratory investigations, prescription eyeglasses, and treated mosquito nets. The NAF spokesman said that there would also be general and eye surgeries for those with conditions requiring minor surgical interventions.

L-R: Abimbola Ogunbajo, president, National Council of the Nigerian Stock Exchange; Patience Nohuoma Alile, late Apostle Hayford Alile’s wife, and Oscar Onyema, chief executive officer, Nigerian Stock Exchange, during the NSE condolence visit to the family of its pioneer Director-General, Apostle Hayford Alile in Lagos, recently.

Flood destroys 280 hectares of rice farm in Edo …affected farmers appeal for help IDIS UMAR MOMOH, Benin

lood has destroyed 280 hectares of rice farm in Iguoriakhi and Iguomo in Ovia North-East and Ovia South-West local government areas of Edo. Dirisu Abdulsalam, she state chairman of Rice Farmers Association of Nigeria (RIFAN) said in Benin that farmers close to the riverine areas in the state were worst hit by the flood. He appealed to government at all levels to assist farmers following the destruction of thousands of hectares of rice farmlands by flood in several communities in Edo North, Edo Central and Edo South senatorial districts.

Abdulsalam noted that the flooding would negatively affect government’s drive at sufficiency in rice production in the country. He said that the association was evolving modalities to ensure the farmers were ready for dry season farming, to make up for the destruction. “The association will be sensitising rice farmers for dry season farming to make up for the shortfall occasioned by the destruction of rice fields by flood. “There are many problems in rice production and the worst of it at the moment is that flood has eroded or washed away crops and even submerged some of our members’ houses. “Therefore, we appeal for assistance

from government and international donors so that our farmers will not go and commit suicide,” he said. According to him, flooding will reduce rice production chain in the state, adding that the affected farmers have lost millions of Naira investment. He appealed to the state government to make tractors available to rice farmers, noting that the state had no single tractor. Abdulsalam said Edo was one of the major rice producing states in the country. He expressed regrets that the state government was not giving priority to rice farmers in terms of provision of certified seedlings and funding.

833 children released from armed group in Northeast ANTHONIA OBOKOH

he United Nations Children’s Fund (UNICEF) has commended the release of 833 children from the ranks of the Civilian Joint Task Force (CJTF) in Maiduguri, northeast Nigeria, as part of its commitment to end and prevent the recruitment and use of children. This is the first formal release of children from the CJTF since September 2017 when the group signed an action plan committing to put measures in place to end and prevent child recruitment following a listing in the annexes of the UN Secretary-General’s annual report for children and armed conflict for the recruitment and use of children. Pernille Ironside, deputy representa-

tive of UNICEF Nigeria and the co-chair of United Nations Country Task Force on Monitoring and Reporting on grave child rights violations (CTFMR) said “the release of these children from shows commitment to implement the provisions of the action plan and to uphold international humanitarian law, human rights laws as well as other regional and national legislations, protecting children’s rights.” “This is a significant milestone in ending the recruitment and use of children, but many more children remain in the ranks of other armed groups in either combat or support roles. We call on all parties to stop recruiting children and let children be children,” Ironside said. Since the action was signed, members of the CTFMR initiated a joint field verification exercise to ascertain the presence and as-

sociation of children within the command structures and ranks of the Civilian Joint Task Force. As of today, a total of 1,469 children (1,175 boys and 294 girls), associated with the Civilian Joint Task Force have been identified within the city of Maiduguri. UNICEF continues to work closely with state authorities to support the implementation of reintegration programmes for the children released today as well as others affected by the ongoing conflict. Since 2017, UNICEF has supported the social and economic reintegration of more than 8,700 children released from armed groups, helping trace their families, returning them to their communities, and offering them psychosocial support, education, vocational training and informal apprenticeships, and opportunities to improve livelihoods.

BUSINESS DAY

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NEWS YOU CAN TRUST I MONDAY 15 OCTOBER 2018

fivethings

Insight Tinubu’s feudalisation of Lagos state politics GLOBAL PERSPECTIVES

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

kinwunmi Ambode, governor of Lagos state, has been thrown under the bus. He will not serve a second term in office not because the people of Lagos state rejected him in an election but because his godfather, Bola Tinubu, pulled the plug on his re-election bid. When somebody dies, Christians often say, quoting Job 1: 21, that “The Lord gives and the Lord takes away”. Well, in Lagos state politics, Tinubu gives and Tinubu takes away! He is the god of Lagos state politics, the lord of the Lagos Manor! In 2007, before leaving office as governor of the state,Tinubu gifted the governorship to his protégé, Babatunde Fashola. Eight years later, in 2015, Fashola did not know his place. He too wanted to be a godfather by making one of his own protégés governor of the state against the diktat of his own godfather. But, forgive the colloquialism, godfather pass godfather! Fashola lost out, and another Tinubu bag-carrier, Ambode, became governor. Now, however, Tinubu has decided that Ambode is not good enough for a second term, and has imposed another ward of his, Babajide Sanwo-Olu, as the governorship candidate of All Progressive Congress (APC) in next year’s election. The politics of APC in Lagos state is redolent of the medieval era, when parties were based on personal or family power. APC has entrenched a personalised style of politics, in which the leader of patronage, Tinubu, decides who gets what. Other leaders and members of the party are either vassals or serfs, obliged to genuflect before the absolute leader. Recently, Ambode made a public ridicule of himself when, at an event, he left his place next to Vice President Yemi Osinbajo saying, “Your excellency, I want to stand next to my boss”, and dashed across slavishly to stand beside Tinubu. Such toe-curling grovelling is how serfs relate to their lords. The new lackey, Sanwo-Olu, has already vowed that he would “never ignore the fatherly advice” of Tinubu, meaning he would not be his own man as governor. Tinubu talks eloquently about democracy and progressive politics, but he is not a democrat and not a real progressive. There is nothing democratic about a leader who arrogates to himself the power to determine the political fates of others. And nothing is progressive in a politics based on self-interested calculations. For strategic reasons, probably linked to his future presidential ambitions, Tinubu supports Buhari’s re-election bid, even endorsing him running unchallenged within the party, with all potential rivals silenced or shooed away, despite Buhari’s appalling performance and the fact the he would be 80 years old in the final year of his second term, if re-elected. Yet, the same Tinubu had no qualms in

brazenly thwarting the second-term ambition of a young man, who has performed well as governor. That’s not progressive politics; it’s retrograde and self-serving. I shed no tears for Ambode. He was a beneficiary of Tinubu’s patrimonialism, and now a victim of it. But I care deeply about democratic values. Ambode’s treatment bore much similarity to the dark politics of the Soviet era. The party decided that Ambode must go through a primary to seek nomination for his re-election bid. Fair enough. But, then, a few days before the primary, the so-called Governor’s Advisory Council (GAC), the party’s politburo, met in Tinubu’s house, with Osinbajo in attendance, and endorsed Sanwo-Olu as the party’s candidate for the governorship election. The council’s spokesman said: “GAC has endorsed Babajide Sanwo-Olu as its preferred candidate ahead of the primary”. Ahead of the primary? Well, that’s exactly what the Soviet or Chinese politburo would have done: endorse a candidate behind-the-scenes and expect the obsequious party members, who have been conditioned to be servile, to simply rubber-stamp the decision. Where was the level-playing field? Where was the fairness? What was the purpose of a primary in which the party machine, whose word was law, had publicly endorsed one of the candidates? It was a charade. The APC National Working Committee saw through it, but it would rather sacrifice Ambode than antagonise Tinubu, whose support Buhari needs in Lagos and some of the other SouthWest states in next year’s presidential election. It is almost impossible not to draw similarities between the APC in Lagos state and the Chinese Communist Party. China’s state capitalism is characterised by the omnipresence of the Communist Party in the Chinese economy. And virtually every Chinese civil servant is a cardcarrying member of the Communist

party. Similarly, the governance of Lagos state is characterised by the omnipresence of the APC, with the party’s leaders having their fingers in every pie. In a recent article, a commentator, Kayode Ogundamisi, who knows the ins and outs of the politics of Lagos APC, described what he called the “mafioso nature of the APC in Lagos”. He said that “Lagos

state civil service is an extension of the party structure”, adding that “hardly would you find a Lagos state civil servant who is not a card-carrying member of the party” and that “Lagos APC has political leaders who depend on state resources”. That’s more like a communist party than a modern progressive party! Last week, I wrote that there is no distinction between “conservatives” and “progressives” in Nigeria today, unlike in the days of Obafemi Awolowo, Aminu Kano and Ahmadu

‘

It is almost impossible not to draw similarities between the APC in Lagos state and the Chinese Communist Party... the governance of Lagos state is characterised by the omnipresence of the APC, with the party’s leaders having their fingers in every pie

Bello, when the progressives were clearly distinguishable from the conservatives and feudalists. Conservatism is an ideology of entrenched privilege, feudalism and static social order, while progressivism is about liberating the human mind and improving the human condition. But the so-called progressives in Nigeria today enjoy entrenched privilege, they behave like feudalists or aristocrats and keep people down as plebs and serfs, while they feed on state

resources, accumulate stupendous wealth and acquire political power and control. Theirprogressivismis not about liberating minds and enhancing people’s social progress, as Awolowo did, but about enriching themselves and their cronies. It is progress for the few, not the many. Think of it. Despite the economic achievement of Lagos state, the fifth

largest economy in Africa, with a GDP of $136bn, why is poverty and inequality so widespread in the supposedly progressive state? Why are 2 out of 3 people in the state living in slums, according to the World Bank? As the Financial Times put it in a recent special report on Lagos state, “Nigerian’s millionaires and billionaires share a city with people living in indescribable squalor”.The British prime minister Harold Macmillan said in the 1920s that, “the central aim of domestic policy must be to tackle unemployment and poverty”. That’s how governments are judged in the West and how any government should. But governance is not just about economic performance, it’s also about political freedom. And it is autocratic politics that has caused Tinubu’s political influence to wane significantly in the South West. His attempts to impose governors in South-West states, such as Ondo and Ekiti, and even Kogi state, backfired spectacularly with people of those states resisting his interference. APC lost Osun state recently not only because of the performance of the governor but also resentment of Tinubu’s interference. It took an unprincipled alliance with Iyiola Omisore, who the APC had accused of a multitude of sins, for the party to snatch victory from the jaws of defeat. Yet, the risk of a backlash is greater in Lagos state. Lagos is a cosmopolitan state. And feudalism or patrimonialism is not compatible with cosmopolitanism. People in cosmopolitan states, such as London and New York, don’t want to be told what to do. For instance, in 2000, the Labour Party decided that Ken Livingstone was too radical for the party, and anointed, through a closed process, Frank Dobson as the party’s mayoral candidate. Livingstone ran as an Independent candidate and beat Dobson hands down. Londoners hated the unfairness and being taken for granted. The same Londoners later voted Boris Johnson, a Conservative, as mayor, and Sadiq Khan, a Moslem. That’s the nature of cosmopolitans. Even in Lagos state, Michael Otedola, of the “conservative” National Republican Party (NRC), defeated the candidate of the “progressive” Social Democratic Party (SDP) to become governor in 1992. And, in 2015, Ambode beat the PDP candidate Jimi Agbaje, who is running again next year, by a slim margin of over 100, 000! Truth is, as I said, cosmopolitanism is completely at odds with feudalism or patrimonialism. David Held, a former professor at the London School of Economics, and an authority on cosmopolitanism, lists the following as its principles: equal worth and dignity, active agency, personal responsibility and accountability, consent, reflexive deliberation and collective decision-making, inclusiveness and subsidiarity and the amelioration of urgent need. Held describes them as “the principles of democratic public life”. Sadly, these are not the values that APC in Lagos state, under the feudal grip of Tinubu, is offering the people. But they are running a big risk. Nothing says that APC will rule Lagos for ever. The spirit of cosmopolitanism might just trigger a change of guards. And that won’t be a disaster. After all, as I argued last week, there is no difference between APC and PDP. Tell me, how is PDP’s Agbaje less a progressive than APC’s Sanwo-Olu? The parties are mere interchangeable vehicles. But,at some point, the feudal hold on Lagos politics must stop!

for your new week

Fascinating business facts

165MW

enya’s new 165.4-megawatt (MW) capacity plant powered by geothermal steam is three quarters complete and on schedule for commissioning next July, the country’s main electricity producer said on Friday. Geothermal steam, hot underground steam found in the Rift Valley which is used to drive turbines for electricity production, is the second biggest source of Kenya’s annual power generation of 2,336 MW, accounting for 26.84 percent of the total. Kenya will add another 720MW capacity by 2020 to cater for growing electricity demand.

$400m

ierra Leone’s government has terminated a $400 million scheme to build a new airport with Chinese labour and loans, according to a letter written last week by the country’s minister of transport and aviation, reviewed by Reuters. The plan - one of many Chinese infrastructure projects that have proliferated across Africa in the last two decades - had repeatedly been criticised by international financial institutions for the additional burden it would place on Sierra Leone’s external debt.

200

oldman Sachs Group Inc. and Standard Chartered Plc have recently expanded the number of staff moving to Frankfurt by April as financial services firms accelerate their Brexit planning. The decision came after the European Central Bank toughened its demands for how many people and IT resources it expects banks to have in the euro area on the day the U.K. leaves the European Union -- called Day 1 -- among regulators. The number of additional employees Standard Chartered will have in Frankfurt on Day 1 was initially increased by a handful. But, the emerging markets lender now expects to more than double staff to in excess of 200 in a few years but it is not clear if other banks have made similar changes to their Brexit planning to satisfy the ECB, said one of the people.

$4.6bn

itigroup generated net income of $4.6bn in the third quarter, comfortably beating analysts’ expectations and last year’s results even as its North American business posted a disappointing fall in revenue. America’s fourthbiggest bank by assets was expected to report net income of $4.1bn for the third quarter according to analyst forecasts compiled by Bloomberg. Last year, Citi’s third-quarter net income came in at $4.1bn. Shares were up almost 3 per cent in pre-market trading.

100 years

team of chemists and engineers at Swiss-German battery start-up Innolith have developed a new battery chemistry they claim is superior to lithium-ion. Innolith, a Basel-based company with a 60-strong R&D team in Bruchsal, near Frankfurt, formally launched on Wednesday with plans to commercialise an inorganic battery chemistry that is non-flammable and durable by 2020. Its key attribute is the batteries can be charged and discharged an order of magnitude more often than batteries that currently power everything from smart phones to electric vehicles. Innolith claims a lifetime of more than 50,000 cycles, versus around 1,000 for lithium-ion. “If this was in your iPhone, it would last more than 100 years,” said Alan Greenshields, chairman and co-founder.

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