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Egbin Power Plant woes a N400bn warning sign for Nigerian banks

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Bureaucracy stunts oil, gas sector as 16 federal agencies stifle operators N

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igeria’s population of over 180 million people and oil reserves of 37 billion barrels, the largest in sub-Saharan Africa, should make it an attractive place for any oil and gas investor to do business in. But these advantages are

offset by structural bottlenecks as operators are often assailed by a bewildering array of up to 16 federal agencies, making it difficult for them to operate or deploy investments. The government agencies who all regulate operations, environments, contracts and procurement-related matters include Federal Ministry of Petroleum Resources, Nigerian

National Petroleum Corporation (NNPC), Federal Ministry of Trade and Investment, Department of Petroleum Resources (DPR), and Petroleum Products Pricing Regulatory Agency (PPPRA). Others are Federal Ministry of Environment (FMoE), National Maritime Administration and Safety Agency (NIMASA), Bureau of Public Enterprises

(BPE), Nigerian Content Development and Monitoring Board (NCDMB), National Oil Spill Detection and Response Agency (NOSDRA), among others. Operators in the upstream (exploration, oil production, and crude oil marketing), midstream (refining of crude oil, transportation and importation), and

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ISAAC ANYAOGU

he United Bank for Africa (UBA) plc last week filed a petition against Sahara Energy Resource Limited (Sahara Energy) at a Federal High Court in Lagos asking that the company’s assets be liquidated to repay a N15 billion loan its Continues on page 34

Inside Patience, persistence are key success factors in entrepreneurship – Linda Ikeji P. 29

L-R: Abiola Afolayan, head, personal banking, Wema Bank plc; Mojisola Abdul, chairman, Mojec International Limited; Chantelle Abdul, managing director, Mojec International Limited; Yemi Odusanya, executive director, corporate bank and south directorate, Keystone Bank Limited, and Olufunwa Olugbenga Akinmade, group head, retail and SME, Unity Bank plc, at a press conference and signing of a Memorandum of Understanding between Mojec and the partner banks on the rollout of prepaid meters in Lagos.

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NEWS PSBs are good for Nigerian banking sector, but concerns remain BUNMI BAILEY

s part of measures aimed at enhancing financial inclusion in the country, the Central Bank of Nigeria (CBN) in October 2018 introduced the Payment Service Banks (PSBs) to

who spoke with BusinessDay. But there could also be challenges, they add. The PSBs are expected to maintain savings accounts and accept deposits from individuals and small businesses, carry out payments and remittances services through various channels within the country, issue debits and pre-paid cards, operate electric purse and invest in government and CBN securities. They would leverage on their capacity to perform more informal transactions than the banks, but that would likely become a big deal in the future when economic value increases in real terms, a source familiar with the matter told BusinessDay. “With the PSBs, people will be able to perform transactions without necessarily getting their hands on cash. These transactions will be recorded in a way that the government or tax system can monitor it,” said the source who spoke on condition of anonymity. While this could help in get-

ANALYSIS

L-R: Audrey Joe Ezigbo, president, Nigeria Gas Association; Odein Ajimogobia, former minister of state for petroleum; Victor Okoronkwo, senior vice president, Aiteo, and Dada Thomas, former president, Nigeria Gas Association, at the 2019 business forum and 20th annual general meeting of Nigeria Gas Association in Lagos. Pic by Pius Okeosisi

Corporates shun domestic listings as NSE suffers IPO drought IHEANYI NWACHUKWU & ENDURANCE OKAFOR

he Nigerian Stock Exchange (NSE) has become a shadow of its former self as Public Offerings that were once choice of many corporates have suddenly become lamentably scarce. BusinessDay checks revealed that for the last three years, the Nigerian bourse has not had a new company listed on the Exchange. Between 2006 and 2010, the market recorded about 180 different Public Offers, IPO’s and Rights Issues. The number of IPOs alone in the market within the stipulated five-year period was 88, public offers numbered up to 54, while 38 rights issues were reported. The allure has, however, faded even after the country exited its worst recession in 25 years. Even the ranking of the NSE as the third-best market in the world in 2017 has not

translated to more IPO or Rights Issue from companies. The long-awaited MTN Nigeria listing is yet to berth. The most recent IPO that could have come to the bourse as expected by market analysts was the Jumia IPO, but that was lost to a more advanced New York Stock Exchange (NYSE). Despite having its largest market in Nigeria with market share of 70 percent of e-commerce in Africa’s most populous nation, Jumia recently listed on the NYSE. Lack of reforms is one of the reasons why the Nigerian bourse has become unattractive, said Henry Ogbuaku, group head, asset management at Growth & Development Asset Management. “Since the time the market began to decline in 2008 till today, not much has been done to revive the market. One would have thought that by now the regulator would have done something to support the mar-

ket but that has not happened,” Ogbuaku told BusinessDay. Oscar Onyema, CEO, Nigerian Stock Exchange, while reviewing the market for 2018 and presenting outlook for 2019, said to enhance its listing prospects, the Exchange has strengthened “government engagement efforts on privatisation and listing of state-owned enterprises, and we expect to take advantage of opportunities within this space during the year”. “We also intend to maintain our collaborative efforts with public and private sector stakeholders to advocate for market-friendly policies and cater to infrastructure financing needs as well as other capital requirements necessary for sustainable economic growth. The Exchange intends to work with the private sector as well to catalyse the listing of more companies,” Onyema said. But these assurances have not yielded the needed posi-

tive sentiment. “This market is not deep, that is the main problem,” Wale Okunrinboye, head of research at Sigma Pension, said. On Jumia’s recent listing on NYSE, industry sources said it was contrary to expectations as it was only normal that the Amazon clone in Africa should have listed on the Nigerian bourse. “I was expecting Jumia to list on the NSE, but I guess they have their reasons for going on NYSE,” said an investment manager who asked not to be named. Jumia, the largest e-commerce company in Africa with operations in 14 countries, holds the record as the first Africa-focused tech company to launch on NYSE or any major global Exchange. The e-commerce company garnered investor interest and

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West Africa’s mobile economy valued at over $50bn in 2018 …As mobile boosts economy, creates jobs across continent JUMOKE AKIYODE-LAWANSON

he mobile ecosystem in West Africa last year generated more than $50 billion in economic value, an equivalent of 8.7 percent of the region’s gross domestic product (GDP). Risingmobilephoneownership and the ongoing migration to mobile broadband networks and services across the region havepositivelyimpactedeconomies and West Africa is likely to see more economic contribution from the mobile ecosystem which will continue to increase over the coming years, forecast

to reach almost $70 billion (9.5 percent of GDP) by 2023, according to a new GSMA study. The 2019 West Africa edition of the GSMA’s Mobile Economy report series was published at the ‘Mobile 360 – West Africa’ event being held in Abidjan this week. “Today’s report underlines the vital role the mobile ecosystem is playing in contributing to economic growth, social development and job creation across West Africa,” said Akinwale Goodluck, head of subSaharan Africa at the GSMA. “To harness the power of a new generation of mobile users www.businessday.ng

and mobile networks, we urge governments and policymakers in West Africa to develop regulatory frameworks that encourage innovation and investment in the sector, enabling the provision of mobile-powered digital services to citizens across the region,” Goodluck said. The report reveals that the number of unique mobile subscribers across West Africa reached 185 million at the end of 2018, equivalent to 48 percent of the region’s population. This number is forecast to rise to 248 million by 2025 (54 percent of the population). Nigeria is at the forefront of

high mobile phone penetration with the number of mobile phone subscriptions surpassing the total number of its population – with over 173 million active mobile phone subscriptions in February 2019, it is no surprise that subscriptions will rise and may surpass 248 million in West Africa by 2025 (54 percent of the population). The world has gone mobile, according to analysts, a fact justifiablebytheincreasinguseand dependence on smartphones and other mobile devices – and Africa is not left behind.

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provide financial services to rural dwellers and stimulate economic activities at the grassroots through mobile and digital services. PSB is a payment service initiative proposed by CBN in which banking agents, mobile money operators (MMOs), retail chains (supermarkets) and telecoms companies who are able to present an initial capital of N5 billion will be given licence to operate under the structures and guidelines 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. The introduction of PSBs comes with a lot of opportunities, according to experts

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Access Bank records profit surge by 86% in Q1 2019 . . records 43% of full-year 2018 net income in consolidation result DAVID IBIDAPO

ier-1 lender, Access Bank kick-started the year on a solid note after recording an 86 percent surge in its profit after tax (PAT) in Q1 2019 ended 31st March 2019, making it the first deposit money bank on the Nigerian Stock Exchange (NSE) to release its first-quarter report for the year. According to Access Bank, the financial report reflects the result of the combined entity after the merger with Diamond Bank plc which was concluded in the first quarter of 2019. The bank’s profit after tax jumped to N41.14 billion in Q1 2019, as against N22.11 billion recorded in the corresponding period of 2018. Key indices in the income statement showed a 16 percent increase in interest income to N110.77 billion, from N95.59 billion in the corresponding period in 2018. Component of interest income during the periods reflected the combination of income from financial assets not at and at fair value through profit or loss (FVTPL). The bank also reported a non-performing loans (NPL) ratio of 10 percent for Q1 2019 compared to 4.7 percent as at Q1 2018 due to acquired NPLs from the merger as @Businessdayng

implied by the bank. Capital adequacy ratio (bank) also stood at 17.2 percent as reported by the bank. “We believe this is inclusive of the debt raise of US$162.5 million,” analysts at CSL opined. “We have a buy rating on Access Bank with a target price of N10.32/s,” analysts further stated in a report released on Tuesday. Our analysis shows that PAT in Q1 2019 accounts for about 43 percent of total net income realised in full-year 2018, after the bank recorded a PAT of N94 billion in 2018. This signifies the resultant effect of the consolidation with Diamond Bank. This also signifies the biggest growth in the bank’s net income in the last eight years (since 2012). The total assets of the combined entity grew to N6.4 trillion (N4.9trn in Dec 2018) while total equity grew to N568.7 billion (N482.6bn in Dec 2018) with a total number of issued shares of 35.5 billion. Share performance on Tuesday didn’t reflect fundamentals of the new entity as the financial report was released later in the day after the market had closed. Shares of Access Bank appreciatedmarginallyby0.83percent on Tuesday with a year-todate performance of 11 percent.

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UNICEF expresses concern, tasks FG on improving birth registration in Nigeria ANTHONIA OBOKOH

he United Nations Children’s Fund (UNICEF) has tasked the commitment of Nigeria government to improve civil registrations, especially of infants, on the continent. UNICEF says Nigeria has the highest number of children without birth records among 10 nations assessed in Africa. Sharon Oladiji, UNICEF Child Protection specialist, at Birth Evaluation Report dissemination event on Monday in Abuja, said the number of children under five in Nigeria was projected to increase from 32 million in 2015 to 58 million by 2050. “The Federal Government must ensure the birth registration of children in the country to properly plan for their education, healthcare and other services. We need birth records for them because this is critical for their education, health and other social initiatives,” she said. Birth registration is the first step towards recognising a child’s inalienable right as a human being. Globally, the births of more than 50 million children - which repre-

sent more than 40 percent of total births worldwide - go unregistered each year. Oladiji said between now and 2030, 136 million babies would be born in Nigeria at 9 million births per year, and from 2031 until mid century there would be 224 million more. “Assuming the current trends persist, Nigeria will be born to 1 in every 11 global births in 2050. A special attention is required for the under-five children in Nigeria. Investing in girls and women, especially in reproductive health, education and preventing child marriage is key to Africa’s demographic transition,” she said. However, in Nigeria, there are provisions in the current legislation for birthregistration.The2003ChildRights Act in its Section 5 states that: ‘Every child has the right to a name and the birth of every child shall be registered’. According to Pernille Ironside, deputy representative, UNICEF, for Nigeria to achieve Birth Registration for all children in Nigeria, we have been addressing bottlenecks that impede Registration. We have been doing this with the fantastic support

of EU in Nigeria. “From 2012 to 2016, we increased the number of births registered in Nigeria from 3 million to 5 million. “However, only half of the children under five in Nigeria have their births registered. This is not enough. I hope we can take this opportunity to commit to a quantum leap to increase Birth Registration in the country because every single child counts and that counting starts at the moment of Birth Registration,” she said. Doyin Odubanjo, chairman, Association of Public Health Physicians of Nigeria, Lagos chapter, said for Nigeria to progress in birth registration, there should be connection with the local government, health systems and services to ensure every new born child was counted and information documented. “Engaging the religious bodies to encourage members on the need to register their child at birth is also strategy to help, the country merge collation of birth registration; I urge that citizens should embrace registration for easy identification and policy making,” Odubanjo said.

Osinbajo leads Fashola, Fayemi to late Imoukhuede’s memorial inaugural lecture IDRIS UMAR MOMOH, Benin

ice President Yemi Osinbajo will on Friday lead Minster of Power, Works and Housing, Babatunde Fashola, Edo State governor, Godwin Obaseki, Ekiti State governor, Kayode Fayemi, and others to the 30th memorial lecture of late Joseph E. Imoukhuede. Osinbajo will be special guest at the occasion, Obaseki will be the chief host, to be supported by Fashola, while Fayemi will chair the panel of discussants. Late Joseph Imuokhuede was a retired permanent secretary in the defunct Mid West Region and died in 1989 after retiring from the service. Afolabi Imoukhuede, son of the deceased and senior special assistant to President Muhammadu Buhari on Job Creation, disclosed this at press brief on activities lined up for the memorial service.

Tunji Olaopa, a professor, will deliver the inaugural lecture titled “Chief Joseph Enaifoghe Imoukhuede, the quintessential administrator: Revisiting our history of selfless public service.” He said his late father pioneered the setting up of the civil servant structure for the Mid West Region at its creation in 1963 upon redeployment from the Western Region, wherein he was only the non-Yoruba permanent secretary so appointed by the Premier in 1960 ahead of Nigeria’s independence. He added that, he was confirmed as the first secretary to the government and head of the civil service of the Mid West Region. He said on April 25, 2019, the late permanent secretary would have been 98 years and as such the family had chosen to inaugurate annual memorial lecture in his honour.

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Earlier, the Secretary to the Edo State government, Osarodion Ogie, said late Imoukhuede’s footprints as an astute administrator were still there for civil servants to continue to lean on in carrying on government’s day-to-day activities in the state. Ogie, who was represented by the State Head of Service, Issac Ehiozuwa, said late Imuokhuede was the brain behind the success of the administration of late Samuel Osaigbovo Ogbemudia, hence till today that administration remained a reference point. “We know he was a very excellent and an astute administrator. Because of his performance and track record in the civil service, he was given an award (OBE) by the British administration. The British administration cannot ordinarily give the award, except one merited it,” he said.

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Emeka Osuji “The Present has finally prevailed The past shall not return The future has since arrived; waiting to be made or marred” - Hernando de Soto and Emeka Osuji igeria is fast becoming a place where a return to the past is something for which to seriously wish. Perhaps, one of the most important wishes of some of our countrymen today is to go back to the past – the 70s and 80s - when, as many would insist, life was better and less brutish in Nigeria. They want to go back to the past because it looks like the future has arrived unannounced; is opaque and holds very debatable promise. It may well be commonplace to hear people, perhaps everywhere in the world, say very glowing things about their past days but not necessarily wishing to return to those days. In Nigeria, the case is slightly different. In Nigeria, people are longing for a return to the past, as the present has become unbearable and the past shall not return. “In those days, life was much better. You could leave your property on the street and nobody will take it”, we hear people say. We also hear them say things like “we slept with our doors open and nobody troubled us”. “We graduated

from school into the waiting arms of the Senior Service; straight from school to waiting jobs.” Today, the civil service is for unwilling servants - children of the privileged, who have no interest in the service and have no training in serving anyone but themselves – a big bad sign of what terrible civil service we are bound to have in the future. Today, our wish is to turn back the hands of the clock so we can return to the days of yore. All these have come about because of our failure to bring prosperity to the people – not that we have not prospered. We have but the benefits are not shared by all. There was a time when it was said that Nigeria’s problem was not money but how to spend it. The man in the saddle in the 70s, General Yakubu Gowon, was quoted to have said this, and it is yet uncontroverted. Some might say that the alleged statement was an exuberant gaff or slip from a young, inexperienced military dictator with limited understanding of economic management, but could we truly deny the fact that during the golden years of military rule, Nigeria had large enough resources to have built itself a sound future? Even today, with our new crown of the home to the largest number of very poor people in the world, aka poverty headquarters of the world, can we truly controvert the general’s alleged statement? Some people around the world still think, rightly too, that we have money but do not know what to do with it. Many people would agree that even as we bow our head in the comity of nations for failing to deliver quality leadership to our people, we still have more money than we know how to manage. Many of our people would wish we

return to the 70s and 80s for so many different reasons. An undergraduate in the University of Lagos in those days was guaranteed three square meals every day for an all-in cost not exceeding 50 kobo. There were no school fees in federal universities and the best teachers taught us. And these 50k a day full meals included pap and akara in the morning, jollof rice with dodo (fried ripe plantain) and chicken, which got up to a quarter chicken on weekends, when rich kids go home to their daddies and mommies, leaving the poorer ones to dominate the cafeteria. It included a full amala and ewedu bang for dinner. All of these at a cost not exceeding 50 kobo! People travelled across the country and made homes anywhere they wanted to live. There were no tribal tags of indigenes and settlers, at least to the point of hostility. Nigeria was a haven for the enterprising. Today, killing a fellow human being has become a popular sport that is spreading like wild fire, because there is little or no reprisal for those who kill. It used to be herdsmen but cult killings are getting even more audacious, rampant and barbaric. Nigeria has become a place that people prefer their past to their present and fear their future like Ebola. The Nigerian economy has not been growing. If anything, it is our population that has been on the rampage; rising rapidly and neutralizing any growth success we achieve. Without a clear population policy and hanging on to the misbelief that there is virtue in large numbers, we tend to see no problem in the superior growth performance of our population over that of the economy. In the past, the Nigerian economy grew at rates that made

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Nigeria has become a place that people prefer their past to their present and fear their future like Ebola

population growth a minor threat than it is today. Indeed, the economy grew at a massive 7 per cent per annum average rate over the decade of 2004 to 2014. That same economy is either stalling now or grudgingly inching forward in pains. It grew about 2.4 per cent, year-on-year in 2018, from its 1.8 dismal growth in 2017, following the recession. As we speak, the International Monetary Fund (IMF) has cut further its 2019 growth projection for Nigeria to 1.9 per cent. Already some people are busy controverting the IMF projections. Indeed, the coming days are likely to bring evidence of how that Bretton Wood institution is working against our progress. That way, we shall successfully mask the challenges inducing the poor growth so that business may proceed as usual. The need to diversify the Nigerian economy is a hot topic at the moment. It was last year and the year before and always like that. Nothing happens. Not even an insistence on the patronage of local producers. Well, it has always been mouthed but nobody walks the talk, even though events in the oil industry of late have increased the concern of everybody with the need to stir the economy away from its dependence on a single product, oil. Time is running out on us. Our country is losing grounds on all indices of a healthy economy and nation. Politics should have its say but let our national survival have its way and pre-eminence, hoping without assuming, that we have got a common understanding of that concept – national survival. Dr Emeka Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emyosuji

Building collapse: Enough of this political trumpery

Tochukwu Ezukanma

ccording to the Federal Ministry of Power, Works & Housing, fifty four buildings collapsed in Nigeria within a period of five years (between 2012 and 2016). This is an average of more than ten buildings collapses every year, which is, by whatever standard, unnervingly excessive. And every building cave-in leaves a trail of woes: death, pains and sorrow, and un-healable emotional and psychological wounds. Recently, a 3 storey building, still occupied by businesses, residents and a primary school, collapsed in Ita Faji area of Lagos, killing twenty persons, many of them primary school pupils. As usual, the tragedy spawned emotive responses and solicitous visits by high-level government officials. In his response, the president, Mohammadu Buhari, expressed his distress and commiserated with the affected families. The governor of Lagos State, Akinwonmi Ambode, visited the site of the catastrophe, lamented the tragedy, condoled with the bereaved families, and ordered the immediate demolition of all the defective structures already marked for demolition in Lagos State. These visits and cogent remarks

were necessary and laudable. However, the problem with the Nigeria power elite is not in political posturing, and in display of concerns, and making germane statements, for bereaved families in times of emergencies and disasters. It is also not in ordering investigations and issuing of reports. Their problem is in accountability. Public accountability is borne out of a sense of responsibility on the part of the governing for the governed. The Nigerian power elite are yet to realize that their legitimacy and moral authority derive solely from the trust reposed on them by the people, and that once they betray this trust, they must resign. The caving in of a fatally defective structure on the innocent and unsuspecting, especially, primary school students was an egregious betrayal of the public trust by the Ambode administration, especially, the Lagos State Building Control Agency (LASBCA), that regulates building construction and the state Ministry of Education that allowed the continued operation of an illegal primary school in that exceedingly dilapidated building. The fundamental reasons for building collapse in Lagos State are the corruption and professional negligence of the officials of the LASBCA. It is their statutory roles to monitor and regulate building construction, and thus, ensure that builders/developers strictly compliance with professional standards and government guidelines and ordinances in building construction; and to identify structurally defective buildings and evacuate and demolish them. It is their failure to thoroughly carry out their statutory duties that results in building collapses in the state. They fail to do their work because they are corrupt, and are therefore, bribed by builders and landlords.

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This allows the builders to use substandard building materials, employ quacks and circumvent building guidelines and ordinances in the attempt to maximize profit. It makes it possible for landlords to forestall the evacuation and demolition of their buildings already designated for demolition, and thus, continue to collect rent from them. Public accountability demands that the chairman of LASBCA and the state Commissioner for Education take personal responsibilities for the corruption and dereliction of duties (of their subordinates) that resulted to the Ita Faji disaster; and resign immediately. In addition, officials of LASBCA and the state education ministry, that are, in any way, culpable of acts of corruption and negligence that resulted in that calamity and the continued operation of an illegal primary school in the collapsed building should be arrested, persecuted and jailed. It will serve as a powerful deterrence to future building collapses in Lagos, as the officials of LASBCA, Ministry of Education, and, by extension, every ministry and agency will learn, the hard way, that they will be held responsible for their professional misdeeds. Disconcertingly, thus far, the state government has not demonstrated any resolve to hold anyone accountable: no one will be forced to resign, and no one will be arrested, prosecuted and jailed. Already, officials of LASBCA are looking for scapegoats. They are blaming the landlords for their inability to evacuate and demolish unsafe buildings before they cave-in on their occupants. They claim the landlords refuse to vacate structurally defective buildings marked for demolition. But their protestations ring hollow. LASBCA has both regulatory and enforcement powers. It is empowered by the

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law to forcibly evacuate and demolish structures already designated for demolition. To evade political responsibility for what is a flagrant blunder by his administration, Governor Ambode inaugurated a five-man panel to investigate the cause of the collapse of the three-storey building. The panel is to determine the level of negligence on the part of the developer or owner, role of the state government, and then, make appropriate recommendations and proffer remedial measures to stem building collapse in the future. What nonsense? So, despite the extremely high number of building collapses in Lagos State and the plethora of investigations that followed them, and the reports that emanated from these investigations, the Lagos State government is yet to know the reasons for building collapse and the remedy to it? The reasons for building collapse in Lagos state are conspicuously obvious: corruption and professional negligence, and its only remedy is public accountability. To set up an investigative panel to determine what is already known is political trumpery. It is political manipulation by a grasping political class consumed by greed, giddy with power and flush with wealth that is contemptuously indifferent to the ever increasing plight of the masses and disdainful of the life of the common man. To continue this political deception with an issue that has resulted in the death of so many, and portends to result in even more deaths is tantamount to gambling with human lives. It is coldblooded shenanigan that casts Nigeria for what it really is, a menagerie, and Governor Ambode as a clownish hypocrite. Tochukwu Ezukanma writes from Lagos, Nigeria maciln18@yahoo.com, 0803 529 2908

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It’s nothing without character Character Matters with Daps

Dapo Akande

adly, we seem to repeatedly make the mistake in these climes of thinking that the mere attainment of a sound and solid educational background will automatically translate to having a good, just, well managed and well adjusted society. Recognition of a similar erroneous notion might have led the late and highly revered Martin Luther King Jr. to say: “Intelligence plus Character, that is the goal of true education.” Our society is one that still parades an enormous number of illiterates amongst its population but if truth be told, our political class, public service and private sector have for long been led by highly educated individuals, by any standard; some have acquired a list of degrees and post graduate degrees and even post-post-graduate degrees (if there is such a thing) as long as your arm! So it makes one wonder why our society is the way it is? Could you conclude that despite all the “book” there is something still missing in their education? “To educate a man in mind and not in morals is to educate a menace to society” – Theodore Roosevelt My observation is, in this society, more often than not, we make the vital error of mistaking credentials for character; and here lies our undoing. There is a huge difference between the two. No matter your academic achievement, titles or financial wherewithal, you

cannot substitute credentials for basic morals and integrity. The difference between credentials and character was broken down perfectly in one of John Maxwell’s books and it went like this: “Credentials are transient where Character is permanent. Credentials turn the focus on rights but Character focuses on responsibilities. Credentials add value to only one person when Character adds value to many people. Credentials look to past accomplishments but Character is concerned about building a legacy for the future. Credentials sometimes evoke jealousy in others where Character generates respect. Sure, Credentials can get you through the door but only Character can keep you there.” In my humble opinion, we as a people place an unhealthy and equally unhelpful emphasis on credentials without doing nearly enough to build enduring content and character in our adolescents. Our political class are a fine example of this malaise but it is by no means limited to them. It’s the failure of character that has led to exam malpractices becoming the order of the day; the winning at all cost culture. It’s the absence of character that permits some of our female university students to use what they have to get what they want; the certificates we prize so highly. An acute lack of character permits a Public Official, despite his education, to fiendishly steal the country dry, knowing fully well that his selfish actions will most certainly bring untold misery to millions or at best, is oblivious to that fact. Unfortunately, that all too familiar character flaw motivates those who should know better to hail him. Lamentably, the same character deficiency causes some churches to reserve special seats for these rogues. A case in point is the hero’s welcome so unashamedly given to a former Governor as he returned from “conquering”

her Majesty’s prison in the UK. He held a Thanksgiving service to offer his gratitude to God for granting him victory over his enemies and for his safe passage back to his people. Amidst the numerous eulogies extolling the many virtues of this valiant and honourable “hero”, I was disappointedly hard pressed to find anywhere during the course of the entire service where the man of God told him any of the home truths, he so desperately needs to hear. There is a saying, and I paraphrase heavily, that your journey to wisdom only begins from the day you realise how dumb you actually are. The day you finally acknowledge that upon all your academic laurels, what you don’t know is infinitely more than what you do know, your journey to wisdom begins in earnest. Getting an education is just the starting point. As much as ignorance is a very deep pit for the illiterate to climb out of, there is an equally dangerous point which one can get to, where one’s education, achievements and the attendant pride can become a major hurdle to acquiring wisdom. Otherwise how do you explain why a Nigerian Big Man who’s supposedly so concerned about his safety would hire a battalion of policemen to escort him wherever he goes, “blowing” siren to alert the whole world that he’s coming? Abraham Lincoln once said, ”Nearly all men can stand adversity but if you want to test a man’s character, give him power.” Correct me if I’m wrong but would it not make more sense to remain incognito? Am I missing something here? I have an uncle, who until recently was far from being what you would describe as a household name. Until then, few had heard of him except for other big men who’ve always known his worth. While chatting over drinks in his garden some years ago, I asked him why he wasn’t at the commissioning of one of his projects which was to be commissioned by the

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To educate a man in mind and not in morals is to educate a menace to society

President at the time, and I was stupefied by his response. He said he could do without the publicity so he gave his foreign partners the go ahead to represent him. He was happy to present them as the face of the company. Is this man really a Nigerian I wondered? This man has been so successful at keeping his face out of public glare till date that despite his tremendous fame and fortune, not many would recognise him if he was to stand right in front of them. He went further to say it’s this desire to remain incognito and be allowed to live a relatively simple life that informed his decision not to herald his presence by blaring sirens wherever he went. His whole lifestyle and outlook on life remains at total variance to what most Nigerians believe speaks of Success. There was a time he told me that whenever the thought crosses his mind to purchase what in Nigeria has become the ultimate symbol of success, a private jet, as soon as he considers how many lives he can touch with the huge sums of money required to maintain the aircraft, his conscience pricks him and he summarily dismisses the idea. Needless to say, his unquenchable appetite to help others and uncommon humility can only be described as tales of legend. Hundreds of such beneficiaries he has never met and very likely never will. The foolish rich man in Jesus’s parable(Luke 12:13-21) who opted to accumulate his wealth rather than use it to bless others could have learned a lesson or two from this. Without warning or further opportunity to repent, God summoned his soul and immediately all his plans came to nothing. Note: The rest of this article continues in the online edition of Business Day @https:// businessday.ng Akande is a graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

The stages of financial inclusion

Usoro Usoro

he discourse around, and drive towards financial inclusion, has been framed in terms of ‘access’ to financial services. Financial service offerings across industries and for all groups - from individuals at the bottom-of-the-pyramid to ultra-high net-worth individuals - have been experiencing a steady rise and evolution. Institutions have taken steps to simplify account opening procedures; others have introduced mobile money to ensure simpler, faster movements of money for the less savvy; and insurance products have become so cheap, that life protection costs as little as N1000. Despite these efforts and their modest impact, we are yet to see a commensurate increase in the standard of living for individuals who have been provided with access to financial services. This makes it evident that access is only a part of the inclusion puzzle. This is a lesson that other countries are also learning. We have to look beyond the immediate drive to increase access and understand the various stages of financial inclusion.

Financial inclusion, according to Nigeria’s Central Bank, is the access to financial services of the adult population; in this first stage access is not just physical. Living and/or working in proximity to financial service points is certainly a crucial part of becoming and remaining included. However, there still remains a significant amount of work to be done to enable this. With limited cash or disposable income, there is a reduced need for a bank or mobile money account, and other savvy financial products like insurance. But without financial service providers providing quality services built to reach and empower those in need, inclusion is still a long way off. Some of these problems may be eased when Payment Service Providers such as telecommunications companies and retailers, etc., begin to operate. Given that a significant proportion of the unbanked population interact with retailers more regularly; have a mobile phone and thus trust mobile service providers to a greater extent; enabling these new financial service providers who are entering the sector, is a crucial next step. Beyond this, however, we need to take greater care not to eliminate subsequent stages. The second stage comes in the form of actual utilisation of financial services. Owning a bank account and having access to financial services is insufficient if one does not, in fact, make use of it. To this end, some Nigerian socio-cultural and economic factors might explain the status quo. Low income groups generally distrust financial institutions, and the banking crises that have plagued the sector over the last 10 years have only exacerbated concerns. The plethora of charges on bank accounts — from withdrawals from cash

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machines, SMS maintenance fees, account maintenance fees — for an economy with the highest global rate of extreme poverty, tends to translate to a reluctance to remain unbanked, even if one did already have an account. The final stage of inclusion culminates in added value. For example, savings accounts appear to be the most accessible financial products, but their usage in Nigeria is such that many do not realise the benefits of interest payments from them. Many financial institutions also require credit-seekers to open (often, expensive) current accounts with them, compounding the limited enthusiasm that many have towards financial services. Despite the rise in banked Nigerians, the quantity of individuals saving has reduced by 6.7%, and the number of individuals seeking loans has reduced by 1.4%. This could also be as a result of limited flexibility and proliferation of varied loan structures, which cater to customer habits, needs, and cultures. In Northern Nigeria, for example, cultural sensitivities based on Islamic religious sentiment, and the dissonance towards traditional banking associations, mean that the most effective methods of providing credit to these audiences involves making no-interest investment-style loans available, through producer and consumer groups. To truly deepen financial service penetration and ensure the attainment of Sustainable Development Goals (SDGs), financial service providers must confer a value on their users beyond mere ownership. There should be some level of empowerment inherent in being an owner or user of financial products. Can small farmers easily

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access loans to enable them scale operations? Are non-banking products readily accessible; e.g mobile phone insurance? Can a small business owner, in addition to owning a corporate account, also access financial services which make it easy for her to collect payment from her customers at lower marginal cost? If the answer to these questions across the board is in the negative, then we have only just scratched the surface of what financial inclusion truly means. Some studies suggest that financial inclusion only helps poverty reduction and reducing income inequality when the overall economic conditions empower people to use the access they have to finance, for productive purposes like investing in children’s education. To truly achieve rates of financial service utilisation in Nigeria that are more commensurate to the extant services available, we need to now focus on improving the quality, as well as the quantity of financial services available to the people. Ultimately, enabling access to financial services is the first stage in reducing poverty and enabling development. However there is much more. It is reductive to think about financial inclusion without an understanding of what constitutes value for the financially excluded. Deepening inclusion, by way of addressing the cultural sensitivities, behavioural traits, and preferences of prospective users; and cultivating trust among the unbanked, will be the tipping point in the race to eliminating financial exclusion and the attainment of the sustainable development goals. Usoro is General Manager of Mobile Financial Services at MTN Nigeria

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comment Is Adamawa governor-elect, Ahmadu Fintiri ready?

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Zayyad I. Muhammad

he Adamawa state governor-elect, Ahmadu Umaru Fintri, became prominent and politically influential within just three months of coming to limelight in 2014. In fact, few weeks before Fintiri became the acting governor in 2014, if he was told he will become PDP’s governorship candidate in that year or in 2019, he would have laughed it off. In a short time after coming to power, Fintiri changed the narrative of Adamawa infrastructure and civil service welfare. Even his staunch adversaries will attest to this. Come May 29, Fintiri returns as Adamawa state governor. This time with more work and expectations on his shoulders. How he manages these will either further endear him to common people or make him a political misfit. For Fintiri to run a successful government in Adamawa state, he must balance policies and politics. No governor in Adamawa state succeeds without understanding the balancing of development with playing smart politics. Local government autonomy, education, civil service welfare and youth development are areas Fintiri needs to give utmost attention to. Outgoing governor Bindow’s failure in addressing issues relating to these areas cost

him a second term. Local governments should enjoy a measure of freedom and autonomy. Fintiri needs to allow the LGAs to run; and as well reduce governor’s interference in their affairs. This will build public trust. The penchant for ‘pocketing’ everyone, everything and anything meant for the LGAs was the undoing of governor Bindow. Fintiri should release funds meant for local councils so it can be used for the common good of the people. On the long run, this will address poverty at the grassroots and the governor will also free himself from the burden of ‘carrying the camel at its loads’ - people will be less interested at what happens in the Government House Yola. In addition, Fintiri should pay special attention to communities affected by Boko Haram senseless war. He should create a special programme solely dedicated to rural development with the objectives; to fight poverty, to unveil comprehensive and feasible post-war programmes to restore communities to their pre-war peaceful and productive statuses and to tackle the age-long cry for the restoration of basic infrastructure and livelihoods of thousands of people. Fintiri should resuscitate the Technical and Skills Acquisition Centers across the state. They should be redesigned and retooled for jobs and wealth creation. The centers should be redesigned as training places for agricultural entrepreneurship. This will go a long way in increasing human capital output that will speed up and sustain economic growth. This will also encourage youths, private sector and the rural poor to be strong participants in the economy. The centers can take advantage of agencies like; The Raw Material Research and Development Agency, Na-

tional Technology Incubation Centre, Small and Medium Enterprise Development Agency of Nigeria [SMEDAN], National Office for Technology Acquisition and Promotion, National Poverty Alleviation Programme, National Directorate of Employment (NDE), Bank of Industries, and the Central Bank of Nigeria (CBN). There are expectations on Fintiri to utilize the human capital potentials in the state to take the Adamawa people out of poverty. Economists are of the view that, for human capital to have a significant impact on economic development, at least 70 per cent of the population should be literate. Adamawa does not have that number. The education system should be overhauled to address illiteracy vis-à-vis human capital development in the state. This overhaul can be hinged on programmes like the Universal Basic Education (UBE) and other schemes. Where will the monies come from? Adamawa has huge debts, poor sources of income and rely heavily on FAAC. The internally generated revenue (IGR) can be a viable source of fund for the state. Taxes, bonds issuance, private-sector investment and land ownership reforms are new options the government can explore for income generation. In Nigeria, IGR is naturally associated with the old method of taxation, which is riddled with corruption and inefficiency. Adamawa can generate revenues and wealth through levies and taxations, but the state needs a paradigm shift in its taxation system. A modified system of awarding ‘tax collection rights’ to investment firms can be experimented. This should be modeled according to Adamawa’s culture, needs and environment. For example, the state can enter into agreement with a firm to give government monies in

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No governor in Adamawa state succeeds without understanding the balancing of development with playing smart politics

advance for taxes from a certain sector, while the firm will collect the money by operating as tax agent- the famous tax auction. The state can also look into leveraging on the assets it has. Adamawa has thousands of unserviceable vehicles and many idle equipment. Government can make money by auctioning such items. Furthermore, the state has abandoned building- completed and uncompleted, fenced and unfenced plots of land. These assets are commercially viable. They can be leased out or sold, Yola international hotel and redundant liaison offices readily come to mind. Kaduna state is generating income from liberalized method of issuance of Certificate of Occupancy (CofO) for all types of lands. Fintiri won his elections through some intricate politicking and alliances. He needs to define how he wants to be perceived politically. However, he faces a huge challenge in managing this because he is known for playing the politics of championing the cause of the minority- it was used against him 2014 at the ‘elite’ level and it worked. In 2019 it failed to work against him at the grassroots level. Fintiri needs to bury the perception forever and widen his network. He should work with the Hausa-Fulani oligarchy- the Kautal Pulaku, who controls nearly 85% of the state’s wealth and resources. This will help in improving his popularity across all classes of the society. Though, he cannot satisfy everybody; he can accommodate anybody. By May 29, Fintiri will be up against high-wired politics of Adamawa and at the same time laden with expectations from the common man. Is he ready? Muhammad writes from Jimeta, Adamawa State, zaymohd@yahoo.com, 08036070980. www.zayyad.com.ng

From US-Sino talks to new trade wars, weakening global prospects

Dan Steinbock

ver since the US-Sino trade talks began almost four months ago, the United States has pushed for a broad commitment focusing on China’s economic practices, including participation of U.S. firms in certain industries and protection of U.S. intellectual property rights (IPRs). In a recent CNBC interview, Treasury Secretary Steven Mnuchin claimed that the countries had “pretty much agreed” on an enforcement mechanism for a trade deal. After his meeting with the Chinese delegation last week, President Trump stated that negotiators may need four more weeks to package the deal. But the enthusiasm may prove premature. The state of US-Sino trade talks As the last globalist in the Trump administration, Mnuchin’s views carry some weight, but he lacks clout to enforce those views. That’s been the case since Gary Cohn, Mnuchin’s former Goldman Sachs colleague, resigned from the White House ahead of the tariff wars. In turn, Commerce Secretary Wilbur Ross has proven too weak, reluctant and old (81 years) to press for compromise. That’s why trade talks are led by Peter Navarro,

Director of National Trade Council, and Robert Lighthizer, U.S. Trade Representative. The former is an advocate of trade mercantilism, who has a dark track record in China-bashing; the latter’s trade wars began against Japan in the Reagan administration. In addition to enforcement mechanisms, the two are pressing for a pact that would allow US tariffs on Chinese goods to snap back in case of violations - but without permitting China to retaliate in response. Understandably, Chinese negotiators consider such conditions unacceptable. Such conditionality has surprised even Craig Allen, President of US-China Business Council, who believes that Mnuchin may have been too optimistic about the deal, if it is burdened by a conditionality clause. Indeed, US business groups tend to focus on commitments, including the proposed “enforcement offices.” They dislike negotiating tactics that needlessly prolong the talks and may undermine the progress achieved. Chinese Vice-Premier Liu He has expressed greater caution by stressing that, by the end the proposed four weeks, the two countries may learn whether a trade deal could be reached. And even if a final deal is achieved, it will take another year or two to verify the structural changes associated with the pact. Trade wars’ next targets However, a US-China deal will not resolve US trade deficits, which have increased for half a century. The imbalances began in the postwar era after the recovery of the key EU economies - UK, Germany, France and Italy - and the subsequent rise of Japan. Toward the late 20th century, the deficits reflected the emergence of the four dragons; i.e., Taiwan, South Korea, Hong Kong and

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Singapore. China’s role in these deficits became prominent in the 2000s. Today, the largest deficits prevail with China, US NAFTA partners (Mexico, Canada), key EU countries (Germany, Ireland, Italy), ASEAN (Vietnam, Malaysia) and India. China has been targeted first, but others will follow. Last year, Mexico and Canada were pressured to a revised “US first” regional pact. Friction has been steadily rising with Japan and Germany. And Trump has pledged to extend the trade war to ASEAN - where the deficits are likely to climb if US companies begin to relocate. Despite half a century of promises to bring an end to deficits, US dependency on trade deficits has only deepened as Washington has become increasingly dependent on foreign financing and sovereign debt (which now exceeds $22.2 trillion, or 106% of US GDP). The net effect is a falling trend line (Figure). Figure: U.S. trade deficits have deepened for half a century (US$ Million) Why tariff wars won’t resolve US deficits Do the US tariff wars make economic sense? No. Here are some reasons why: US deficit issue is multilateral and regional, not bilateral and national. Trying to resolve it by forcing the bilateral trade deficit down is a bit like mimicking the fictional story of the little Dutch boy who discovered a leak in the dyke and stuck his finger in it to save his country. That’s Trump’s strategy. Unfortunately, it ignores the dyke’s many other leaks and may thus make the flood more likely. Second, Trump’s trade hawks presume that international trade is a competition between companies representing different countries. They ignore the fact that, for decades – and particularly

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since the 1980s – national industry leaders have built multinational value activities around the world. Consequently – as even the OECD has concluded - conventional data on bilateral trade deficits can be misleading, due to multinationals’ global supply chains. Third, it is the overall size of the trade balance that matters, and that is largely a function of macroeconomic forces, such as domestic savings and investment. If the US domestic investment continues to exceed savings, it will have to continue to import capital and will have a large trade deficit. Since late 2017, the Trump administration has made this challenge much worse, thanks to large tax cuts, which have caused US fiscal deficits to soar. That is likely to cause the trade deficit to increase, irrespective the outcome of the trade war. Of course, one way to avoid this is that the White House will lead the US into a recession, with incomes declining adequately for investment and imports to plummet – as with the aftermath of the 2008 crisis . Why tariff wars will weaken global prospects Unfortunately, that path would further penalize American middle-class and working people, but it would also have even more severe implications internationally. It has potential to further derail global economic prospects (which would harm the very same US multinationals Trump claims to support). Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

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Editorial Publisher/CEO

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

A country where life is cheaper than a litre of petrol

magine a country where deaths from preventable causes scythes the poor and vulnerable the most but its government plans to spend, in 2019, N305 billion to keep the price of petrol low for the benefit of its poor and vulnerable citizens. That country is Nigeria where life is cheaper than a litre of fuel. Deaths of Nigerian children from preventable diseases is the equivalent of 16 plane crashes daily. This graphic description was made by Faisal Shuaib, the Executive Director National Primary Health Care Development Agency (NPHCDA), at a recent event in Abuja. Air crashes, within or outside Nigeria, with or without survivors ; always make the headlines but not the 2,300 children and the 145 women who die every day from preventable diseases and causes.

Shuaib notes that “one out of 10 children under five years old that dies in the world is a Nigerian, and one out of every eight Nigerian children dies before his or her fifth birthday.” These nameless and faceless women and children are the unmournables. Nigeria wants to meet the 2030 Sustainable Development Goal (SDG) of less than 70 deaths per 100,000 live births. And so, to reduce the number of mothers and children dying from preventable causes by 50 percent before 2021, the government has dutifully done the expected. It has established the National Emergency Maternal and Child Health Intervention Centre, and committed one billion naira (just one quarter of the estimated four billion naira spent daily to subsidy petrol). Continued spending on petrol subsidy while women and children die from diarrhoea, malaria and at or during birth because

state-owned primary and community health centres are decrepit is a clear case of misplaced priorities. Besides, most beneficiaries of low petrol prices are car owners and anyone who can afford a taxi ride. And some of whom, by the way, never go to a private much less a public hospital to remove a tumour, fix a broken bone or get a heart operation. Petrol subsidy, like every palliative, relives the pain (of a few) but sadly doesn’t deal with the cause. Nigeria’s real pain is the dire condition of its human development. Nobody wants the poor and vulnerable to keep dying from avoidable causes but, alas, they won’t, at this rate, live long enough to benefit from lowerpriced petrol. Being alive is one of the conditions for receiving government pension or salary. Why else is government taking the trouble to exorcise its records of ghost pensioners and workers?

Though death is certain and inevitable some of its causes are avoidable. That’s why we’re taught early on to look left and right, and left again when crossing any road; that’s why we’re advised not to drink and drive; that’s why prevention is better than cure is a popular adage. Human life is invaluable. It is worth more than the billions spent to subsidise petrol. That money is better spent to save and educate millions of Nigerians. We commend the NPHCDA for drawing attention to the death-trap our primary healthcare system has become; reversing the trend, however, requires more than declaring a state of emergency. Maybe we are waiting to act when the number of women and children dying every day from preventable causes and diseases is equivalent to a planeload of 550 passengers crashing every hour.

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COMPANIES & MARKETS

Lenders see backward integration helping local industries cut production costs Pg. 16

COMPANY NEWS ANALYSIS INSIGHT

ICT

MTN jumps to 8-month high as Jumia stake hits $570mn LOLADE AKINMURELE

T N ’s share price

climbed to its best level since August 29, 2018 as its e-commerce associate, Jumia, soared in its first trading day in New York. MTN shares closed 0.5 percent higher on Monday to 9,800 South African rand, the highest level since the mobile operator ran into its most recent regulatory troubles in Nigeria. The share price rally also comes after MTN Group was awarded additional broadband

spectrum in Nigeria related to its 2015 acquisition of Visafone Communications Ltd. following a le n g t h y regulator battle. On Friday, shares in Africa-focused Jumia Technologies leapt 75 percent in New York, giving the e-commerce group a market value of $1.9bn. MTN’s roughly 30 percent stake in the company is now worth about $570 million. “When it comes time to sell their stake, it will raise a nice chunk of easy-to-use cash [for MTN],” local money manager Vestact said on Monday. MTN’s shares are

trading at around their best level since the netw ork operator announced in late August 2018 that the Nigerian central bank wante d it to return $8.1bn worth of dividends. That demand, together with a $2bn tax demand by the country’s attorney-general just days later, sent the group’s stock crashing at the time. In midS e p t e m b e r, M T N ’s shares briefly dipped below the R70 mark. While the company reached a settlement with Nigeria’s central bank in late December — the $8.1bn claim was reduced to $53m — the

L-R: Richard Arlove, regional director, Africa Middle East and Asia (AMEA), Ocorian; Ari Sengupta, GMD, Chicason Group; Nousrath Bhugeloo, regional head, Ocorian AMEA, business development; John Felicite, business development director, AMEA, Ocorian, and Wola Asase, head of syndication and trade finance, Africa Finance Corporation, at the Ocorian Forum in Lagos.

tax case remains an overhang on its share price. MTN’s court battle

against Nigeria’s attorney-general has been adjourned until 7 May. The company main-

tains that its tax affairs are up to date and has not made any provision for extra taxes.

E-COMMERCE

Konga targets health sector with plans to acquire pharmacy chain

Paxful, Jumio develop AML product to track down cybersecurity

JUMOKE AKIYODE-LAWANSON

onga, one of Africa’s top e-Commerce platforms, has confirmed plans to extend its retail revolution to the health sector by launching an integrated cost-efficient health project through the acquisition of a pharmacy chain. The project which will expectedly reduce the cost of health services delivery is set to kick off by the third quarter of 2019. This was confirmed by Konga Co- CEO, Nnamdi Ekeh who disclosed that the company is keen to revolutionize the face of health service delivery in Nigeria and beyond by ensuring swift delivery of quality drugs to endusers. “Health services delivery in Nigeria is still very expensive and beset with challenges bordering on access and speed of delivery to residents in metropolitan cities but even worse with users in the hinterlands. Konga

intends to change this situation by extending our retail revolution to this very critical sector. “We have all the necessary approvals of the Konga Board to launch the most integrated genuine drug availability and delivery project by the third quarter of this year. We already have a commitment of a huge amount from a foundation to subsidize the cost of last mile delivery to some classified persons and organizations. “We also have approval to import digital lab equipment to test some batches of drugs supplied to our pharmacies nationwide by manufacturers and distributors to make sure they meet global standards. “We consider this as purely not a commercial rollout because there is social content to it. We are going to partner with stakeholders up to the village level to make sure this happens. “The roadmap to our quality health project

is clear and we are sure it will be a rewarding experience for Nigerians. We will release more information in the month of August but rest assured that, the technology that will drive the network is ready and certified,” he disclosed. Acquired by the Zinox Group from previous owners, South Africa’s Naspers and Swedish investment firm, AB Kinnevik in January 2018, Konga has undergone a huge transformation that has seen its value grow astronomically over the past 12 months. The company which is working towards becoming the first e-Commerce venture to turn profitable on the African continent, has creatively resolved some of the biggest challenges that has hobbled other players in the Nigerian and African e-Commerce scene, including logistics, payment, warehousing, last mile delivery, product quality and customer satisfaction, among others.

MICHAEL ANI

axful, a peer-to-peer Bitcoin marketplace, ha s a n n ou n c e d a partnership with Jumio, a digital identity and address verification company, to improve Anti-Money Laundering (AML) procedures and implement Know Your Customer (KYC) requirements into the marketplace. The new product will help in minimizing risk by ensuring that all users submit proper documentation. Ju m i o’s e n d - t o - e n d identity verification and authentication technologies will also be used to fight fraud and maintain compliance when on-boarding users in order to continue to enrich the community that already exists on the Paxful platform. By adding Jumio’s ID verification to the platform, Paxful has taken a stance to improve its AML procedures and compliance program in every operating country, the firm said in a statement. “We take compliance and security very seriously here at Paxful. We’re hoping that these and other upcoming changes will help

our customers in understanding the importance of regulation and compliance when it comes to operating on a peer-to-peer finance marketplace,” said Lana Schwartzman, Chief Compliance Officer at Paxful. Pa x f u l i s c o n s t a n tly improving to protect honest customers in the marketplace, according to Schwartzman. The company boasts a growing community of consumers in Africa, and their feedback has been vitally important in advancing security and compliance on its peer-to-peer marketplace. Through Jumio’s AIpowered Trusted Identity Service, Paxful will now be able to verify customers’ real-world identities, with a simple ID scan and real-time biometric authentication and liveness detection which will go into full effect in April. Paxful will now require users around the world who reach an equivalent of USD $1,500 in trade volume or wallet activity to verify their accounts through ID verification. In addition, users who reach USD $10,000 in trade volume or wallet activity must provide ID verification as

well as address verification. “Paxful now reaches ov e r 2 m i l l i o n p e o p l e worldwide through our P 2 P t ra d i n g p l at f o r m. When operating at such great numbers dedication to strong security measures that align with a future goal of enhanced oversight and compliance, will provide a better customer experience by affording a greater degree of trust and transparency for all customers”, Schwartzman noted. Paxful has also invested in the new Compliance and Information Security team. They have hired L a n a S c hw a r t z m a n a s Chief Compliance Officer. Lana has 14 years of experience in compliance and anti-money laundering and prior to coming on as CCO at Paxful, she was a manager in the Regulatory and Compliance Risk Group at Grant Thornton LLP. Her compliance experience included working in Deutsche Bank and Morgan Stanley. She will be enhancing the current compliance program and growing the existing compliance team to better serve the needs of Paxful’s customer base.

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

Wednesday 17 April 2019

BUSINESS DAY

COMPANIES&MARKETS

The Companies and Allied Matters Act (repeal and re-enactment) Bill 2019 – What you need to know Part 7 – Private Companies UDO UDOMA & BELO-OSAGIE

BACKGROUND he Companies and Allied Matters Act (Chapter C20) Laws of the Federation of Nigeria 2004 (CAMA) was enacted in Nigeria as a decree of the military government in 1990, and in the past 28 years, there have been no significant amendments to the CAMA. This is, however, all set to change if the Companies and Allied Matters Act (Repeal and Re-enactment) Bill 2019 (CAMA Bill), which was passed by the Nigerian Senate on 15th May 2018 and by the House of Representatives on 17th January 2019, is passed into law. In this series, which is scheduled to run for 12 weeks, Udo Udoma & Belo-Osagie will provide insights and digestible excerpts on the effect of key changes proposed by the CAMA Bill. RESTRICTIONS ON TRANSFERS OF SHARES AND ASSETS OF PRIVATE COMPANIES Under the CAMA, a private company is required, in its Articles, to restrict the transfer of its shares. The CAMA imposes this requirement without specifying how private companies should do so, thereby giving companies the flexibility to determine how they restrict the transfer of their shares. This is usually done in the form of a discretion given to directors to approve or reject a proposed transfer – this discretion could be absolute or applicable in certain circumstances. Some private companies go further by conferring a right of first refusal on shareholders in respect of any shares that any shareholder wishes to transfer to any person or to non-shareholders. The CAMA Bill attempts to go further than the CAMA in relation to the restrictions

that should be imposed on the transfer of shares and assets of private companies. It provides that “subject to the provisions of the articles, a private company may restrict the transfer of its shares and also provide that: (a) the company shall not without the consent of all its members sell assets having a value of more than fifty percent (50%) of the total value of the company’s assets; (b) a member shall not sell that member’s shares in the company to a nonmember, without first offering those shares to existing members; (c) a member, or a group of members acting together, shall not sell or agree to sell more than fifty per cent (50%) of the shares in the company to a person who is not then a member, unless that non-member has offered to buy all of the existing members’ interests on the same terms.” The restriction in (a) is new and relates to a proposed disposal of assets of a private company. The restriction in (b) is a right of first refusal in respect of any shares that any shareholder wishes to transfer non-shareholders, and (c) is essentially a mandatory takeover bid requirement that is triggered where a non-member acquires 50% of a private company. The wording of the CAMA Bill, however, provides companies with enough flexibility to determine whether to include these provisions in their articles, and to indicate, in the articles, whether these restrictions would apply. Without this flexibility, these restrictions will create concerns for investors, such as private equity investors, that require clarity and assurances regarding their ability to exit their investment as required by the terms of their funds. ELECTRONIC GENERAL MEETINGS In recognition of evolving business dynam-

ics, the CAMA Bill provides that a private company may hold its general meetings electronically provided that such meetings are conducted in accordance with the articles of the company.

One final point. The total amount guaranteed by the members of a Ltd/Gte under the CAMA is a minimum of N10,000.00 but under the CAMA Bill, this is to be increased to a minimum of N100,000.00.

COMPANY LIMITED BY GUARANTEE Under the CAMA, the approval of the Attorney-General of the Federation (“AG Fed”) is required in order to register the memorandum and articles of association of a company limited by guarantee (“Ltd/ Gte”). This approval is a pre-requisite to the registration of such companies at the Corporate Affairs Commission (“CAC”), and in practice, has resulted in significant delays in the process of registration, usually dragging out the registration process for months. The requirement for the AG Fed’s approval has been removed in the CAMA Bill. The main reason for this is to ease the process of registration of this type of company, which is usually set up to promote art, science, religion, sports, culture, education, research, charity or other similar nonprofit purposes. The only other structure available for such purposes is Incorporated Trustees and the AG Fed’s consent is not required for setting up Incorporated Trustees. This strengthens the argument for the removal of the AG Fed’s approval which is yet another roadblock in the process of establishing an entity in Nigeria, and is a problem usually confronted by international and local non-profits seeking to establish a platform through which they can provide much-needed support to the underserved sectors of the society. The CAMA Bill seeks to align more closely the process for registering Ltd/Gte with the process for Incorporated Trustees by requiring that an application to register a Ltd/Gte should be advertised in three newspapers.

ENTRY OF TRUSTS OVER SHARES Section 86 of the CAMA provides that “no notice of any trust, express, implied or constructive, shall be entered on the register of members or be receivable by the Commission.” This provision is not contained in the CAMA Bill. Another innovation of the CAMA Bill is the reduction of the threshold for disclosures of significant shareholding (currently ss. 94 and 95 of the CAMA). In the CAMA, this disclosure is required by persons holding shares amounting to 10% or more of a public company. In the CAMA Bill, this threshold has been reduced to 5%. S. 119 of the CAMA Bill introduces a new statutory register to be maintained by Nigerian companies - a register of persons with significant control. Every person with “significant control” over a company must notify the company within 7 days of becoming such a person and state the particulars of such control. These innovations of the CAMA Bill are to promote transparency and strengthen the ability of companies and the government to combat asset shielding. Udo Udoma & Belo-Osagie actively participated in the drafting of the CAMA Bill. Corporate Partner, Ozofu ‘Latunde Ogiemudia was the chairperson of the Technical Advisory Committee set up by the office of the Senate President to advise on the CAMA Bill and the bill to amend the Investments and Securities Act 2007. Managing Associate, Christine Sijuwade was a member of that committee and led the drafting subcommittee on the CAMA Bill.

FOOD

TGI Distri hits seasoning market with Terra Seasoning Cubes CHINYERE OKEKE

GI Distri Limited has launched Terra Seasoning Cubes in all markets across Nigeria. This was announced on Monday at a press briefing at its head office in Lagos. Speaking during the press briefing, Sunil Sawhney, TGI group executive director (Foods and Dist.) and managing director of TGI Distri, said Terra Seasoning Cubes are a true cooking sensation, allowing everybody to enjoy great taste. “We are now releasing two variants: Beef and Chicken into the market. Both variants come in single cubes of 4gm. Terra Cubes have particularly been designed to meet the palate requirements of all Ni-

gerians especially in terms of aroma and flavour. They are also designed to preserve the aroma of meals during and after cooking,” he said. He explained that the response from product testers and early adopters has been encouraging, adding that the company could not be more enthusiastic about releasing the seasoning revolution to the market. Also speaking at the product unveiling event, Onyekachi Onubogu, executive director – commercial of TGI Distri, said: “Terra seasoning is launching with two SKUs to address different pocket power: 50-cube pack and a 25-cube pack. We are also launching with 5 free cubes in the 50cube pack and 2 free cubes in the 25-cube www.businessday.ng

pack as a consumer promo.” Giving reasons for the choice of the brand’s pay-off line ‘Locks the aroma in; Gets the taste out’, Onubogu stated that Terra Seasoning Cube has been formulated and manufactured to preserve the aroma of meals during and after cooking. Responding to a question on why he believes the new brand wouldn’t have side effects to its users accepted by the market, Sawhney said, “We have conducted an intense research and we have been able to discern the needs of our customers. Our cube contains lesser salts in comparison to other brands. This will therefore improve healthy eating. We believe in studying the needs of our consumers and acquiring genuine insights

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into their requirements and demands. We respond to these requirements with better products and services that enhance the quality of life. We support our product offerings with strategic marketing and sales initiatives.” Sawhney continued, “We’re excited to be launching these new variants of seasoning cube into the market and we have no doubt that in a short period of time Terra Seasoning will gain competitive edge over other brands and control a large chunk of the market”. “Terra Seasoning Cube is an outcome of painstaking research. It is many steps ahead of other brands in the market in terms of taste and aroma. I enjoin everyone to try it,” he added.

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Wednesday 17 April 2019

BUSINESS DAY

CITYfile FG distributes relief items to 500 Lagos refugees JOSHUA BASSEY he Federal Government through the National Commission for Refugees, Migrants and Internally Displaced Persons (NCRMI) has distributed food and non-food items worth N12 million to over 500 refugees in Lagos State. The items, which were distributed in large quantities on Monday included pots, plates, spoons, mattresses, buckets, stoves, blankets, nets, wrappers, soaps, slippers, pillows, rice, beans, garri, palm oil, groundnut oil, salt and others. National commissioner with the agency, Sadiya Foruoq, said the items were meant to provide a soft landing for the beneficiaries after their rehabili-

Cross section of students at the National qualifying examination for InterswitchSPAK 2.0 in Lagos. Pic by Pius Okeosisi

Lawyer drags NSCDC to court over suspect’s death in custody ...seeks N500m as damages YOMI AYELESO, Akure n Ondo State based human rights lawyer and activist, Morakinyo Ogele has dragged the Nigeria Security and Civil Defence Corps (NSCDC) to court over the death of a suspect, Razak Ahmed, in the custody of the Ondo State command of the corps. Ahmed was arrested last month by officers of the state command for allegedly having carnal knowledge of his eighthyear-old daughter. He reportedly died in the custody of the command in Akure, the state capital, three days after

his arrest. Family of the deceased alleged that he was tortured to death by officers of the command while trying to extract confessional statements from him. However, the command’s spokesperson, Samuel Oladapo denied the family’s allegation, saying the suspect committed suicide in their custody. Not satisfied with the command’s explanation, Ogele approached the state high court in Akure to seek justice for the deceased and his family. The human rights lawyer is seeking the court’s order directing NSCDC to conduct investigation in its Ondo State command to identify officers involved

in the arrest, detention and alleged torturing of the deceased. He is also seeking an order directing the corps to hand over the officers to the police for proper investigation and prosecution of the culprits. Ogele is further asking the court to order NSCDC to pay a sum of N500 million as damages to the family of Ahmed. Besides, the legal practitioner wants the court to direct the security agency to subject all its officers to psychiatric test and stop them from torturing their suspects in order to obtain confessional statements. In a 33-paragraph-affidavit, Ogele said he initiated the suit on behalf of

the family of the deceased and in the public interest. “The family members of the deceased have been calling on human rights organisations to help them get justice. “This is because NSCDC is trying to cover up this extra judicial killing. They felt unconcerned about the gruesome act against the family of the deceased. “Their spokesman declared that the man committed suicide in their custody without giving evidence. I think NSCDC is a security agency established to protect lives and properties in Nigeria. Its officers are not expected to take any life,” Ogele said.

Gunmen kill pregnant woman, 15 others in Nasarawa

h a i r m a n , A kwanga local government of Nasarawa State, Samuel Mashi, has confirmed the killing of a pregnant woman and 15 others in Numa village. Mashi said the victims were killed on Sunday night by unknown gunmen. He told newsmen on Monday that the gunmen attacked the community at about 10:00pm during

a naming ceremony. “They just started shooting sporadically in a community that was having merriment. Unfortunately 16 people were killed in cold blood for just no reason,” he said. The chairman said that security had been beefed up in the affected community and environs to forestall reprisal attacks and further breakdown of law and order. www.businessday.ng

Similarly, Samson Gamu-Yare, Chun-Mada and chairman traditional council of Akwanga, described the attack as barbaric. He added that apart from the 16 people killed, so many others were injured and are receiving treatment in various hospitals. He called on the state and federal government to urgently fish out the perpetrators of the attack. The

monarch urged people of the affected community to remain law abiding even in the face of the unprovoked attack. Confirming the incident, Mohammed Akira, a deputy commissioner of police in charge of Criminal Investigation Department (CID), said the command was doing everything to forestall further breakdown of law and order.

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tation and empowerment trainings. “The items cost the commission about N12million. This distribution of items is in continuation of what the commission has been doing as part of its commitment to providing refugees and persons of concern with soft and durable solutions,’’ she said. Represented by the commission’s assistant director of procurement, Funmilayo Bara, the commissioner said that beneficiaries have swelled the number of refugees and persons of concern the commission has supported. Foruoq said that the donation was the commission’s interventionist programme and commended the Federal Government for continued support.

Ogun: TRACE deploys 350 operatives ahead Easter

g u n T ra f f i c Compliance and Enforcement Corps (TRACE) says it has commenced operation “Safety on Ogun traffic corridors,’’ with the deployment of 350 operatives and 23 patrol vehicles for the Easter celebrations. Seni Ogunyemi, TRACE corps commander, said in Ota, Ogun, on Monday, that the operation would ensure free flow of traffic during the Easter period. According to Ogunyemi, the operation, which commenced on Monday, to end on April 28, would involve 20 towing trucks through Hired Tow Operators (HTOs), to cover the state traffic throughout the Easter period. “The exercise is to ensure effective traffic management in all the nooks and crannies of the state, especially at diversion points, where road reconstruction is ongoing. “It will also ensure timely clearance of obstructions, prompt rescue, @Businessdayng

emergency service and collaboration with other sister security agencies,’’ he said. The exercise, he added, would also involve all road users through the TRACE traffic whistle blower Iinitiative, TRACE Emergency Traffic Service (TETS), and its community-based traffic management scheme. He urged all operatives to be humane, civil and exhibit a high level of professionalism in the discharge of their duties. Ogunyemi, however, felicitated with Christian Faithful, urging them to reflect on the reason for the season. He implored the public to be safety conscious and to ensure strict compliance with traffic rules and regulations. According to him, any vehicle found to be involved in any traffic infraction during the celebration will not be released until April 29, when the corps would end her Easter special operation order.

Wednesday 17 April 2019

BUSINESS DAY

Harvard Business Review

MANAGEMENTDIGEST

Brexit and how Japanese companies are navigating its uncertainties PAUL MAIDMENT

apanese companies that have invested in Britain offer an interesting example of how international business is coping with the political tumult roiling the UK economy over Brexit. Japanese firms operating in the UK and the Japanese ambassador to London have been uncharacteristically outspoken about their dissatisfaction with Brexit and its inept handling by British politicians. However, they are not rushing to exit the UK. Instead, they are making limited, defensive moves while they wait for clarity to emerge from the chaos. These include relocating their headquarters to EU countries and moving to where they legally base financial transactions. When they know more about critical aspects of the post-Brexit trade and investment relationship between the UK and the EU — from tariffs to customs procedures, supply-chain disruptions to corporate tax rates — they will determine the pace at which they will shift operations to the EU or back to Japan, or leave them in the UK. Longer-term, there will likely be a UKJapan free trade agreement. However, talks on this broke down in February with the Japanese side pushing for more favorable terms than Japan has under its current trade agreement with the EU. This was framed in part to compensate for the smaller size of the UK market and the fact that Japanese firms’ UK operations will no longer have unfettered access to the EU’s single market. Japanese investment is still coming into the UK. But it’s going into the EU faster. From 2015 to June 2016, when the UK held the referendum in which it voted to leave the EU, Japanese investments into the UK and the rest of the EU were growing at the same rate. From mid2016 until now it has continued to grow at the same rate in the rest of the EU but slowed to half that pace in the UK. Japan’s cumulative company investments in the UK totaled $158 billion, across 634 Japanese firms reporting annual sales of $68 billion and employing 150,000 workers as of the end of March 2017, according to Bank of Japan and Ministry of Economy, Trade and Industry figures. Although it accounts for 60% of the employment, manufactur-

ing accounts for one-quarter of the total Japanese investment in the UK. Services account for more than 60% of the investment but less than 40% of the employees. The most visible part of that is accounted for by Japan’s “big three” carmakers — Honda, Nissan, and Toyota — which employ around 60,000 UK workers in auto production and sales. Between them, they produce 40% of the cars made in the UK and it was their arrival that revitalized UK car-making after the industry collapsed in the 1970s. Perversely, they have plants (and thus jobs) in towns like Sunderland and Swindon that voted heavily in favor of Brexit. Japanese auto companies’ calculations about where to put new investment are colored by more than just Brexit. Other factors include vehicle sales slowing across Europe and the Japan-EU trade agreement, which makes centralizing the output of some models in Japan more economically feasible. Late last month, Nissan said it would cease production of its Infiniti Q30 and QX30 models at its Sunderland plant in the northeast of England by the middle of this year, but as part of a withdrawal of its luxury marque from Western Europe in the face of competition from Germany’s carmakers. This followed its announcement that it was canceling a plan to produce the new model of its X-Trail sport utility vehicle at the same Sunderland plant, where it employs around 7,000 people, citing Brexit uncertainties. In 2015, before the Brexit referendum, Honda promised a $263-million investment in its Swindon plant in southern

England, its only European production facility and the sole global producer of its Civic hatchback. In mid-February, the company said it planned to shut the plant in 2021, with the loss of 3,500 jobs. Honda said that the decision is based on global trends — Honda’s sales in Europe have halved from their peak in 2007 — but acknowledged concerns over postBrexit tariffs. Two-fifths of the components that Honda uses in Swindon come from the EU, and 35% of the plants’ exports go to the bloc. The company is expected to repatriate production to Japan. Toyota said earlier this month that it could end its UK production in the event of no-deal Brexit . Of the 144,000 vehicles Toyota built in the United Kingdom in 2017, about seven-eighths went to the EU. The company did say it would make its next-generation Auris hatchback at its Derbyshire plant despite Brexit, following a $300-million investment (and a $28-million UK government grant) to retool the plant. In the electronics sector, Sony and Panasonic are moving their European headquarters to the Netherlands to ensure that their European operations will continue to be subject to the EU’s common customs procedures. Panasonic will transfer only 10 staff from the UK, but Sony is not moving any at this point. Nor will Sony move any of its operations from the UK. Many Japanese companies are also transferring their euro-denominated invoicing to an EU country. Post-Brexit, financial firms in the UK will lose their “passporting” rights — which let finan-

cial services companies based and regulated in one EU or European Economic Area country do business in any other member state. To re-establish these, at least across the post-Brexit EU, Japanese financial institutions with UK-based businesses are establishing subsidiaries in the EU. This will increase regulatory complexity for them and require additional capital and liquidity, but is the least bad of the available choices. Japanese financial holding company Nomura, with about 2,300 people in London, will set up a broker-dealer in Frankfurt to use as its trading hub, shifting 50 to 100 staff to Frankfurt and elsewhere in Europe. And the list goes on: Mitsubishi UFJ Financial Group is expanding its operations in Amsterdam and plans a Paris branch, even while increasing its London staff modestly. Daiwa has opted for Frankfurt as its EU hub, but will still employ 450 people in London. Mizuho Financial Group and Sumitomo Mitsui Financial have also said they will set up German subsidiaries. Norinchukin bank has gone Dutch. The UK could stem some of the bleeding by lowering its corporate tax rate significantly post-Brexit to retain or attract investment. However, Japan could then treat it as a tax haven. That would leave Japanese businesses at risk of potentially large liabilities at home arising from Tokyo’s anti-tax-haven rules. This is believed to have weighed heavily in Panasonic’s decision to move its European headquarters to Amsterdam. One takeaway from these moves is that Japanese companies are keeping a clear head in the political fog, making sensible defensive decisions to position themselves from what they know is certain about Brexit in the short-term. Given that the UK and the EU will still have to negotiate their future trade arrangements, which will likely take years as trade agreements often do, this approach may well be the one international companies have to consider when it comes to the UK for several years to come.

Paul Maidment is the director of analysis and managing editor at Oxford Analytica, an independent geopolitical analysis and consulting firm.

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Wednesday 17 April 2019

Harvard Business Review

BUSINESS DAY

MANAGEMENTDIGEST

The dual-purpose playbook JULIE BATTILANA

orporations are increasingly being pushed to pay close attention to their impact on employees, customers, communities and the environment. Corporate social responsibility from the sidelines is no longer enough, and a growing number of business leaders now understand that they must embrace both financial and social goals. Changing an organization’s DNA is extraordinarily difficult. Our research reveals that successful dual-purpose companies take an approach we call hybrid organizing, which involves four levers: 1. SETTING GOALS, MONITORING PROGRESS — SETTING GOALS: Well-constructed goals are an essential management tool. They communicate what matters and can highlight what’s working and what’s not. These goals should go beyond mere aspirations to clarify a company’s dual purpose for employees, customers, suppliers, investors and regulators. No single playbook exists for setting social goals. But our studies point to two rules of thumb. First, do the research. Often leaders try to set goals without developing a deep understanding of the specific social needs they aim to address. Second, set goals that are explicit and enduring (though they may have to be updated in light of a changing environment). — MONITORING PROGRESS: Just as important is identifying key performance indicators in order to measure the achievement of specific targets. While we know how to measure sales, no widely accepted metrics currently exist for many social goals. Nonetheless, it is possible to set both financial and social KPIs successfully. Our research has found that companies succeed by dedicating substantial time and effort to developing a manageable number of trackable metrics during the goal-setting process, and revisiting them regularly. 2. STRUCTURING THE ORGANIZATION — ALIGNING ACTIVITIES AND STRUCTURE: Some activities create social and economic value at the same time. Others create predominantly one kind of value. For activities that create both kinds, an integrated organizational structure usually makes sense. Otherwise the activities are often best managed separately. Revolution Foods, for example, provides nutritious lunches to low-income students in the United States. Every time they sell a healthful meal to a school, two things happen: They enhance a child’s health, and they make money. Their core activity thus

creates both kinds of value. As a result, they opted for an integrated structure, with a single manager in charge of operational efficiency, business growth and the promotion of child well-being. — CREATING SPACES OF NEGOTIATION: Tensions will inevitably arise — particularly in differentiated structures. Successful dual-purpose companies avoid paralysis by supplementing traditional organizational structures with mechanisms for working through tensions. These mechanisms let employees actively discuss trade-offs between creating economic value and creating social value. Consider Vivractif, a French work-integration company. It hires and trains the long-term unemployed at recycling facilities. While production supervisors managed workers to meet recycling targets, social workers were eager to take them away from the floor for mentorship and job-search training. The company set up quarterly meetings between the two groups so that they could discuss each beneficiary’s progress and bring up coordination issues. This improved productivity and furthered the company’s social goals. 3. HIRING AND SOCIALIZING EMPLOYEES — HIRING: Employees in a company that pursues dual goals tend to be successful when they understand and connect with both the business and the social mission. We’ve seen companies mobilize such people by recruiting three types of profiles: hybrid, specialized and “blank slate.” Hybrid individuals arrive equipped with experience in both business and social fields, are able to understand issues in both camps and can connect with employees and other stakeholders of either orientation. Specialized talent allows companies to tap into deep expertise and networks

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in each area. This approach is more likely to result in conflict between groups, which may not understand each other’s norms, vocabularies and constraints. When companies recruit “blank slate” individuals — who have experience in neither business nor the social sector — they put them in entry-level jobs and help them acquire dual values and skills. This approach requires a considerable investment in training. — SOCIALIZATION: Every employee needs to understand, value and become capable of contributing to both financial and social goals in some form. Formal approaches to socialization may include companywide events such as annual general assemblies and retreats where dual goals and values are explained, discussed, assessed and put into perspective. Dedicated trainings can remind employees of the interconnectedness of revenue-generating and social-value-creating activities. Jobshadowing programs and other forms of experiential training can also purposefully bring different groups together. Promotion and compensation are also important. Some companies use shared ownership to motivate employees and increase their commitment to dual performance. 4. PRACTICING DUAL-MINDED LEADERSHIP — MAKING DECISIONS: Decisions provide real evidence of leaders’ commitment to achieving specific aims. François-Ghislain Morillon and Sébastien Kopp created Veja in 2004 to sell sneakers made under fair trade and environmentally friendly conditions in small cooperatives in Brazil. When they realized that advertising accounted for 70% of the cost of a typical major brand’s sneakers, they made the bold decision not to advertise at all. That allowed them to sell sneakers at a price

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comparable to what their bigger competitors asked. At first Veja’s clients — shoe retailers accustomed to the marketing of major sneaker brands — were skeptical. So Veja trained salespeople to educate them about the benefits of its product for people and the environment. They also refused to lower their fair trade and environmental standards to sell more shoes. Instead they decided to set production targets in keeping with the capacity of their fair trade partners while working closely with them to increase that capacity. In making bold decisions, the co-founders both emphasized the company’s priorities and created the conditions for achieving them. — ENGAGING THE BOARD: In successful hybrid companies, board members serve as guardians of the dual purpose. Thus they must collectively bring a combination of business and social expertise to the table. Diversity on the board is important for drawing the organization’s attention to both social and financial goals, yet it increases the risk of conflict, because members with different perspectives are more likely to differ as to the best course of action. Companies have managed to avoid governance crises by having a chair or an executive director who systematically bridges gaps between different groups. By fostering regular interactions and information sharing between them, such leaders enabled the groups to develop mutual understanding. Changing organizations and the ecosystem that surrounds them is difficult. Companies must fight the inertia of inherited ways of thinking and behaving. Trade-offs and tensions are inevitable, and success is more likely when leaders address them head-on. The four levers we have outlined are meant to help.

Julie Battilana is the Joseph C. Wilson professor of business administration at Harvard Business School and the Alan L. Gleitsman professor of social innovation at Harvard Kennedy School. AnneClaire Pache is the chaired professor in philanthropy at ESSEC Business School. Metin Sengul is an associate professor of strategy at Boston College’s Carroll School of Management. Marissa Kimsey is a research associate at Harvard Business School.

Wednesday 17 April 2019

BUSINESS DAY

insurance today

E-mail: insurancetoday@businessdayonline.com

Nigeria looks to benefit from Africa Trade Insurance $5b premium potential in 2020 Stories by Modestus Anaesoronye

f the awaited formalization of Nigeria’s membership of the Africa Trade Insurance (ATI) is concluded before the end of this year, the country is looking to benefit from an estimated $5 billion premium income of the continental body, expert said. The income is expected to come from political and commercial risk cover of investment and trade into the continent, according to Simba Chinyemba, head of actuary, Zenith General Insurance Limited. The continental insurance agency was set up with the support of the World Bank, owned by African government and is registered under the United Nations treaty to provide insurance and promote economic growth in member countries The investment risk insurer is owned by 14 African nations and other organisations such as the African Development Bank. It was formed in 2001 with World Bank support to offer insurance for large investment and financing projects against risks such as sovereign default, war and insolvency, to spur investment by companies and private equity into Africa. Major insurance projects on the continent insured by ATI include electricity generation projects in Kenya and a $200 million mining project in the Democratic Republic of the Congo.

In 2017, ATI recorded gross exposures of $2.4 billion and, in the same period, the company covered investment and trade activities across the continent valued at $10 billion. ATI also posted a $10 million profit representing a 55 percent increase

over 2016. ATI owes its strong results in part to growing demand from investors and African governments for their products as the continent continues to position itself as an attractive destination for investors. Africa’s

drive to increase trade within its borders is also fuelling ATI’s success. The African multilateral insurer also announced the Government of India’s $10 million shareholding, which will be represented by ECGC, India’s export credit agency.

Staff of Nigerian Insurers Association(NIA) and the Chartered Insurance Institute of Nigeria(CIIN) in a group photograph with the Principal, Teachers and Students of Baptist Senior Secondary school, Obanikoro during the Financial Institutions Global Money Week in Lagos recently.

World Bank eyes updated pandemic Sigma Pensions emphasises stronger health for better retirement experience risk transfer facility for 2020

eading Pension for Administrator (PFA), Sigma Pension Limited has emphasised the importance of healthy living and good health in having a smooth retirement life. The PFA believes that retirement will be a happier stage in life, if the retiree is healthy and strong. Sigma, committed to ensure that its contributors, retirees and other Nigerian publics enjoy their life in retirement through healthy living is taking round the country a fitness awareness walk with the theme ‘‘Walk to Live Campaign’. The event which held early hours of Saturday in Enugu saw participants including retirees march from Okpara Square, through Bisalla Road, down to New Haven Junction and back to Okpara Square. Dave Uduanu, managing director of the Pensions Fund Administrator (PFA), said that the walk was aimed at promoting health among staff and their customers. Uduanu said that the event was also an attempt to promote awareness on the need for every Nigerian to plan towards his or her retirement, stating that similar exercise had been conducted in Abuja and Lagos as nowhere will be left out. “We are trying to connect with our customers across the country and to encourage

them to be healthy to enjoy their pensions. We have done it in Abuja as well as in Lagos and now connecting with those in the hinterlands. You have to live to enjoy your pension.” Uduanu said that the PFA was signing new customers in the state and that the response was massive. On the launch of a pension plan for the informal sector by the National Pensions Commission (PenCom), the managing director said that Sigma Pensions was well positioned to queue into it. He added: “We are operationally ready to go into the informal sector. We have the funds and the manpower.” A retiree and customer of the organisation, Adesina Odunmbaku, said he was excited at such exercise organised by Sigma Pensions, while urging other PFAs to take a cue from the event with a view to ensuring healthy living among their members of staff and customers. “This is a novel idea which should be emulated by others. Sigma Pensions has good services and they give customers personal attention,” he said. Another customer and staff of Bank of Agriculture (BOA), Ruth Kalu, said that she felt good to be part of the exercise. “I am impressed with what they are doing. They are simply the best,” Kalu said. www.businessday.ng

he World Bank Group has reached out to catastrophe risk modeling firms as it prepares to begin development on the next phase of its Pandemic Emergency Financing Facility. In response to the high financial, social and economic loss driven by outbreaks of infectious disease, such as the 2014 Ebola outbreak in West Africa, the PEF was announced in 2016 by the World Bank as a facility able to channel capital to member countries of the International Development Association (IDA) facing a major virus outbreak with pandemic potential.

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The World Bank subsequently turned to the global reinsurance industry and broader risk transfer markets to launch specialist bonds, also known as catastrophe bonds, designed to provide financial support to the PEF. The transaction was oversubscribed by 200 percent, and underlined the positive response from the investor community. This enabled the World Bank to price the deal below initial guidance from the marketplace, with the total volume of risk transferred to the market via derivatives and bonds standing at $425 million. Of the $425 million transferred to the global risk transfer market, $320 million was in the form of pandemic cat bonds, with an additional $105 million of pandemic risk linked swaps, or derivatives. Now, in anticipation for the scheduled maturity of the PEF 1.0 parametric insurance coverage in July 2020, the World Bank along with selected re/insurance brokers is reviewing all aspects of the facility’s structure. The World Bank hopes this move will improve the program where necessary for the anticipated commencement of marketing the PEF 2.0 risk transfer mechanism around May 2020.

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Wednesday 17 April 2019

BUSINESS DAY

insurance today E-mail: insurancetoday@businessdayonline.com

Anchor in the next 5-years wants to be a place where insurance works - MD Austine Ebose was about a year ago appointed the managing director/CEO of Anchor Insurance Ltd, and within the period he has repositioned the company for greater growth and contribution to the economy. In this interview with Modestus Anaesoronye, he shared his experience, issues in the industry and where the company is headed. Excerpt: You were one year in office as the MD/ CEO of Anchor Insurance Company Limited about a month ago. How has it been since the last one year? hank you very much. It has been challenging and at the same time interesting. I have never been an MD before. This is my very first time. So, it’s a new page altogether. But thank God for the experience we have had in doing the job for some time now. We are coping and we have been able to consolidate and address those challenges we met on ground in moving the company forward. Where is Anchor Insurance today and what is the company doing differently? We have been able to improve on our premium income in the last one year by raising it to about N3.5bn from the N2.2bn it had hovered around each year before we came in. This is about 70 or 72 per cent improvement from the last premium written. This is the first time the Company will be hitting a premium income in the range of N3bn and above since it commenced business going to 30 years now. I must state that my predecessors did their very best to keep the company on the profit margin. However, when we came in, we challenged ourselves to do things differently for better results and the outcome has been a commendable one. The first thing we did when we came in was to carry out an ICT audit to find out lagging areas in terms of IT facility. In doing that, we found out that our online real-time was not good enough, so we audited our IT system. Presently, we have improved our services particularly our motor insurance business. What we also did was to look at our human capital and carried out reengineering and re-organization without necessarily laying off people as the only option, although those close to retirement and others who did not fit in in the fast moving train were excused from the system. In doing this, we understood that there were gaps which required that we brought in people to align with the vision we are driving. You said there were some remarkable additions into your premium; give us an insight into your performance in the past year and what your shareholders should be expecting? Our shareholders will be looking at receiving dividends at the end of the year. The external auditors, as I speak, are about concluding their work on our 2018 accounts. So, we cannot give exact figures yet. The audit will be completed very soon which will give accurate figures of what we did during the past year. However, like I had hinted earlier, since the existence of the company, the maximum premium the company has generated is N2.1bn or N2.2bn. This is the first time we are doing up to N3bn plus.

Austine Ebose

The focus of the market today is deepening the retail end of the market where opportunities are said to lie. What are you doing in this regard? We have gone bullish in terms of our retail business in the area of micro-insurance policies. We have tried to create a scheme within the banking sector for all their products that have to do with credits and those facilities that are taken by bank customers. We are in discussion with so many banks that have insurance services related to them. We have also discussed with some traders’ associations and other associations we are collaborating with to see how we move our retail sales to the next level. We have also partnered with NEXIM Bank to ensure that those who are seeking for loans get the necessary insurance for it. Besides that, we have gone through the agricultural line and have had partnership agreements with some agricultural organizations and in the next quarter we will disclose what we have achieved. The third party motor insurance has always been very important to this company. We have gone into partnership with some frontline associations with critical mass and institutions of government to widen the market for the policy. We plan to replicate this across the federation. At the moment, we are heavily penetrating the North with this idea. www.businessday.ng

Today, there are rumors about a possible capital raise in the industry; do you think this is necessary at this time? I won’t call it a rumor but anticipation, because at every given time you need to grow your business, you need to have good capital for stronger capacity. Any man that is scared of growing should not be scared of living. Capitalisation is very necessary because the more you have it, the more you can give. In insurance, the more capital you have, the more businesses you can accept, so if recapitalization is the way forward why not. But I am concerned about the way and process; we must try to do this by not rocking the system. The apathy for insurance is high, so if it’s not handled well it might affect a lot of personnel which will increase unemployment. If enough time is not given for the process and the process is not created, then it can lead to serious issues. Question on the importance of recapitalization for insurance, yes, it is very important and useful for the insurance industry. Even before the recapitalization pronouncements started coming the first time, the company itself and the board have seen the need for recapitalization. And I can tell you that the suspension of the Tier-based capitalization created apathy in the minds of ready investors. Again, we are hearing about recapitalization but nobody has told us. Yes,

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it is our anticipation that we will recapitalize. So, we are waiting for government to take decision. We at Anchor Insurance are already working on raising ours, so when it surfaces, we will have nothing to fear and that is the way forward. Some people say the number of operators in the industry is too many, what is your take on this? Even in a football pitch, there are fringe players and everybody is important. We all need each other. There is no one company in Nigeria that is big enough to take the entire risk of the industry. We have a population of about 200 million; even in America, how many insurance companies do they have with their population. We are more endangered in this country, so we need more players in this industry that will push the campaign. In terms of exposure, risk acceptance or industry expansion. As a millennial managing director, I think differently from other persons. Insurance is a specialised business; if other companies are good with third party, other insurance companies could be better in other areas. In abroad, some insurance companies concentrate on third party only. The government needs to create more awareness for insurance. The capacity could come in terms of premium income received or profit made. If more profit is made, we will invest in ICT and awareness. If the capital base is increased to N18 billion and there is no policy to underwrite, what type of investment will it be?. There have been regulations and reforms in the industry in the last few years, which of them excites you most? The ‘No Premium No cover’ rule which states that if you do not pay for premium, do not expect anything from the insurance company. But we should go further and strengthen that policy, that anyone who does not insure or does not have policy should not do any business with government, people will take it serious like the BVN policy. Where do you see anchor in the next 5 years? I want to see Anchor grow in leaps and bounds; I want see Anchor being recognized as one of the leading insurance companies in Nigeria; also I want to see Anchor writing a premium income of N10 billion in the next five years. We have a supportive board that are very ready to assist in terms of capitalization process, and also help open partnership with lots of agencies and financial institutions to see that Anchor is not just doing the normal traditional method of insurance, but also ready to look at investment issue in collaboration with NAICOM and other government agencies. Anchor in the next 5 years, wants to be a place where insurance works and a solution center in terms of happiness recovered as well as a modern model of insurance where things work.

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Wednesday 17 April 2019

BUSINESS DAY

PENSION today

In Association with

Micro pensions: Consumers await PFAs for product roll-out

any people particularly the educated informal sector workers who followed with keen interest the official launch of the Micro Pension Scheme by President Mohammadu Buhari on 28th March 2019 in Abuja are eagerly waiting for the product roll out. Some of them said the expected that the launch was going to be followed with a big bang in terms of awareness creation, advertisement, radio and television jingles that will explain the process of enrolment. According to some of them who spoke on the new scheme, they were yet to see anybody coming to market them or displaying the products for enlightenment and possible enrolment. Jerome Ubaka of Udo Eletu & Co, a lawyer said “I am interested in enrolling into the contributory pension scheme, even if under the micro pension plan, but I need to be convinced”. Ubaka said he is waiting seriously to see someone come to market him or even enlighten programmes from the PFAs. “I have seen some advertorial by the regulator, and I am waiting to see the marketers, the young lawyer said. Peter Aghahowa, head of corporate communications at the National Pension Commission said last week at the Enugu Trade Fair that the Commission was targeting no fewer than 30 million Nigerians in its Micro Pension Plan (MPP) within the next five years. Aghahowa said the move was to assuage the yearnings of the categories of workers by ensuring financial inclusion in the sector. According to him, the scheme would cover all manner of self employed people including artisans, petty traders, water sellers and many more. “The plan, which is an initiative of the PenCom is aimed at the provision of pension services to self-employed persons in the informal sector and employees of organisations with less than three staff. “The informal sector constitutes an estimated 69 million work force in the country and represents an estimated 88 per cent of Nigerian workers that lack pensions and safety nets for their old age. The goal of the commission is to achieve coverage of 30 million people in the informal sector by 2024,” he said. Aghahowa said they were at the trade

Members of the National Commercial Tricycle Motorcycle Owners & Riders Association (NACTMORAS) at the Micro Pension Plan Launch in Abuja.

fair to sensitise members of the informal sector including artisans on the new initiative. Aisha Dahir-Umar, acting directorgeneral of PenCom said during the official launch in Abuja that this is the first time such window of opportunity is being opened to self-employed Nigerians and those working in the informal sector, to participate and enjoy the benefits inherent in the Contributory Pension Scheme. She said the launch is remarkable because it unveils a unique financial product, which democratizes the savings culture in Nigeria in a systematic and efficient manner. “The product also perfectly aligns with the current social empowerment prgrammes of the Federal Government as it seeks to ensure, in the long term, the

sustainability of the benefits of the empowerment programmes for the participants, who may seize this opportunity to save for their old age.” “Micro Pension Plan is designed to fit the peculiarities of these informal sector groups. The National Pension Commission had extensively engaged all relevant stakeholders and obtained their inputs before the product was developed to suit their requirements. The product is flexible with respect to contribution amount and the channel of remittance of contributions to the respective pension accounts. Access to accumulated contributions is also flexible, seamless and facilitated by technology through varied payment system platforms.” A prospective Micro Pension contributor is required to open a Retirement Savings Account (RSA) by completing a physical

or electronic registration form with a Pension Funds Administrator (PFA) of his/her choice. The contributors may make contributions daily, weekly, monthly or as may be convenient to them. Every contribution shall be split into two, comprising 40 percent for contingent withdrawal and 60 percent for retirement benefits. The contributor may, based on his/her needs, periodically withdraw the total or part of the balance of the contingent portion of his/her RSA, including all accrued investment income thereto. The contributor may also choose to convert the contingent portion of the contributions to the retirement benefits portion. The remaining balance in the RSA shall be available to the contributor upon retirement or attaining the age of 50 years.

This section is created to increase awarness and deepen knowledge about the contributory pension scheme. If you have enquiries or contributions, send to this e-mail:

RC634453

Diamond Pension Fund Custodian Limited 1A, Tiamiyu Savage Street, Victoria Island, Lagos State. Tel: 01-4613753, 2713680, 2713954 Fax: 01-2713955 Email: info@diamondpfc.com Website: www.diamondpfc.com www.businessday.ng

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diamondpfcbusday@yahoo.com

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Wednesday 17 April 2019

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Apapa, Tin-Can, Onne seaports control 90% market share in cargo in 2017 amaka Anagor-Ewuzie

papa, Tin-Can Island and Onne Ports accounted for about 90 percent of market share of all the cargoes that were handled in Nigeria’s seaports in 2017, Nigeria’s Maritime Industry Forecast, a report released recently by the Nigerian Maritime Administration and Safety Agency (NIMASA), says. The NIMASA report, which quoted the National Bureau of Statistics (NBS) port statistics report 2012-2017, said most of Nigeria’s 43,019,889 metric tonnes of merchandise trade including bulk, commodities or containers occurs via the sea and that the vast majority of the containers arrive at Apapa, Tin-Can Island or Onne. It stated that port usage nevertheless has seen a decline in recent years as reported by the Nigerian Ports Authority (NPA), which owns the six ports complexes across the country including Lagos, Tin-Can Island, Calabar, Onne, Delta and Rivers Ports. According to data from the website of the NPA, while non-oil cargo throughput rose to its highest point in 2014 with 84.9 million metric tonnes, there has been a decline in the

volume of cargo throughput in the preceding years with provisional data for 2018 standing at 35.9 million tonnes from January to September. “External factors remain the key reason for the decline experienced in Nigeria’s port usage. The volatile nature of international crude oil prices led to a fall in the value of naira against other international currieries especially the dollar and, has also reduced domestic demand for imports,” the NIMASA report further explained. It further said that ban on the importation of certain consumer goods- which was part of the government’s effort to

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encourage domestic production and reduce the country’s trade deficit, also had impact on volume of imports in the period under review. “These policies, including the ban on import of certain products, were intended to increase value addition and domestic production, and this is supported by the fact that ships calling into Nigerian ports typically leave empty, as was the case for 1.6 million tonnes of outward containerised cargo against 5.1 million tonnes inward containerised cargo in 2018, according to the NPA,” the NIMASA report added.

Lucky Amiwero, the national president of the National Council of Managing Directors of Licensed Customs Agent (NCMDLCA), said the Nigerian economy has been at a standstill in recent times since the Federal Government started implementation of the 41-item list. Amiwero, who noted that the policy has caused lots of havoc on businesses, lamented that many small and medium sized Enterprises (SMEs) have closed down due to the hardship in the economy, fuelled by lack of foreign exchange to import essential raw materials needed as critical input for production.

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NigerStar 7 acquires pipelay vessel for execution of deep offshore projects

s part of its commitment to developing Nigerian offshore oil and gas industry, NigerStar 7 on Friday announced the acquisition of a new pipelaying vessel, called Seven Antares. A pipelaying ship is a vessel used in the construction of subsea infrastructure. It connects oil production platforms with refineries on shore and used for submerged laying of pipes and ultra-deepwater pipeline installation. According to the company, the vessel has multipurpose capacity to provide conventional services including heavy-lifting and hook-up projects. Built in 2009, Seven Antares has a 300t main crane capacity and is a 120t S-lay vessel with capacity to lay pipe of up to 60-inch diameter. It has an accommodation area in excess of 330 berths and a deck area of over 1300m². The acquisition of the Sev-

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en Antares adds up to other recent investments made by NigerStar 7 to strengthen its local fleet, thus reinforcing the company’s leading role in the ownership of Nigerian flagged vessels. It also reflects the company’s strategy of domiciling its fleet with the objective of meeting clients’ needs and the requirements of the Nigerian Local Content Act. Derek Izedonmwen, sales and marketing director of NigerStar 7, said: “The Seven Antares acquisition is a very important milestone for us. I am deeply proud of this investment, as it reinforces NigerStar 7’s commitment to invest in Nigeria through the acquisition of strategic local assets and to continue to invest and develop our people. Izedonmwen said the Seven Antares is currently laying pipe for one of the company’s clients, and “we are sure she will be busy supporting the growth of Nigeria’s energy industry.”

Wednesday 17 April 2019

BUSINESS DAY

MARITIMEBUSINESS

Shipping

Logistics

Maritime e-Commerce

‘Govt needs to simplify trade by removing all bottlenecks to attract more volume’

Over the years, shippers (importers and exporters) grapple with difficulties trying to clear their consignments from the nation’s seaports due to the cumbersome procedure and multiple taxation as well as levies imposed on the by government agencies. In this interview, Jonathan Nicol, president of the Lagos Shippers Association, shares with AMAKA ANAGOR-EWUZIE the travails of Nigerian shippers as well as the things shippers want from President Buhari’s administration in the next four years. Excerpts: What does Buhari’s reelection mean to Nigerian shippers? he past four years have been difficult for shippers and not much was done as far as infrastructural development in the maritime industry was concern. We made a call to government to save our souls because the bills we were paying were out of this planet. Maritime is a sector that is badly revenged by government agencies. We took time to compute what the shipper made when he eventually clears his goods after computing how much was paid for clearing goods. Unfortunately, it was sad that shippers do not even make up to 10 percent and this occurs even in the manufacturing sector, and once the private sector is badly ravaged, the country is 60 percent sick. We noticed that the sector does not have very experienced individuals in its agencies. We had people, who had never done this business before and it took them time to study the industry. We grappled with their lack of experience for months before they started to pick. So, that again was a big setback.

Can you share the experience of shippers while clearing his cargo from Nigerian ports? Government gave the agencies targets and there was nothing like trade facilitation. For instance, an agency that was asked to make N500 billion, ended up declaring N530 billion. But the question is, is that the basis for development? In the past four years, we never had any infrastructural development. The bills shippers paid were not regulated. When you want to bring in your goods, you start with the SONCAP certificate. After, you go for Form ‘M’, which takes one week before you can place order for your products. It takes the manufacturer a minimum of one month or two, and when the shipper gets his shipment,

Jonathan Nicol

the first quarter would have gone. It is in the second quarter of the year that you will now begin to receive some of the goods. This means that in the first four months of the year, companies will be paying salaries and don’t forget: no light, no water and no road to pass. You have to subsidise from the little revenue saved to meet up with these pressures. By the time the goods will come in, the shipper will be looking for money to clear it from the port. We don’t have much problem abroad negotiating for the freight. The problem is dealing with our local charges and Shippers Council has been finding it very difficult to negotiate a downward review of these charges. Customs says the PAAR is an advisory document, prepared based on the invoices from the importer’s supplier. I get upset with government policy because all the problems that we have in the system is from Government that gives a tag on the neck of its agencies to bring billions www.businessday.ng

of naira. We have this five percent VAT computed by taking the FoB and total CIS value; seven percent port charge; one percent ETLs surcharge before getting the VAT. It is believed that the five percent VAT has covered your goods and you also pay the Customs duty. PAAR is not even a document that government should display on its platform. It is a deceitful aberration to take one percent Comprehensive Inspection Scheme (CIS) charge for a job that Customs officers were trained to do. In other words, the shippers are paying the Customs twice. Customs say they are generating funds for government by making people pay for what is not supposed to be paid for. Government policies encourage corruption. On one consignment, the shipper also pays shipping line agency fee with five percent VAT, and terminal charges with another five percent VAT. This means a shipper pays 15 percent VAT on one con-

signment. If it is goods that need NAFDAC certification, you will also pay another five percent VAT, amounting to 20 percent. When the goods leave the port, you will now have the Federal Operations Unit of Customs to contend with. It is worrisome that the same Customs that releases the goods turns to intercept the same goods on the high way. Hardly will you see Customs officers on the highway in Britain and USA. The clearing agent will also put five percent VAT on his bill on the same consignment. So, you have 25 percent VAT and 10 percent withholding tax and all these have legal backing for the agencies. These are all receipted payments because the amount given as bribe is more than the legal payment. If you seat back to calculate how much was spent, you understand why people smuggle the same goods at cheaper price. We need to start the clean-up from government agencies and policies because they are creating dif-

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ficulties. For instance, an agency like Standards Organisation of Nigeria (SON) is only interested in their statutory charges, and none of them is facilitating trade. Why doesn’t government simplify trade by removing all these bottlenecks rather than equipping quasi-military officers to arrest shippers’ cargoes? The Federal Inland Revenue Services (FIRS) says they will keep the withholding tax till when you want to pay income tax, the company can use part of it but you must pay the five percent VAT. If you don’t pay the five percent, you will be penalised. Meanwhile, FIRS is still holding your 10 percent, which would have taken care of the five percent. The 10 percent will continue to build up with their receipt for so many years. So, anytime the shipper says he cannot pay the VAT due to paucity of fund, the FIRS will say that you have violated the rule. Shipping trade ought to be one of the most lucrative businesses all over the world and we have the ocean flowing into our lagoons and creeks, so for the next 1,000 years, we are guaranteed. So, why is government in a hurry to take all the money from shippers? This is one of reasons they are leaving the shores of this country to countries where government encourages them. Today, we see sporadic development offshore Benin Republic where you see choice houses built by Nigerians. Government made so much money from the maritime sector, from tax, over N1 trillion from Customs, billions from NPA, SON, NAFDAC and other government agencies like NIWA, which brings the total monies generated from the sector to trillions. Yet, we don’t have good hospital, no good roads, no power and no amenities for the citizens, then why do we need to pay tax to government? FIRS has started accessing people’s account to debit 30 percent tax from their gross income and turnover. This has gone beyond pro@Businessdayng

fessionalism because the monies are not ploughed back to developing the system. People still run generator to get power. What shippers want from Buhari’s administration? First, we need complete restructuring of the sector. We need professionals to take over agencies in the sector. We do not want Federal Government to put tags on the necks of these agencies to generate whopping sums as revenue; rather they should be allowed to do their jobs. It is when Nigeria has enough cargo that governments make more money. We do not want these agencies to enslave people to pay monies they ought not to. Cu s t o m s s h o u l d b e manned by professionals, who will not be killing people on the high way, seize their goods and cars. If a smuggler beats the network of a law enforcement agency in the developed world, they will look for him to learn how he was able to do that in order to improve, but in Nigeria, they will shoot you. Because of the tortuous system we have, people study the import adjustment policy day and night to identify loopholes that would enable them escape. We need a ministry of maritime. The National Transport Commission is coming to checkmate cost of doing business, but Ministry of transportation is overloaded. Maritime ministry will enable us pay serious attention to trade facilitation and service delivery. We also need to bring back our importers, who have taken their businesses to other countries by making our trade platforms simple. The easiest way to get people to align with government is through simplified trade. Beyond PEBEC, government needs to look at ease of doing business because the Presidential Enabling Business Environment Council (PEBEC) is not doing any adjustment in the system. There should be a platform to discuss our challenges because government is for the people and by the people.

Wednesday 17 April 2019

BUSINESS DAY

BANKING

In Association with

DBN in plans to set up credit guarantee company Stories by Hope Moses-Ashike

he Development Bank of Nigeria (DBN) is working on setting up a company that will provide credit guarantee and provide capacity building or technical assistance to financial institutions. The move is to encourage financial institutions to lend to Micro, Small and Medium Enterprises (MSMEs) which are the engine of any economy. This formed part of the discussions of DBN with the World Bank at the just concluded 2019 World Bank/ IMF Spring meetings in Washington D.C, Acting on its role as a wholesale development finance institution (DFI) to provide sustainable financing to MSME for the development of that segment, through eligible Participating Financial Institutions (PFIs), DBN has from the scratch disbursed a total of

N31 billion to this sector. Tony Okpanachi, managing director/CEO, who spoke to journalists on the sideline of the Spring meetings said the World Bank, being a strong partner has been supporting the DBN, providing $500 million for the bank. “DBN is a unique model of a development finance institution which is a wholesale finance institution. The last two years have been exciting for us we started from scratch and we have been able to do N31 billion in terms of loans in different sectors of the economy and have reached 5000 end borrowers through the financial institutions we deal with”, he said. He explained that the bank has three core mandates, first is lending through commercial institutions, second is providing credit guarantee for MSMEs to encourage banks to lend to them. “We are working on setting up a company that will

so we will discuss what we have been doing and see the areas open for collaboration”. Having been part of the series of meetings with the World Bank, one might

think that the essence of such meetings was to raise funds from the World Bank but Okpanachi said, “We are not here to raise money, when you take money from people, you have to give account to them on what you have done with the money. What we are doing now is to review what we have done so far with the money we have received and what plans we have to deploy the remaining money”. According to him, one of the major problems that MSMEs have is collateral and especially when it has to be fixed like using houses. “With the moveable assets, as collateral, it is an encouragement for banks to lend and even as DBN, we have been encouraging the financial institutions we work with to accept those moveable assets as securities to enable them lend to these businesses. So even when they are to provide securities to us, we also encourage them to bring such securi-

ties”. “At the moment, we have 29 financial institutions on board with us, made up of commercial banks, we are now telling the public that you have options of which bank to go to, they are all listed on our website”. “The process is simple, go to your bank and ask for a DBN loan, once you meet the eligibility criteria with your bank, the bank comes to us with your agreement. 80% of the loans we gave out last year were to customers of microfinance banks; they come in large numbers even though they ask for small amounts”. “DBN encourages longer tenure funding, the idea is that growing businesses need longer tenures for their businesses to stablise before they start paying back. We are not sector specific unlike other DFIs. For micro businesses, the maximum loan is N10 million, from the small and medium businesses go up to N150 million and we have a program for

to appraise and approve requests, forward approved requests to CBN, disburse facility to beneficiaries, monitor roll-out and ensure proper utilization of Funds, render monthly returns to CBN, and bear credit risk for loans comply with the guidelines. Borrowers also have their own responsibilities such as adhere strictly to the terms and conditions of the facility, utilize the funds for the purpose for which it was granted, make available records for inspection/verification by the CBN and PFI, repay loan as at when due, and comply

with the guidelines. According to the guideline, the facility shall be term loan limited to N500 million with disbursements to be in tranches subject to satisfactory performance. It is a 10 year tenor (maximum) with of 5%, 2% to the CBN and 3% to the Participating Financial Institution (PFI). Repayments shall be quarterly to CBN with moratorium of 2 years on principal and 1 year on interest. The objectives of the facility are to enhance the capacity of mobile money operators (MMOs) and super- agents to establish

financial services access points in under-served and unserved locations; increase agents penetration among the unbanked and excluded population; provide platform for achieving the financial inclusion targets; and create jobs and promote inclusive economic growth. The facility shall be utilized for associated cost for on-boarding of agents, where 25 percent of the agents must be located in financially excluded areas particularly in the North Western and North Eastern States.

Tony Okpanachi, managing director, DBN

provide credit guarantee and provide capacity building or technical assistance to financial institutions to encourage them to be able to lend to MSMEs which are the engine of any economy

Roles of CBN, banks in SANEF project

he Central Bank of Nigeria (CBN) last week released the framework for the Shared Agent Network Expansion Facility (SANEF), where it outlined its responsibilities and that of the Deposit Money Banks (DMBs) in the project. The CBN and the bankers committee in 2018, established SANEF, to enhance the provision of financial services to the excluded population. Access to financial services has remained a major challenge to development in Nigeria. Establishment of

bank branches as a strategy to improve access may not be viable due to inadequate infrastructure and huge cost. Efforts by various governments, policy makers and regulators to increase access to finance have not yielded the desired result. However, the SANEF facility provides financing to CBN-licensed Super Agents and Mobile Money Operators, to expand their networks to deepen financial inclusion in Nigeria. The Facility will enhance the capacity of the operators to roll-out more financial access points across the 774

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local government areas in Nigeria particularly in the financially excluded locations. As part of its responsibility, the CBN is expected formulate guidelines, provide funding, determine lending limits and interest rate, monitor and verify projects financed. Other responsibilities include to conduct impact evaluation, generate periodic reports on its performance, conduct stakeholder engagement, and review the guidelines as may be necessary from time to time. For the DMBs, they are

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Wednesday 17 April 2019

BUSINESS DAY

XECUTIVE MOTORING

Mercedes delivers 227,644 vehicles in March Pg 27

Toyota boss satisfied despite bumpy ride …As MOD, DPR, MTN grab Toyota Awards MIKE OCHONMA mikeochonma@gmail.com

…. Announces a R3bn investment in Rosslyn facility

he journey of Toyota brand and that of Toyota (Nigeria) Limited to the leadership position in the local market has been a chequered one, so said Michael Ade.Ojo, 81, and chairman , Toyota Nigeria Limited (TNL) at the last Toyota Awards/Customer Night ceremony held in Lagos last Thursday. In his welcome address presented during the awards night, the Octogenerian chairman of TNL admitted that, the auto franchisee have had its own share of success and setbacks, but noted that the franchisee has been able to navigate through the bumper part to establish itself as a priority brand of choice. He described the night of awards as the right platform to savour the tremendous and suceesses TNL has recorded as wellas progress made collectively in the strategic partnership. The partnership has endured for nearly 5 decades; a partnership whose history is replete with exciting and nostalgic moments; a partnership that has come to stay. According to Ade.Ojo, ‘’We have seen the good times as well as challenging times. However, with the cooperation and support of our loyal and ever reliable customers and partners, we have remained storng and formidable’’. He expressed delight that, despite the lull in the automotive sector, that many customers have supported the Toyota brand tick and thin. ‘’The continue to be our source of strength and pillar of support. Their support has made us a force to reckon with in the automobile

L-R: Representative from ministry of defence ; Michael Ade. Ojo, chairman , Toyota Nigeria Limited, his wife ,Taye, and Henry Ade Ojuoko, head, dealer development and special project, Toyota Nigeria Limited, at the Toyota Customer Nite 2019 inside the Civic Centre, Victoria Island, Lagos last Thursday.

industry in the country. It is therefore our joy to seize every available opportunity to celebrate you’’. The Toyota chairman said. Michael Ade.Ojo regretted that, the Nigerian economy has experienced series of crisis over the years, adding that, the last few years in particular have been extremely tough. The purchasing power of average citizen has been thoroughly weakened; this coupled with the unprecedented surge in prices of goods and services have made acquisition and ownership of new vehicles extremely difficult for average Nigerians. This has inevitablt resulted in a huge drop in sales of vehicles.

He assured the buying public that despite the monumental challenges confronting the nation’s economy, that Toyota Nigeria Limited will continue to devise means that willenable customers to keep on enjoying their preffered Toyota auto brand. ‘’We will continue to initiate customer friendly, business improvement strategies that is aimed at making the brand more affordable. One of such startegies is the introduction of more chaeper Toyota models and spare parts’’. The TNL chairman concluded. Meanwhile, the Ministry of Defence has won the Toyota (Nigeria) Limited Customer of the Year

award, while the Department of Petroleum Resources (DPR) and MTN Communications Limited came first and second runners-up respectively. As an appreciation for remaining committed to the Toyota brand in 2018, the MTN got N1million, DPR received N1.5million while Ministry of Defence received N2million. The high point in the award category was the emergence of First Bank Nigeria Plc as the Evergreen Customer of the Year. The big financial giant was presented with the key to a brand new Yaris for cumulatively buying the highest number of Toyota vehicles for over a long period of years.

BKG expo puts nation’s auto industry on trial

he fledging Nigeria automotive industry will be tested at this year’s Lagos Motorfair /Autoparts Expo Africa holding from May 6 to 11, 2019 at the Federal Palace Hotel, Victoria Island-Lagos. As prepartaions for this year’s event heats up, Ifeanyi Agwu, chairman organizing committee and managing director, BKG Exhibitions told newsmen in Lagos that many indigenous firms have confirmed their participation. He disclosed that over 80 foreign firms world be storming the Federal Palace Hotel Victoria Island venue of the event with different products and services from their stables. Ifeanyi Agwu revealed that a good number of the major brands of automobiles, spare parts, accessories, lubricants, banking, insurance, regulatory and policy making agencies and bodies are taking part.

Nissan to produce Navara pickup in S/Africa

He noted that although the sector is passing through turbulent times in the country, the persistence of major stakeholders in participating in this event is attributable to the importance they attach to it as a key event for demonstrating and showcasing capabilities and potentials. We cannot but attribute their consistency to the strategic importance attached to it by all the

stakeholders in the industry who have been hardworking and making sacrifices here and then. It has been a collective effort and all hands have continually been on deck, starting from the private sector to the various agencies of government both at the state and federal levels. From the Financial sector, auto financing and acquisition facilities and schemes shall be on display

at the various stands of the firms from the sector. Those interested in enjoying the synergy existing between the automobile industry and the Insurance sector will get the best and latest from reputable Insurance Companies at the fair arena. Some of the automobile dealers will showcase their own in-house finance/ acquisition schemes Visitors that are interested in knowing and also concerened on updating their knowledge about fleet management would also get the best and the latest in that sector of the automotive business from experts in the field that would be on ground at the fair. “It’s going to be a bumper harvest for the numerous visitors to the event; their socio-economic status notwithstanding. Every visitor would gain one thing or the other at the fair as we have ensured that almost the interests of all segments of the society are adequately catered for at the fair”.

issan has announced a R3 billion investment in its facility in Rosslyn, Pretoria, South Africa to prepare the plant for production of the next generation Nissan Navara pickup. With this announcement, the Navara will join the popular NP200 and NP300 models, which are already built at Rosslyn and sold in the domestic market, as well as up to 45 pan-African countries. The move expands the role of the plant as a Light Commercial Vehicle manufacturing hub for Nissan. The announcement was made at the Rosslyn plant and attended by the President of the Republic of South Africa Cyril Ramaphosa, Peyman Kargar, chairman of Nissan’s Africa, Middle East and India region (AMI) and Mike Whitfield, managing director for the Nissan Group of Africa. Production is expected to start in 2020 and will create around 1,200 new jobs directly at the facility as well as across the local supply chain. Depending on market conditions, it is anticipated Navara’s arrival will add 30,000 units to Rosslyn’s current annual production volume of 35,000, creating the need for a new, second shift at the plant. President Ramaphosa said the decision to produce Navara in South Africa was further proof of the increasing contribution of the automotive industry to the country. He said, “Automotive is already the largest part of South Africa’s manufacturing sector, contributing around 7.0% GDP annually and accounting for a third of manufacturing output. I am delighted Nissan will produce Navara here and congratulate the employees for their efforts in securing this important model.” Nissan’s Africa, Middle East and India chairman, Peyman Kargar commented: “Africa is an essential part of Nissan’s M.O.V.E. to 2022 midterm plan in which we aim to double our presence across the Africa, Middle East and India region. We already have a strong industrial footprint in Africa including plants in Egypt, Nigeria, South Africa and a planned facility in Algeria. Today’s announcement highlights the continuing evolution of Africa as one of the most important global markets. In South Africa, this is supported by the government’s creation of a stable environment for long-term investment.” The investment in Navara production will result in further modernization of the Rosslyn plant, including a new, flexible production line and additional facilities, as well as training and upskilling of staff. Working with the Automotive Industry Development Centre (AIDC), a local government agency that promotes small businesses in the supply chain and skills develContinues on page 27

Wednesday 17 April 2019

BUSINESS DAY

EXECUTIVEMOTORING

Mercedes delivers 227,644 vehicles in March …. Sells over 560,000 vehicles in Q1 2019

Continued from page 26

MIKE OCHONMA

ercedes-Benz closed the first quarter of 2019 with 560,873 passenger cars sold worldwide (-5.6%). For the third year in a row, sales in the first quarter were therefore well over 550,000 units. In March, 227,644 vehicles with the threepointed star were delivered to customers all over the world (-4.1%). The first three months of the year featured important model changes in the highest-volume SUV and compact-car segments. The company expects an increasing vehicle availability in the next months and therefore global sales to increase slightly overall in 2019. In terms of Mercedes-Benz unit sales by model, in the first quarter of 2019, more than 67,077 compact cars were handed over to customers – a new best value in March (+2.3%). Worldwide unit sales of the AClass increased by 25.6% during the last three months. Never before so many A-Classes have been sold worldwide in the first three months of a year, as in 2019. One month after the market launch in Europe, unit sales of the new B-Class increased in Germany, UK, France, and

Spain. Due to the successful market launch of the B-Class, more compact cars were sold in Europe than ever before in the first three months of a year (+5.3%). The new C-Class Saloon and the new Estate achieved an increase in unit sales (+2.1%) with 105,708 units sold in the first quarter. In the Asia/Pacific region, the sales of the two models reached in the first three months of the year a new record level (+9.7%). In the United States unit sales of the C-Class Saloon increased by 10.6% in March and

by 12.4% in the first quarter. More than 20,000 dream cars (coupés, cabriolets and roadsters) from Mercedes-Benz were delivered in March to customers worldwide (+1.9%). Sales of the CLS Coupé continued to grow, with strong increases in March and the first quarter. Since the beginning of the year, Mercedes-Benz has maintained its market leadership in the premium segment in Germany, UK, France, Italy, Switzerland, Sweden, Portugal, Poland, Denmark, South Korea, Australia, Canada, Brazil and

Nissan to produce Navara pickup...

other markets. “In the coming months, further highlights of our current model offensive at MercedesBenz will be launched; the CLA Coupé, for example, will be available in our showrooms in May. From the middle of the year, the ungraded generation of our very popular Midsize SUVs GLC and GLC Coupé will then be available at our dealerships”. Said Britta Seeger, member of the board of management of Daimler AG responsible for Mercedes-Benz Cars Marketing and Sales.

opment, Nissan has identified 15 black-owned companies that it will support in step with its preparations for the new Navara. It plans to partner with these businesses as it ramps up production and increases its spending on local content. To date, Nissan together with the AIDC has incubated 8 new component manufacturers and related companies from its Broad Based Black Economic Empowerment start up programme. In total Nissan has 318 BBBEE suppliers which make up 34 percent of the total number of suppliers in South Africa. Mike Whitfield, managing director for the Nissan Group of Africa, commented: “The new Navara is the perfect model for South Africa and our workforce is ready to build it, supported crucially by the government’s Automotive Production and Development Programme (APDP). Vehicles already account for around 14 pecent of total exports from South Africa. Navara production will allow us to expand Rosslyn’s role as an export hub for Light Commercial Vehicles and contribute further to the local automotive sector, fully in line with the goals in the next phase of the APDP.” Navara has won multiple awards across the world since its launch, including the 2016 International Pickup of the Year. In calendar year 2018, global sales totaled 231,435 units, representing a 6% increase year-on-year and establishing Navara as Nissan’s highest selling pickup worldwide.

TNL sends DCAC works to Japan for global challenge ….As 1,101 children display creative skills teen

he management of Toyota Nigeria Limited (TNL) has sent the best nine drawings to Toyota Motor Corporation (TMC) Japan for assessment. This follows the final selection of the best nine drawings by TNL in the 2019 edition of the Toyota Dream Car Art Contest organised annually for teenagers and children of between the ages of under 8, 8-11 years and 12-15 years. The 13th edition was held in Nigeria on different dates in Abuja, PortHarcourt and in Lagos respectively. Accreditation and contest involving many children from different schools and states across Nigeria started in the morning to share their concepts about the future of vehicular mobility by drawing their dream cars in the contest. Record of attendees indicates that the number of children that participated in the contest are as follows Abuja 290, Port Harcourt 361 and Lagos 450. At the end of the programme, three winners emerged from each category in Port-Harcourt, Abuja and Lagos centers respectively; making a total of twenty-seven (27) winners

Winners of the Toyota Drean Car Art Contest organised by Toyota Nigeria Limited to identify the creative ingenuity of Nigerian children aged under 8 to 15

from the three zones. Out of this number, three national finalists from each category were selected, bringing the total of winners to nine winners that emerged after the rigorous assessment of entries from the three drawing centers. All the winning entries were judged based on the originality,

creativity (the big idea behind the drawing), environmental friendliness, safety and futuristic concept in their drawings. The nine winners were invited to the award of prize and certificate ceremony at Toyota (Nigeria) Limited corporate headquarters, Lekki on March 30, 2019.

Among the nine winners, four were from Port-Harcourt, three from Abuja, and two from Lagos. The winners’ parents, teachers and well-wishers were entertained and winners went home with Laptops, other corporate gifts and winner’s certificate. The TDCAC is a corporate social responsibility (CSR) initiative of Toyota Motor Corporation Japan to develop the innate artistic talent in children and to cultivate an enduring relationship with them. Toyota distributors and dealers alike globally have keyed into this initiative because of its acceptance and impact on children’s psyche the world over. In his speech, Kunle Ade.Ojo, managing director of Toyota (Nigeria) Limited expressed the company’s resolve to continue to support this laudable CSR initiative. He said Toyota (Nigeria) Limited believes in tapping into the minds of children towards helping them realize their God-given talent and express it positively. He added that the platform will help build the confidence of these budding artists and future leaders in the creative world’’. He expressed high hopes that one of the local winners will win

on the Toyota global platform and added that Toyota will continue to organize the contest annually as long as it remains relevant to our CSR objectives. Each winner presented his/her drawing; explaining the concept of their drawings typified the guidelines of originality, creativity, environmental friendliness, safety and future relevance. respectively, they also urged Toyota to manufacture their dream car in the future. Responding, one of the winners; Ebelechukwu Onyejekwe thanked the organizers on behalf of the entire winners and expressed her gratitude to TNL for the opportunity given to them to exhibit their talents. Abdulbasit Bolaji Bakare, one of the parents and school proprietor thanked the management of Toyota (Nigeria) Limited for giving the children the opportunity to exhibit their creativity. He opined that the event would leave an indelible and sweet memory in the minds of the children. In attendance during the event Andrew Ajuyah, head of marketing department, Bukunola Ogunnusi, public relations manager, Adebayo Olawoyin, the marketing manager.

Wednesday 17 April 2019

BUSINESS DAY

FINANCIAL INCLUSION

& INNOVATION

New challenges facing financial inclusion in Nigeria-AMMON

This means that a typical merchant/agent will have to shut down for about a week to reconcile and ascertain his or her liquidity position. Lack of awareness among police command structures: Most POS dispute issues are today being treated as criminal cases by the Nigerian Police. Agents are being detained upon any complaint of failed transaction by POS users at agent points. USSD transfers are often criminalised by the police. If we are indeed interested in the success of financial inclusion drive, CBN needs to urgently engage the Inspector General of Police to curb these rampant detentions of bank and mobile money agents across the country. Attached is a copy of a court summon of an agent due to POS dispute issue, treated as a criminal case. Agent deployment and viability: Success of financial inclusion is not about quantity of agents but quality of agents. The unrealistic targets being set for commercial

banks and MMOs only increase inactivity of agents due to cannibalisation. Today, bank agent signboards are everywhere but transactions are actually not happening everywhere. Why can’t CBN re-strategise, placing emphasis on quality (Agent training, adequate agent spacing, interoperability, agent funding, agent protection etc?) rather than the current astronomic targets. Feedback Channels: We have observed that major drivers of financial inclusion policies (CBN, NIBBS etc) are disconnected from the last mile touch points of merchants and agents. They often rely on the commercial banks, PTSP, MMO etc. It is normal that genuine feedbacks are sometimes unfavorable but the regulated entities will not want to be seen to working against the regulators. Account opening and BVN at agent points: There are still channel of delivery challenges with capturing the non-account holders. The technology of the BVN delivery for the excluded regions is still the same with that of the cities. The equipment are still with high class specifications instead of simplifying to suit the terrain of the excluded. For instance, agents still have to move around with printers, scanners, laptop, etc to capture the excluded populace in terrains without power and good road to move equipment. Why should this not be simplified by linking it to a tech that accepts smart phone camera and scanners, while NIBBS platform should be made possible to be accessed using the mobile app?

ment Service Banks (PSB) aimed at deepening financial inclusion in a country that is lagging its African peers in financial inclusion rate. The impact of the financial technology wave is becoming broader with emerging innovations. FinTechs would, therefore, need to leverage on the opportunities in the Digital Financial Services space. Digital Financial Services can be accessed via innovative technologies like mobile-phone enabled solutions, electronic channels, and digital payment

platforms. At least 30 business names are currently undergoing registration as payment service banks with the functions to: 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 crossborder personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse.

Stories by Endurance Okafor

hile the Central Bank of Nigeria (CBN ) is pushing to achieve its 80 percent financial inclusion target by 2020, the Association of Mobile Money Agents in Nigeria (AMMON) has disclosed new challenges facing the programme in the country. Fasasi Atanda, the president of AMMON told BusinessDay on Monday that as the CBN is driving financial inclusion with giant strides coupled with the upgrade of NIBBS system to accommodate the projected 600m POS transactions for 2019, “agents at the last-mile are facing new trends of challenges in deepening financial inclusion.” With less than two years to bridge its financial exclusion gap at 16.8percent, CBN proposed payment service banks to enable others stakeholders besides banks to participate in the financial inclusion space. As the end of 2018, Nigeria was said to have 36.8 percent of its adult population excluded from the financial cycle, although the industry regulator has a target to reduce that number to 20 percent by the year 2020. AMMON president therefore stated that, for Nigeria to achieve 80 percent financial inclusion goal by the year 2020, stakeholders must promptly find solutions to the following nume systemic hindrances: POS resolution challenge: Most customer desks of commercial banks in Nigeria lack

proper knowledge of POS dispute resolution procedure. POS is an electronic device like ATM, and any dispute should be electronically resolved between issuing and acquiring bank. So, why should the banks toss customers around? Today, banks usually turn customers back by asking them to return to agents and claim their declined-debit funds. In fact, to demonstrate the seriousness of their knowledge gap, some banks will print internal arbiter conversation mail for customer to go after the agents for refund (sample attached). This action has led to customer loss of trust in the use of POS and agents are at times locked up by the police upon a customer’s complaint. CBN needs to urgently circularise POS dispute procedure and ensure compliance of commercial banks. For some other banks that accepted and processed dispute complains, they usually fail to follow up and close the resolution by getting customers

account credited. Are there no time limit for POS dispute resolution in Nigeria? Lack of accurate transaction data: There should be at least three sources of data for POS transactions. NIBBS source, PTSP and the bank sources. Agents or merchants should ordinarily have access to at least PTSP and/or the bank data. Unfortunately today, there are serious challenges with all the above data sources. There are also instances where transactions of certain TIDs got missing from transaction records on the PTSP database. Few banks make POS transaction reports available to agents and merchants daily. The implication of loss or inaccurate data is reconciliation issue and merchant/ agent capital erosion. Unauthorized POS Chargebacks: Most merchants and agents are closing shops today because of numerous unauthorised chargebacks . While

recent upgrade by NIBBS has reduced the POS transaction failure rates, the other determinant (Prompt terminal upgrades by PTSPs) still causes high declined rate with the accompanied daily chargebacks by the banks. Most banks abuse their power to debit bank accounts without recourse to laid-down rules of notifying merchants and agents at least 72hrs ahead of debits. Also, some bank chargeback narrations do not show TIDS of the terminal being charged and most agents see this as fraudulent debits. Incomplete POS transaction settlements: Agents and merchants are regularly being short-paid by some banks while several others delay transaction settlements beyond the NIBBs T+1 standard. In Nigeria, merchants/ agents’ total POS transaction values are not expectedly settled in 24 hours timeline in full. Banks do give excuses of some processors not turning in values. Are there no regulations for the processors?

EFInA to power financial inclusion through Fintech

h e B r i t i s h Hig h Commission to Nigeria and Enhancing Financial Innovation & Access (EFInA) are convening an interactive session that brings Fintech operators, investors, policy makers and hubs to explore the ways in which increased funding and enhanced regulatory harmony can grow the Nigerian Fintech ecosystem. Schedule to hold on the 18th of April 2019, EFInA will be announcing the winners of its $2 million Fintech Challenge Fund. The win-

ners are Fintech companies who have built solutions to improve financial inclusion among low-income earners in Nigeria. Late last year, EFInA requested for proposals for the Fintech Challenge Grant which focuses on supporting new concepts to enhance the uptake and usage of financial services. The challenge Fund is aimed at supporting the development of innovative financial products & services for the low-income population in Nigeria through leverage on financial technology

delivery channels provided by the FinTechs. The funding information for the Fintech Challenge Grant is as follows: $50,000 – $200,000 for Startup FinTechs – Fintech Challenge 1 Grant, and $200,000 – $500,000 for Growth stage FinTechs – Fintech Challenge 2 Grant The objectives of the EFInA Fintech Challenge Fund are to provide financial services that are accessible to everyone especially the low-income segment, improve customer experience, enhance the transpar-

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ency of financial services and increase the adoption of financial services with reliable and affordable products. In addition, the major purpose of this fund is to target FinTechs with innovative and cost-effective solutions to overcome the challenges or obstacles hampering financial inclusion in Nigeria. In the quest to ensure it includes 80 percent of Nigerian adult population by 2020, the apex bank on the 5th of October 2018 released an exposure draft guideline in which it proposed Pay-

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Wednesday 17 April 2019

BUSINESS DAY

INTERVIEW

Patience, persistence are key success factors in entrepreneurship – Linda Ikeji

LINDA IFEOMA IKEJI is a woman that needs no introduction. By 2006, she was well on her way to conquering the online publishing space with her ground-shaking blog LindaIkeiji.com. While blogging may be a normal concept in 2019, back in 2006 blogging was not considered a ‘suitable’ career choice by most Africans. This infamous blog has transformed the way Africans, specifically Nigerians, consume entertainment news and has forever imprinted the Nigerian media ecosystem. While her blog came with a lot of controversy and sabotage attempts, 13 years after her first blog post, Linda Ikeji is still on top of her game. Linda Ikeji, who attributes her success to her humble beginnings and hard work, is the quintessential 21st century media entrepreneur. What started off as a career in modelling turned into a love for writing and journalism, which propelled her to start a blog of her own. What started off as a passion project that was unprofitable for the first few years has now transformed into the most visited website in Nigeria. The Linda Ikeji story is not one that stops at all the great things that hard work has been able to afford her; the testament of her story lies in her struggles, business success, determination, and unending faith. For the April edition of the BusinessDay CEO Magazine, Lehlé Baldé had the pleasure of interviewing Linda Ikeji at her home in Banana Island, Ikoyi, Lagos, where she opened up about how it all started, her success, being a working mother, her new business ventures and everything in-between. To read the entire in-depth interview, visit www.businessday.ng/ceo-magazine/

hen you started blogging in 2006, you did so when blogging was still an unfamiliar territory for many in Nigeria. What inspired you? Growing up I wanted to be a journalist. I applied for Mass Communication in the university but was placed in English. I have always had a passion for journalism and being the one to break the news. My role models at the time were Abike Dabiri, Frank Olize, Funmi Iyanda. I realised then that my passion was to write and to be a news bearer. When I discovered blogging, I saw that it was the next best thing to journalism because it gives you a platform to put out something others can read and it was born from that. Before then, I was a columnist for magazines, writing strictly on fashion, modelling, and beauty because I had a background in modelling. When I started blogging, what was common at the time was personal blogs, where people talked about themselves and what was happening with their lives. There wasn’t really any solid gossip blog. I started my blog as a personal blog and that’s why I named it Linda Ikeji. The blogging community was a small community and we all used to go to each other’s blogs to comment with our names. I also discovered Paris Hilton which was the biggest blog in the US at the time and I started reading his blog and got obsessed with it and then I told myself, why can’t I do something similar? So, I put gossip on my blog and the reaction to that news was more than I expected. People were far more interested in it than the other things I had put on it. I normally would get 300 views on my stories but with the gossip news I got over 3,000 views! I received 10 times more comments, my reach immediately went beyond my community of bloggers and I discovered this was what people wanted to read and hear! I went on to mix the news with my personal gist and entertainment news and that increased the engagement with my blog. I realised this is really what I should be doing. One way I could get the news was to get the gossip tabloids and magazines in Nigeria like Encomium and City People.

Linda Ifeoma Ikeji

I would buy them, find interesting stories and put them on my blog and of course credit them. When you started your blog, did you understand the commercial potential and viability of the blog? Absolutely not. It took me four years before I realised it was possible to make money from it. My passion for blogging kept me going. I had a business named ‘Black book communications,’ which was my source of livelihood. I didn’t think that blogging would make me money. Blogging was born out of passion, it was what I always wanted to do growing up. What kept me going were the comments I read and the

‘‘

I think that the things that happened to me, happened for a reason because I’m not afraid to share and let people into my life and I hope that with my life and my story and experiences, people can learn from it and do better or do as great or as much as I have or even better www.businessday.ng

people who were eagerly waiting to read new gossip news on my blog. It kept growing gradually from 20k to 30k visits and it was very exciting. It kept me going. Then the next thing was when I was asked to send rate cards for adverts! When did you realise the blog was successful? What was your light-bulb moment? It was in 2012. I started making money in late 2010 which was a one-off. Early in 2011 was when I started making more money and advertisers started seeing my blog as a channel to advertise and the rest is history. I started having a few millions in my account and that was the first time I ever had that much money in my account. I was hesitant about spending just in case the income stopped. I was apprehensive because it was all so new. A year after that, it tripled and in 2012, I was like “WHAT?!” Then I realized it was all going to get better going forward. You have diversified the Linda Ikeji brand to TV and, more recently, digital marketing. Are your career moves strategically filling a market gap or are your business moves ad-hoc? I think my ideas always come from my vision and where I see a need or where I think I will be successful. For years, a lot of Digital Marketing agencies contacted me when they wanted to

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run campaigns, etc. Some brands come directly to me and asked me to put content on, not only my blog but other blogs as well, as a kind of PR/marketing agency. We would always referred them to other agencies to do that because that was not our focus. Our focus was on blogging and creating amazing content. Re c e nt l y , s o m e o n e approached my business to market their product on our platform. We gave him a budget and then he asked if we could give the budget for other blogs. We couldn’t do that because we had a lot on our hands. We recommended a PR person but he wanted a Digital Agency instead. He went to do the job and he told me how much he paid. He then told me he thinks it would make sense for me to open my own agency. He told me all I needed to do was employ the experts and leverage on the name I have built. He became my first client and now Linda Ikeji digital Marketing agency has quite a number of clients. What is your process going from ideation to execution? Many people are full of ideas but those ideas never actualize... Once I think of something, I get experts on that topic, ask opinions and get details. After several strategy sessions, we build a team dedicated to executing. For example, we have a number of people who have travelled to the eastern part of the country to cover some stories on cultural events there for our docu-series. They use what they have to get good content and then come back to build it into what can be aired. What advice do you have for entrepreneurs on staying consistent? One of the most difficult things when pursuing success is patience. What many don’t have is the belief that something can be great. They get frustrated with things like failure, lack of support, lack of funds, trials upon trials and then give up. Five years in, they give up. Most people can’t handle the challenges of entrepreneurship and later tell themselves: “this is not for me.” One of the things I tell people is, you have to be patient because eventually, it will work out. It might take 5 years, it might take 10 @Businessdayng

years, it might take 15 years, it will happen. Not so many people have the patience to get to that point. It took me 4 years to start making money; it took me 14 years to break out of the hustle. Patience is a virtue. You have to be consistent, you have to be hardworking, you have to believe. If you are hardworking and don’t believe in what you are doing and in God, you are wasting your time. Tell yourself “I am not doing this in vain, there is absolutely no way God will not bless me at the end of the day. I just have to be patient; I just have to continue doing what I am doing because I am heading somewhere and I will get there even if I can’t see the end yet.” What can we expect from you in 2019? Well, the blog has been there for 12 years, it’s thriving and doing well, so currently my focus is on Linda Ikeji TV. For the digital agency, it’s just new, I have my employees who are doing very great work there but my primary focus is the Linda Ikeji TV, the online platform that I launched last year. In 2019, expect to see amazing content and phenomenal pieces of work. This is the kind of content that you haven’t seen on TV before. From unique documentaries, reality shows and very soon, blockbuster movies on the platform. There is so much I have working for 2019 TV content. When it’s all said and done, what will be the Linda Ikeji legacy? When it’s all said and done, people will know I was here, that’s basically it. I want people to know Linda Ikeji existed and she made an impact on society, the community and the world. And I hope that people will hear my story which is why I share it a lot. There is still so much that I’m going to say, there is still so much that has happened in my life that I’m going to share, and I hope that people will learn from. I think that the things that happened to me, happened for a reason because I’m not afraid to share and let people into my life and I hope that with my life and my story and experiences, people can learn from it and do better or do as great or as much as I have or even better. I want to leave my footprint in the sands of time.

Wednesday 17 April 2019

BUSINESS DAY

BOOK SERIALISATION

W H Y N OT Citizenship, State Capture, Creeping Fascism, and Criminal Hijack of Politics in Nigeria

Continued from Tuesday

Chapter IV The Complicit Middle

y personal experience with agenda-cutting could be interesting here. Frustrated with how narcissistic leaders were stoking civil wars across Africa and exacerbating the crisis of poverty and deprivation on the continent, I learnt my voice to the groups calling for an international criminal court to try leaders for genocide. I even advocated for two courts, a political crimes court and an economic crimes court. I argued then that the corruption of many African leaders constituted the moral equivalence of economic genocide against their people. In January of 1998 I had the opportunity to push my views to editors of a remarkable US newspaper. Earlier in my career, on arrival in the US to start graduate studies I ran into the Africa Editor of the Christian Science Monitor at a conference. Many in 1979 considered the Christian Science Monitor to be perhaps the best newspaper in the World. Meeting David Anabel was therefore a great thrill. It would end as a pleasant shock when the conversation finished with him inviting me to contribute on African affairs. My second claim to fame would therefore be appearing on the pages of the Christian Science Monitor where people like Dele Giwa first came across my name. So, when in 1996/97 I was spending my sabbatical at the Harvard Business School writing the book Managing Uncertainty: Competition and Strategy in Emerging Economies, I thought I should take my campaign for an international criminal court to the newspaper. I called up and introduced myself as a contributor from 17 years back. They graciously invited me for a chat. When, that cold morning, I raised my campaign for the two international criminal courts, they laughed it off as Utopian and unlikely to happen. Obviously, Americans were not comfortable with possible consequences of an International Criminal Court, not because of what a former Harvard Professor, Robert Klitgard, would call “tropical gangsters” in referring to bandit African leaders but because of American covert activities around the world. You can imagine how I felt when the Rome treaty establishing the International Criminal Court in The Hague came into being. The attempt of the establishment media in the US to do agenda-cutting on that matter had failed. My experience is that dominant media ultimately influence culture.

One of the great contemporary historians, the British historian, Niall Ferguson, in his book, Civilization – The Six Killer Apps of Western Power, analyses how the cultural power of the blue jeans extended American economic and political hegemony into Eastern Europe. Less generous people describe that as cultural imperialism, but media research sees it as the product of more resources in America to create film and other artefacts of culture that less financially endowed buy cheaply and then get enmeshed in. Media influence theories such as the cultivations theory of George Gerber essentially provides framework for understanding such culture influence. This is so important because I am persuaded that culture or values shape human progress. A colloquium at Harvard on how Values shape human progress helps provide deep insights into phenomena on the subject. Based on Patrick Daniel Moynihan’s two truths, the colloquium which is reported in the volume, Culture Matters, edited by Lawrence Harrison and Samuel P Huntington Jnr, point us to culture being central to progress. As I argue in explaining the Growth Driver’s Framework, the thesis central to, Why Nations Are Poor, leaders are important because they set the tone of culture and that determines economic performance. Huntington himself cites the example of Singapore in which one Liberal, Lee Kuan Yew, used politics to engineer culture and move a pretty backward society, in one generation, from Third World

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Americans were not comfortable with possible consequences of an International Criminal Court, not because of what a former Harvard Professor, Robert Klitgard, would call “tropical gangsters

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t o the First World. If culture shapes human progress and media can help engineer culture, the media influence can be a catalyst for development, economic growth and social advance. For me, ultimately, the influence of the media is best understood in the nature of the public sphere. Here we turn to philosophy and the remarkable work of contemporary German philosopher Jurgen Habermas who I call the philosopher of the public sphere. His thoughts on the state of democracy and the place of public sphere largely defined by its marketplace of ideas elevate the role of the media in the erection of a democracy that advances the common good. As is evident, Nigeria’s democracy is dangerously flawed because instead of being a government of the people, for the people and by the people, it is patently a government of politicians for politicians and by politicians with occasional rationalisation of an apparent common good. Sadly, the Nigerian media is significantly complicit in this obtuse operation of democracy in what it does and what it fails to do.

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Can the Nigerian Media Rise to the Agenda Setting Challenge of NationBuilding? From Siebert, Peterson and Schramm and the Four Theories of the Press, we learnt long ago that press systems were supportive of governmental philosophies within which they operate. But those systems, even beyond the social responsibility typology are generally mobilised to advance a social purpose. They do indeed become institutions of socialisation like schools, religious agencies and the like. But how they do so depend on extant governmental philosophies. It is this that influenced part of my early research in media and society resulting in my 1981 publication in the Dutch Journal of Media Studies, Gazette. The historical-philosophical foundations of government ownership of newspapers in Nigeria aimed to show the relationship between ownership and content. Ownership influences content and in Nigeria this remains an issue as it affects the nature of the role the mass media, as we know it can play, in nation-building and economic development. When I wrote the journal article

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the concerns were with government ownership of media as that was the factor of that period. The Daily Times, the primary newspaper of record in Nigeria at the time, had been nationalised in the mid-1970s and the alternatives were state-owned newspapers which flourished at the time. Many of our graduating colleagues went first to the Renaissance in Enugu (later, The Star) and others to The Chronicle in Calabar. To compound matters, by 1977/78, state owned television stations were co-opted into a centralised body called the NTA. Part of my small claim to fame was that as a Youth Corper at Newbreed Magazine I wrote an investigative report on this subject in a cover story titled, The Radio Kaduna Controversy. It ostensibly forced the departure of the then Federal Commissioner for Information, Chief Ayo Ogunlade, from the Federal cabinet. With the Structural Adjustment Programme (SAP), turning to privatisation to rescue the state from its errors, a new mindset took hold. Today, there is significant private ownership. How has that changed the way the media plays a role in development? Private media has played a huge role in the evolution of the American free enterprise system and the shared values that define Nation-building there. America’s success comes significantly from how the media helps build the legitimacy of American institutions. How well do our private media do so in Nigeria? Legitimacy is so important for governance as Seymour Martin Lipset so well advances in his book, The First New Nation. Such institutions are useful for establishing links between the people and power in a way that establishes the essence of authority. In my view the economics of media in Nigeria which leaves us with newspapers and electronic media that pay poor salaries and many times fail to pay for months, diminishes capacity for performance. Many media practitioners are caught in a crisis of an existential nature and so lack the sobriety for the issues in nation-building. Reportage in Nigeria is dominated by staged events, press conferences, AGMs, lectures, etc. This ensures that the news stories are focused on those who stage events and facilitates the dolling out of gratification to the poorly paid reporter whose turn has come to look forward to it. The reporters rarely get transportation money from their employers to the staged events much less resources for the investigative report. This is largely because the media business models in Nigeria are such that they cannot afford the traditional

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BUSINESS DAY

BOOK SERIALISATION methods of news gathering. Compare this to a personal experience I will now share. I once arrived Washington DC and checked into the Hilton on Embassy Row, near Dupont Circle. I was hardly settled in when the phone rang. The operator connected me to the caller, a reporter from the Wall Street Journal. I was shocked because few people knew I was coming to DC and fewer still knew where I was going to be lodged. The reporter wanted insights on the operations of Halliburton in Nigeria. He was investigating whether the US Vice President Dick Cheney was implicated in corruption allegations in Nigeria. But how did he know where to find me, I asked. Simple he answered. His boss had given him a budget of $100,000.00 to nail Dick Cheney. He combed the academic and policy community for Nigerian contacts. Someone mentioned me, another indicated I was due in Washington and yet another indicated I stayed in Hiltons around the Washington DC Northwest. So, he began to call them until he found the one that I had checked into. These are simple steps every investigative journalist or researcherreporter knows to take with vigour. But how many newspapers will give a reporter a million naira to follow a story, not to talk of US $100,000. So, ownership and economic structure issues become prisms through which we see the world. How will poorly resourced media find the platform to use the sociological imagination in crafting those early drafts of history? How will a newspaper founded just to advance the political interest of its owner discover sustainability and deploy a strategy that ensures it delivers sustainable superior performance over rivals in terms of value offered its readers. I had the good pleasure of being co-founder of Business Day Nigeria, and the Chairman of its Board until I stepped down to run for public office. The start-up team probably still remembers the passion with which I drove all toward strategy that would provide for an institution built to last. Many media projects do not deploy enough rigour in constructing strategy because of the motive of its owners and so arrive at very poor economics. This is above and beyond the general troubles in the environment of business in Nigeria. How much does the structureconduct-performance paradigm in structural economics teach us about why many media ventures are not on a sustainable course? Plenty, I would dare say. If you take the Porter Diamond made popular by Michael Porter at the Harvard Business School, you will see that the typical newspaper or magazine in Nigeria is in an arena of intensity of rivalry; the threat of substitute products from social media and other news sources, low barriers to entry and low purchasing power, with effect on weak power over suppliers and buyers, and you see a prostate business. But can you alter industry structure and play in a profitable niche. Surely that is plausible, but it may require scope economies in which the marketing of business intelligence or organising of sector conference off the back of content

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In my view the economics of media in Nigeria which leaves us with newspapers and electronic media that pay poor salaries and many times fail to pay for months, diminishes capacity for performance. Many media practitioners are caught in a crisis of an existential nature and so lack the sobriety for the issues in nation-building gathered or mined information from the flow of news. These could create cash cows and new stars of the types identified in the Boston Consulting Group (BCG) matrix that could better sustain profitability and superior performance. So, how can media so challenged as in Nigeria find a decent place of play in economic development and nation-building? I am convinced that strategy focused on promoting successful enterprise development and nation-building can be found. To do this well, media entrepreneurs have to realise that media is business and only best business practices will enable sustainable good performance. Were the media to evolve on a structure that facilitates it being a catalyst or major driver of development, what would be the critical emphasis of effort? What would be the key issue on which it must set an agenda for society to travel in the right direction? To elevate the dignity of citizens by reducing infant and maternal mortality, build capacity to adapt to the pace of a changing world and have infrastructure that enable and sustain economic competitiveness. My approach is to suggest that the media has to understand what shapes human progress and speeds up economic growth. I have, in the past tried to identify that path of understanding in a framework I first offered in the year 2000 which came to be, as already indicated, the base framework of my 2006 book: Why Nations Are Poor. The Growth rivers Framework brings together sets of interdependent variables which influence that path of progress. The Growth Drivers Framework identified salient sets of variables that impact growth and progress: The policy choices of the governments, the strength of their institutions, and the quantity and quality of available human capital. The others include the state of the practice of entrepreneurship; the values that underpin popular culture and how leadership www.businessday.ng

drives culture and performance. Origins of The Growth Drivers Framework At the World Economic Forum (Southern Africa Summit) in Growth Drivers Framework Human Capital Entrepreneurship Policy Choice Institutions Culture Leadership 2000, I was part of the team that produced the Africa Competitiveness Report and had the opportunity to gauge the amount of pressure African leaders faced on the challenge of lack of progress in Africa. A remark by one of those leaders who lamented the lack of new nvestments in his country following economic reforms, proved a ringer on the barometer I carried. Humorously, he stated that they had been assured that if they tightened their belts (austerity), showed new policy disposition away from economic controls, etc. investments would pour in. He complained that despite their swallowing the bitter pill, investments were not forthcoming. He was counselled by a World Bank official present at that forum, to be patient as investors were watching track records. The leader sat down unconvinced, but I was convinced that neither the African leaders nor the World Bank official were right in their gauge because they relied mainly on policy choice to impact outcomes. The response was the offer of a framework for growth that brought together six sets of interdependent variables which act to make infrastructure and the right strategies in areas of comparative advantage or competitive advantage drive take-off growth. These build on factor endowments as well as capacities for being competitive on value chains, to assure sustainable growth and superior performance. The variables identified as key to growth variables were policy choice, institutions, human capital, entrepreneurship, culture and leadership. Policy ChoiceWhen the weight of where the burden of growth and development falls, between destiny and policy, it tends to fall on policy as the way out. The experience has been that governments act as if once you get policy right everything else will drop into place. Many experiences especially the Nigerian one, where policy reforms during structural adjustments improved the foreign exchange markets, reduced the distortions of a licensing web, price controls and government ownership of business ventures through an aggressive privatisation programme, point to the importance of policy choice. But as we saw repeatedly, when more appropriate policy choice resulted in a growth spurt with the introduction of a market based foreign exchange system and reforming the banking system, these gains were quickly eroded by a weak institution like the Central Bank of Nigeria struggling with inflationary pressures and deploying tools like stabilisation securities. These charges on accounts of banks at the CBN to force money supply contraction and reduce inflation but it introduced shocks into the banking decisions. This was meant to shrink money supply. The result was the disappearance of long-term lending that would hurt enterprise that required commitment to the long term. Flexibility as survival strategy for many firms would create a pipe-

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line of capital flight from some alien businessmen. In such sectors as the textile industry, the alien businessmen borrowed locally and fled with repatriated capital, at a time when local entrepreneurs could not support their business with a 90-day tenure for loans. Improved policy would prove to be inadequate to drive and sustain growth. Policy choice was a necessary, but insufficient condition for sustained growth. Institutions If economic historians have a growing consensus or are increasingly working within a dominant paradigm, it has to be that institutions are a major key to man’s material progress. From the old Institutional Economics School to Douglas North’s frame setting 1990 book, “Institutions, Institutional Change and Economic Performance” to Niall Ferguson’s “Civilization – The West and the Rest” evidence amassed to show that institutions were critical for success. Institutions which have been more the domain of Political Scientists gained currency in economic analysis. The analysis done by Daron Acemoglu and James A. Robinson in “Why Nations Fail”, began from a base in political economy to bring further proof to this new sense already embraced by Economists like the Peruvian Economist Hernando De Soto. Hernando explains The Mystery of Capital in an elegant effort, defective mainly to the extent it denies the place of culture in shaping progress. Institutions have rules and structures that set the boundaries for conduct. Appropriate sanctions for stepping out of those boundaries, essentially act to reduce uncertainty and increase the possibilities of economic intercourse. In the 1998 book, “Managing Uncertainty: Competition and Strategy in Emerging Economies”, I noted that weak institutions meant people looked at the risk of engaging in economic transactions and either choose not to engage or hedge their bets These result in high transaction costs, and a loss of competitiveness. It is around here that the vote to eradicate poverty is most strongly made. When state authority is used to abuse property rights or elites fail to act outside their own self-interest and in a manner that results in the evolution of institutions as Douglas North theorised, competitiveness is threatened. The reign of impunity that has

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...I was part of the team that produced the Africa Competitiveness Report and had the opportunity to gauge the amount of pressure African leaders faced on the challenge of lack of progress in Africa

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defined the recent Nigerian experience provides ample evidence of the fracturing of institutions. When in 2014 a Governor-elect from the ruling party was accused of getting thugs to beat up High Court Judges a rapid response did not come from the NigerianPresidency. This indicated to me a subtle support or acquiescence for such conduct. The inaction did more damage to possibilities of progress than the sharp drop in oil prices that followed long after, but the drama of sudden price drop received much more attention. Human Capital At the heart of the divergence in the quality of life of the average African in the twentieth century, and that of the average European was, as Peter Drucker pointed out, the tremendous surge in productivity in Europe. Central to the spirit of productivity in ascent, was human capital. The improved education and healthcare that provided the great escape from misery in Europe, which Angus Deaton explored with care in his book; “The Great Escape - Health, Wealth and the Origins of Inequality”, essentially defines the age. That many countries of Africa and remarkably, Nigeria, mismanaged investment in education and health is evidence of commitment to poverty, especially if they once acted differently. I refer often to the report of the Ashby commission on higher education in Nigeria at the time of independence and the remarks of the British educator Eric Ashby who chaired that commission that recommended the founding of the University of Lagos, after the Eastern region had led off with the University of Nigeria and the other two regions had followed suit with Ife and Ahmadu Bello, in addition to the University College, Ibadan. Sir Ashby had said higher education in Nigeria was as good as the best in the world, noting that it was harder, at the time, to get into the University of Ibadan than it was to get into Harvard. But funding for higher education dropped dangerously below UNESCO prescribed minimums even as the military governments of the late 1970s insisted on democratising access to higher education. The result was falling standards, and university environment culture that negated rigorous study orientation. Quality crashed, effectively mediocritising higher education. Worse happened to vocational training on the watch of several leadership teams in Nigeria; the same can also be said for healthcare. In one of my op-ed pieces, I have referred to the golden age of healthcare when the University College Hospital was top three in the Commonwealth and wealthy Arabs came to Ibadan for care in the 1960s. Those have reversed over the last decade such that a Professor of the College of Medicine who spoke before me at a symposium described the healthcare system as ‘a manmade disaster.’ Could such happen if, as a result of some considerations, the elite did not choose “The Great Escape” as a universal gift to man? In effect there was an inadvertent commitment to the pursuit of poverty, in the way healthcare has been implemented in recent history. Continues on Thursday

Wednesday 17 April 2019

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NEWS Bureaucracy stunts oil, gas sector as 16... Continued from page 1

downstream (retail servic-

es, distribution, research, and development) would need to deal with these government agencies in order to operate, according to Nigeria Natural Resource Charter (NNRC). Firms in the upstream sector also have to interface with other agencies such as Nigerian Petroleum Exchange (NipeX), which provides electronic contracting platform for NNPC and its operating partners in the Joint Venture (JV) and Production Sharing Contract (PSC) arrangement, Nigeria Customs Service, and Nigerian Ports Authority (NPA). Other agencies include PPMC, a subsidiary of NNPC in charge of marketing and distribution of petroleum products, and Nigerian Nuclear Regulatory Authority (NNRA),

an agency responsible for nuclear safety and radiological protection regulation. Kelvin Atafiri, who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector, said foreign investors operate in other countries too where they do not encounter all this needless bureaucracy. “A lot of agencies operating as a standalone agency were just a desk before in the old inspectorate division under NNPC. When political interference came in, people started making a desk as an agency and went further to find a law to back it up, which is sad,” Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), said. “If you are setting up a petrochemical plant, six agencies will have to give a report on you starting from the Mnistry of En-

vironment inspection, licences from DPR, downstream inspection from NOSTRA. These have costs and there are other legal processes involved,” Henry told BusinessDay. On many occasions, concerned stakeholders in the oil and gas industry have expressed worries that the rising operational costs in the industry, among other challenges, have been limiting capital importation. Data from the National Bureau of Statistics revealed that foreign investment inflow into the Nigeria petroleum industry hit a three-year low of $133 million in 2018, a sharp decline of 59.82 percent compared to $331 million recorded in the same period in 2017. Wunmi Iledare, Ghana National Petroleum professor and chair, University of Cape Coast’s Institute of Oil and Gas, said the problem with Nigeria is the rent-sharing and rent-seeking

mentality when it comes to the oil and gas sector because most of the agencies know there is money in the sector and they want to be partakers. “No regulation should have a higher cost than the benefits of the regulations itself,” Iledare said. Nigeria is yet to domesticate the value chain in the oil sector which is still in recession as it recorded a real GDP growth rate of -1.62 percent (year-on-year) in Q4 2018, while on an annual basis it stood at 1.14 percentage as against 4.69 percentage recorded in 2017, according to NBS data. Iledare said reforming the industry would mean removing the amorphous nature of governance, and having institutional reforms enacted. “Most of the agencies in Nigeria are personality-driven rather than having institutional empowerment,” he said. In 2015, Nigeria ranked

170th in the World Bank’s ease of doing business report. However, by 2017, Nigeria’s ranking had improved considerably to 145th. But despite the improvement, multinational companies operating in Nigeria and other businesses do not seem to share that optimism as many continue to close shop and leave Nigeria in droves with all of them citing the harsh business environment. Last month, oil marketers and the Organised Private Sector (OPS) advocated the need for two regulatory bodies to regulate the oil industry in the Petroleum Industry Governance Bill (PIGB) pending before the National Assembly. “We strongly canvass for the creation of two regulatory bodies each focusing on the downstream and upstream sectors of the industry and on the entire gamut of technical and commercial issues in each of the sub-sectors,” Obafemi

Egbin Power Plant woes a N400bn... Continued from page 1

partner company, KEPCO,

acquired in 2013 to buy Egbin Power, an indication that lenders’ patience for the energy sector may be wearing thin. The troubles at Egbin Power is a warning sign for Nigerian banks whose total exposure to the power sector stood at N403 billion as at the end of 2018, according to latest data from the National Bureau of Statistics (NBS). KEPCO, like many successful bidders in 2013, applied for the facility with Sahara Energy as its corporate guarantor and obtained a $35 million debt. UBA said KEPCO failed to meet its obligations even after it restructured the loan on two different occasions. The interest on the rescheduled debt increased the facility to $42.282 million (N15.2 billion) as of December 31, 2018. Analysts say it is expected that other lenders may take even more drastic action as hopes of recovering their loans seem untenable with the difficult operating environment power companies

have found themselves. “I think we should expect to see more banks taking this kind of action,” said Taiwo Oyedele, head of tax at PwC Nigeria. “The tough policy environment of these companies where there is no market tariff and transmission is inefficient means that more power companies will continue to default and we will see actions like this.” Power distribution companies (DisCos) have been unable to fully collect electricity bills and even remit less. The sector regulator in a recent report said DisCos remitted about 30 percent of collections. This means generation companies (GenCos) like Egbin do not have their invoices fully settled. In February, the company said it was owed N100 billion by the Nigerian Bulk Electricity Trading Company (NBET), a factor that has constrained its ability to deliver at full installed capacity of 1,320MW. Egbin’s power generation fell to 1,085MW in March 2016 and it dipped to 537MW in February this year. The com-

PSBs are good for Nigerian banking... Continued from page 2

tingmorepeopletobefinancially included, the PSBs still have some setbacks which include their inability to give credit or loans at the initial stage. “But when you form up the databasebybuildingtheknowledge, it allows you to know who to give loans too,” he said. Nigeria currently battles a high financial exclusion rate at 36.5 percent, according to the CBN, but the apex bank

said it remained determined to reduce the rate to 20 percent by 2020 through innovations like the PSBs. To achieve this, low income earners and rural dwellers, who are mostly unbanked, are assigned nonBank Verification Numbers. Companies have to create a separate entity, according to guidelines released by CBN about the initiative, and this is a shortfall for companies who want to apply as they cannot leverage on their brand.

Corporates shun domestic listings as... Continued from page 2

enjoyed an impressive first day run. It offered 13.5 million shares for purchase and raised $196 million. Its stock, which was priced at $14.5, closed up 75 percent in its first

trading day. N i g e r i a’s e c o n o m y emerged from contraction in Q2 2017 fuelled by the increase in global oil prices, its major source of foreign earnings. Entering 2019, the biggest concern for investors www.businessday.ng

L-R: Azuka Okofu, group head, bottom of the pyramid, Bank of Industry (BoI); Hassan Osuwa, legal adviser, BoI; Shekarau Omar, executive director, small and medium enterprises (SMEs), BoI, and Hassan Usman, managing director/chief executive officer, Jaiz Bank plc, at the BoI’s N3 billion cheque presentation to Jaiz Bank plc in Abuja, yesterday.

Olawore, executive secretary, Major Oil Marketers Association of Nigeria (MOMAN), said. The proposed legislation, the Petroleum Industry Bill (PIB), is currently under legislative consideration and represents the most comprehensive review of the legal framework for the oil and gas sector in Nigeria since the industry began commercial operations in the 1960s. It could signal the dawn of a new era, an era in which restructuring and transformation could address many of the issues that have dominated the oil and gas industry in sub-Saharan Africa’s biggest oil economy. However, the PIB faced a plenitude of debates, criticisms and opinions for and against its passage which have significantly stalled its passage into law, thus denying Nigerians the full benefit of the radical promise of the law. ed in the 2017 financial year. In a speech at the annual Vanguard Economic Discourse in January, Ifie Sekibo, managing director, Heritage Bank Limited, said the bank’s exposure to the energy sector is at 35 percent which has already impaired their books. This creates a problem for new projects that could reduce energy poverty for over 80 million Nigerians without access to power. This rift seems to validate Guaranty Trust Bank’s decision to stay away from the power sector. Giving a breakdown of the bank’s performance in the 2017 financial year in Lagos last year, Segun Agbaje, managing director, said the bank decided to stay away from the onset of the power privatisation programme because it was not professionally structured. Agbaje said this decision was based on their position that what was needed for the programme was equity and not debt and when it was clear that the programme would be driven by debt, it stayed away. The bank said it will stick to the policy until government and regulators apply the necessary strategies to make investment in the sector safe and secure.

pany reported over N7 billion in losses for 2017. According to court records, UBA says Sahara Energy is insolvent and unable to pay its debt and in the circumstance, it is just and equitable that the company should be wound up. KEPCO owns 70 percent stake in Egbin after both companies entered an operation and maintenance agreement.

The energy sector accounts for over 35 percent of banks’ NPLs, according to industry operators, and banks are unwilling to further expose themselves to risk assets, a move that could set back the energy sector and force litigations like the one instituted byUBAtocallupdebtsandseize assets of power companies. For example, Zenith Bank, one of Nigeria’s biggest banks,

recorded a slight dip by 2.88 percent in its NPLs to N38.487 billion at the end of 2018, compared to N39.63 billion recorded in the bank’s books at the end of 2017. The bank said gross loans to the energy sector, comprising oil and gas, as well as power firms, stood at N598.99 billion, dropping by 19.46 percent from N743.713 billion record-

“This guideline by the CBN is understandable because of the nature of banks. You have to create a separate entity that the CBN can regulate,” Yinka Ademuwagun, a macro-economic analyst at United Capital, said. “For example, MTN, the largest telecommunication network in Africa who has announced plans to apply for the PSB licence, cannot leverage on its MTN name because that name is known for telecommunications which is not within the purview of

regulation by the CBN,” Ademuwagun said. Some analysts who spoke to BusinessDay raised concerns of possible threats the PBSs could pose to traditional banks in the country. A 2019 report by Guaranty Trust Bank plc stated that the PSBs could have a negative impact on the banking industry as they would compete with the banks. “PSBs are prohibited from providing lending services and participating in the Foreign Exchange market, but

they will be able to offer other services,” GTB said in the report themed ‘Macro-economic and Banking Sector Themes for 2019’. “They will be competing with commercial banks for the pool of earnings and also ensure that the battle for retail is won using digital and mobile strategy and this could negatively impact on the banking industry,” it said. But financial experts said rather than threats, the PSBs will complement the traditional banks, adding that

banks need to be innovative with their products. Ademuwagun said as people gradually begin to access the platform and their transaction processes start to increase, they will need to shift away because there is a limitation to what they can do with the PSBs. Having been captured by the PSBs and having enjoyed the advantage of having a bank account in the traditional bank, the people could see reasons to shift to traditional banks.

was that the stock market could fall further, given that most of the challenging factors that beclouded market performance in 2018 were expected to persist over 2019. But the economy has remained below its population growth rate. The full year 2018 real GDP stood at 1.93 per-

cent, higher than the 0.82 percent growth rate recorded in 2017 but below the estimated 3 percent annual population growth rate. Except the NSE All-Share Index and GSE Composite Index (Ghana), most of the stock markets that were monitored by analysts appreciated

in Q1 2019. The last IPO seen on the Nigeria bourse was in 2016 when Seplat Petroleum Development Company plc and Transcorp Hotels plc went on the Exchange. The current state of the NSE is affirmed by First Aluminium Nigeria plc, one of the first Nigerian listed com-

panies, as it lamented that “the current illiquidity nature of the capital market” has rendered the primary corporate objective of its listing to raise capital and provide liquidity unattainable.

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Wednesday 17 April 2019

NEWS

FG needs N250bn to recapitalise Bank of Agriculture - Ogbeh … plans Agro Rangers to secure farmers Cynthia Egboboh, Abuja

minimum of N250 billion is required to recapitalise and restructure the Bank of Agriculture (BoA) in Nigeria, Audu Ogbeh, minister of agriculture and rural development, said on Tuesday. Fearing that insecurity may further threaten food supply in the country, Ogbeh hinted of plans by the Federal Government to raise Agro Rangers as a panacea for farmers safety in the wake of recurring farmers / herders clashes. Ogbe, who lamented that many farmers had abandoned their farms due to insecurity, said the Agro Rangers would be used to stem the persistent clashes threatening food security across the country. The minister, who was speaking at the meeting with the management of Bank of Agriculture on “ensuring a sustainable Agricultural development,” said that the recapitalisation of the bank aims at making the agriculture sector stronger and profitable to the Nigeria economy. “The recapitalisation of the bank of agriculture will make the sector stronger,” Ogbe said, saying, “This is a chance to make all farmers co-owners of the bank, make them responsible and ease their access to credit facility as access to credit has been the major challenge facing the sector over time.” The minister revealed the ongoing plans to intensify the Agro Ranger Service to deepen security in the sector, adding that insecurity had driven some Farmers out of their farms. “We have plans to provide new forms of security for the farmers.

We are going into agriculture extension services, getting the kings and chiefs in the rural areas to be involved in ensuring security for the farmers.” He said he the ministry was also planning improve the supply of seeds and soil testing to prepare the sector for the projected population increase by year 2050. Heneiken Lokpobiri, minister of state for agriculture and rural development, noted that restructuring the bank would be an opportunity for Nigerians to own the bank and ease farmers’ access to finance, adding that the current administration has laid a solid foundation to develop the sector. “If the BoA is fully recapitalised, it will be an opportunity for Nigerians to own the bank and it will ease access to finance. The President has laid a solid foundation for the sector as we go into his second tenure, it will be better for the sector.” He noted that Nigerians had been carried away by the oil revenue, but declared that the time had come for the nation to go back to agriculture, and prepare for the challenge of feeding over 450 million people in the next 30 years as projected”. “We should work to ensure we produce what we eat, eat what we produce and provide jobs for the rising unemployed youth,” he said. Alex Okoh, director-general, Bureau of Public Enterprise, said the meeting signalled the commencement of restructuring and recapitalisation of the Bank of Agriculture to deepen farmers’ and small scale businesses’ to access to low-cost credit.

JAIZ Bank secures N3bn from BoI to finance MSMEs HARRISON EDEH, Abuja

aiz Bank plc, the premier non-interest bank in Nigeria, has secured a N3 billion financing facility from the Bank of Industry (BoI) to boost and develop Micro, Small and Medium Enterprises (MSMEs) in Nigeria. The funds would be lent to small business operators to grow their businesses and create wealth, Hassan Usman, managing director/CEO, said in Abuja on Tuesday during the presentation of the amount to Jaiz Bank. Receiving the cheque from

CHANGE OF NAME

I, formerly known and addressed as Miss Adebola Aramide Azeezat now wish to be known and addressed as Mrs Akande Aramide Azizat. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Awosoji Omowunmi Segilola now wish to be known and addressed as Alabi Omowunmi Segilola. All former documents remain valid. General Public please take note.

Shekarau Omar, BoI’s executive director for Small and Medium Enterprises, in Abuja, Usman assured that the funds would be disbursed to targeted beneficiaries. “Fundamental to the vision and mission of Jaiz Bank is to create wealth for MSMEs. I want to assure you that maximum benefits will to the stakeholders. “We have already started a pilot financial inclusion drive. We are also going to use agency banking to reach those people in places where we are not physically present. We are also intervening to provide financing to women groups.”

Abimbola Ogunbanjo (1st r), president, National Council of The Nigerian Stock Exchange (NSE), accompanied by Aliko Dangote, president, Dangote Group/former president NSE (2nd r), and Aigboje Aig-Imoukhuede, ex-officio, NSE (2nd l), recently paid a condolence visit to the family of late Herbert Onye Orji, erstwhile National Council member of NSE and they were received by Nnenna Orji, wife; Leslie Okoye, daughter, and Christian, sister.

Rejected bills now 38, as Buhari again declines assent to another OWEDE AGBAJILEKE, Abuja

he number of bills passed by the eighth National Assembly but rejected by President Muhammadu Buhari since assumption of office in May 2015 has risen to 38. This followed the President’s rejection of the Nigerian Correctional Service Bill at Tuesday’s plenary. In a letter addressed to the Senate president, Bukola Saraki, and read at plenary, President Buhari said the bill violated Sections 81 and 84 of the 1999 Constitution (as amended). In a letter dated April 4, 2019, and read by Saraki at Tuesday plenary, the President said: “I am declining assent to the bill because Section 44 (d) of the bill which seeks to fund the special noncustodial fund with 5 percent of all fines paid to the federal purse violates the provisions of Sections 81 and 84 of the 1999 Constitution (as amended) will guarantee the independence of the Judiciary.”

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I, formerly known and addressed as Alarape Shakirat Oyebola now wish to be known and addressed as Alarape-Ibiyemi Shakirat Oyebola. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Miss Kofoworola Jokotola Omo-Izirein now wish to be known and addressed as Mrs Kofoworola Jokotola Olayiwola. All former documents remain valid. General Public please take note. www.businessday.ng

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I, formerly known and addressed as Aderibigbe Margaret Temitope now wish to be known and addressed as Okunola Margaret Temitope. All former documents remain valid. General Public please take note.

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I, formerly known and addressed as Miss Nwagwu Ogochukwu Miriam now wish to be known and addressed as Mrs Obi Ogochukwu Miracle. All former documents remain valid. General Public please take note.

It would be recalled that last month, the President had rejected eight new bills passed by the National Assembly. The bills included the controversial National Housing Fund Bill, Ajaokuta Steel Company Completion Fund Bill, Nigerian Aeronautical Search and Rescue Bill, Small and Medium Enterprises Development Agency Bill and National Biotechnology Development Agency Bill. Others were the National Institute of Credit Administration Bill, Federal Mortgage Bank of Nigeria Bill as well as the Chattered Institute of Training and D e ve l o p m e nt o f Nig e r i a (Establishment) Bill. Other bills earlier rejected by Buhari since 2015 include: Industrial Development (Income Tax Relief ) Amendment Bill, Petroleum Industry Governance Bill, Stamp Duties (Amendment) Bill, National Institute of Hospitality and Tour ism (Est.) Bill, National Research a n d In n ov at i o n C o u n c i l

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I, formerly known and addressed as Amadi Chimaobi Samuel now wish to be known and addressed as Amadi Chimaraeze Samuel. All former documents remain valid. General Public please take note.

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(Est.) Bill and National Agricultural Seeds Council Bill. Also rejected were: Agricultural Credit Guarantee Scheme Fund (Amendment) Bill, Chattered Institute of E n t re p re n e u r s h i p ( E s t . ) Bill, Subsidiary Legislation (Legislative Scrutiny) Bill, Nigerian Maritime Administration and Safety Agency (Amendment) Bill, Advance Fee Fraud and Other Related Offences (Amendment) Bill as well as six constitution amendment bills. Others include: Nigerian Film Corporation Bill, Immigration (Amendment) Bill,

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This is to inform the general public that Olaniyan Monsurat Oluwatoyin and Kola Isiaq Monsurat. Henceforth, I want to be known as Olaniyan Monsurat Oluwatoyin. refers to same and one person. All former documents bearing any of the two names remain valid. General public please take note.

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I, formerly known and addressed as Emah Ekpo now wish to be known and addressed as Emah Bassey Ubong. All former documents remain valid. General Public, banks and Federal Government Institutions please take note. @Businessdayng

Climate Change Bill, Chattered Institute of Pension Practitioners Bill, Digital Rights and Freedom Bill, National Transport Commission Bill, Federal Road Authority (Establishment) Bill, National Broadcasting Commission Amendment Bill, National Oil Spill Detection and Response Agency (NOSDRA) Act (Amendment) Bill and Federal Polytechnics Act (Amendment) Bill. The President also rejected the four versions of the Electoral Act (Amendment) Bill passed by the Eighth National Assembly.

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I, formerly known and addressed as Agboola Obasanjo Aderemi now wish to be known and addressed as Agboola Gabriel Obasanjo. All former documents remain valid. General Public & banks please take note.

Wednesday 17 April 2019

BUSINESS DAY

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Wednesday 17 April 2019

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Wednesday 17 April 2019

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What farmers expect from Buhari’s next agric minister …as fish farmers seek for more inclusion

YOMI AYELESO, Akure

Josephine Okojie

ith the re-election of President Muhammadu Buhari for another four years, a new minister will be appointed to steer the agricultural revolution under the ‘next level agenda.’ Far m ers in Af r ica’s most populous country are expecting the next agriculture minister to address fundamental issues that have prevented Nigeria from attaining its food security target. They stated that the performance of the sector in the next-level agenda depends on the ability of the new minister to provide solutions to the lingering problems. “The main reason we have not made much progress with agriculture is our inability to address fundamental issues that are limiting productivity,” AfricanFarmer Mogaji, chief executive officer, X-Ray Consulting, said in a telephone response to questions. “The next agric minister needs to address these lingering issues to drive growth in the sector. How can we grow our agriculture with low use of technology and little or no infrastructure?” Mogaji asked. Growth in the sector has been on decline since the first quarter of 2017, with marginal growth rate recorded only in the fourth

Ondo engages over 2,000 cassava farmers for ethanol project

quarter of the same year, data from the National Bureau of Statistics (NBS) show. Experts say the inability of the government to address key fundamental issues is responsible for the persistent decline in the sector in recent years. Prince Wale Oyekoya, former chairman - agriculture group, Nigerian Chamber of Commerce and Industry (LCCI), called on the government to provide a scorecard for evaluation and monitoring of progress made and identifying areas for improvement. “One of the major problems facing smallholder farmers is the lack of adequate food storage and processing facilities. The next agric minister should address this,”

Oyekoya said. Nigeria is populated by about 190 million people who must be fed with staple foods ranging from yams, rice and cassava to beans, bananas and tomatoes, among others, but inadequate storage facilities have made this an herculean task for farmers. “Despite our rapidly growing population our farming method remains the same. We cannot continue to grow food the way we do if we must feed ourselves. These are issues the next agric minister should look into,” Mogaji said. Similarly, far mers in the livestock subsector are seeking for inclusion in any initiatives and programmes that would be driven by the incoming agric minister.

They complained of neglect in the last four years and hope that the next minister will drive inclusion for all famers and not just for crop farming. “In the last four years the entire focus of the government was for crop farmers. We expect Buhari to focus on the fishing and livestock subsector,” Oloye Rotimi Olibale, president, Catfish and Allied Fish Farmers Association (CAFFAN), said by phone from his Ibadan, western Nigeria, farm. “We were not entirely included in the ABP programme. We want the government to totally include all fish farmers in the anchor borrowers programme so that we can have access to cheap credit,” Olibale said.

How APPEALS initiative will drive value-addition in aquaculture, poultry, rice

he Ondo state government has said that no fewer than 2,434 cassava farmers had been engaged for its ethanol project proposed to boost the economy of the State. Governor Oluwarotimi Akeredolu of Ondo state, who spoke at a stakeholders breakfast meeting in Akure, the state capital, noted that the move was aimed at industrializing the state through an agricultural project tagged, ‘Cassava Revolution to Ethanol.’ The breakfast meeting facilitated by the Alex Ajipe led Klick Connect Net w orks had in attendance R e p re s e n t a t i v e s o f f i n a n c i a l institutions, including the Central Bank of Nigeria (CBN) and foreign partners. Governor Akeredolu commended the company for the initiative which he said would further boost his government’s industrialisation drive. The Governor who was represented by the commissioner for agriculture urged all stakeholders to ensure success of the project. Speaking earlier, Ajipe, who is the chairman of Klick Connect Networks explained that the meeting was called to laid bare the project and x-ray the potentials and challenges. He added that the project would ensure food security and create employment opportunities in the state. “We have a lot of value chain in agriculture especially in cassava production. Take for Instance, we know before a cassava can move

…as stakeholders hold advocacy and interactive session Josephine Okojie

he Lagos State Agro-Processing Productivity Enhancement and Livelihood Improvement Support Project (APPEALS), a World Bank-assisted initiative focused on enhancing the productivity of smallholder farmers, is positioned to drive value addition in aquaculture, poultry and rice production in the state. Oluranti Oviebo, state project c o o rd i nat o r, A P P E A L S L a g o s,

made this known at a stakeholders interactive and advocacy session in Lagos recently. Oviebo stated that the objective of the six-year project was to increase processing and output of aquaculture, poultry and rice production in Lagos State while improving farmers’ livelihood as well as providing them with technological support to enhance productivity. She noted that APPEALS initiative has partnered with some research

L-R: Olayiwole Onasanya, permanent secretary, Ministry of Agriculture; Oba Adebowale Adegbesan,Oba Onise of Island; Oluranti Oviebo, state project coordinator, APPEALS project and Salisu Garba, project operations officer, APPEALS project during a stakeholders interactive session held recently in Lagos. www.businessday.ng

institutes to provide new technologies in the areas the state has comparative advantage for farmers who are beneficiaries of the project. “ The APPE AL S project w ill help improve productivity and value addition in rice, poultry and aquaculture in Lagos state. It will also help farmers and processors access markets to make the initiative sustainable,” Oviebo said. “A financial support in form of grants is provided to farmers after undergoing training and providing a good business proposal,” she said. She stated that 35 percent of the beneficiaries are women, saying that the initiative is mainly targeted at youths and women. Also speaking during the interactive session, Toyin Suarau, Lagos State commissioner for Agriculture, said that the APPEALS initiative is a project of inclusion which has employed 252,000 people directly and indirectly. “It is apt that we embrace the APPEALS project because food security is key as agriculture plays an important part in economic growth and development,” said Suarau, who was represented by Olayiwole Onasanya, permanent secretary,

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Ministry of Agriculture. “Today, when we talk about agriculture we are talking about value chain development,” he further said. The commissioner stated that the state is targeting to double its current poultry production from 15 percent to 30 percent of its required needs under the initiative. For aquaculture, Suarau said that the state’s target was to increase production from its current 180,000 metric tons to 220,000MT under the initiative. For rice he said “our target is to increase production to 1500 hectares in the state.” Amin Babandi, national project coordinator, APPEALS, represented by Salisu Garba, project operations officer, said “we are so impressed and happy with the interaction from the farmers, stakeholders and technical set of people that are involved in agriculture.” “The project is currently piloted in five states which are Lagos, Kano, Kaduna, Kogi, Cross River and Enugu, and that the Federal Government is working on adding more states,” he added. He called on the state to maintain and improve on its standards set in terms of agricultural development. @Businessdayng

from the farm to the factory, it will need logistic. But when this is not coordinated, the amount lost cannot be ascertained. “We are bringing in Logistics Company that will ensure optimum realization. About 2,434 farmers are needed in 3 hectares to produce over 146 tons of cassava. If all these are not coordinated, we will not know if government is working or the employment that is being created,” he said. Also speaking, wife of the governor, Betty Anyanwu-Akeredolu who commended the initiative however pleaded for inclusion of women in the Cassava to ethanol project.

Wednesday 17 April 2019

BUSINESS DAY

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Technoserve trains processors on HMM to drive compliance in food fortification Josephine Okojie

n a bid to drive compliance in the fortification o f p ro c e s s e d f o o d products in the country, Technoserve Nigeria has traine d major food processors on Holistic Margin Management (HMM). According to the Eviano Useh, treasurer, Partners in Food Solutions and the training facilitator, HMM is about removing the nonvalue components from a customer’s perspective and reinvesting those savings in value creating opportunities. He identified waste elimination and capturing value as the key enablers for HMM, noting that food fortification is a valuecreating opportunity that processors should not ignore. “With the adoption of HMM principles processors will be able to mitigate and minimise the impact of the cost of fortification,” said Useh, who is also the global finance director – global procurement, General Mills.

(Front row) Larry Umunna (5th l), country director, Technoserve Nigeria; Ayodele Tella (6th r),program manager Ayodele; (back row) Eviano Useh (6th l), global finance director, General Mills and other participants at the Holistic Margin Management executive workshop held recently in Lagos.

“Fortification by itself should not automatically translate to higher cost for the consumer or the processors,” he explained. “The HMM principles are imbedded in the culture of major global food processors and their investments in fortification has not incurred additional cost because of effective management of HMM and this should also help the Nigerian processors,”

said Useh. He stressed that HMM has helped major global processors fortify, revamp and enhance their product line without incurring any additional cost in the process. He called on the processors present at the training to adopt the HMM principles to grow their bottom line while fully complying with the fortification of food products with essential nutrients.

Only 4.3% of Kogi agric allocation was released in 2018 budget, says Actionaid Victoria Nnakiaike, Lokoja

ctionaid Niger ia has frowned at the poor release of agric allocation in 2018 budget by the Kogi state government. The organisation stated that a total of N8.5 billion was allocated to the sector in 2018 but only N363 million accounting for 4 percent of the total budget was released during the period. Gift Omoniwa, programme manager Actionaid Nigeria disclosed this during the Public Finance of Agriculture (PFA) budget committee, a consortium of various civil society organisations meeting. The civil society organisation appealed to the state government to ensure the release of a minimum of 80 percent of the 2019 total budgetary allocation to agriculture. Omoniwa, who is also t h e e x e c u t i v e d i re c t o r, Participation Initiative for Behavioural Change in Development (PIBCID), described agriculture as the only sector with potentials to turn around the fortunes of the state and the nation at large.

“We want full implementation of the budget to this sector. We want the status quo to change. We want at least 80 per cent implementation of the budgetary allocation to the sector. This will boost the economy,” she said. Ma t h i a s O k p a n a c h i , c h a i r m a n o f t h e P FA , comprising representatives of Civil Society Organisations (CSOs) and the media in the state, said that the trend of poor releases of budgeted funds to the sector was of serious concern to the committee. This, according to him, is in view of likely adverse effect of such practice on food security for the state and the nation. Okpanachi said that the poor releases were in spite of the general acknowledgement by all, on the need for increased spending in the sector, particularly to meet up with the minimum 10 per cent spending benchmark stipulated in the Maputo Declaration. The chairman said that the visit was aimed at seeking areas of possible collaboration and synergy with the ministry toward improving release of budgetary allocations www.businessday.ng

particularly for line items with direct impact on farmers especially smallholder women farmers. He said the PFA had highlighted key line items in the budget for prioritisation including procurement of agricultural inputs, Women in Agriculture, Kogi State ADP, Mini milling processing machine for rural farmers, House farming system and Fadama counterpart funding among others. In his response, Emmanuel Id e n y i , t h e p e r m a n e n t secretary, said though the 4.3 percent release to the sector in 2018 was not good enough, it was an improvement on previous years’ releases. He maintained that agriculture was the mainstay of the nation’s economy before the advent of oil, adding that the present administration, under Governor Yahaya Bello, was committed to making the sector assume its rightful position again. “Oil diverted our attention and dragged us off our routes to solid economic development and now we are facing challenges. Agriculture should be the mainstay of our economy,” he said.

Despite the pledge by major food processors in the country to fortify their products with essential micro nutrients, most food products found in the Nigerian market have less than the specified quantity of nutritional requirements, or none. Experts attribute the noncompliance to fortification by food processors to the high cost of premixes – micro nutrients needed for

fornication which according to them translates to higher production costs. Sp e a k i ng a l s o at t h e training, Larry Umunna, d i r e c t o r, Te c h n o s e r v e Nigeria, said the training was organised to help increase the fortification of food based products in the countr y while helping processors address issues fuelling noncompliance. “We provide market-based solutions to help increase the fortifying of food based products in Nigeria and across Africa. We are hoping that learning of the HMM tools can help improve compliance to food fortification,” Umunna said. “If the processors deal with the issues affecting their bottom line, this will allow them commit more to food fortification. We want to ensure that every processor runs a competitive business,” he said. He urged the processors to ensure that they did the right thing in the area of fortification and communicate regularly to their consumers what they are doing.

Fortified processed food products have enormous benefits in a child development, experts say. Nino Ozara, manufacturing director, Honey Well Flour Mills Plc, who was one of the participants of the training, stated that what they have learnt from the training was significant to their business. “ Th e t ra i n i ng I have received here will help us look at areas of minimising waste and creating more value for our manufacturing business and find out how we invest those cost- saving back into the system as well as neutralise the added cost of fortification so that it becomes a sustainable programme,” Ozara said. “ P re m i x e s c o s t a l o t because they are imported and the added issues of logistics, ports congestions and demurrages that are associated with it. “So, if we are able to reduce cost of manufacturing by improving efficiency then it is a good idea we have learnt that can help us make fortification a sustainable process in Nigeria,” he added.

Why food import is rising rather than export in Africa- FARA Akinremi Feyisipo, Ibadan

emi Akinbamijo, e x e c u t i v e d i r e c t o r, Fo r u m for Agricultural Research in Africa (FARA), Ghana, has stressed the need for the African continent to shift into more organized m a r k e t t o c re a t e g o o d incentives for producers as well as farmers. Akinbamijo who disclosed this in a paper, entitled, ‘New trends in agricultural research for development’, at the closing ceremony of the Institute of Agricultural Research & Training (IAR&T), Ibadan, 50th anniversary, held recently said Africans need to harness the potentials of 4th Industrial Revolution technologies based on strong innovation ecosystem that include skills, infrastructure, regulations and policies. Akinbamijo who underscored the need for new partnerships, funding mechanisms as w ell as frameworks for financing Agricultural Research for Development (AR4D) in the continent, however, insisted that food production in Africa cannot increase if mechanised farming is not practiced.

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“It is not rocket science that we are eating chicken from Netherland. I feel it is a pathetic situation here. I recalled in 2003 this country hosted three conferences on agriculture and food but up till today, the country is still struggling to bridge the gap. “We need new approaches to move forward, if we continue business as usual, no country will meet the Malabo declaration of doubling agricultural productivity by 2025. “So, righting this wrong is a task before IAR&T and other research institutes. FARA is the apex agricultural body in Africa. In 2003, Heads of States/ Governments made a declaration that should keep Africa. So, Africa missed out from Maputo in 2003, and quickly what we did, we ran to Malabo in 2014. He bemoaned the use of crude implements saying it has remained the major reason importation of food and other agricultural products are rising in Africa and Nigeria in particular. Akinbamijo while speaking said it was unfortunate that after Nigeria signed various declarations such as the Malapo, Maputo declarations, the country and @Businessdayng

most African countries are still exporting food farther than exporting. Eyitope Ogunbodede, Vice Chancellor of Obafemi Awolowo University (OAU), I l e - I f e a n d a p ro f e s s o r however appealed to governments in the SouthWest region to suppor t research institutes, such as IAR&T to improve agriculture and food production. He underscored the need for Africa to engage more in mechanized agriculture to improve food production in the continent, as he urged IAR&T to ensure that farmers benefitted from its various research and experiments. He congratulated the management, staff of the institute for the notable achievements it had made despite the dwindling of funds. Professor James Adediran, executive director, IAR&T expressed gratitude to God for granting them a safe, successful anniversary celebration with no casualty. “I am amazed of the spirit with which the whole staff joined hands to celebrate every day, moment; the road show was well attended, participatory and exciting,” he said.

Wesnesday 17 April 2019

BUSINESS DAY

NEWS LCCI, AMEN collaborate to demystify mining, metals export … show the way forward JOSEPH MAURICE OGU

agos Chamber of Commerce and Industries (LCCI) and the Association of Metals Exporters of Nigeria (AMEN) are coming together to organise the first Nigeria Mining and Investment summit. According to information made available to the press in Lagos, the chairman, mining, solid mineral and allied services group of the Chamber, Babatunde Atalise, says the aim of the summit is to clarify some of the myths, misinformation and challenges surrounding the exportation of extractive minerals in the country so that local private investors can be part of the fast-growing solid minerals industry. “Presently, local investment in the segment pales in value and volume in comparison with investments by foreign companies. There is a need to attract critical local investment to the sector in order to maximise the benefits of the industry to the nation,” Alatise says. He notes that some efforts have been made to sensitise investors on the potential of mining sector, but these efforts seem not to have addressed the issues of presenting the sector as a veritable and robust business opportunity to investors. “The coming summit will address those issues,” he said, adding, “Enough talks about the problems, it is time to proffer

solutions.” The summit has been designed to offer local and international players in the industry an opportunity to meet and deliberate on the fortunes of the industry with a view to making Nigeria indeed an investor’s destination in mining and metals exports. According to Alatise, the summit, which is a local initiative, is designed to take a practical look at mining and the ancillary businesses that make up the mining value chain. “We will proffer practical and workable solutions to the challenges militating against mining and metals exports in Nigeria,” he assures. While attempting to appraise existing financing opportunities for mining and metals export in Nigeria, if any, the Chamber will view the sector from an investor’s perspective and would explore avenues of attracting investable equity funds and structured derisked debt facilities to boost the sector. “Some of the objectives of the summit include the identification and appraisal challenges in mining and metals exports in Nigeria, and a clear definition of the value chain in mining and metals exports in Nigeria,” he says. One of the targets of the summit is the production of an investor’s guide in mining business for investors and potential investors in the Nigerian mining sector.

Price of petrol unchanged at N145.3 in March … as inflation slows by 0.06 percentage points Endurance Okafor & OLUWASEGUN OLAKOYENIKAN

he average price paid by Nigerians for premium motor spirit – petrol remained unchanged in March, making it the lowest since October 2017. The average price consumers paid for a litre of petrol for the month of Match was unchanged from the N145.3 it sold the previous month, data from the Nigerian Bureau of Statistics (NBS) show. Year-on-year, average per litre declined by 11.1 percent to N145.30 in the review month compared with N163.4/ litre sold in the similar month a year earlier. Though the maximum price of petrol is capped at N145 per litre by the government, figures by the state-funded bureau show that Nigerians bought the product at N0.3 more than the stated price.

States with the highest average price of premium motor spirit were Oyo (N146.50), Plateau (N146.55) and Taraba (N150.55). Ogun, Imo and Ekiti paid the least for petrol in the review period, with the product selling for N143.06, N143.18 and N143.47, respectively. Meanwhile, the recent advice by the International Monetary Fund (IMF) that Nigeria remove oil subsidy and deploy savings from the scheme to fix social infrastructure has received serious resistance from different quarters. Christine Lagarde, IMF managing director, gave the advice at the just concluded World Bank/ IMF Spring Meetings in Washington DC. She urged Nigeria to establish Social protection Safety Net to help the government meet the needs of people at the lower cadre of the society saying about $5.2 trillion has so far been spent

on fuel subsidies. “I will give you the general principle. For various reasons and as a general principle, we believe that removing fossil fuel subsidies is the right way to go,” Lagarde said. She added that the Fiscal Affairs department has actually identified how much would have been save financially, but also in terms of human life if there had been the right price on carbon emission as of 2015. The “Numbers are quite staggering,” she said. “If that was to happen, then there would be more public spending available to build hospitals, roads, provide educational facilities and lift more people out of poverty.” BusinessDay analysis of the latest financial records of Nigeria National Petroleum Corporation (NNPC) shows that in 2018, the government spent N730.9 billion on subsidy, popularly called ‘Under Recovery’.

The IMF explained that the continuous payment of fuel subsidy could lead to a lack of social protection safety net for the people. Another report by the state funded bureau on Tuesday revealed that Nigeria’s inflation rate had reached its lowest level in six months. The Consumer Price Index (CPI), which measures the composite changes in the prices of consumer goods and services purchased by households over a period, slowed by 11.25 percent on year-on-year (yoy) basis in March 2019, representing a 0.06 percentage points drop from 11.31 percent recorded in February 2019. The drop in the nation’s headline inflation means the prices of consumer goods and services rose at a slower pace in March 2019 compared with the corresponding period a year earlier.

Youths urged to acquire new skills to fit into emerging knowledge economy CHUKA UROKO

igerian youths have been urged to acquire new skills in various fields of human activity, including security, in order to fit into the emerging global knowledge economy. With the fast-paced changes in the nature of the environment, the youths have also been tasked, specifically, to embrace new knowledge in security studies to live in harmony with society. The management of Academy Halogen, a subsidiary of Halogen Security Group, which made this call on the youth, also harped on the need for the youth to prepare themselves for future challenges. “The future is here already and only those who have requisite knowledge will be fit for the emerging knowledge economy in our country and the world,” Wale Olaoye, GMD, Halogen Security Group, who spoke at the maiden graduation ceremony of over 500 security operatives who completed Certificate in Security Management (CISM) in the company recently, said. Olaoye, who was represented at the event by Wale Adeagbo, the company’s chief operating officer, challenged the graduands and millions of other Nigerian youths to continuously seek new knowledge in their field and even beyond. “Our society is changing and

the knowledge of staying in it is fast changing as well. Knowledge is changing in terms of its form, process of acquiring it and the way we use it. I therefore encourage you not to rest on your oars by looking for opportunities to grow your skills in security enterprise and technology,” Olaoye advised. He told the graduands to see their newly acquired knowledge as an impetus to add value to the security enterprise space which, today, is driven more by innovative ideas and intelligence, as an integral part of their just completed studies. Egwakhe Johnson, a professor, who represented the Vice Chancellor of Babcock University, Ademola Tayo, commended the graduands for showing tenacity and passion to learn throughout the programme. “It is exciting to see a good number of upcoming security professionals creating time to undertake courses in security studies like this. We are proud of them and ready to open doors of more world-class academic programme for them. That is what Babcock University is noted for globally,” Tayo said. Michael Ewa, chief security officer at Jagal Group, who was the guest speaker, also tasked the course participants to see the Academy Halogen and Babcock’s certification as a premium opportunity that would boost their career in the security industry. www.businessday.ng

Umaru Ibrahim, MD/CE, Nigeria Deposit Insurance Corporation (NDIC) (l), exchanges pleasantries with Ibikunle Amosun, governor, Ogun State (r), during the NDIC Board’s visit to the governor led by Ronke Sokefun, NDIC board chairman (c), as part of the Corporation’s Board Retreat in Abeokuta, Ogun State.

West Africa’s mobile economy valued at over $50bn in 2018

… as mobile boosts economy, creates jobs across continent Jumoke Akiyode-Lawanson

he mobile ecosystem in West Africa last year generated more than $50 billion in economic value, an equivalent of 8.7 percent of the region’s gross domestic product (GDP). According to a new GSMA study, rising mobile phone ownership and the ongoing migration to mobile broadband networks and services across the region have positively impacted economies, and West Africa is likely to gain more economic contribution from the mobile ecosystem, which will continue to increase over the next coming years – forecast to reach almost $70 billion (9.5% of GDP) by 2023. The 2019 West Africa edition

of the GSMA’s Mobile Economy report series is published at the ‘Mobile 360 – West Africa’ event being held in Abidjan this week. “Today’s report underlines the vital role the mobile ecosystem is playing in contributing to economic growth, social development and job creation across West Africa,” Akinwale Goodluck, head of subSaharan Africa at the GSMA, said. “To harness the power of a new generation of mobile users and mobile networks, we urge governments and policymakers in West Africa to develop regulatory frameworks that encourage innovation and investment in the sector, enabling the provision of mobilepowered digital services to citizens across the region,” Goodluck said. The report reveals that the

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number of unique mobile subscribers across West Africa reached 185 million at the end of 2018, equivalent to 48 percent of the region’s population. This number is forecast to rise to 248 million by 2025 (54% of the population). Nigeria is at the forefront of high mobile phone penetration with the number of mobile phone subscriptions surpassing the total number of its population – with over 173million active mobile phone subscriptions in February 2019, it is no surprise that subscriptions will rise and may surpass 248 million in West Africa by 2025 (54% of the population). Analysts say that the world has gone mobile. A fact, justifiable by the increasing use and dependence on smartphones and other @Businessdayng

mobile devices, and Africa is not left behind. “Another report carried out by Ericsson sometime last year, showed that Nigeria had the fifth largest mobile subscription growth in the world in the first quarter of 2017, with over 3 million new, trailing behind India who grew the most in terms of net additions during the quarter with more that 43 million, China with more than 24 million, Indonesia with 10 million and Pakistan with 5 million respectively. This shows the growing rate of Africa’s mobile economy, even as telecommunications revenues spike. In fact, countries like Nigeria are looking towards the telecoms sector for economic diversification,” Seun Ogunbandele, a telecoms industry analyst, said.

Wednesday 17 April 2019

BUSINESS DAY

NEWS Congo, Ghana prepare to commence aircraft maintenance in Aero’s facility IFEOMA OKEKE

ero Maintenance Organisation (AMO) has received further boost as the Civil Aviation Authority of Congo has commenced audit of the facility in order to approve it for maintenance of Congo registered aircraft. Also, the Ghana Civil Aviation Authority (GCAA) has commenced the process of renewing its certification of the MRO after the expiration of the one-year approval granted the Aero to maintain Ghana registered aircraft or foreign registered aircraft that operate within or into Ghana. BusinessDay’s checks show that separate teams from Congo and Ghana CAAs are in Lagos, the headquarters of Aero Contractors Company, the oldest airline in Nigeria to assess their books and capacity to conduct maintenance checks. The establishment of Aero AMO in 2017 has become a relief to many Nigerian airlines that

now maintain their aircraft up to C-check level at the Aero Hangar in Lagos. Med-View and Max Air aircraft are undergoing comprehensive maintenance while others including Air Peace and Arik Air are undergoing Airworthiness Directive (AD) checks at the hangar. But the West and Central African countries like the cases of Ghana and Congo have also taken advantage of the proximity of Aero MRO to access high quality and more cost-effective maintenance service. Since the approval of Aero MRO by GCAA last year, some Ghanaian carriers like Passion Air have been ferrying their aircraft to Lagos for light and heavy maintenance. With Congo auditing the MRO, airlines in the country that spend more money and time taking their planes to South Africa or East Africa and Europe for maintenance can now be doing same in Nigeria.

Taxify changes name to Bolt to reflect company’s future ISRAEL ODUBOLA

n a bid to brand identity in line with the company’s broader vision of transportation, Taxify, one of the leading European on-demand transportation platform has just changed it’s name to Bolt and introduced a new logo. Speaking during the press conference in Lagos to announce its name change yesterday, Uche Okafor, Regional Manager for West Africa at Bolt, said, “While we have made progress on our mission, we have also started to outgrow parts of our brand, including the name. Given our ambition to solve transportation problems on an increasingly broader scale, we want the brand to reflect the company’s future rather than the past. Our new name “Bolt” stands for fast, effortless movement-exactly what the experience of getting around in a city should be, be it by car,

scooter or public transport. It also underscores our belief that the future of transportation will be electric,” he said. According to Markus Villag, CEO and co-founder, Bolt, he said that the company’s broader vision of transportation ranges from ride hailing, to cars and motorbikes as well as scooter sharing, hence the need for a change of name. “Taxify launched five years ago with a mission to make urban transportation more convenient and affordable. Our first product was a taxi dispatch solution that gave the company its original name, but the current development has warranted for a change of name,” Villag said. He assured that the Eistonian-born tech company had evolved in leaps and bounds since its inception to now serve 25 million customers in over 30 countries globally, making it a leader in Europe and Africa.

GOtv subscribers in Asaba, Onitsha to enjoy more local channels

ollowing the recent addition of nine new local channels to its subscribers in Jos and Kaduna, Digital Terrestrial Television service provider, GOtv, has concluded plans for the addition of the same number of local channels to its Max and Plus subscribers in Asaba, Delta State, and Onitsha, Anambra State. The rollout commenced on Sunday, April 14 in Asaba and on Tuesday, April 16 in Onitsha. The nine local channels include: Spice TV, MiTV, WAP TV, ITV Benin, BISCON, Liberty TV, Tiwan Tiwan, R2TV and Rave TV. Speaking on the latest development, John Ugbe, CEO, MultiChoice Nigeria, explains

that the continuous infusion of local channels across its platforms, is part of the company’s commitment to ensuring that customers have access to various categories of content, and in a variety of indigenous languages, while supporting the Federal Government’s efforts in the digital switch over process. “We commenced the current phase of the expansion in Jos, and from there we moved to Kaduna. The extension of the programme roll-out to Asaba and Onitsha indicates that we are fulfilling our promise to make available quality programming for Nigerians in different parts of the country,” Ugbe says. www.businessday.ng

L-R: Akintunde Adelana, director, monitoring and evaluation, NCDMB/chairman NOGOF 2019 planning committee; Simbi Wabote, executive secretary, Nigerian Content Development and Monitoring board (NCDMB), and Funmi Ogbue, CEO, Jake Riley Limited, NOGOF 2019 Organiser holding the compendium of Nigerian content opportunities in the oil and gas industry at the Nigerian Oil and Gas Opportunity Fair, NOGOF 2019 in Yenogoa, Bayelsa.

Only prudently managed states can access foreign loans - Edo ... assures on judicious use of credit

do State government has allayed fears that the state’s foreign debt profile was worrisome, arguing that the credits, which the state enjoys, were accessed as a result of the state’s transparent governance and prudent financial management. The Debt Management Office (DMO) recently released Nigeria’s foreign debt profile, in which Lagos, Edo, Kaduna and Cross River states, in that order, topped the list of sub-nationals with high external debts. In a statement, special adviser to the Edo State Governor on Media and Communication Strategy, Crusoe Osagie, said the state government prioritises sustainable development and judicious use of state funds, which is what has enabled it to promptly access the lowinterest credit from multilateral

organisations. He argued that it was erroneous to assume that foreign credits were bad, noting that they help to fast-track development at the lowest cost of funds possible. According to Osagie, “Foreign credits usually come with single, lower digit interest rates, ranging from one to five per cent. They carry many years of moratorium, that is, a period within the tenure of the loan when the borrower is not required to make repayment. This gives the borrower more time to bring development to the people and therefore increase the capacity to repay the loan.” He argued, “Contrary to opinion by less informed people that ranking as the second state in the country after Lagos with the highest foreign debts

portfolio is a negative feat, it is actually a positive development because this simply indicates that Edo State, like Lagos and Kaduna States, are the few states in the country with the requisite level of transparency in governance to access the huge international pool of development financing to help improve infrastructure and enhance the living standards of the ordinary people.” He stressed that what is important is that the Governor Obaseki-led Edo State Government is putting every penny sourced from the Federation Account, Internally Generated Revenue (IGR) and international development financing to judicious use to improve the lives of the people. “In less than three years, Obaseki’s government has constructed more roads than

previous governments were able to do in 16 years. We have revamped and rebuilt basic education almost to the point of re-invention. There is a primary healthcare revolution currently going on in Edo State, as well as the big-ticket transactions of the Benin River Port, Benin Industrial and Enterprise Park, the Benin Modular Refinery Project and many more, where we are making steady progress,” he said. He stressed that many of the states that are ranked low on foreign debts in DMO’s records are not necessarily happy to be in that position, as they would have preferred that they had the requisite governance structure and transparency in financial management to attract these useful funds from international development finance institutions.

Banks’ chatbot, investment in digital platforms push mobile transfers to 81% in Q1 2019 BUNMI BAILEY

igerian banks’ innovative mobile applications and investment in digital technology pushed up the volume of mobile transfers by 81.3 percent year-on-year, from 1.6 million in the first three months of 2018 to 2.9 million in the first three months of 2019. Similarly, data from the Nigeria Interbank Settlement System (NIBSS) showed that the value of mobile transfers increased by 41.0 percent to N95.2 billion in the first three months of 2019, from N67.5 billion in the same period of 2018. “Mobile transfers have been on a rise due to the banks’ chat-

bot. The chatbot has made user mobile banking experience easier. It saves a lot of cost. For the USSD code, there is a limit to the amount you can transfer but the chatbot experience limit far transcends that of USSD,” Yinka Ademuwagun, a macroeconomic analyst at United Capital, said. “USSD transactions are used more for low value transactions but for the chatbot, it can do low to medium level transactions. Convenience is what service business sells,” Ademuwagun said. Last year, most Nigerian banks started adopting the use of chatbots to offer basic interactive banking services directly to customers on specific social messaging platforms. UBA was the first to launch

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a banking chatbot called Leo in January. Leo is a handsome young male persona who helps to transfer money, pay bills, buy airtime, freeze, open and link account, get mini statements, check account balance, stop cheques, make inquiry and pass complaints. Then Diamond Bank’s Ada joined in March. Ada is a young female vibe who helps you with services like airtime purchase, money transfer, stock prices check, payment of bills and account balance check. Access Bank also came with Tamara. She can be found on WhatsApp and on the web. She offers various services such as bills payments, money transfer and airtime purchase. Also, Stanbic IBTC unveiled @Businessdayng

its own bot, Sami. Keystone Bank launched Oxygen, while Heritage Bank came up with Octopus. Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers, said although the chatbots could be a driver for the increase in transfers, investments in digital platforms could be another factor. “Banks have deepened their penetration in the consumer and retail segment of the market. And they have been able to make significant investments in their digital platforms, which make transactions less stressful and easier for customers. And there are also a lot of innovations to simplify banking transactions in the retail part of the market,” he said.

Wednesday 17 April 2019

BUSINESS DAY

PRIVATEEQUITY &FUNDRAISING

Rich countries keener to fund private equity firms than African aid programmes – Arlove RICHARD ARLOVE, regional CEO, AMEA at Ocorian, a fiduciary and corporate services provider, headquartered in New Jersey and with 700+ staff spread in 11 jurisdictions across in Europe, Asia, Middle East and Africa. The company has a representative office in South Africa and in Ivory Coast. The main office for the Africa, Middle East and Asia region is in Mauritius where it was previously known as ABAX. Arlove tells BusinessDay’s ISAAC ANYAOGU how the shift from aids to private equity by rich countries creates opportunities for Nigeria and other African countries.

hat is your philosophy at Ocorian, what do you set out to

where and Mauritius has come out in the world over the past ten years as the prominent place where private equity funds for Africa is domiciled because it is an African financial centre with an eco-system that works. So a lot of private equity funds are in Mauritius and we administer a number of these funds.

achieve? Ocorian is present in international financial centres with the objective of adding value to our clients through innovation. Our sense of purpose is in how we enhance enterprise value and protect investor value for our clients through the use of financial centres. Secondly, we help to facilitate the flow of funds in and out of emerging markets. When you think of development of the African continent, it is my view that a lot of development is how do we facilitate the flow of funds. It is about intra Africa, it is really about helping to make funds flow to entrepreneurs. When they go outside the market and expand, we think of how to protect and enhance their value. What practically things do you do to enhance and protect value for your clients? First of all, we listen to the entrepreneurs. Let’s say an entrepreneur has developed a mobile platform capable of providing mobile banking. So what is going to happen is that the entrepreneur has launched his platform and is quite successful in his country. Now he realises that there are many other countries that requires such products and he wants to expand there and other countries. As soon as he goes international, he can have a number of issues. So when we talk to the entrepreneur, we understand what it his business model and what we call the component of value, because when you do business, you may not have profit yet but you can still have a lot of value. If you look at Facebook, they did not have profit for a long time but they still had value. So what are these components of value and how do you think about the structure to open up your value? The value might be intellectual, because you have to develop the platform. So you have developed the mobile money business and then fast forward to ten years and the value has risen to say $100 million. We can structure a Mergers and Acquisition deal, and the sale can happen through a structure we have created to facilitate it. This is where an international financial centre comes in. It might also be that you need your central procurement to be somewhere because you are buying many things from different

countries. So maybe Nigeria is not the best place to have for such central procurement, maybe in Dubai and maybe for the protection of your I.P , you need to be in a

‘‘

A lot of business in Africa is now through private equity funds. Years ago a lot of African countries were receiving aids from richer countries but many have realised these aids effectively goes into the pockets of politicians and do not end up in projects they are intended. So there is a shift from aids from richer countries towards setting up private equity funds and development financial institutions investing in projects in Africa

country like Mauritius, or London. Now if you put it in London, where is your server? Where do you recognise your revenue, do you start to recognize your revenue online? So these are the questions that we ask the entrepreneur as we look for how best to structure it. You recently launched your platform in Nigeria, what are your plans for the market? Well you see Ocorian, previously called ABAX, has been working with many companies in Nigeria - very large companies, entrepreneurial types, people who need the structure of a financial centre. So we already have a history with Nigeria clients. On one hand those that are within Nigeria and outside and also those of them coming into Nigeria. A lot of business in Africa is now through private equity funds. Years ago a lot of African countries were receiving aids from richer countries but many have realised these aids effectively goes into the pockets of politicians and do not end up in projects they are intended. So there is a shift from aids from richer countries towards setting up private equity funds and development financial institutions investing in projects in Africa. These private equity funds need to be domiciled some-

Having travelled to many countries in Africa, what is your assessment of corporate governance in the continent since this is an important factor for private equity firms, how does it compare with other western countries? I think is not yet deeply rooted in Africa. I think this is often the situation. We have this entrepreneur who has started his business from savings or capital from family or friends. Soon he wants to expand. He will turn to a bank or private equity firm for finance. Then comes the problem of corporate governance because he will be told to produce his books and he may have several. Obviously, the financier will be hesitant providing capital. So this is the main problem with corporate governance in Africa. Many businesses have grown a family business and the methodology of business was good 10 or 20 years ago but they are not appropriate today. When you want grow an international business and access financial capital and be sustainable, governance is essential. But obviously governance is a pain. Many prefer to do their business their way. but if you want to grow and be sustainable, you need corporate governance, and this is where we come in. If you want your business to be part of an international finance centre, then you need to have an independent board, you need to have audited financial reports, you need transparency and all these is what corporate governance entails. It is not just about board composition, it is how an investor can trace his money from everything in your business, down to where it goes and how it comes back to him without leakages. That is what corporate governance is all about and this is where we come in to advise and help execute this flow of funds in and out of the business. So in my view, with better corporate governance practices in Africa more funds will flow into businesses here. Many PE firms today have money lined up, saying I want good projects to invest in and

you have many people needing these funds, but there is no match. We at Ocorian, call it financial gap. We tell people that if you want to access financial capital, you need governance capital. Speaking of capital, do you think Chinese debt is actually a threat to the development in Africa? It is a threat if we don’t make it an opportunity. So, the continent is very attractive to others because of its numbers. There is huge infrastructure required and it has vast resources. Hence, we must ensure we benefit from business with China because we are in a strong position. I believe the Chinese have been pragmatic; they have their own way to the business which is different from what the Europeans have. The Europeans colonized our countries and we must be aware that there are a lot of bad things out of colonization’s however, there have been some few good things though. We don’t want to be colonized again we have been through that so how are we going to go through in the position where we are really in the positions were we are, play the Chinese, the Indians, the Europe and the Americans in a sense one against the other in other to gain from it. We can do that by playing according to our rules by allowing China to help developed our countries but we must play by our rules. I will give you an example of Mauritius was I came from. In the late 70s and early 80s, the Chinese were looking for a place to build their textile because they are afraid that the Chinese will take over from the UK in 1997. This was when Mauritius now said why not in Mauritius because we got the free trade agreement with Europe, we got the electricity, we have got the cheap labour, and people are unemployed because the unemployment rate was about 20 per cent so come over. They came, we learnt from them and today there is no Chinese doing textile anymore the grains are now Mauritian grains, designed by Mauritians sold in Europe and in the UK and in The US and sold in South Africa. So what we did, was to allow the Chinese in, learnt from them, they make their profit and create a new breed of entrepreneurs and industrialization and now they are gone, we are doing our own good business. So that is a small example of what can be done and if you think about the development of China in many countries, this is what they have done.

BusinessDay PRIVATE EQUITY & FUNDRAISING (Team lead: LOLADE AKINMURELE - Analysts: MICHEAL ANI, DIPO OLADEHINDE, ENDURANCE OKAFOR, DAVID IBEMERE ... Graphics: OGAR DAVID ) Businessday’s Private Equity and Fundraising section is a weekly publication that provides in-depth analysis on private equity trends and tracks deal activity in Nigeria.

Email the PE & F team loladeakinmurele@gmail.com

Continues on page 34

Wednesday 17 April 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Germany warns Britain cannot have further Brexit extension Foreign minister Heiko Maas says another delay would ‘signal UK plans to stay in EU’ TOBIAS BUCK

ermany’s foreign minister has warned London that there will be no Brexit extension beyond October, sending out the strongest signal yet that Berlin’s patience with the UK’s deadlocked political system is starting to wear out. “They will have to decide what they want by October,” Heiko Maas told the Financial Times in an interview. “You cannot drag out Brexit for a decade.” Angela Merkel, German chancellor, fought hard to secure a sixmonth Brexit delay at last week’s European summit against French insistence that the UK should be given at most until the end of June to secure an orderly withdrawal from the EU. Mr Maas’s intervention suggests that Berlin will side with the harder French line should the new Brexit deadline of October 31 draw closer without progress on the UK side. He also cautioned British leaders that an appeal for a further Brexit delay would be read as a plea to remain in the EU: “Another extension could send the signal that they plan to stay in the EU after all.” The foreign minister stressed that he had not given up hope that the UK parliament would back Prime Minister Theresa May’s draft withdrawal agreement before the European elections next month, pointing to the apparent absurdity of Britain’s predicament. “Just think

about it: you say you want to leave Europe and then you hold a European Parliament election,” he said. His Brexit remarks came during an interview in which Mr Maas launched a vigorous defence of German foreign policy against recent criticism from allies, highlighted German concerns about the political rift with the US, and warned countries such as Italy not to be “bought out” as part of Chinese attempts to split the EU. Mr Maas said he was “very critical” of Italy’s decision to endorse China’s Belt and Road Initiative, describing it as “further evidence that China might have a strategy that seeks to divide the EU”. He added: “We are living through a new age of great power competition between the US, Russia and China. If we want to stand our ground we have to confront this as Europeans. If some of allow themselves to be bought out then the EU will become a mere object of world politics. That cannot be our goal.” He acknowledged that Germany had been criticised by allies, most notably with regard to Berlin’s failure to meet Nato defence spending targets. “We have outlined a path that takes us to 2024, when we will spend 1.5 per cent of GDP on defence. That means an increase in defence spending of 40 per cent. Both from a financial and a political point of view that is for the German public an ambitious project,” he said. Critics point out that Germany’s 1.5 per cent target would still fall short of Nato’s 2 per cent of gross

BlackRock’s Fink says markets are poised for a ‘melt-up’

lobal equity markets are poised for a “melt-up” as signs of healthier economic growth in the US and China reassure big investors that have largely stayed on the sidelines of the 2019 market recovery, according to BlackRock’s Larry Fink. The chief executive of the world’s largest asset manager said he is optimistic that a “Goldilocks” scenario of improving economic data and more dovish central banks will compel institutional investors that have kept ditching stocks this year to reverse course. Investment strategists have dubbed the 2019 stock market rally the “flowless recovery”, with equity funds continuing to suffer outflows even as the FTSE AllWorld index has climbed over 14 per cent — its best start to a year since 1998. “There’s too much global pessimism,” Mr Fink said in an interview. “People are still very underinvested. There’s still a lot of money on the sidelines, and I think you’ll see investors put money back into equities.” Bond funds have attracted $112bn of inflows already this year, but equity funds have suffered almost $90bn of investor withdrawals, according to EPFR, a data provider. BlackRock cemented its position

as the world’s biggest fund manager, growing its assets under management to $6.5tn in the first quarter, thanks to strong market returns and inflows of $65bn. The impact of last year’s market tumult was apparent in the quarter, however. Year-on-year, base fees decreased 5 per cent, because it started the year with less than $6tn in assets. There was a 7 per cent decline in revenues to $3.3bn, which resulted in a 1 per cent fall in diluted earnings per share to $6.61. However, this comfortably beat analyst expectations of $6.13, and the group saw technology revenue for the 12 months to March 31 increase 11 per cent, driven by its widely used Aladdin investment platform. Listed investment groups saw their shares tumble almost 26 per cent on average last year — their worst performance since the financial crisis — as investors feared buoyant markets would no longer mask mounting fee pressures across the industry. BlackRock has this year trimmed jobs and reshuffled its senior management ranks. Mr Fink took a 14 per cent pay cut. “With fees coming down a lot of the big players are looking for new ways to generate revenues,” said Kyle Sanders, an analyst with Edward Jones. “For BlackRock it’s through software and Aladdin, which isn’t tied to moves in the market.” www.businessday.ng

domestic product spending goal, and that Berlin’s medium-term plans suggest even a 2024 defence budget of 1.5 per cent might be out of reach. But Mr Maas, whose centre-left Social Democratic party is viewed as the main obstacle to higher defence spending, sought to allay those concerns. “I know there is irritation on this issue — but we will implement this and we will deliver,” he said. He also rebuffed criticism of Germany’s recent moves to block European defence exports to Saudi Arabia, which has angered Britain and

France. “Our policy on Saudi Arabia is I think the correct one,” he said. “You cannot sit in the UN Security Council and call on the conflict parties involved in Yemen to stop the war — and then walk out the door and go about as if nothing happened.” Mr Maas acknowledged the deterioration in relations between Germany and the US under President Donald Trump, but dismissed speculation about a complete rupture. “I think on the whole we can still rely on one another. But there have been changes in American foreign policy that mean we now

have to take on more responsibility ourselves. That’s one area where we really notice the new ‘America First’ approach,” he said. One important area of disagreement between the US and Europe remained the Iranian nuclear deal, and in particular Washington’s threat to impose sanctions on European companies that trade with the Islamic republic. To circumvent those sanctions, Germany, France and Britain recently launched Instex, a special purpose vehicle to help European businesses settle payments with their Iranian partners.

Huawei reveals it has no 5G contracts from mainland China

A dovish Fed and robust global economy will lure big investors back to equities ROBIN WIGGLESWORTH, RICHARD HENDERSON AND OWEN WALKER

Disclosure comes as analysts say country has scaled back roll-out of technology LOUISE LUCAS

uawei, the Chinese telecoms company that is leading a global race to build 5G mobile networks, has revealed that none of the 40 commercial contracts it has won for 5G equipment are from mainland China. “Until today, only one commercial contract for 5G is from China, and that’s in Hong Kong,” said Yang Chaobin, president of Huawei’s 5G product line. “In the mainland, although we’ve done a lot of trials . . . these are not commercial contracts.” Huawei said 23 of its 5G contracts were from Europe, 10 from the Middle East, six from Asia and one from Africa. Mr Yang made the comments at an annual analyst summit in Shenzhen and did not explain why Huawei has yet to win Chinese contracts for 5G equipment, although the company has rolled out trials, such as a 5G network for Hongqiao railway station with China Mobile that it announced in February. The revelation came as analysts said that China was slowing down its roll-out of 5G, the next generation of mobile internet that is expected to enable every-

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thing from instant downloads of movies to connected cars. Annual results from the country’s biggest telecoms carrier, China Mobile, show its planned capital expenditure on 5G is running at half the levels that analysts had forecast. Bin Liu, telecoms analyst at Citibank, said this year’s guidance from China Mobile — typically responsible for 55 to 60 per cent of the industry’s capital expenditure — implied a maximum spend of Rmb17.2bn ($2.6bn) on 5G, roughly half his expectations. “This indicates that, at least so far, there’s no big pressure from the government on 5G dollar spending yet,” he said. The Chinese telecoms regulator opted in January just to issue temporary 5G licences in a number of cities and the supply chain is running behind schedule following a three-month delay on a key 5G standard. Edison Lee, telecoms analyst at Jefferies, linked the slowdown to “tech constraints and a possibly more rational view by the government.” “Geopolitical tensions could derail one key benefit of a ‘fast and furious’ 5G buildout in China: creating scale for its supply @Businessdayng

chain so that it can become a global leader,” he said, in a research note, referring to how 5G has become a major flashpoint in the battle between the US and China, as Washington fretted over China’s rapid adoption of the new technology. Since last year, Washington has lobbied other governments to drop Huawei as a 5G equipment supplier, arguing that the security of their networks could be compromised. Meanwhile, the delay of a key 5G standard — the one relating to 5G for consumer and other basic uses — has put a spanner in the supply chain. Equipment makers, who had banked on having a specification to work from at the end of last year, only received it last month. A mooted similar delay on the next standard — the one that will extend uses to more sophisticated uses like the industrial internet of things — means manufacturers will not be able to launch until around the second quarter of 2020, said Mr Liu. “The government now understands the supply chain delay issue and the Huawei issue is also making the government promote 5G less actively,” he added.

44 BUSINESS DAY

Wednesday 17 April 2019

NATIONAL NEWS

Sudan’s new regime has still to prove its sincerity Protesters worry there is nothing credible to replace the old guard JANE CROFT

ow comes the hard part. It took four months of extraordinary protests by mostly young Sudanese to topple the geriatric regime of Omar al-Bashir. There is understandable euphoria on the streets of Khartoum. The experience of countries that went through the Arab spring, from Egypt to Syria and from Libya to Yemen, however, suggests that severe dangers lie ahead. For the 30 years that Mr Bashir held office, the Sudanese state has been geared to one thing: keeping him and his cronies in power. Everything was sublimated to that aim. Elections were rigged and the opposition cowed. War was waged in Darfur. A huge chunk of national expenditure went on the defence forces, leaving other public services woefully neglected. Yet the military apparatus was also deliberately divided to ensure it was never strong enough to mount a coup. With the Bashir edifice crumbling, the concern is there is nothing credible or coherent enough to replace it. The first job is to dismantle the Bashir security state. It must be handled in such a way that does not catalyse mutiny or armed infighting. Thankfully, there has been little violence since the fall of Mr Bashir on Thursday. This may prove to be a temporary lull. The military council running Sudan is anything but stable. Barely 24 hours after Lieutenant General Awad Ibn Ouf an-

nounced the coup, he, too, was gone, replaced by hitherto a less prominent general, Abdel-Fattah Burhan. Perhaps more significant, Salah Abdallah Gosh, the feared head of the intelligence services, was replaced. Protesters have taken understandable glee in such developments, joking that Lt Gen Ibn Ouf left office before his Wikipedia page could be updated. They are glad to see the back of Mr Gosh, closely associated as he was with the worst excesses of the regime. Yet the Sudanese Professionals Association, which led the protests, is right to be cautious. There have been suggestions that the military is conducting an elaborate piece of political theatre to give the appearance of wholesale change, while actually maintaining its grip on power. Assuming its sincerity, the military council’s main task is two-fold. First, it has to negotiate with an amorphous opposition a credible form of interim government. It has made a first step by meeting with representatives of demonstrators. It has yielded to some of their demands, including promising a transition to democracy. It foresees that process taking two years at most. Slightly counterintuitively, some members of the opposition want to double that time, saying it will take four years to organise coherent political groupings after years in the wilderness. That looks too long a limbo period, the danger being that chaos could beat democracy to the punch.

US companies reveal pay gap between bosses and workers Among 100 chiefs analysed, 11 made more than 1,000 times that of the median employee

ANDREW EDGECLIFFE-JOHNSON

arren Buffett earned less than seven times as much as the median Berkshire Hathaway employee last year while Elon Musk was paid 40,668 times more than the median Tesla worker, according to corporate filings, stirring debate about a disclosure that politicians demanded after the financial crisis. Such details are emerging in US proxy filings for the first full year since the Securities and Exchange Commission mandated American companies to disclose the relationship between their chief executive’s compensation and that of their median employee, providing fuel for those seeking to rein in executive pay. The median chief executive pay ratio for 2018 was 254:1, according to an analysis released last week by Equilar, a compensation consultancy, up from 235:1 in 2017 when only two-thirds of the companies it tracks disclosed such figures. The ratio, a legacy of the DoddFrank Act’s post-crisis efforts to regulate executive pay, has attracted attention from labour unions, activists and politicians at the beginning of a 2020 election season in which several Democrats are campaigning on taming corporate excesses and reducing inequality. “Politicians know that this is an issue that really strikes a chord

with people across the political spectrum,” said Sarah Anderson, director of the global economy project at the left-leaning Institute for Policy Studies, who noted that a 2016 Stanford poll found majorities of Democrats and Republicans favoured capping executive pay. “It’s a really important indicator of whether a corporation is sharing their wealth internally,” she added, saying that the disclosures have encouraged lawmakers in seven states to try to tax companies with high pay ratios. One such tax has been introduced, in Portland. Companies in Oregon’s largest city must pay a 10 per cent surcharge if their CEOs make 100-250 times more than their median employee, while those with a ratio above 250 face a 25 per cent surcharge. Portland said in February that the tax would raise $2.4m in its first year. In its 2018 fiscal year, Nike, the city’s most famous company, paid its chief executive Mark Parker 379 times the amount it paid its median employee, with a US-based retail employee earning $24,955 a year. The ratio’s political potency was on display last week when Katie Porter, a California congresswoman, challenged Jamie Dimon, head of JPMorgan Chase, on the discrepancy between his $31m compensation and the $16.50 hourly wage the bank offered a teller in her district. www.businessday.ng

Terry Gou, founder and chairman of Foxconn, speaks at the fifth World Internet Conference in China in November 2018 © Reuters

Foxconn chairman Terry Gou weighs run for Taiwan presidency Founder of world’s main iPhone supplier to step back from daily operations KATHRIN HILLE

erry Gou, chairman of Apple supplier Foxconn and Taiwan’s richest man, is considering running for president, a move that could shake up the island democracy similar to the way Donald Trump’s turn to politics has in the US and trigger big changes at the world’s biggest contract electronics manufacturer. The self-made billionaire and founder of Hon Hai Precision Industry, as the parent company is called, said on Tuesday that he would decide over the next few days whether to contest the primaries for the opposition Kuomintang. “I didn’t sleep all night,” he said on the sidelines of a conference in Taipei. “I have four grandchildren and three children in Taiwan. What is their future? I think about what I can do for the young people.” Foxconn, which assembles the majority of iPhones for Apple in vast factories in China, said that Mr Gou wanted to start handing management to a new generation. “His wish is to withdraw from daily operations after having developed and mentored a new generation of talent to carry on Foxconn’s mission,” the company said in a statement. “As chairman, Mr Gou will continue to provide strategic direction and guidance.” The prospect of Mr Gou run-

ning in Taiwan’s January 2020 presidential polls could raise big questions for the island’s relations with China. His business ties to China could trigger controversy even more serious than that over Mr Trump’s business interests. The Chinese Communist party claims Taiwan as its territory although it has never ruled it, and threatens to invade if Taipei resists unification indefinitely. “How can you head a business so dependent on a country that threatens to annex us?” said a senior government official in Taipei. “Where do your loyalties lie?” The 68-year-old entrepreneur started Foxconn with $7,500 in 1974 and has built it into a company that employs nearly 1m people. Foxconn was one of the first Taiwanese businesses to set up factories across the Taiwan Strait 31 years ago, and now employs at least half a million people there in more than a dozen plants. Incumbent Taiwan president Tsai Ing-wen is struggling to win her Democratic Progressive party’s nomination as a string of unpopular economic and social reforms have damaged her support ratings. Meanwhile, the KMT already has four men vying for its nomination and party leaders are considering tapping a fifth — the populist mayor of the southern city of Kaohsiung, who leads in the polls. Deriving more than half of its

revenues from Apple, Foxconn is taking a hit from the iPhone’s sluggish sales, especially in China. The group, which had total revenues of NT$5.3tn ($171bn) last year, is also grappling with a broader tech industry slowdown as smartphone demand has peaked. “Hon Hai is a brilliant process company that is very good at cost control and making things cheaper,” said Nicolas Baratte, head of Asia technology research at CLSA. “But they are stuck with 55 per cent of revenue of a product that does need a lot of labour [and] that is not designed to be automation-friendly.” Over the past year, many of the Taiwanese-owned manufacturers that dominate the global technology hardware supply chain have stepped up manufacturing outside China, with server maker Quanta Computer moving some operations back to Taiwan and others to North America and Apple supplier Wistron assembling in Indonesia and looking at India and Vietnam. Foxconn is due to start mass production of the iPhone in India this year and is expanding in Vietnam. However, while server manufacturers are effectively shifting capacity out of China over security concerns, industry executives say no other location can replace China as a manufacturing base for consumer gadgets such as the iPhone.

ECB renews vow to hold rates steady until ‘at least’ end of 2019 Central bank warns of persistent weakness in bloc’s economy CLAIRE JONES

he European Central Bank has left interest rates on hold at record lows and reiterated its commitment to keep monetary stimulus in place until the eurozone’s economic slowdown reverses course. In its latest monetary policy announcement on Wednesday the bank’s governing council kept its benchmark main refinancing rate at zero and its deposit rate at minus 0.4 per cent. The council said it expected to keep official borrowing costs for the region on hold “at least through the end of 2019”. The 25-member body also

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s a i d i t p l a n n e d t o re i nv e s t bonds maturing under its €2.6tn quantitative easing programme “for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation”. The decision to leave policy unchanged was widely expected after the bank unveiled new stimulus measures at its March policy vote. Wednesday’s announcement came as the ECB acknowledged that the eurozone is still struggling to recover from a slowdown @Businessdayng

that started in the second half of last year. On Tuesday the International Monetary Fund became the latest organisation to cut its 2019 forecast for growth in the region — bringing it closer to other estimates, including the ECB, which now forecasts an expansion of just 1.1 per cent. The central bank’s policymakers think growth is more likely to miss that target than exceed it, warning that risks to the outlook have “moved to the downside”. ECB president Mario Draghi has so far insisted that the eurozone’s return to stronger growth has been “delayed” rather than “derailed”.

Wednesday 17 April 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Stock rebound keeps momentum after latest Wall Street earnings Michael Hunter , Alice Woodhouse and Matthew Rocco

lobal equities were positive as investors worked through more touchstone numbers from the financial sector, with upbeat results from bellwethers among healthcare and consumer stocks also helping. The S&P 500 in New York rose 0.1 per cent around lunchtime in New York after first-quarter results from BlackRock and Bank of America helped warm sentiment after a chillier reception over the previous session for numbers from Goldman Sachs and Citigroup. Johnson & Johnson and United Healthcare Group added to the trend away from banks. An update from Netflix is due after the close of trade. The Europe-wide Stoxx 600 added 0.3 per cent, staying on course back toward the eightmonth high it touched last week. Frankfurt’s Xetra Dax 30 rose 0.7 per cent with financial and industrial stocks in demand. The FTSE 100 gained 0.4 per cent in London. There were brisker moves on

mainland China, where the CSI 300 closed up 2.8 cent with financial stocks in the lead after the country’s central bank injected liquidity into the market for the first time in 18 days. Hong Kong’s Hang Seng ended the day 1.1 per cent higher. As the US trading day draws closer to an end, attention will be on Chinese economic growth figures for the first quarter. The numbers, set to be released on Wednesday, will be coming against a backdrop of still ongoing US-China trade talks. Economists polled by Reuters forecast a 6.3 per cent annualised increase in gross domestic product, with the data being closely watched for signs of an improvement in the world’s second-largest economy. Gold prices dropped more than 1 per cent to their lowest levels this year amid gains in equities and the US dollar. The dollar index, which measures the greenback against global currencies, was up 0.1 per cent.

German regulator files complaint on alleged Wirecard manipulation BaFin targets two FT journalists and several short-sellers after reports hit payments group’s share price OLAF STORBECK

he German financial watchdog has filed a criminal complaint against two Financial Times journalists and several short sellers, accusing them of potential market manipulation over reports about suspected accounting irregularities at payments processor Wirecard. The criminal complaint by BaFin was filed a few days ago to the Munich criminal prosecution office, which is already investigating potential market manipulations related to the FT’s Wirecard coverage. The criminal prosecution office in Munich was not immediately available for comment. BaFin confirmed it filed a criminal complaint but declined to disclose the identities of the suspects or to give further information on the nature of the suspected misconduct. A person familiar with the matter said that two FT journalists were subjects of the complaint as well as about 10 short-sellers. The criminal complaint was first reported by German news magazine Der Spiegel on Tuesday. On January 30, the FT reported that a senior Wirecard executive was last year suspected of using forged and backdated contracts in a string of suspicious transactions that raise questions about the integrity of the group’s accounting. Shares in Wirecard lost 35 per cent in the days following the report. It is now up to the Munich criminal prosecutor to formally

evaluate the evidence, conduct further investigations and decide wether to file criminal charges against the suspects. Short sellers are investors who bet against the stock price of a company by borrowing its shares and selling them, expecting to buy them more cheaply in future. The FT said it “continues to stand by its journalism” and had nothing to add to its previous statement: “Any allegation against the FT or any of its reporters or staff of market manipulation or unethical reporting in relation to Wirecard is baseless and false. It is a smokescreen obscuring the serious allegations that were revealed by the FT.” Wirecard told investors earlier this year that an external law firm had been investigating alleged accounting manipulations. The executive at the focus of the investigation has since left the company, and the external law firm concluded that several Wirecard employees in Singapore may face criminal liability. The company said it had improved internal processes. P o l i c e f ro m S i n g a p o re ’s co m m ercia l a f fai rs depar tment are investigating whether senior Wirecard staff have been using fake companies and doctored contracts to boost revenues artificially over several years. BaFin has also slapped a unique ban on short sales of Wirecard stock, citing risks to the economy and market stability. www.businessday.ng

Equivalent of doping? Private equity takes juicing the numbers to the next level Firms are giving themselves credit for cost-cutting even before they have bought the company ROBERT SMITH

rivate equity firms have become notorious for juicing the numbers. It is rather less common for their senior partners to be bracingly honest about it. This year marks the 30th anniversary of Barbarians at the Gate — the seminal account of the 1980s leveraged buyout boom — and the private equity playbook remains essentially unchanged: pile debt on a company to fund its acquisition, strip out as many costs as possible, then flip the “improved” company to another buyer for a higher price. Today’s masters of the universe have taken this template one stage further, giving themselves credit for the cost-cutting before they even get their hands on the company. Heavily adjusted earnings have become an inescapable fact of life in the modern buyout boom. Private equity firms now use eyebrow-raising “pro forma” earnings numbers, a useful bit of Latin allowing them to factor in cost savings before they are even made. This has the helpful effect of bringing down a buyout’s lever-

age, the crucial measure of how much debt it has relative to its annual earnings. Jonathan Lavine, co-managing partner at global private equity giant Bain Capital, recently took aim at these “increasingly aggressive” adjustments in a refreshingly honest interview with the Financial Times. He compared it to a 5ft 8in man telling people that he was “6ft 2in on a pro forma basis”. “I’m not actually 6ft 2in on a pro forma basis, but I can make adjustments like standing on a box, maybe trying to stretch,” Mr Lavine said. Another way to think about the practice: it is the financial equivalent of doping in sports. Private equity firms are artificially enhancing their company’s performance to get large deals over the line. And there is a common refrain that will be familiar to anyone who has read an interview with an athlete caught using performance-enhancing drugs: everyone is doing it! The culprit for this near-ubiquity of juiced-up numbers is also a familiar one: regulatory arbitrage. In 2013, US banking regulators brought in effective caps on the

level of leverage on investment banks’ debt deals. This wellintended effort to curb a potential bubble in riskier debt became the original sin of earnings adjustments. When banks underwrite an LBO, they take on the risk that they will not be able to sell on the debt to investors. Unsurprisingly, their main guide is whatever leverage they think bond and loan fund managers will be willing to accept. This appetite can sour quickly; Jefferies and Credit Suisse were last week left holding chunks of loans to Israel’s NSO Group. There, though, tepid investor demand had little to do with its rather modest 3.7 times leverage ratio and everything to do with corporate governance concerns about the cyber security group. More broadly, as more money has chased high-yield bonds and leveraged loans — the riskier types of corporate debt backing these buyouts — bankers found that the market would often tolerate much higher leverage than the regulators. So in order to get their deals within the lines, they started working with the private equity firms to heavily adjust earnings.

Miners slide as gold price hits lowest level of the year PETER WELLS

old fell more than 1 per cent on Tuesday to its lowest level this year, dragging the share prices of many producers and explorers along for the ride. Down 1.1 per cent at $1,273.86 an ounce, the metal’s price was at its lowest level since December 26, when the stock market began to recover from a sharp sell-off that left it on the precipice of bear market territory. On the Toronto Stock Ex-

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change, Barrick Gold was down 3.2 per cent and Goldcorp was off 1.5 per cent. US-listed Newmont Mining, which is taking over Goldcorp in a $10bn deal that will see it surpass Barrick as the world’s biggest producer, was down 1.6 per cent. Gold prices have come under pressure this year owing to a firm dollar, optimism about US-China trade talks and rising equity markets. That has blunted the sometime haven appeal of gold, even though patchy economic data and @Businessdayng

an inversion of the yield curve in the bond market, which is regarded as a predictor of a recession, had given the yellow metal a bit of a boost at the start of this month. The counter argument to that is the Federal Reserve and other global central banks looking set to refrain from tightening monetary policy this year. Markets predict the Fed might actually cut rates by the end of 2019, a move that should lead to a weaker dollar, which, in turn, ought to support the price for gold.

Wednesday 17 April 2019

BUSINESS DAY

ANALYSIS

Goldman Sachs leaves Wall Street wanting more Quarterly update fails to satisfy investors looking for signs of strategic rebirth LAURA NOONAN

a v i d S o l o m o n ’s e a r l y months as chief executive of Goldman Sachs have been long on rhetoric, as he promised to take digital disruption to the next level and rigorously review the company’s existing business, all the while embracing a new era of transparency and introducing a millennial-friendly “casual every day” dress code. But for all the talk of futureproofing one of Wall Street’s most venerable institutions, the bank’s quarterly update on Monday failed to encourage investors looking for signs of Goldman’s strategic rebirth. Its shares fell nearly 4 per cent, bringing their decline to 11 per cent since Mr Solomon took over in October. That makes Goldman the worst performer of the big six US banks since he became chief executive. “So far, there has been sound and fury . . . but little in terms of evi-

year in 2017 and revenues in the fixed-income, currency and commodities division (FICC) fell by a worse-than-peers 22 per cent between 2016 than 2018, triggering criticism that Goldman had failed to grasp secular changes in the business during the past few years. Goldman’s FICC performance has improved relative to other Wall Street banks in the past two quarters, partly because of the bank’s low base. While Mr Solomon and his team have promised to reshape FICC for today’s opportunity, not the boom years of the past, concrete information on how this will happen has been scant. On Monday’s earnings call, executives spoke of leveraging technology across the FICC business, cutting resources to underperforming segments and investing in more promising ones. “It’s still not clear,” said Mr Mayo, adding that while Goldman “rattled off about a dozen areas” for potential growth, he still did not know what

dence (or progress) or recognition from investors,” said Mike Mayo, analyst at Wells Fargo, adding that Goldman’s price-to-book value of about 0.95 is “one of its lowest noncrisis valuations in history”. Jason Goldberg, banks analyst at Barclays, said that while there had “definitely been progress” since Mr Solomon took over, there was “a lot more work that can be done”. The master plan to take Goldman to the next era has been the single biggest talking point among investors and analysts since Lloyd Blankfein’s 12-year reign as chief executive ended last year. Mr Solomon and his team promised a “front to back” review that would assess resource allocations and priorities across the business. An update was originally promised in “the spring” of 2019. On Monday, Goldman said the “comprehensive update” would come in the first quarter of 2020, while promising incremental progress reports before then. Many analysts were not pleased. “Ultimately, we need to see his strategic plan and he needs to execute on it before we can really judge him,” said Christian Bolu, banks analyst with Autonomous, who believes Mr Solomon is “doing the right things [by] trying to move the business away from slow-growth legacy businesses to faster growing ones”. Fixed income revamp Fixed income trading was the problem child at Goldman when Mr Solomon took over. The bank posted its worst commodities

they actually plan to do. Mass market revolution Just as former trading executive Mr Blankfein represented the face of Goldman in FICC’s heyday, Mr Solomon, an amateur disc jockey, became the embodiment of the bank’s mass market future. Goldman’s recent announcement of a credit card with Apple is a step in that journey, even though the financial impact of the tie-up is unclear. Mr Solomon also has plans to expand Marcus, Goldman’s online-only bank, and get deeper into managing money for wealthy Americans. In investment banking, Mr Solomon has accelerated Goldman’s efforts to serve smaller corporate clients, announcing plans on Monday for a team of 100 investment bankers focusing on companies worth less than $2bn. Under Mr Solomon, Goldman is also pushing into the cash management business, an unglamorous business dominated by big commercial banks such as Citigroup, HSBC and JPMorgan Chase. Investment banking rebound Investment banking — and particularly the advisory end of the business where Mr Solomon built his career — has been a bright spot since he started. In the first quarter, Goldman grew advisory revenues by 51 per cent, to $900m, far better than the 12 per cent rise in advisory fees at rival JPMorgan’s in the same period. Goldman also stormed ahead of JPMorgan to clinch the number one spot for M&A and equity capital markets revenues in the year to date. www.businessday.ng

Indonesia: Joko Widodo plays ‘religion card’ in election gamble Some fear president’s alliance with Islamic cleric will drive up intolerance in the south-east Asian country STEFANIA PALMA

he most important character in the Indonesian election could be neither of the two main candidates but a 76-year-old cleric enlisted to bolster the religious credentials of the incumbent Joko Widodo. Ma’ruf Amin, a controversial choice as Mr Widodo’s running mate, heads Nahdlatul Ulama, the biggest Islamic organisation in a country with the largest Muslim population in the world. He was a catalyst for a 2016 blasphemy campaign that saw mass protests in Jakarta against the Christian governor Basuki Tjahaja Purnama, known as Ahok, who was later jailed in a move that alarmed international business. Wednesday’s general election — with 193m eligible voters — is a rematch of the 2014 contest that pitted Mr Widodo, then the governor of Jakarta and seen as a political outsider, against Prabowo Subianto, a former army general dismissed following allegations of human rights abuses against activists. Mr Widodo, commonly known as Jokowi, won narrowly on campaign promises to boost infrastructure and a call for a more meritocratic country. Civil society groups and NGOs backed him in the hope that he would defend minority rights. But this election is being fought against a very different backdrop, say observers, arguing that the blasphemy case has acted as a catalyst for a rise in intolerance in the country. Some fear that Mr Ma’ruf’s influence, should the president win a second term as seems likely, could translate into a further Islamisation of Indonesia. Two decades after the end of dictatorship in south-east Asia’s largest economy, some fear this could spark a reversal of its democratisation. Its openness to foreign investment is also at stake, with Mr Prabowo hinting at a desire to reassess commercial relations with China and build on protectionism around natural resources in one of the world’s biggest commodity producers. Those who back Mr Ma’ruf say the cleric is working to bring Islamic standards to Indonesian society and the economy but opponents argue that as one of the most influential clerics in the country he is responsible for poisoning community relations. Chart showing how over 50% of voters in Indonesia are under 40 “The religious polarisation of elections in Indonesia, long believed to be on the decline, reached new heights [with the anti-Ahok protests],” wrote Marcus Mietzner, assistant professor at Australian National University, in a recent paper. Speaking to the Financial Times, Mr Mietzner adds: “Jokowi deserves a lot of blame for not countering the

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intensifying Islamist discourse with a compelling pluralist narrative. Instead, he tried to adopt many of the Islamists’ themes — and the minorities were the main victims of that move.” For many this is embodied in Mr Ma’ruf. He was brought on to the ticket to neutralise attacks on Mr Widodo for not being sufficiently Muslim — even if others argue that Mr Widodo actually represents a large chunk of the population as a moderate Muslim and centrist. Already under pressure after a crackdown on Islamist groups, the president has been labelled by opponents as everything from a communist to an apologist for China — a major investor in the country — and even an advocate for the LGBT community. The president’s supporters praise his infrastructure push — including the launch of ports, highways, airports and the long-awaited Jakarta underground network — in a disjointed country of about 17,000 islands. But other younger, urban voters who backed him in 2014 are critical of him for failing to protect religious freedoms and for playing what they describe as a religiousbased political game to win the Muslim vote. “Jokowi has not invested enough political capital to protect religious, gender and sexual orientation minorities,” says Andreas Harsono, researcher for Human Rights Watch in Indonesia, adding that the president — not a member of the military or business elite — used the little capital that he had to force through infrastructure development. The most disillusioned former supporters of Mr Widodo — who appears comfortably ahead in opinion polls — have joined an abstention movement, Saya Golput, led by Lini Zurlia, a Jakarta-based female gay rights activist who voted for Mr Widodo in 2014. “We thought he [Mr Widodo] was going to really be a new hope for us,” she says. But the elevation of Mr Ma’ruf — and the appointment of former generals to Mr Widodo’s cabinet — has left her frustrated. “That’s when I decided 100 per cent that I was not going to vote for either Jokowi or Prabowo”. Described by Human Rights Watch as “central to some of the most intolerant elements of Indonesian contemporary religious and political culture” Mr Ma’ruf was never supposed to be a candidate for vice-president. He won out in an internal power struggle within the ruling coalition. There is a visible lack of chemistry between the president and his running mate. At a campaign rally on Saturday Mr Widodo applauded diversity in the country while Mr Ma’ruf led an Islamic prayer for electoral victory. A few hours later, at the final presidential debate, the candidate for vice-president appeared a pe@Businessdayng

ripheral figure. But, having won a seat at the table, critics fear Mr Ma’ruf will push an Islamic agenda as the price for his support. In what is already a socially conservative country — where homosexuality is illegal in the province of Aceh and where publicising atheism can land you in jail — some fear that will make minority groups more vulnerable. Mr Ma’ruf has criticised the constitutional court for rejecting a petition to criminalise gay sex and has pushed for a broad anti-pornography law. Under his chairmanship, the Ulama Council issued a fatwa, or religious ruling, against the Ahmadiyya Muslim minority for deviating from Koranic teachings, and a separate one calling for the criminalisation of LGBT activities. Yet his most famous intervention came with the issuing of a fatwa against Mr Basuki for blasphemy after the ethnic Chinese and Christian politician dismissed the notion that the Koran prohibits Muslims from selecting a non-Muslim as their leader. The move helped trigger mass rallies against Mr Basuki, an ally of Mr Widodo, who ended up losing the 2017 Jakarta gubernatorial elections to an ally of Mr Prabowo and was later found guilty of blasphemy. At the time Mr Widodo’s popularity was soaring, but Mr Basuki’s demise was seen as a victory for Islamists frustrated by the president’s attempts to limit their influence over the government. To placate protesters, Mr Widodo acquiesced to the prosecution of his ally. But when a second mass rally in Jakarta followed, the government responded by banning the local branch of Hizbut Tahrir — a global organisation calling for the establishment of a caliphate in the Muslim world that has been outlawed in many Muslim-majority countries as well as China and Russia. It also sought to prosecute Habib Rizieq Shihab, a cleric who was seen as a leader of the anti-Ahok protests. Mr Rizieq — who appeared via video at a recent mass rally of Prabowo supporters in Jakarta — was effectively pushed into exile in Saudi Arabia. “Prabowo has stayed the same,” says Charlotte Setijadi, assistant professor at Singapore Management University. “It’s Jokowi who has changed.” Surveys compiled after the Jakarta rallies — which attracted upwards of 700,000 people — by Mr Mietzner and Burhanuddin Muhtadi, a political analyst, show the share of Muslims objecting to non-Muslims holding political office jumped by about 12 percentage points from before the anti-Ahok rallies in 2016 to 54.6 per cent in 2018. These results also hint at the impact of the successful mobilisation of Islamist groups, which have a long history in Indonesia but have often lacked direction.

WEST AFRICA

ENERGY intelligence oil

gas

power

Wednesday 17 April 2019April

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BUSINESS DAY

OIL

Gabon: CGG Completes 2D Survey Offshore Gabon

Page 48

GAS

Mediterranean: Egypt, Israel inch closer to resolving gas arbitration Page 49

Market Insight

R-L: Oyebuchi Okereke, publicity secretary; Debo Fagbami, chairman, both of Society of Petroleum Engineers Nigeria Council and Kunle OdusokiStevenson , head, strategist/legend and legacy PR, at the press conference on the forth coming Oloibiri Lecture series and Energy Forum in Lagos. Pic by Pius Okeosisi

Debrief

We may not see the end of coal soon. Not so soon FRANK UZUEGBUNAM

Oil pauses; focus on future supply direction Page 53 OPEC weekly basket price DAY

PRICE

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70.44

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70.41

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70.31

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70.35

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70.33 Source: OPEC

art of the transition to renewables include phasing out coal to avoid the worst effects of climate change. Environmentalists are keen to see that the phasing out of coal move forward as quickly as possible. Already, over 40 banks worldwide have stopped financing new coal mines and/ or coal plants directly, through project finance or dedicated finance in any part of the world. Germany, the most coaldependent country in Europe, plans to phase out all of its coalfired power station by 2038. The country closed its remaining black coal mines last year, but its import of coal is on the rise. The country is expected to import 45 million tonnes of hard coal this year, up by 1.4 percent from 2018 as closure of domestic mines reduces domestic supply. Across Europe, coal generation has dropped at a 5 percent

average annual pace over the past 5 years. In US, coal-power generation decreased by about a third in the 7 years through 2017. South Africa’s coal production output are dropping too but it is more as a result of low investment in new coal mining capacity and older mines reaching the end of their lives. But while the noise about phasing out coal keeps trending, Asian countries continue to build new coal-fired plants and expects coal-fired generation to keep rising up to 2027; 13 of the top 20 countries building new coal capacity are Asian, led by China, India, Vietnam, Indonesia and Bangladesh. India added 152 GW of coal power capacity from 2006 to 2017, second only to China. Vietnam is also considered a major coal hotspot, with large numbers of proposed projects in active development, largely financed by China, Japan and Korea. Here in Nigeria, there are moves to build new coal-fired plants. Speaking recently at the 55th Annual International Conference and Exhibition of the

Nigerian Mining and Geoscience Society (NMGS) in Enugu, Abubakar Bawa, Minister of Mines and Steel Development, said the Federal Government is committed to building coalfired electricity by 2020 and plans to grow the coal-fired electricity generation to about 30 per cent of total energy generation in the country. Experts say that diversifying the Nigeria’s energy mix to include coal-to-power projects can add an additional 4,300MW to its electricity power generation for 20 years with its proven coal deposits estimated at about 2.8 billion metric tons. “At the calorific value of coal in the Anambra basin (Enugu, Anambra, Benue and Kogi), 3.2 million tonnes of coal is required to generate 1000MW per year. A typical coal fired power plant is designed to last for a minimum of 20 years. This means that 2.8 billion metric tonnes can sustain 4375 MW”, Bath Nnaji, former Minister of Power and Chairman, Geometric Power Limited told Businessday.

It is estimated that a1,000MW coal-fired power plant costs about $1.7 million to $2 million to set up and it takes approximately 3 years to set up. Elsewhere in Mexico, global trader, Glencore just won contracts worth around $520 million to supply 4.94 million tonnes of coal to Mexico, staterun power utility, the country’s Federal Electricity Commission (CFE) said. Glencore won all 12 auctions held to supply a CFE plant in the southwestern state of Guerrero with the coal, for delivery between May and December of this year. And there is a new innovation. Royal Dutch Shell just signed a long-term deal with Tokyo Gas that partly uses coal-linked indexation for the pricing. Analysts say pricing an LNG contract to coal is a kind of a risk management strategy for companies competing with coal-fired power generation and would be attractive in markets with solid shares of coal generation, including the Asian markets Japan, China, and India.

Wednesday 17 April 2019

BUSINESS DAY

oil

WEST AFRICA

Outlook

Brief Uganda: Uganda to launch second oil licensing round in May

Gabon: CGG Completes 2D Survey Offshore Gabon

eophysical services company, CGG, said it has completed acquisition of 9,800 km long-offset broadband 2D multi-client seismic survey in the highly prospective Gabon South Basin. Fast-track data sets will be delivered in batches from the end of April, giving interested oil companies sufficient time to understand offshore petroleum systems and appraise blocks offered in Gabon’s 12th offshore licensing round planned for September 2019. “The vast offshore acreage of Gabon

includes unexplored areas with good potential for a hydrocarbon system. However, there is often not enough high-quality geological and geophysical data to effectively reduce the exploration risks. This new 2D survey, which received significant industry pre-funding, puts the right data in the hands of our clients at the right time, enabling them to de-risk opportunities and select the appropriate blocks during the current licensing round. It also extends CGG’s data coverage from our recent 3D survey further inshore, which led to two successful discovery wells,” Sophie Zurquiyah, CGG CEO, said.

The modern data set will help define the full extent of existing and new plays in the region. It will also aid in understanding the thickness variations in the sediment overburden for source rock and maturity analysis. Broad bandwidth data will not only increase resolution and improve characterization of the turbidite systems that represent potential exploration targets, it also provides deep imaging penetration with low frequencies to help describe the nature of the crust. New insights from this data will expand and update CGG’s Gabon South Basin JumpStart integrated geoscience package.

ganda plans to launch a second competitive bidding round for exploration licenses in the Albertine Graben area where over 6.5 billion barrels of oil resources have already been discovered, Irene Muloni, Uganda’s minister of Energy and Mineral Development said. According to Muloni, the new licensing round will cover seven new exploration blocks located in areas such as the Lake Kyoga, Moroto-Kadam and Hoima basins in the Lake Albert stretch. “We have already compiled data for seven oil blocks and we shall announce their availability in the new bidding round in May this year at the African Petroleum Conference and Exhibition in Mombasa,” Muloni said. The bidding had earlier been scheduled for June this year but the government has brought forward the round following early completion of data compilation. The minister expects licenses to be offered in the first quarter of 2020. Uganda launched its first competitive round in 2014 but the round failed to attract significant interest from larger oil companies. Completed it in 2016, the round saw Armour Energy from Australia and Oranto Petroleum from Nigeria emerge as the top bidders for the Kanywataba area and Ngassa block respectively all in the Albertine Graben area. France’s Total, China’s CNOOC and the UK’s Tullow are preparing a final investment decision this year for a $20 billion project to develop over 1.7 billion barrels of reserves in Uganda’s western Albertine Graben area near the border with the Democratic Republic of Congo. The country is also planning to construct a 1,445 km crude export pipeline via Tanzania’s port Tanga and an oil refinery that is expected to produce finished products for the East African region.

Nigeria: NigerStar 7 adds pipelay vessel

igerStar 7, a joint venture between Subsea 7 and Nigerdock, said it has acquired 2009-built pipelay vessel Seven Antares. The Seven Antares, previously owned by Subsea 7, has a 300-ton main crane capacity and is a 120-ton S-lay vessel with capacity to lay pipe of up to 60-inch diameter; with an accommodation area in excess of 330 berths and a deck area of over 1,300 square meters. “The vessel will provide both NigerStar 7 and Nigeria a fully owned versatile pipelay vessel ideal for conventional, heavy-lifting and hook-up projects,” the company said in a press statement. “The Seven Antares acquisition is a very important milestone for us. I am deeply proud of this investment, as it reinforces NigerStar 7 commitment to invest in Nigeria through the acquisition of strategic local assets and to continue to invest and to develop our people.

“The Seven Antares is currently laying pipe for one of our clients and I am sure she will be kept busy supporting

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the growth of Nigeria’s energy industry,” Derek Izedonmwen, Sales & Marketing Director of NigerStar 7, said.

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In April 2018, Subsea 7 was awarded a contract by Mobil Producing Nigeria Unlimited for the Production Uplift Pipeline Projects (PUPP) in shallow water, offshore Nigeria. The contract scope includes engineering, construction, transportation, installation and pre-commissioning of 20 kilometers of 24” Corrosion Resistant Alloy (CRA) pipeline between the Idoho Platform and the terminal onshore and of 2 kilometers of 24” CRA pipeline between the Edop and Idoho Platforms, as well as associated topside modifications and tie-ins at both ends. For NigerStar 7, the Seven Antares acquisition adds to other recent investments to strengthen its local fleet. The company acquired DP2 anchor handler NigerStar 7 Adaba (previously Nor Cheif ) in 2018, and it added a 60-meter cargo barge CB34 earlier this year. NigerStar 7 also operates jack-up accommodation and crane barge Seven Inagha.

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Wednesday 17 April 2019

BUSINESS DAY

gas Brief

WEST AFRICA

ENERGY intelligence

Mediterranean: Egypt, Israel inch closer to resolving gas arbitration

Global LNG Market: Asian prices climb for a second week as buying interest returns

sian spot prices for liquefied natural gas (LNG) rose as interest from buyers returned amid a wide price disparity between spot and term prices. Most long-term LNG contracts in Asia are linked to oil prices and rising crude prices are likely causing buyers to seek more spot cargoes though no firm purchases could be confirmed, four trade sources said. Spot prices for May delivery to Northeast Asia LNG-AS climbed to $5.25 per million British thermal units (mmBtu) up 75 cents, or nearly 17 percent, from the previous week, trade sources said. Prices for cargoes to be delivered in June are estimated to be higher at around $5.50 per mmBtu, the sources added. “The Brent rally could be causing more people to look for spot volumes which are cheaper than long-term contracts,” said one of the sources, a Singapore-based LNG trader. European gas prices climbed earlier but have since eased slightly. Some interest for LNG was seen from Chinese buyers, two traders said, though inventories were said to be still quite high in the world’s second biggest LNG importer, after Japan. South Korea’s GS Energy is seeking a cargo for early June delivery. Buying interest was also seen from India with Indian Oil Corp seeking a cargo for delivery in second half of May into its newly commissioned Ennore terminal while Essar Steel had earlier sought a cargo for June delivery, they added. Papua New Guinea LNG plant has offered a cargo for delivery in second half of May while Angola LNG offered a cargo for mid-May delivery to a destination as far as Singapore, two trade sources said.

srael’s energy minister, Yuval Steinitz, said that an arbitration case with Egypt over a defunct natural gas deal could be solved in the coming months, but that the issue was not holding back cooperation in the sector. In 2015, the International Chamber of Commerce ordered Egypt to pay state-owned Israel Electric Corp about $1.8 billion in compensation after a deal to export gas to Israel via pipeline collapsed in 2012 due to attacks by insurgents in Egypt’s Sinai peninsula. Egypt appealed the decision and a final agreement has yet to be reached, though earlier this month Israel Electric said they were close to reaching an agreement in which Egypt would pay it $500 million over eight and a half years. “I think there is already a final understanding, but it needs approval of the Israeli electric authority and maybe also of someone on the Egyptian side,” Steinitz said. In the meantime, Steinitz said, the dispute was not stopping Israel from expanding energy ties with Egypt, one of

two Arab countries to have made peace with Israel. Egyptian officials have said the arbitration could hold up commercial agreements. Israel sees Egypt as a key market to export its newfound gas and a landmark $15 billion export deal is due to commence this year. One Israeli company, Delek Drilling,

is considering expanding its presence in Egypt by buying into liquefied natural gas terminals that would then export gas to Europe. “There is no linkage, whatsoever, between this arbitration and Israeli and Egyptian energy cooperation and relations. We have no government control on such kind of commercial arbitration,” Steinitz said.

Equatorial Guinea: Rosneft, Eni in line for Fortuna gas block

ussian oil giant Rosneft and Italy’s Eni have expressed an interest in developing Equatorial Guinea’s stalled Fortuna LNG project which is now back on the block as part of a new licensing round, according to a government official from the Central African producer. Equatorial Guinea launched a new onshore and offshore licensing round, as OPEC’s smallest producer looks to reinvigorate upstream activity and stem a decline in oil output from its maturing fields. The licensing round includes 24 offshore and two onshore blocks and covers Ophir Energy’s former gas-rich Block R, which was to feed its Fortuna floating LNG project. Rosneft and Eni are among a list of integrated oil majors which have already signaled an interest in the former Block R. China’s CNOOC and Malaysia’s Petronas have also shown interest, he said. Equatorial Guinea stripped UKbased Ophir Energy of its license to develop the major offshore Fortuna gas discovery earlier this year after Ophir failed to secure financing for the project. Now renamed as block EG-27, the former Fortuna block’s resources are estimated at some 3.7 Tcf (105 Bcm) of gas, and the $2 billion Fortuna LNG facility www.businessday.ng

had been expected to produce 2.2 million mt/year of LNG. “We do have a lot of interest in that block, especially some Russian interest. They have made a very enticing and interesting proposal but we still want everybody to bid,” Gabriel Obiang Lima, Equatorial Guinea oil minister, said. Equatorial Guinea is open to block EG-27 being developed either as a floating LNG project or as pipeline connection to its existing Punta Europe LNG plant on Bioko Island, he added. In addition to the gas block EG-27, ExxonMobil, Tullow and Kosmos have also expressed interest in the coun-

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try’s latest upstream round, the official said. Block EG-23, adjacent to Marathon Oil’s Alba gas-condensate field and the maritime boundary with Nigeria, holds the Estaurolita gas discovery. Located 27km from ExxonMobil’s Zafiro field, the EG-23 block also includes the Tsavarita oil discovery and the non-commercial Sodalita West oil find, the ministry said. The round closes on September 27, and a month later winners will be announced at the Gas Exporting Countries Forum 5th Gas Summit in Equatorial Guinea. The government expects to sign the final PSC in early 2020.

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Wednesday 17 April 2019

BUSINESS DAY

power

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ENERGY intelligence

West Africa: GE to build energy systems in Benin, upgrade three substations in Cote d’Ivoire

E announced that it has signed two deals to build energy systems in Republic of Benin and upgrade three substations in Cote d’Ivoire. The energy company noted in a statement that in Benin, 85 percent of electricity utilised is currently imported from neighbouring countries. To strengthen the country’s grid and manage electricity losses that result during energy transmission, GE will design and supply the first Advanced Distribution Management System (ADMS)

in Benin for the Société Béninoise d’Energie Electrique (SBEE) and undertake the rehabilitation of substations and telecommunication infrastructure at the National Distribution Control Center in Cotonou. Part of GE’s Digital Energy portfolio, ADMS, is engineered with adaptive algorithms and predictive analytics to help utilities operate the grid more efficiently and enable automation. The system will be able to predict issues, identify the faults on the grid, and propose a restoration plan.

“The Distribution Management System (ADMS) will help optimise energy distribution, reduce electricity losses and minimise shortages,” said the National Coordinator for MCA-Benin II. “This project is aligned with the government’s ambition to efficiently manage the generation from power plants, microgrids, and other grid infrastructure to improve the quality, efficiency, and availability of power to our customers. This system will also help manage the security and maintain control of the grid.” Under this contract with Cote d’Ivoire, GE will rehabilitate and expand three 225kV substations in Ferke, Man and Taabo. The project will help improve the electricity supply in the northern, western and central part of Cote d’Ivoire. “With about 90 percent of the country’s population having access to electricity and the growing demand for energy, limited distribution systems cause a total energy loss of approximately 20 percent annually. There is a need to rehabilitate and strengthen the country’s grid infrastructure,” said Bile Gerard Tanoe, Secretary General of CI-ENERGIES. “This project will improve the power capacities of Ferke, Man and Taabo substations to help mitigate total energy losses and provide the reliability needed to limit the total unavailability of these critical substations,” he added.

Wind Energy: 300GW of new wind capacity in the pipeline for 2023

he Global Wind Energy Council (GWEC) has published the 14th edition of the Global Wind Report, which confirmed that in 2018 there was 51.3GW of new installations. Market-based mechanisms, such as auctions, tenders and Green Certificates

were the main drivers behind new installations in 2018. GWEC expects strong growth in the coming period, with around 300GW of new capacity to be added in the next five years, as the wind industry continues to prove its cost-competitiveness in relation to incumbent fossil fuel generation

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and nuclear around the world. “2018 was a good year for the global wind industry, with installations remaining above 50GW. The dominance of onshore wind power is not surprising given continued and growing investment, with market-based mechanisms like auctions, tenders and Green Certificates being the main drivers of new onshore installations, accounting for 35% of total installations. 2018 was also a pivotal year for the offshore industry, particularly in Asia. If governments remain committed, offshore wind will become a truly global market in the next five years,” Karin Ohlenforst, director of market intelligence at GWEC, said. Ben Backwell, CEO of GWEC, added: “We have changed the way we gather, analyse and share data. This year’s Global Wind Report is built on our new and improved Market Intelligence function that offers unmatched exclusive data and insights. We are growing our team and are more dedicated than ever to steering the industry and supporting our members into new and exciting opportunities for wind energy.”

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Ghana: Total paves way for better energy with its 4th solarpowered station

otal Petroleum Ghana Limited has converted its service station at Korle Bu into a solar-powered one, aiming to equip 5,000 service stations with photovoltaic solar panels around the world. The project is fully aligned with Total’s ambition to become the responsible energy major and its commitment to developing solar power. “The solar-powered stations repre-

sent Total’s commitment towards energizing communities and fostering sustainable development. It also illustrates the company’s dedication towards ensuring environmental sustainability, innovation, and premium customer service”, Eric Fanchini, Managing Director of Total Petroleum Ghana Limited, said. Since Total Petroleum Ghana inaugurated its three solar powered service stations, namely, TOTAL Tema Main Harbour, TOTAL Takoradi Airport Junction and TOTAL Miles 4 in Kumasi, it has been able to reduce its operation cost thus decreasing the pressure on the local grid and exploring the potential of solar energy. The four solar-powered stations were constructed and maintained by local engineers and solar experts. “Total takes action to develop new energies that are efficient and environmentally friendly, and it is our resolve to contribute to local development and environmental sustainability. This is equally central to the modernization of our service stations to bring convenience and quality products and services to customers”, Fanchini said. The TOTAL Korle Bu solar-powered station is an integral part of efforts to reinforce Total’s network identity with a resolutely contemporary image and installations that are more energy- efficient and outlets that blend harmoniously into the environment. The photovoltaic panels of 18.5 kWp on its forecourt roof convert the sun’s rays into electricity. This electricity is used to supply renewable energy to power the entire service station.

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Wednesday 17 April 2019

BUSINESS DAY

POLICY

WEST AFRICA

ENERGY intelligence

Revenue of drilling and well services industry recorded slight disruption in 2018 - Rystad Energy DIPO OLADEHINDE

report by a Norway based, independent energy research and business intelligence company Rystad Energy, have disclosed that there was a slight revenue decline in 76 of the top drilling and well services companies which have reported their annual results for 2018. “Although we saw a generally positive trend from 3Q 2016 towards 2Q 2018, where revenues grew at an average quarterly rate of 3percent, we now see a slight disruption; a 2percent revenue decrease in 4Q 2018,” Rystad Energy said. However the change was not dramatic as the decline was driven by a sudden $30 per barrel drop in oil price. “We have seen a similar decline in 1Q 2018, which reverted to growth the following quarter. This time, however, we expect to see growth rates strained into 2019 as several E&P companies in North America are now guiding their investments flat or downwards.” Drilling and well service companies experienced abrupt revenue declines from 2014 to 2016 due to the plummeting oil price. Alongside a declining number

of new wells being drilled and completed, the companies’ combined revenues dropped a staggering 44 percent in two years before the industry bottomed out in the third quarter of 2016. Rystad Energy noted that from 2016 to 2018, global drilling activity began to rise again, driven by unprecedented growth in North America. Likewise, demand for services has also begun to pick up, especially for shale-focused oilfield service providers. “In contrast, the road to recovery for providers focusing outside North America has gotten off to a slow start,” Rystard Energy said. According to Rystard Energy, one key discussion that has received extra attention is the North American land market versus the international market which has generated a lot of controversy over the years. Rystard Energy noted that there has been a wide variety of strategic approaches to this matter, with some service companies seeking balance between the markets whereas others have chosen to focus their efforts wholeheartedly on one of the two segments while entirely disregarding the other. “In recent years, the North American land market has been driven by the production of shale and tight resources. www.businessday.ng

Many wells need to be drilled in order to develop these resources and, due to the short lead times, the North American market has been quick to react to improving oil prices,” Rystard Energy said. “The international market, on the other hand, is comprised of conventional resources with longer development leadtimes.” Rystard Energy explained that international revenues were less affected by the downturn in 2014 to 2016, but on the other hand, “we see that the highest growth rates – recorded during the recovery period from 2016 to 2018 – comprised revenues generated in the North American market.” Conversely, international markets have maintained flat revenues and service providers have struggled to revert to consistent growth as international investments by E&P companies have remained low. Looking back at the second half of 2018, an interesting trend emerged as North American revenues were immediately slowed by the weakening of the oil price, while the international market maintained its gradual growth trend. Looking ahead, Rystard Energy expect the price of Brent crude to remain in the range of $60 to $70 per barrel, and

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that the number of wells being drilled will stabilize around 2018 levels in the short and medium term. Many shale-focused E&P companies have guided their investments flat or down this year as they aim to focus on improving their free cash flow. Contrarily, Rystard Energy expects that internationally-focused E&P companies will increase their investments after a period of low investment, and focus on maximizing free cash flow. “We anticipate a return of offshore investments as project sanctioning activity has picked up considerably over the past couple years, and numerous projects will soon enter the development stage,” Rystard Energy said. Also, many E&P companies have experienced negative reserve replacement as an indirect result of cost-cutting during the downturn, and those players will need to increase exploration expenditure in order to flip the trend. “We expect international drilling and well service revenues to maintain a gradual increase as investments return, while the North American providers can expect reduced growth potential as E&P companies are indicating new market strategies in a bid to please investors,” Rystard Energy concluded.

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Wednesday 17 April 2019

BUSINESS DAY

finance people appointments

WEST AFRICA

ENERGYintelligence

Trafigura loses $254m on oil, gas hedges

Brief

Aramco gets unprecedented $100 billion demand for bond deal

audi Aramco has received more than $100 billion in orders for its maiden global bond. The order book is set to be the largest ever seen in emerging markets, covering many times the $10 billion to $15 billion Aramco is expected to raise. It is a sign of investors’ hunger for yield in a world where bonds from some developed nations have negative interest rates. “This deal should do extremely well,” said Anthony Simond, a fund manager at Aberdeen Asset Management in London. “The company appeals to more than one type of investor. Firstly, emerging market debt funds and secondly global investment grade investors.” The bond sale is largely seen as Plan B to raise money for the kingdom’s economic agenda

oil producer’s pristine balance sheet to finance his ambitions. The Aramco bond sale will be final confirmation of the turnaround for the Middle Eastern nation. The company told investors it would sell debt in six portions, from three to 30 years, according to the people familiar with the matter. With strong demand, Aramco told investors it expects to pay about 1.25 percentage points more than US Treasuries for its 10-year notes, compared with Saudi sovereign bonds trading at about 1.27 percentage points. Traditionally, those risk premiums fall in a high-demand bond sale as the process advances, suggesting Aramco may pay even less. Investors will be watching closely to see how much

ne of the world’s biggest traders, Trafigura, booked a $254 million loss from oil and gas market hedges in 2018, highlighting the challenges traders face when taking large loans to protect against price swings in illiquid commodities. In 2018, Trafigura signed a deal with US company, Cheniere, to buy LNG for 15 years and export it to Europe and Asia. On signing the deal, Trafigura hedged its exposure to US LNG prices against sharp price moves in the rest of the world. But hedging LNG is complicated and contains risks, says Trafigura’s own 2018 report

and its auditor PwC, which reviewed and signed off on Trafigura’s accounts for last year. To hedge the deal, Trafigura had to rely on a combination of liquid prices such as those of US natural gas or Brent crude and assumptions on the correlation of those liquid benchmarks to illiquid global LNG prices for up to five years forward. “This hedge is not perfect but it is the best one available out there at the moment,” a Trafigura source said. As the LNG market develops, he said, more instruments will appear. “It is extremely difficult to effectively hedge these long-term contracts, especially in a new market like LNG,” said Arnaud

Vagner, founder of Iceberg Research. Vitol also said contract maturities created hedging complexities. In addition to LNG, Trafigura in 2018 hedged its US oil pipeline and refining deals against sharp moves in US crude versus Brent prices. To hedge LNG, pipelines and refining Trafigura built a short position with a fair value loss of around $1.9 billion using liquid instruments such as Brent, US natural gas and diesel. As losses from the shorts exceeded gains from the longs, Trafigura had to book a $254 million loss representing a reduction of 22 percent of the potential net profit it would have otherwise achieved in 2018.

Chevron to buy Anadarko for $33bn

after the initial public offering of Aramco was postponed until at least 2021 from an initial 2018 target. In effect, Saudi Crown Prince Mohammed bin Salman, who runs the country day-to-day, is using the state

the pricing tightens at the next stage of the process. Such has been the massive response to the deal, the company has opted not to give any further price indications until after the book has closed today. www.businessday.ng

hevron Corp said it will buy oil and gas producer Anadarko Petroleum Corp for $33 billion in cash and stock in a deal that doubles down on its bet on US shale and LNG as US energy production is shattering records. The deal makes Chevron the second-largest major by crude production, behind Exxon Mobil Corp, up from fourth. It expands Chevron’s reach in two areas where US energy output is surging - shale from the Permian Basin of west Texas and New Mexico, and liquefied natural gas (LNG) - which have helped make the US one of the world’s largest energy exporters. “Chevron now joins the ranks of the ‘ultramajors’ – and the big three becomes the big four,” said Roy Martin, senior analyst at consultants Wood Mackenzie. “The acquisition makes the majors’ peer group much more polarized. Exxon Mobil, Chevron, Shell and BP are now in a

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league of their own.” US crude production stands at a record 12 million barrels a day (bpd), and the nation is the third-largest producer of LNG, the super-cooled fuel that is seeing record demand as a cheaper, cleaner alternative for countries that still rely heavily on coal for power generation. The combined companies are expected to produce more than 1.6 million barrels of oil

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equivalent per day (boepd) in the United States this year, according to Wood Mackenzie. Mike Wirth, Chevron Chief Executive, called the deal a “great fit” for the company. “This is really about creating shareholder value,” Wirth said. “It’s a great combination. That is what drives this.” The deal is the oil industry’s largest since Royal Dutch Shell bought BG Group in 2016, and it sparked speculation that other shale producers are in play. Shares of Apache Corp, which also has extensive acreage in the Permian Basin, rose 2 percent, while Pioneer Natural Resources Co jumped 10 percent. Anadarko also has a Mozambique LNG project, part of one of the industry’s largest planned current investments, which Wirth said he still expects to move to final approval “sooner rather than later” this year. Expenses from that project are expected to reach $4 billion over several years.

Wednesday 17 April 2019

BUSINESS DAY

marketinsight

WEST AFRICA

ENERGY intelligence

Oil pauses; focus on future supply direction

il prices halted their rally with Brent futures falling below $71 per barrel on signals that Russia may exit production cuts. Losses were limited by a tightening of global supplies, as output has fallen in Iran and Venezuela amid signs the United States will further toughen sanctions on those two OPEC producers. Brent crude futures were at $70.95 a barrel, down 60 cents, or 0.85 percent, having hit their highest since November 12 at $71.87. US West Texas Intermediate crude futures were at $63.30 per barrel, down 59 cents or 0.93 percent. The Organization of the Petroleum Exporting Countries (OPEC) and its allies meet in June to decide whether to continue withholding supply. OPEC, Russia and other producers are reducing output by 1.2 million barrels per day from January 1 for six months. OPEC’s de facto leader, Saudi Arabia, is considered keen to keep cutting, but sources within the group said it could raise output from July if disruptions continue elsewhere. Russian Finance Minister An-

ton Siluanov said that Russia and OPEC may decide to boost production to fight for market share with the United States, but this would push oil as low as $40 per barrel. US energy companies increased the number of oil rigs operating for a second week in a row. On the bullish side, the head of Libya’s National Oil Corp warned that renewed fighting could wipe out crude production

in the country. Production has been also falling steeply in Venezuela due to US sanctions. Iranian output is expected to suffer when the United States tightens sanctions on Tehran in May. “We see a risk of a spike in oil prices by year-end,” said Bank of America Merrill Lynch, citing a weakening dollar and a surge in distillates demand due to rule changes for marine fuels.

OPEC Flakes UAE energy minister says Russia committed to OPEC+ oil cuts

nited Arab Emirates’ energy minister, Suhail bin Mohammed al-Mazroui, said that Russia was committed to its oil supply cut agreement with OPEC and would not raise its output unless in coordination with the exporting group. Al-Mazroui also said that compliance with the cuts by both Russia and OPEC’s second largest producer Iraq has increased in March, adding that he expected the oil market to achieve balance by the end of 2019. “Russia will not increase its output unless in coordination with the rest of OPEC and OPEC+ countries,” Mazroui said. “I believe in the wisdom of Russia, and I believe that Russia has benefited from this agreement. I don’t see any reason for Russia not to continue with us.” Mazroui’s comments came a day after Russian President Vladimir Putin said that Russia and OPEC should discuss the future of their oil output-cutting deal later this year, adding that cur-

rent oil prices suited Moscow. The Organization of the Petroleum Exporting Countries and other oil producers led by Russia agreed to reduce their combined output by 1.2 million barrels per day (bpd) from January 1 this year for six months in an attempt to balance the market. Russia agreed to cut its production by 228,000 bpd but has struggled to comply with the pact.

OPEC could raise oil output if prices increase, shortages mount

IEA highlights demand concerns amid oil market tightness

he global oil market is tightening due to sharp production falls in Saudi Arabia and Venezuela, the International Energy Agency said, but cautioned there are still “mixed signals” over the outlook for oil consumption and stock levels. In its monthly oil market report, the IEA kept its estimates for global oil demand unchanged at 1.3 million b/d in 2018 and 1.4 million b/d in 2019, but warned

“risks are currently to the downside”. With Brent oil futures having recently risen above $70 a barrel this month from a nadir of $50 at the end of 2018, the Paris-based agency was keen to point out that “the IEA has regularly warned of the dangers of prices rising even higher.” While demand in China, India and the US is estimated to have grown by 1 million b/d in January-February, it was a very different story for the OECD econ-

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omies, the IEA noted. “Overall demand in the OECD countries fell by 0.3 million b/d year on year in the fourth quarter of 2018, the first such fall for any quarter since the end of 2014, and it is likely to have fallen again in the first quarter of 2019 due to weakness in some European economies, with perhaps more to come if there is a disorderly Brexit,” it said. The IEA also pointed to uncertainties in Argentina and Turkey and that higher oil prices had not yet given the Middle East economies a substantial boost in terms of demand. Global supply dropped 340,000 b/d in March due to the OPEC-led production cut deal and a sharp drop in output at sanctions-hit Venezuela, the IEA said. The agency estimated that OPEC production in March fell 550,000 b/d to 30.1 million b/d as Saudi Arabia’s output fell to its lowest level in two years, boosting compliance with supply cuts to 153 percent. Saudi Arabia’s production fell 320,000 b/d to 9.82 million b/d in March the IEA said, and noted indications are that output could stay close to this level in April, with exports down sharply.

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PEC could raise oil output from July if Venezuelan and Iranian supply drops further and prices keep rallying, because extending production cuts with Russia and other allies could overtighten the market, sources familiar with the matter said. Venezuelan crude production has dropped below 1 million barrels per day (bpd) because of US sanctions. Iranian supply could fall further after May if, as many expect, Washington tightens its sanctions against Tehran. The combined supply cuts have helped to drive a 32 percent rally in crude prices this year to nearly $72 a barrel, @Businessdayng

prompting pressure from US President Donald Trump for OPEC to ease its market-supporting efforts. OPEC has been saying the curbs must remain, but that stance is now softening. The market outlook remains unclear and much depends on how far Washington tightens the screw on Iran and Venezuela before OPEC’s June meeting, the source added. The Organization of the Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from Jan. 1 for six months. They meet on June 25-26 to decide whether to extend the pact.

Wednesday 17 April 2019

BUSINESS DAY

WEST AFRICA

talking points

ENERGY intelligence

New players are emerging in Africa’s oil and gas space DIPO OLADEHINDE

lthough the challenges are immense, the outlook for Africa’s oil and gas industry is optimistic amid thorny operating and economic headwinds. As oil price is steadily rising towards record high, the continent continues to emerge as one of the world’s fastest economic region with a growing population that is becoming more urbanized. With regional growth seen picking up for a third year in a row in 2019; with Nigeria’s recovery gathering pace, Angola exiting from a three-year recession and modest growth in South Africa; some new African countries are gaining momentum by reviewing or developing their energy policies as many countries are investigating changes in the government take, taxation regulations and state participation. “Africa’s oil and gas countries have weathered the downturns and capitalized on the upswings focusing their efforts on new ways of working, reducing costs and utilizing new technology,” Chris Bredenhann, PwC Africa Oil & Gas Advisory Leader said. Africa as a whole has seen an increase in drilling, with oil and gas rigs around the continent topping 100 in recent months which is a three year high, according to Baker Hughes data. Wunmi Iledare, Ghana National Petroleum professor and chair, University of Cape Coast, Institute of Oil and Gas, said over time there is need to split African countries into either strictly oil or gas because some countries are more dominant in one than the rest except for few countries like Nigeria or Angola who are dominant in the two sector. “In the oil sector, Ghana is emerging while Mozambique’s, South Africa and Tanzania are emerging in the gas space,” Iledare said In recent years, technological advances, higher commodity prices and an insatiable global thirst for energy have meant that African oil is increasing in demand. Countries as far apart as Niger, Cote d’Ivoire, Uganda, Ghana, Chad, Ghana and Kenya are looking at the prospect of almost unimaginable flows of money into their national budgets. There are more prospects to come as the Republic of Congo, the newest member of the Organisation of Petroleum Exporting Countries (OPEC), offers both onshore and offshore blocks. Cairn Energy is moving forward with its project in Senegal, the largest offshore oil find of 2014, which is expected to produce 100, 000 barrels a day. “It has completely changed the potential for Senegal in a very positive way,” CEO Simon Thomson said in a press statement. “It shows what can happen through the drillbit, through exploration.”

In gas, Africa countries like Senegal, Mauritania maritime border and Egypt have been the hotspots in the past three to four years where there has been a considerable amount of exploration which has resulted in some high profile discoveries like the giant Zohr gas field, Nooros discovery onshore, Atoll discovery offshore in Egypt; and Ahmeyim, Teranga, Yakaar discoveries offshore in Mauritania and Senegal. Norway-based independent energy research and business intelligence institution Rystad Energy, said the exploration plans for the rest of 2018 and 2019 seem encouraging with as many as 15 such high impact wells are planned in the coming 15 to 16 months. “The locations for these wells vary from onshore Egypt, Morocco and Tanzania to deep-water Gambia, Namibia, South Africa, Ghana, Mauritania and even Angola.” Rystad Energy noted that the participation of super-majors like Total and ExxonMobil, and Norwegian E&P Equinor and British Independent Tullow as well as Kosmos and FAR Limited who have already seen success in the Mauritania Senegalese waters, shows encouraging signs for near term future exploration activity in Africa in the remaining of 2018 alone as 10 of such high impact wells, including Total’s Tarif prospect onshore Egypt; Tullow’s Cormorant prospect offshore www.businessday.ng

Namibia; FAR’s Samo prospect offshore Gambia and so on, are expected to be drilled. In Africa’s market share, Nigeria’s LNG production is expected to shrink to a less than 10 percent by 2029 from having a huge chunk of 50 percent in 2019, while another Africa country Mozambique by 2029 will dominate the market share with at least 65 percent by 2029 from absolutely nothing in 2019. Although, data from the Norwegian based research institute showed Africa’s production capacity is almost expected to double over the next decade, however, the data also revealed North Africa and the Middle East which include Djibouti, Egypt, Libya and Algeria are also expected to miss out in the market share from 50 percent in 2010 to less than 10 percent in 2019. The outlook for the oil and gas industry is looking more optimistic with the Brent oil price having broken through the $80 mark at the time of compiling our report. Although there has been a significant increase in the number and size of final investment decisions (FIDs) in 2018, the industry is not what it was. New finds are much smaller and leaner than they were in prior years. Deepwater oil has been given preference over gas, and oil fields offering

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the highest rates of return are attracting investment. There is also a preference for brownfield over greenfield developments. Africa’s share of global oil production slightly increased by 0.3percent since last year to 8.7 percent standing at 8.1 million bbld; The main contributors continue to be Nigeria, Angola, Algeria and Egypt while Libya doubled production in 2017, promoting it to the fourth-largest oil producer in Africa with an 11 percent share, moving Egypt into fifth position. Leading consulting firm PricewaterhouseCoopers (PwC) in its Talking on tomorrow Africa oil & gas review said Africa’s proven reserves as at 2018 stood at 126.5 billion bbbl which is 7.5 percent of world’s proven reserves while production was 8.1 million bbd which was 8.7 percent of global production. Despite the challenges, Africa offers plenty of opportunities in form of unexplored acreage and ever-increasing hydrocarbon demand fuelled by population growth, urbanization and the emergence of a growing middle class. While alternative energies and electric vehicles are already a near-future scenario in many developed countries, many countries in Africa lag behind due to the lack of power infrastructure and transmission networks.

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Wednesday 17 April 2019

BUSINESS DAY

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Wednesday 17 April 2019

BUSINESS DAY

tax issues Addressing the challenges of the Digital Economy - New thinking and possible pitfalls Funke Oladoke and Victor Adegite Adeloye

Continued from last week

ifferent states and governments have slightly different definitions of what their state’s Nexus Rules are, and when a business meets the threshold of being taxed by that state or government (such as value of sales or a certain amount of transactions done within a particular timeframe). Companies with large international presence that have both strong physical presences often outsource quite a number of their operations to different geographic locations. Through digital means, they can essentially make a large economic presence on the other side of the world, while being headquartered in a completely different country. The question that arises is how are taxing rights allocated between different jurisdictions? An example scenario mentioned in a report by the OECD illustrates the issue: “...some highly digitalised business models may solicit substantial contributions to, and active utilisation of, a web-based platform by a jurisdiction’s residents, generating substantial value for a business but, under the current tax rules, that jurisdiction may not have a taxing right over any of that business’s income. Some of these business models may facilitate large numbers of transactions between persons within the same country, similarly generating value for the business without creating any taxing right for the user or market jurisdiction – notwithstanding the highly localised impact of the utilisation of the platform. This “remote” participation in the domestic economy enabled by digital means but without a taxable physical presence is often seen as the key issue in the digital tax debate.” Businesses that with arrangement similar to this example are often classified as “scale without mass”, meaning they have the ability to

scale their business growth, without the consequences (good or bad) of having a large physical presence. Businesses that rely heavily on intangible assets Intangible assets are things of value that don’t actually have no “physical” form. An example is patent of an invention of a new product, copyright, license, trademark, among others. Traditionally, a factor in determining the jurisdiction of a business also played heavily on the assets that business has. With the digitalization of economies, a large growth of intangible assets such as market awareness, consumer relationships, brand presence and sentiment, etc. are all valuable assets but there may be multiple jurisdictions that may or may not have taxing rights over the benefits accruing to the owner. Potential solutions to digital economy challenges In determining a solution for the above discussed challenges, the OECD suggested three options: • The “user participation” proposal • The “marketing intangibles proposal” • The “significant economic presence” proposal The “user participation” proposal It is evident that the value of a business often depends www.businessday.ng

on the participation of the business’s users, especially for large digital companies. This is often referred to as a “network effect” in that a company becomes more and more valuable the more active users it has. An example of this is social media platforms such as Facebook. Would the platform be as valuable if your friends and family weren’t using it? Currently, this added value to a business is not taken into account under current tax rules and regulations. Current regulations focus mainly on the physical activities of a business in determining where profits should be allocated, and which governments have taxation rights. This proposal suggests that allocation of the added value derived from large and active user bases be allocated according to the activities of active users based on their geographical location. Should a particular geographical location have a highly engaged user base, that government may have jurisdiction of the value brought to the business from those users. Because of the ability to grow a large user base in nearly any part of the world without having an actual physical location, this pro-

posal would not require a company to have a physical location present in a jurisdiction before such jurisdiction exercise its taxing rights over the applicable income. If the user base is large enough in that area, then value is provided to the company and is derived from a large audience of that governing jurisdiction. The “marketing intangibles” proposal Companies today, as mentioned by the OECD, “... can essentially ‘reach into’ a jurisdiction, either remotely or through a limited local presence, to develop a user/customer base and other marketing intangibles.” Based on this capability provided to businesses from innovative technology, the marketing intangibles proposal suggests that marketing intangibles and associated risks would be allocated to the market jurisdiction in which they reside. The “significant economic presence” proposal This proposal suggests that when a non-resident business has a noticeable presence, making a significant impact to the economy and a large awareness to consumers, it will have established a taxable presence. According to the OECD report, the main deciding factor will be the “revenue

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generated on a sustained basis.” In addition, the proposal suggests that it would only work without the defined Nexus rules. In place of following the Nexus rules, the following factors would be taken into consideration when determining jurisdiction : 1. A solid user base – does the company have a strong user base in that geographic location? 2. The amount of digital content that comes from the jurisdiction – Are users in that geographic location active, providing large amounts of intangible asset growth for a digital company? How much of the company’s content is catered to cultures and individuals of certain areas internationally? 3. The amount of billing and collections in the local currency or local form of payment – How much of the billing and collections from a company’s user base is coming from each geographic location? 4. Is a website in the local language maintained consistently? – The presence of a website in the local language suggests a focus on, and highly valued geographic location. This suggests which geographic area has jurisdiction for taxation laws and profit sharing. 5. The responsibility of goods delivered to consumers including after sales services, repairs or maintenance – How much work is being done upon the “final delivery” of a good or service is being done in each geographic presence? This includes customer service and maintenance of a digital company’s user base. 6. Are there sustained marketing and sales activities to attract local customers? – This goes along with the geographic presence. A company that focuses marketing efforts heavily in one location, suggests that they are growing their intangible assets, brand awareness, and user base in that area as well. Based on a business’s presence and response to the above questions, it should @Businessdayng

be easier to determine the jurisdictions that have taxing rights and how the profit should be allocated. Conclusion It seems as though an economic cycle where drastic change occurs happens just about every 10 to 20 years. Economic changes like the industrial revolution, the dotcom economic boom, and the current digitization the economy are the reasons why tax laws and fiscal framework needs to be updated regularly. The idea is not to find out how to tax businesses and make them grow slower due to higher taxation costs, but rather to properly tax a business to support the related government jurisdictions that are providing value to that business. With the drastically different laws and regulations of each country, state, city or province, it makes it a difficult task to find a common ground where all parties are credited with the proper value provided to large digital companies. Naturally, as large companies seek to reduce their expenses and increase their profits, digital technology has enabled large enterprises to take advantage of different tax laws. As the growth and transformation of the digitalization of economies progresses, it’s apparent that the future holds potential major changes to how local governments define jurisdiction and are able to tax the income of digital-based companies. It’s also apparent that physical presence of a company or product is becoming less and less of a factor in deciding what laws that company abides by. Rather, the digitalization of economies suggests that laws and jurisdictions will be based on the presence of a company’s intangible assets and local active user base. Funke Oladoke is an associate director and Victor Adegite is a senior manager KPMG Advisory Services, Lagos Nigeria. The authors can be contacted at: funke. oladoke@ng.kpmg.com and victor.adegite@ng.kpmg.com respectively

Wednesday 17 April 2019

BUSINESS DAY

LEGALPERSPECTIVES With Odunayo Oyasiji

Pre-incorporation contract: Is it binding? Pender V Lushingnton 1877 6 CH D 701 I W LOCUS CLASSICUS ssue- Minority protection i.e. on the right of a member of a company to sue in his personal capacity. P r i n c i p l e - W h e re individual right is breached, the particular person that is aggrieved can institute an action in his personal capacity. This is because the injury is done to him in his personal capacity. He can do this without seeking the consent or approval of any other member. Fact- The article of association of the company provides for one vote per ten shares. It also provides that no member is to have more than 100 votes. One of the members who has more than

one thousand shares transferred the excess shares to a nominee. It must be noted that he directed the nominee on how he is to vote. The Chairman refused to accept the vote of the nominee. On this basis, this matter was instituted. The court held that the right to vote was enforceable against the company. A person’s right to vote cannot be tampered with because it is a right of property.

hat are pre-incorporation contracts?Th e y a re mainly contracts entered into by promoters of a company before the company was incorporated. In Sparka Electrics Nig. Ranor v. Ponmile (1986) 2 NWLR (Pt. 23) 519 at 525, the Court stated that “Pre-incorporation contracts are contracts purported to be made usually by promoters on behalf of a company before it is incorporated.” They are mostly contracts meant to aid the establishment of a company and make its operation smooth after incorporation. An example of such pre-incorporation contract is contract that has to do with securing office accommodation/place of business for the company. The position of law in Nigeria is that pre-incorporation contracts are not binding on the company. The directors or promoters that

entered into the contract are to be held liable for anything that goes wrong in the contract. It is often argued that the promoters that entered into the contract are doing so on behalf of the company that is to be incorporated. Therefore, they are agents of the company and as such the company should be held liable under the contract. However, the

law is settled with regards to the foregoing argumenta person cannot act as an agent for a company that is not in existence. In Kelner v. Baxter (1867) L.R. 2 C.P 174, it was held that at common law a pre-incorporation contract was not binding on the Company because there was no principal on behalf of whom an agent could have contracted and that

the Company was not permitted to ratify or adopt it. The simple interpretation of the above is that a promoter cannot act as an agent for a company that hasn’t been established. The contract is binding on the promoter and not the agent. It must be noted that the Companies and Allied Matters Act (CAMA) of Nigeria states that a company after incorporation can ratify the existing pre-incorporation contract and make it binding on the company. Section 72 of CAMA provides that- “Any contract or other transaction purporting to be entered into by the company or by any person on behalf of the company, prior to its formation, may be ratified by the company after its formation and thereupon the company shall be bound by and entitled to the benefit thereof as if it has been in existence at the date of such contract or other transaction and had been a party thereto”.

done. In this situation, it will be wise to allow the minority to institute an action to quickly remedy the situation before things get out of hand. 6. Section 300 (f ) of CAMA -Where the directors are likely to benefit or they have benefitted from the dereliction of their duty- this is straightforward. In a situation where the directors who are the ones responsible for the day to day running of the business of the company are deliberately in breach of their duties to the company so as to attract benefits to themselves. It is certain that they will never take steps to remedy the wrong as they are the

wrongdoers. Therefore, the minority can take steps to seek redress on behalf of the company. 7. Where it will be in the interest of justice- this exception is a creation of the Supreme Court of Nigeria in the case of Edokpolor & Co Ltd v Sam-Edo Wire Industries Ltd (1994) 7 S.C. 119. The Supreme Court of Nigeria stated that the minority can seek remedy when it will be in the interest of justice regardless of whether the situation falls within the ones earlier discussed above. This can only be determined on case by case basis. This has also provided a leeway for minority shareholders to seek to protect their interest.

The rule in Foss V Harbottle and its exceptions

he rule in the case of Foss V Harbottle (1843) 67 ER 189 simply states that “where a wrong is done against a company by the majority it is only the company that can bring a claim to remedy the wrong.” Going by the tenets of this rule, no claim will definitely be brought as far as the majority represents the voice of the company. This rule is codified under section 299 of Companies and Allied Matters Act. The section provides that “Subject to the provisions of this Act, where an irregularity has been committed in the course of a company’s affairs or any wrong has been done to the company, only the company can sue to remedy that wrong and only the company can ratify the irregular conduct. The exceptions provided are1. Section 300 (b) of CAMADoing by ordinary resolution what should be done by special resolution- Resolutions refers to decisions taken in a meeting. A resolution is regarded as ordinary resolution if it is passed by simple majority e.g. 13 people voted in favour while 12 people voted against. A resolution is a special resolution if same is passed by not less than 75% of the voters. CAMA stated that the articles of association of a company can provide for how a resolution should be

passed (whether special or ordinary) as long as the act is silent about it. Examples of the resolutions that must be passed by special resolution as provided in the act are- alteration of the memorandum of association, alteration of the articles of association, reduction of the authorized share capital, changing the company’s name, resolution on winding up of the company by court, making the liability of the directors to be unlimited, re-registration of unlimited company as company limited by shares, re-registration of a private company as public company and vice versa, etc. If CAMA or articles of association of a company stipulates that an action www.businessday.ng

should be done by special resolution (or vice versa) and same is not followed then the minority can institute an action. 2. Section 300( C) of CAMA- When there is an act or omission which affects the individual rights of the minority shareholders as members of the companyExample of this situation is where they are being denied their rights as a member of the company e.g. the right to vote, right to receive notice of meeting. 3. Section 300(d) of CAMA- Where fraud is being committed on the company or the minority shareholder and the directors are not taking steps to remedy the wrong- This can happen in a situation where

the majority are dealing with the properties of the company in such a way as to unfairly dispossess the company of same to their own advantage. A good example of this situation was seen in the case of YALAJU AMAYE –V- AREC (1990) 6 NILR 290- in this case, the directors withdrew a lot of money from the account of the company and even came up with forged board resolutions meant to change the signatories to the accounts of the company. The minority shareholders were allowed to sue to remedy the wrong. 4. Section 300(a) of CAMA- Entering into a transaction that is ultra vires or illegal- Example of this situation came up in the case of YAL AJU AMAYE –V- AREC (1990) 6 NILR 290 where the board appointed new directors despite the fact that the articles of association of the company does not give such power to them. 5. Section 300 (e) of CAMA-Where a meeting cannot be called early enough to address the wrong done to the company or minority- this situation can occur where an irreversible damage is about to be done and waiting for a formal meeting to be held will not address or remedy the wrong as the deed would have been

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DO YOU KNOW?

t is possible to check if a company is registered in Nigeria from the comfort of your house. In order to protect the general public from dealing with companies that are not registered in the country the Corporate Affairs Commission has a space on its website where a search can be made. Basic details like the name of the company, its registered office and date of registration can be found on the @Businessdayng

website. Prior to when this was done, anybody that wants to confirm that a company is registered will have to go to the office of the commission and pay before the file of the company will be brought out for the person to go through. To be able to conduct the search, visit http:// publicsearch.cac.gov.ng/ ComSearch/. Type in the name of the company and the details will come up.

Wednesday 17 April 2019

BUSINESS DAY

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Wednesday 17 April 2019

BUSINESS DAY

POLITICS & POLICY

Lagos PDP crisis deepens as Adewale takes over party secretariat Iniobong Iwok

he crisis rocking the Lagos chapter of the People’s Democratic Party (PDP) took a new twist, this is just as Segun Adewale, Tuesday, took control of the party secretariat. Adewale is laying claim to the chairmanship position of Lagos PDP. He alleged that the tenure of Adegboola Dominic who currently occupies the position expired last December and based on the 2016 state congress of the party he was the legally recognised chairman. However, Adewale, with scores of his supporters gained entrance and took control of the party’s state secretariat in the presence of security officials. Addressing scores of protesting party members and supporters Adewale stated that he was the authentic state chairman of the party and was in the struggle to liberate the party from the grip of few individuals who

had held it captive. He added that Dominic was never elected in a state congress of the party, but was handpicked by Bode George, stressing that based on the state congress election of 2016 he was the authentic state chairman. According to him, “I emerged as the State Chairman during the reign of the then National Chairman of the party in 2016 to oversee the affairs of the party for four years, which should ordinarily terminate in 2021. I stepped aside when there were some issues within the party, which does not amount to my resignation as the chairman. “Chief Bode George against the constitution, Section 46-48 unilaterally picked an Acting Chairman, Adegbola Dominic. Our constitution recognises State Executive Committee or Congress as the only means of filling vacant position or electing state officers but not by fiat as being carried out by Chief Bode George and his cohorts”, Adewale added. He boasted that he had support

NIP guber candidate in Oyo, SarumiAliyu, defects to join PDP, gives reasons Akinremi Feyisipo, Ibadan

overnorship candidate of the National Interest Party (NIP) in the March 9th governorship election in Oyo State, Bolanle Sarumi-Aliyu has defected to the People’s Democratic Party (PDP). Sarumi-Aliyu, while saying that the decision was arrived at after due consultation noted that “what we stood for, even in NIP was that Oyo State indigenes deserve the very best in terms of governance. And I am sure many people will agree with me that things can be better than what obtains presently. “We are teaming up with the PDP to take Oyo to the greater heights. It is not all about SarumiAliyu, it is about the love I have for the people Oyo State. Please, don’t forget I am the Jagaban of the poor so my being in PDP will be to ensure the downtrodden are taken care of. “The conscientious efforts of the Governor-elect, Seyi Makinde to make things better over the years, even when he was not holding any elective position have proved him to be an honourable, forthright and noble-spirited person”. According to him, “Our presidential candidate actually stepped down for Atiku Abubakar. And I must also state that the move is in the interest of the people. I will assist the governor if given the opportunity so he can serve well. “Four years may not be enough to make the desired change in Oyo State as a lot of work needs to be done. The earlier we start

to tackle the challenges facing our dear state, the better. I look forward to living in a robust state that provides ample opportunity for her citizens to thrive”. Sarumi-Aliyu who said that she decided to join PDP in order to actualise her plans for the state, however insisted that Nigerians are not ready for new political parties that have no millions of naira to share. It was however, gathered that she might make the list of commissioners in the in-coming administration in the pacesetter state. The female politician added that it is unfortunate that after spending her personal money, money donated to her campaign by friends and family members, her former party recorded little votes in the elections. She informed that the votes secured by the party compared to the resources spent during the campaigns and other occasions have shown that people are not ready for new political parties that don’t have millions to share for them. “With the experience I and many contestants all over the country, we noticed that the typical Nigerians are not for new political parties. We brought a new political party to Oyo, we spent personal money, people also donated all over the world but with the votes we got, it was obvious people are not ready for a new political party. The other factor that worked against us is that the governor-elect is a good man and he has been doing great charitable deeds in the state for decades so definitely I guessed we couldn’t win the elections,” she said. www.businessday.ng

Segun Adewale

of most chairmen of the party in the state, stressing that the current lead-

ership had further divided the party. Meanwhile, the National Vice

chairman, (Southwest) of the party, Eddy Olafeso, faulted the claims of Adewale, noting that Agboola remains the Lagos State chairman of the party until the National Working Committee (NWC) of the party calls for a fresh state congress nationwide. Olafeso, who spoke in an interview with BusinessDay, Tuesday, on the current crisis, added that Adewale was not a member of the party and was not ready to discuss with him. According to him, “Adewale is not a member of PDP, he went to contest in Ekiti and now he is back, at the National Working Committee we have taken a decision on him, he is a joker, Dominic remains the Lagos PDP chairman until a fresh state congress is called by NWC nationwide . “I am not ready to negotiate with him, neither do I take money to support anybody; I don’t abuse elders, he is taking laws into his hands and we would not tolerate that.”

INEC hires El-Rufai’s lawyer to defend case at tribunal …Shehu Sani raises alarm Abdulwaheed Adubi, Kaduna

enator representing Kaduna Central Senatorial district at the Upper Chamber of the National Assembly and the candidate of the People’s Redemption Party (PRP) in the last National Assembly elections, Senator Shehu Sani has raised the alarm over the hiring of Governor El-Rufai’s lawyer, A.U. Mustapha (SAN) by the Independent National Electoral Commission (INEC), for the ongoing tribunal cases. Shehu Sani disclosed this while briefing newsmen in his Kaduna residence on Monday. According to him, his legal team has already written to the commission on the matter titled: ‘An Expose of Ground Con-

spiracy against Senator Comrade Shehu Sani by Independent National Electoral Commission and Government of Kaduna State’. While lamenting the conspiracy between Kaduna State Governor, Nasir Ahmed El-Rufai and the Commission, he said: “We have documents to demonstrate that our claims are true, and that the said lawyer is a personal lawyer to the governor. “Of all lawyers in the country, why must INEC hire El-Rufai’s lawyer in a case that involved one of his aides.” The Senator said despite the intimidation, he would never relent, or remain silent in the struggle to get justice and reclaim his stolen mandates. “I will not remain silent when I discover that INEC and El-Rufai

are planning to further suppress the will of the people. “Without any doubt, I am the winner of the February 23 Kaduna Central Senatorial election. Nothing will silence us from reclaiming our mandate”, he said. The lawmaker, who is currently in court with the governor over defamation of character, stressed that the National Assembly election that was conducted on the said date was marred with massive rigging. He further explained that the last election was massively manipulated to wrest power from the likes of him and planted stooges to do the governor’s bidding. “My votes were not counted. My votes were subdued,” he emphasised.

Edo 2020: Group, Obende galvanise support for Obaseki/Shaibu re-election

ouths under the aegis of Obaseki/Shaibu Movement (OSM) and a Chieftain of the All Progressives Congress (APC) in Edo State, Senator Domingo Obende, have thrown their weight behind the re-election of Governor Godwin Obaseki, pledging to mobilise support for the governor and his deputy, Rt. Hon. Philip Shaibu ahead of the 2020 gubernatorial election in the state. They made the submission during an interactive session with journalists in Akoko Edo, declaring that Governor Obaseki has brought a rare panache to gov-

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ernance, which has engendered development in different parts of the state. Obende, who is the Grand Patron of OSM, described Edo people as progressives, who support good governance which Obaseki’s government embodies, noting that their support for him is devoid of political, religious or regional differences. He said that Governor Obaseki, as a leader, has a mission to move the state forward, noting, “We are proud of the meaningful projects executed by the Obaseki/Shaibu administration in the state and assure Edo @Businessdayng

people of more people-oriented projects.” Senator Domingo said OSM is working hand-in-hand with all stakeholders to ensure the successful re-election of the Obaseki/ Shaibu administration. State Coordinator, OSM, Hon. Miracle Ogbebor, said the group is out on an enlightenment campaign to educate the people on achievements recorded by Governor Obaseki in the state. He said that the group was set up to ensure the re-election of Governor Obaseki and his deputy, Shaibu, in the 2020 gubernatorial election.

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Opinion

PMB’s cabinet: Guide him O God!

Franklin Ngwu

s President Muhammadu Buhari prepares for the start of his second term of four years, he has a singular task that will make or mar his last chance of having a remarkable legacy. It is a very important task, a task that will determine the future of about 180 million human beings, old and young, male and female, Christian and Muslim, North and South, employed and unemployed, disabled and abled, mothers, youths, children and unborn generation. It is a serious task with inestimable impacts and as such I earnestly pray that God will guide PMB as he tries to complete the task in about a month’s time. Even though he has done the task before, the lamentable state of our country clearly indicates that a deep retrospection is required if we are interested in rescuing Nigeria from the rapidly escalating failures and crisis. While effective performance of the task will save us, ineffective approach will most unfortunately exacerbate our already very perilous and sad situation. That very important and singular task is the duty of assembling a very competent and committed team of Nigerians to help in rescuing our country through effective

and patriotic governance. The challenges are numerous and complex and as such, it has to be a first class team, thoroughly, painstakingly, strategically and most importantly patriotically selected. As PMB pencils down the names as he is currently doing, I pray that utmost in his mind will be about the state and future of Nigeria. May God help him to appreciate that he is assembling a team that will deeply understand and realize what it means to be poor and that Nigeria is rated as the poverty capital of the world with over 90 million brethren classified as extremely poor. A team that will be driven by their deep dissatisfaction that our dear country is the 6th most miserable country in the world and ranked together with Pakistan, Afghanistan, Libya, Somalia, Syria and Yemen as the most insecure countries in the world. A team that will be pained that over 150 Nigerians are now violently killed almost every week with pervasive signs of genocide in many towns and villages of our dear country. A team that will love Nigeria and work as a true team to create jobs for over 21 million unemployed Nigerians through effective formulation and implementation of robust fiscal, monetary and supply-side policies. A team that will be truthful to themselves, to the President and Nigeria! A team that will disagree and agree among themselves and with the President and determined to stand for the truth and good of the country including the overwhelming need to restructure Nigeria. A team that will genuinely serve with all their heart, mind and body for a progressive Nigeria! As the list will hopefully be compiled in Aso Rock which is fine and acceptable, I implore PMB to possibly review the list outside Aso Rock. For instance, in selecting

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A team that will love Nigeria and work...to create jobs for over 21 million unemployed Nigerians through effective formulation and implementation of robust fiscal, monetary and supply-side policies

the Minister of Internal Affairs, National Security Adviser, the Service Chiefs and the heads of all the security agencies, it might be helpful to review the list in the killing mountains and valleys, villages and farmlands of Plateau, Benue, Borno and Taraba states. After this initial review, the second review should be done in Maro, Kajuru Local Government of Kaduna State, Wonaka, Ruwan Baure, Takoda and Tudun Maijatau villages of Zamfara State and in Abonnema, Kalabari and other killing areas of Rivers state. As the list is reviewed while moving round these villages of horror and anguish, a key question that should be asked is if the listed candidates can really do the job of securing and keeping Nigeria safe and peaceful or if a new and more capable hands will be required. In selecting the Minister of Power, Works and Housing, the first question is if these three key sectors that are separately very important and central to the growth and development of Nigeria should be coupled together and headed by one person. As I have done these reviews, my findings suggest that having one person heading these very important sectors might not be the best for Nigeria in terms of speed, productivity and delivery. As we continue to generate only about 4,000MW, with about 16 million housing units deficit and majority of our roads unsafe and almost impassable, it might be important to rethink if the three important sectors should continue to be headed by one person. A good place to review the current situation in these key areas will be a night flight into any of our cities, a visit to any of our populated neighborhoods and a road trip across Nigeria. As all the ministries and agencies are all important and should work in

If so big why so small (2) Bongonomics

Bongo Adi

ast week on this column, we dwelt on the discrepancy in Nigeria’s financial depth relative to its GDP size. We argued that Nigeria’s financial system largely lags its size when compared to peer countries around the world. Based on an analysis of a time series data of over 10 years, we came to the view that most indicators of financial depth including the money stock have gradually shrunk in size relative to Nigeria’s GDP. Some other measures like equities have similarly remained stunted and therefore, unable to drive growth which consequently, has continued to dwindle. Readers’ reaction to these claims necessitates this concluding part. To start with, financial depth largely measures the financial sector relative to the rest of the economy. It is an aggregate measure of the size of banks, other financial institutions and financial markets within a country, relative to a measure of economic output such as the Gross Domestic Product or the GDP. It is also related to the oft-used term of financialisation which captures the increase in size and influence or importance of the financial sector relative to the overall economy of a country. The link between financialisation and economic growth has been extensively covered in the literature on finance and economic development. The received wisdom is that financial depth is a predictor of sustained

economic growth. “The ascent of money,” wrote Nail Ferguson, a Harvard professor and one of this century’s most influential economic historians, in his 2008’s The Ascent of Money, “has been essential to the ascent of man.” Quoting Frederick Mishkin, former governor of the US Federal Reserves, he argues further: “the financial system is the brain of the economy… it acts as a coordinating mechanism that allocates capital, the lifeblood of economic activity, to its most productive uses by businesses and households. If capital goes to the wrong uses or does not flow at all, the economy will operate inefficiently, and ultimately economic growth will be low.” It therefore goes without saying that finance is at the heart of economic growth and its efficient deployment is the key to unlocking the prosperity of nations. As Ferguson argues in his book: “The evolution of credit and debt was as important as any technological innovation in the rise of civilization, from ancient Babylon to present-day Hong Kong. Banks and the bond market provided the material basis for the splendours of the Italian Renaissance. Corporate finance was the indispensable foundation of both the Dutch and British empires, just as the triumph of the United States in the twentieth century was inseparable from advances in insurance, mortgage finance and consumer credit….Economies that combined all these institutional innovations – banks, bond markets, stock markets, insurance and property-owning democracy – performed better over the long run than those that did not, because financial intermediation generally permits a more efficient allocation of resources than, say, feudalism or central planning.” Private credit relative to the size of the gross domestic product is one indicator that has featured prominently in the literature as a proxy for financial depth. It is to this

that we need look to understand a country’s overall economic growth prospects – it is positively and strongly correlated with both GDP and GDP per capita growth. Although private credit to GDP varies widely across countries, it however exhibits very strong correlation with income levels. It has been estimated that for high-income economies, this proxy could be as high as 103 percent (private credit to GDP ratio) which is usually more than 4 times the average ratio in low income economies. Countries like UK, US, Canada, Australia, Japan and South Africa are among those in the highest 20 percent in terms of private credit to GDP. The sub-Saharan Africa average domestic credit to private sector to GDP ratio stands at 45.5% in 2018. The global average is 129% while Nigeria’s is dwarfed by both at just 17%. It is therefore not hard to see from this that financial intermediation is rather weak in Nigeria. We cannot overemphasize the role of financial intermediation which is a direct product of financial depth in the country’s economic development. It is clear that absence of credit both strangulates businesses and stifles private consumption. Both are deleterious to the growth of aggregate demand in the economy. Poor financial intermediation is also evidenced by the fact that 95% of bank deposits mature within one year. This goes to prove that deposits are held primarily for transactions processing purposes. What is left for investment or speculative purposes is just a meagre 5%. If we add the other indicators of poor financialisation which include bonds at 12% of GDP, equity at 13% of GDP and foreign reserves at just 10% of GDP, Nigeria’s overall financial situation does not warrant any optimistic conjectures about robust growth prospects. Although it may be interpreted as tentative to link these developments to productivity without further rigorous and

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We cannot overemphasize the role of financial intermediation which is a direct product of financial depth in the country’s economic development

synergy for the good of the country, all appointment especially that of ministers should pass through the diligent process described above. After identifying all the potential appointees, they should all travel as one group by road from Abuja to Lagos and spend reasonable time and days in Mile 12 market, Oshodi, Apapa and Tincan sea ports, Okokomaiko, Balogun Market, Idi iroko, Badore and Epe from where they will move to Benin by road via Ijebu Ode. While in Benin, they should visit Okomu Palm Plantation and other places and then take a short lecture on the link between infrastructure development and economic growth before they depart Benin for Onitsha and then to Ogoni, Ikot Abasi from where they will move to Taraba, Kano and back to Abuja. As most of the people that will be selected might not have recently travelled across and properly interacted with Nigerians, the above trips will help them to get first hand information on the state of the nation. They will be able to see the hardships, poverty, infrastructural decay, insecurity and of course the abundant resources and opportunities that we endowed with. Nigeria is in serious crisis and failing in all measurements of human existence! For any change in our current situation, things must be done differently and urgently also. As the buck starts and ends with the office of the President, I deeply implore PMB to use this his last term to rescue Nigeria from the escalating but avoidable crisis.

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail: fngwu@lbs.edu.ng

theoretically nuanced research, but it is hard to resist the temptation to link these developments to the low productivity that we have in the system currently. Total factor productivity (TFP) is the efficiency measure of the combined inputs to the production system and is the main predictor of future economic growth. China’s economic growth in the last 3 decades has been linked to the growth of its factor productivity which grew at an average of 3.5% and accounted for nearly 40% of its GDP growth. Nigeria’s TFP has unfortunately achieved a negative growth in the last 5 years. In the case of China, TFP-driven economic growth was consequent upon institutional reforms and technological progress; efficient reallocation of resources – both labour, capital and finance; and economic structural changes. Nigeria’s low productivity on the other hand is of course, driven by perverse institutions that disincentivize efficiency; lack of technological progress; and inefficient allocation of resources. One school of thought argues that monetary tools cannot fix the fiscal problems that the country currently faces - especially the fiscal gap where the sum of salaries, overheads and debt service is greater than government’s independent revenues. And the implementation of the new minimum wage will if anything, worsen the fiscal balance in the face of suboptimal productivity which amounts to “a recipe for inflation and fiscal slippage” with a total wage impact of approximately 3.5% of GDP and 18% of broad money. The policy recommendation from this school of thought is the IMF recommendation of aggressive tax expansion. Continues online at www.businessday.ng

Dr Adi is a Senior Economics faculty at the Lagos Business School

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