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BusinessDay Man of the Year 2018

Benedict Peters: For making Nigerians love their football again Billionaire Businessman Unifying Nigeria through Football

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t appears strange to discuss oil and football in the same sentence. But in Nigeria, these two “commodities” represent two of the most influential features in the lives of its people. Oil, because, obviously, this has remained the mainstay of country’s commercial life since its discovery in 1958.

Football, because it is the single mostfollowed sport across Nigeria. Both convey sentiments that have a significant bearing on the Nigerian life that is sometimes taken for granted. Oil has been variously described as a curse to our nation but also the single most important source of revenue, a source of delight and pain in equal measure.

Football? Some of the nation’s happiest moments have been associated with on-field success of the country’s football team, a sentiment that is reversed when the nation’s teams fail. Indisputably, Nigerians love football. In our common love for football, there is neither tribe nor religion. Football has come to be seen as the greatest source of unity for Nigerians, celebrating together any of the national teams’ successes and also collectively mourning our failures.

This was the case in early 2017 when the Super Eagles, the country’s senior team, lost a Nations Cup qualifier against arch-rivals, Bafana Bafana of South Africa, in a depressing 2-0 defeat at home. It was one of the low points of the country’s footballing history as

Nigeria risked the prospects of missing out on another Nations Cup, Africa’s leading country competition. The Super Eagles were plagued with problems that were directly affecting on-field performances.

The problems had a lot to do with money. This was not strange.

Nigerian football teams have always had money issues because they have always depended on the government funding, largely epileptic and typically grossly inadequate for their needs. Despite the country’s love for football, corporate bodies demonstrate a disturbing reluctance to support the teams even when it is the obvious that football is a game Nigerians love. Indeed, this was the background that preceded the game against South Africa.

And this was the state of play when Benedict Peters, Founder and CEO of leading indigenous oil and gas firm, Aiteo Group intervened. Peters’ intervention was decisive and has changed the face of not only the national but local football. Peters’ move to re-engineer interest in the country’s football started in April 2017 when Aiteo signed a 5-year deal with the Nigeria Football Federation (NFF) to inject N2.5 billion into providing support for the national teams’ technical staff starting from the Super Continues on page 46

BD INVESTIGATIVE SERIES

Dying in instalment: Foreign buyers pile pressure on polluting company (2) ISAAC ANYAOGU

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wo weeks after blood tests confirmed a link between recycling of lead acid batteries by Everest Metals Nigeria Ltd and lead poisoning Ipetoro community in Ogun State, the investigation shifts to foreign car makers who buy lead ingots from the company.

See full story on page 47

Inside Nigeria engages Afreximbank in new trade deals for power, healthcare after $2.2bn agreement P. 7 National & regional economic analysis (South East) P. 26 National Discourse As the 2019 General Election draws near, BusinessDay is introducing a daily political commentary section titled National Discourse, starting today.

P. 34 How Lagos voted in 2015

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Delay in oil licence renewals worries investors OLUSOLA BELLO

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nvestors have decried the delay in renewal of many oil licenses which are due in 2019, saying that the country may lose the opportunity to attract reasonable amount of foreign direct investments into the oil and gas industry.

The operators said that they cannot take any serious investment decisions because they are at a loss as to what the next line of action of the government would be.

No serious negotiation has started in respect of renewals of many of the licenses, one of them said.

A good number of operators that are apprehensive about the unnecessary bureaucracy surrounding the renewal are the operators of indigenous companies who need the license renewal to as guaranty before they can raise financing or approach foreign firms to invest in their companies.

About 19 of such licenses are due to expire next year but industry sources said the process is too slow.

Reacting to the development Abiodun Adesanya, managing director of Degeconek limited said there are legal basis governing the process of renewal of the licenses.

He said the negotiation must be properly made while the size of the acreages, reserves and many other things are taking into consideration.

He said he believes that progress is being made in respect of the renewal of the licenses but that the unnecessary bureaucratic process may cause investors not want to put down their money down.

“Investments would be hard to come by because of the delay,” he said.

He however said: “Once the right things are done, work programmes approved, and the re-

quired fees paid the license would be renewed”.

Oyibo Chambers, former managing director of the Nigerian National Petroleum Corporation NNPC said that he believes that with time all those whose license needed to be renewed would have them renewed.

On whether the delay was caused because the government was planning to withdraw some blocs from their owners, he said, the oil and gas industry is an international one and if any company whether local or international is treated badly it would have repercussions.

“Those running the industry on behalf of the government know what is good for the country”.

President Muhammadu Buhari recently approved the renewal of three onshore oil production licenses, the OML 4, 38 and 41 for a period of 20 years for Seplat Petroleum Development Company.

The company is the operator of the oil blocks on behalf of the Nigeria National Petroleum Corporation (NNPC) joint venture and holds 45 percent working interest in the three oil assets located in Edo and Delta States.

President Muhammadu Buhari and Minister of Petroleum Resources gave consent for the renewal of OMLs 4, 38 and 41 to a new expiry date of 21 October 2038,” the company said.

According to Roger Brown, chief financial officer, the first nine months of 2018 production from the three licenses accounted for 92 percent of Seplat’s total oil production and 100 percent of Seplat’s gas production.

“In connection with the license renewal, Seplat has paid in full a Renewal Bonus of $25.9 million, thus ensuring all conditions for license renewal have been met,” the notice read.

Nigeria’s $4.5bn balance of payment deficit may put naira under pressure … Current account deficit hits $3.10bn in Q3 2018 … Analysts say expect further deficit till after elections HOPE MOSES-ASHIKE

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he foreign exchange market may be under pressure and the economy at risk following a significant turnaround in the country’s position as the overall Balance of Payments (BOP) estimates for the third quarter of (Q3) of 2018 swung into a deficit of $4.54 billion compared to surpluses of $503.97 million recorded in the preceding quarter and $2.78 billion in the corresponding period of 2017.

The balance of payment statistics for the third quarter released by the Central Bank of Nigeria (CBN) on Friday show that current account balance (CAB) worsened from a surplus of $4.45 billion in the second quarter (Q2) of 2018 to a deficit of $3.10 billion in Q3 2018.

This means that Nigeria lost

more money to other countries, through trade, services and capital flows during the period than it received from other countries through these sources.

Net out-payments for services during the review period increased significantly by 35.4 per cent to a deficit of $7.02 billion when compared with the level recorded in Q2 2018. When compared with the corresponding period of 2017, it indicated a much higher increase of about 65.0 per cent.

“This is not good for the Nigerian economy as it places pressure on the foreign exchange market, shows the vulnerabilities of the Nigerian economy and also show the low level of confidence on the Nigerian economy,” Ayodele Akinwunmi, head of research, FSDH Merchant Continues on page 44

L-R: Ernest Ebi, chairman, Fidelity Bank plc; Emeka Okoli, chairman, Emzor Pharmaceutical; Stella Okoli, founder/CEO, Emzor Pharmaceutical; Cosmas Maduka, founder/CEO, Coscharis Group of Companies, and John Agbola Odeyemi, chairman, JKN Limited, at the 14th annual thanksgiving of Emzor Pharmaceutical in Lagos.

Pic by Pius Okeosisi

MARKETS

Nigeria bond yields hit 2-year high in boon for investors, threat to economy LOLADE AKINMURELE

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nvestors who lend the government N100 million for a period of 12 months, could make a profit of around N17.5 million in as many months, as the Central Bank of Nigeria (CBN) bids rates higher in an effort to lure foreign portfolio investors and keep the exchange rate stable ahead of elections next February.

Yields on one-year government treasury bills are now around 17.5 percent from as low as 11 percent at the start of the year and that gives a 14.62 percent spread to the benchmark 10-year US treasuries of 2.8 percent.

“With the 12 month yield now around 17.5 percent and bond rates shy of 16 percent, the investment case for Nigerian debt is becoming more attractive,” said Samir Gadio, the head of research at Standard Chartered.

“It is possible that open market operations (OMO) bill yields will

rise further, but even in this case the curve will probably bear flatten rather than shift in parallel. As such, duration losses at the back end could be contained, while investors will be able to average returns on their bill positions at higher rates (if they materialise),” Gadio said in an emailed response.

As yields on government debt inch back upwards, there are opportunities for investors but risks abound for Africa’s largest economy which has been slapped with growth downgrades from the International Monetary Fund (IMF), World Bank and local economists who say the government’s diversification efforts have not yielded sufficient results.

Investors can buy Treasury bills through their banks or through iinvest- a mobile platform for trading government securities.

The last time yields were this high was between 2016 and early 2017, when the CBN pushed benchmark interest rates to a record high 14 percent to make

naira assets attractive to foreign investors who were rushing out the door.

Investors were fleeing then from capital controls targeted at defending the naira from weakening, but which ended up in acute dollar shortages that contributed to Nigeria’s first economic recession in a quarter of a century.

The apex bank governor, Godwin Emefiele got some stick from investors for defending the naira when it didn’t have the external reserves to back it up as foreign investments dried up.

It took a 40 percent devaluation of the naira and the creation of the Investor and Exporters window in April- which helped foreign investors get a fair market price for each dollar- for foreign investors to trickle back in; albeit foreign inflows have not recovered to the pre-crisis high.

Amid the rally in yields which led government’s debt servic-

Continues on page 46

Penny stocks free-fall as investors show less interest …sell-off intensified after new pricing methodology, par value take-off IHEANYI NWACHUKWU

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olding onto value stocks can come with a lot of advantages over the long term but discerning Nigerian investors seem not to have made such decisions for penny stocks.

BusinessDay check in the past eleven (11) months shows many penny stocks trading on the Lagos Bourse have not attracted reasonable buyers leading to them further underperforming the NSE All Share Index.

Many of the penny stocks got off to worse price levels following the January 29, 2018 implementation of new rules on par value and share price methodology by the Nigerian

Stock Exchange (NSE).

A look at the price list of NSElisted stocks as at December 13 reveals the negatives recorded by many penny stocks, most of which are insurance stocks.

For instance, from a 50 kobo per share price as at January 26, 2018, John Holt Plc at 44 kobo represents 12 percent decline this year.

Also, AG Leventis Plc at 25 kobo has lost 64.3 percent of its price this year; ABC Transport Plc at 25 kobo has also lost 50 percent of its share price this year.

“Now we can go and start trading more penny stocks. I am waiting for them at 2kobo,” a Lagosbased analyst had told BusinessDay at the commencement of the new rules on pricing methodology

and par value.

Cornerstone Insurance Plc at 20kobo per share has lost 60percent of its value this year; same as Courteville value at 20kobo, representing a year-to-date (ytd) decline of 60percent.

Having lost 20percent of its value this year, Daar Communications Plc is valued at 40kobo. Diamond Bank Plc is valued at 87kobo, representing Ytd decline of 42percent.

Others are First Aluminum priced at 30kobo (-40percent); Jaiz Bank Plc at 47kobo (-25.4percent); Japaul Oil Plc at 22kobo (-56percent); Lasaco Plc at 29kobo (-42percent); and Law Union & Rock at 51kobo representing deContinues on page 44

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NEWS

Nigeria engages Afreximbank in new trade deals for power, healthcare after $2.2bn agreement ODINAKA ANUDU

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igeria has begun e n ga g e m e nt s with Afreximbank to boost investments in the power and the health sectors. This is following a $2.2 billion trade deals signed between the Afreximbank and the Nigerian government last week.

Sources close to the Nigerian government have told BusinessDay that extensive engagements are ongoing. In an exclusive interview with BusinessDay on the sidelines of the African-Union sponsored Intra-African Trade Fair in Cairo, the coordinator of Nigeria’s Economic Recovery and Growth Plan (ERGP) Implementation Unit in The Presidency, and senior special assistant to the President, Fola Alayande, said the government was “extremely focused on firing the economy on all cylinders through beneficial trade, and the Federal Government remains committed to following through on all business-friendly trade commitments made to ensure that the benefits trickle down to large corporates and

SMEs in the country.

“Transactions such as the refinancing arrangements for the power sector by Afreximbank would require some innovative structuring deals but this is a major development for the industry. Likewise, the development of industrial parks and special economic zones is an integral part of the nation’s economic plan and the Federal Government remains committed to following through on implementation.”

Benedict Oramah, president of Afreximbank, during his remarks at the Nigeria Country Day at the inaugural Intra-African Trade Fair co-sponsored by the African Export Import Bank and the African Union had last Thursday, announced that the regional Exim bank was discussing arrangements to support Nigeria’s power sector and deleverage the bank, thereby making it possible for distribution companies sell power to private companies to access more fund.

While details of the transaction structure are being worked out with relevant agencies in Abuja, Afreximbank and the African Development

Bank had earlier last month during the Africa Investment Forum in Sandton, Johannesburg, South Africa, indicated interests in developing new transaction structures to boost the Nigeria power sector.

Investigations reveal that one of the initial beneficiaries of the Afreximbank support may be Geometric Power in Aba, Abia State, which was also one of Nigeria’s largest projects at the Africa Investment Forum. The Governor of Abia State Okezie Victor Ikpeazu, who was one of the two state governors at the Intra-African Trade Fair, had earlier been reported to hold talks with the Afreximbank on developing the power sector in Abia State and in the South-East in particular to re-ignite the industrial potentials of Aba, leveraging Abia State’s competitive advantage and centralized location that makes access to all South East and South South cities easy.

The planned Aba Industrial Park project is one of the major projects that may benefit from the $1.23 billion deal signed last Thursday to boost special economic zones and industrial parks in

Nigeria. Honourable Minister of Industry, Trade and Investment, Okey Enelamah had earlier on at the Fair also confirmed that the country is moving beyond planning to concrete implementation of the special economic zones.

Separately, a senior Afreximbank executive/Afreximbank President hinted that talks were ongoing to develop some Centres of Excellence for tertiary healthcare in Nigeria.

Industry observers spoken to commented that Nigeria has maintained a visibly strong presence at African trade and investment fora in the last quarter. At the IntraAfrican trade Fair, exhibitors from Nigeria were one of the top three country representations similar to the Africa Investment Forum in Johannesburg last month where Nigeria had the second highest deal representation after the host country of South Africa. Folarin Alayande’s disclosed, “The Federal Government has a special delivery unit focused on delivering on the economic recovery and growth plan. We would continue to follow through on high-impact projects that can deliver catalytic growth in the economy.

Stakeholders condemn foreign domination of Nigeria’s shipping business AMAKA ANAGOR-EWUZIE

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aritime industry stakeholders have expressed worry over the continued domination of the Nigeria’s shipping business by foreign owned shipping companies at the expense of Nigerian ship owners.

Speaking at the Ship Owners Association of Nigeria (SOAN) Annual Workshop held recently in Lagos, Adebayo Sarumi, a former managing director of the Nigerian Ports Authority (NPA), condemned the continued flouting of extant laws that reserve the shipping of some cargoes for local vessel.

According to Sarumi, foreign shipping companies have been dominating the business of lifting all project cargoes in contravention of Nigeria’s shipping policy that reserves the shipping of Cabotage cargoes for indigenous shipping companies.

“Beyond offshore oil support services, Nigerian ship owners also have roles to play in the carriage of cargo all over the whole place. Therefore, ship own-

ers need to fight for their right to access the cargoes set aside for lifting by indigenous shipping owners,” said Sarumi at the workshop themed: ‘The Nigerian Maritime Industry: Galvanising Stakeholders Engagement for Sustainable Growth.’

Sarumi, who said Nigerians should insist on carrying most of the project cargo, insisted that the business of shipping project cargo should not be left to the supplier to look for shipping companies from his country.

He advised ship owners to think of the possibility of diversification, saying there was no reason for Nigerians not to trade within the North and Central Africa region.

Dakuku Peterside, director-general, Nigerian Maritime Administration and Safety Agency (NIMASA), who delivered a lecture on: “Effective Policy Implementation: A Panacea for Sustainable Participation and Growth of Nigerian Maritime Sector, promised that the agency would begin the disbursement of the Cabotage Vessel Financing Fund (CVFF) in the first quarter of 2019.

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Be afraid; be very afraid

Bashorun J.K Randle Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

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obert Mugabe (ex-president of Zimbabwe) i.) “I can’t vote for those who tormented me.

Let the election be the voice of the people to say never again shall we experience a period when the army is used to thrust one person into power.” ii.) “If you are ugly, you are ugly. Stop talking about inner beauty because men don’t walk around with x-rays to see inner beauty.” iii.) “sometimes, you look back at the girls you spent money on rather than send it to your mum and you realise witchcraft is real.”

Alex Otti (on CNN) “As of December 2017, the following countries had corresponding balances to their credit in foreign reserves: China, U.S.$ 3.194 trillion; Japan U.S.$ 1.233 trillion; European Union U.S.$ 741 billion; Switzerland U.S.$ 680 billion and Saudi Arabia U.S.$ 509 billion.

According to Nigeria’s Debt Management Office (DMO), our total external debt stock has risen from U.S.$ 10.718 billion in 2015 to U.S.$ 22.1 billion as at June 2018.

Robert Mugabe (former President of Zimbabwe) in text message to former President Laurent Gbagbo of Cote d’Ivoire: “You caused your own downfall.

You don’t allow the electoral commission to rig you out of power.”

Thomas Edison (the inventor of the lightbulb) “Many of life’s failures are people

who did not realize how close they were to success when they gave up.”

John Cardinal Onaiyekan (The Catholic Archbishop of Abuja) “It should be politics of care for Zimbodians not politics of fat salaries which politicians give to themselves.”

Front page headline: “Daily Trust” newspaper November 26, 2018 “Why Many Banks Are Bound To Fail In The Present Digital Age.” - Segun Agbaje, Managing Director and Chief Executive Guaranty Trust Bank Plc. Dr. Obadiah Mailafia (Presidential Candidate) “No people in the entire history of humanity have suffered such injustice, mass genocide, and humiliations as the Africans have suffered. For over 400 years, 15 million Africans (mostly Zimbodians) were transported into the New World as chattel slaves.”

Front page of “The Nation” newspaper November 26, 2018: “Suspected Cannabis Dealers Allegedly Injure Family Members” “Suspected drug sellers have allegedly assaulted family members at Bolorunduro in Akure North Local Government of Ondo State, over alleged missing of drugs suspected to be Indian hemp.

The incident was said to have occurred on the family’s farm.

Sources said the hoodlums allegedly invaded a cocoa farm belonging to Augustine Christopher at Bolorunduro where they reportedly apprehended Isaac Akpan, who worked on the farm.

The suspects, who were said to be 40, reportedly invaded the farm on motorcycles with weapons and took away Akpan, accusing him of stealing their produce kept on the cocoa farm.

They allegedly threatened to kill him if he failed to produce bags of the missing cannabis.”

Front page “The Punch”newspaper November 26, 2018

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Opaqueness is the tool of dictators, who think to lead they must keep the led in the dark. They are incapable of standing up to be challenged or giving account to the public of their stewardship

’

“Gang Rapes 13-year-old Virgin While Unconscious” Front page headlines of “The Punch” newspaper November 15, 2018 i.) “Former President Olusegun Obasanjo Seeks Constitution Amendment to Allow Youths Participate In Politics ii.) The House Of Representatives On Wednesday Adjourned Plenary Over Failure Of The Public Address System iii.) Senate Alleges Fresh U.S.$ 1.15 Billion Illegal Withdrawal From Nigerian Liquified Natural Gas Company

By The Nigerian National Petroleum Corporation iv.) Concerns As Nigeria Fails To Attract Big Oil Investments v.) A Former Director Of Navy Accounts, Rear Admiral Tahir Yusuf (Rtd) Has Temporarily Forfeited N510 Million To The Economic And Financial Crimes Commission.

Front page headline “Daily Trust” newspaper November 15, 2018 “Obasanjo To Politicians: Stop Using Youths As Thugs.”

Mary Lindsey “Flattery Is Nothing But Attention Without Intention.”

Front page headline “Daily Trust” newspaper November 12, 2018 “President Muhammadu Buhari: Jail Term Not Sufficient To Deter Corrupt Persons.”

Front page headline “Vanguard” newspaper November 12, 2018 “My Government Succeeded Because I Assembled Technocrats” Back page report “Vanguard” newspaper November 12, 2018 “Money, money everywhere and yet more debt. It is inexplicable and possibly also reckless to have doubled our debt burden in the last three years and, yet still, seek foreign loans with 7 per cent interest rate, when in fact the Central Bank of Nigeria and Zimboda ironically continues to freely auction its relatively bountiful foreign reserves for free.”

Front page report “Vanguard” newspaper November 12, 2018 “Federal Government Of Zimboda Paid N1 Trillion To DISCOs; GENCOs Without Evidence Of Electricity” Front page report “ThisDay” newspaper November 12, 2018 “Outrage Over Search Of Alhaji Atiku Abubakar’s (Presidential Candidate) Private Jet By Security Agents” Alex Otti (Back page of “ThisDay” newspaper November 12, 2018 “Opaqueness is the tool of dictators, who think to lead they must keep the led in the dark. They are incapable of standing up to be challenged or giving account to the public of their stewardship. Leadership is the process of influencing people to achieve an objective, which should be common to both the led and the leader. Actions that do not forge common objective choke the leadership ecosystem and do not encourage accountability and transparency.

Dr. Obadiah Mailafia (front page of “Nigerian Tribune” November 12, 2018 “The two countries that started off with the same initial conditions, with enormous petroleum resources at their disposal, eventually diverged.

While Indonesia prospered, Nigeria (Zimboda) was bogged (down) in underdevelopment.”

Front page headline: “Daily independent” newspaper 1st October, 2018 “President Muhammadu Buhari has warned that the use of social media to stir up negative passions by some Zimbodians is a threat to the nation’s democratic development.”

Dr. Mike Omotosho, National Chairman Of Labour Party “Independence anniversary: Zimboda still crawling at 58. In terms of development.”

Reed Markham “Successful Leaders See The Opportunities In Every Difficulty Rather Than The Difficulty In Every Opportunity.”

Robert Collier “Success Is The Sum Of Small Efforts Repeated Day In And Day Out.” Front page “The Nation” newspaper October 1, 2018 Alhaji Femi Okunnu, SAN (85 years old) Former Federal Commissioner For Works And Housing “Zimboda has gone down the drain over the last 58 years. The aspirations of the founding fathers have been dashed; more importantly, those of us who were young persons at the time of Independence. I was at the Race Course (opposite King’s College) in Lagos when the British Flag was lowered and the Zimbodian flag was hoisted on 1st October 1960.

My personal dreams of Zimboda as a leading nation in the world and as a leader in Africa, politically and economically have also been dashed over the years. So we are not doing well; we are retrogressing and we have been doing so for the past 30 years.”

Exodus 32:34 “The sinner will not go unpunished no matter how long it takes.”

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The anatomy of entrepreneurship

Tajudeeen Ahmed Ahmed, a strategy expert, with several years of senior management experience in consulting, commercial banking, and FMCG, is the General Manager/Group Head Business Development at BUA Group.

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arly this month, I had the privilege of being invited to make a presentation, for over an hour, to a group of about 40 selected entrepreneurs during the Variant Advisory Mentoring Programme (VAMP). Although the theme of my presentation was “Impact of current socio-economic climate on entrepreneurs & SMEs”, I ensured that the discourse was a combination of other salient issues in addition to impactful situations in the global and domestic economies. Thus, we discussed what was described as the anatomy of entrepreneurship. Similar to the makeup of the human anatomy, the entrepre-

neur who is likely to run or establish successful businesses should have the following ‘parts’.

Brain: Ideas are the fuel that drives the entrepreneurship vehicle, and they run via the “brain”. Whether or not they are commercialized, the common starting point is conceptualizing the idea that ultimately becomes a business. Successful entrepreneurs are well-known for being idea factories; and it is this tendency that enables them to see gaps and needs that would have to be filled or met.

Mouth: The spoken word, via the mouth, communicates the vision of the entrepreneur. One who does not communicate his vision is likely to be lost in the business/organizational wilderness. Without this, the basis for the existence and the future of the business is blurred, and there is less likelihood of goal congruence, as members of the organization may work at cross purposes, or in jaundiced, uncoordinated manner.

Eyes: The entrepreneur, having decided to commercialize his idea(s) could seek investors and opportunities, which he does, with his ‘eyes open’- i.e. with real consciousness about potential investors

and what we commonly describe as ‘destiny helpers’ who may give the requisite technical, financial, and/or structural support to take the business to a new, better level.

Ears: Listening to feedback from customers is a very important attribute of a successful entrepreneur. With a ‘sound/discerning ear’ he seeks to know the met and unmet needs of the customers with a view to making necessary amends and serving them better. There are countless examples of businesses that died on account of lack of proactive and constructive engagement of existing and potential customers.

Stomach: Trusting one’s gut as an entrepreneur is an excellent gift. Not necessarily steeped in clairvoyance, the perceptive entrepreneur develops the instinctive aura of trusting his gut even when things appear to have gone awry regarding the business and its operating environment. It is that gut feeling that ensures that the entrepreneur stays the course even in turbulent periods and he could get vindicated when the tides turn in his favour.

Heart: Almost unarguably, having passion (“the heart”) for the business/ organization is at the centre of the success of any entrepreneurship endeav-

our. It was on this basis that I stated that entrepreneurship is not for the faint-hearted. Businesses are naturally expected to go through good and bad times, based on the vagaries surrounding all human undertakings; however, it is the heart full of passion which ensures that when bad times fall upon the business, presence of mind is maintained and the business is not allowed to fall apart.

Feet: Having the nimble feet that propel the entrepreneur to dream high and keep him grounded at the same time are not contradictory.

Nothing in any rule book says that dreaming high is akin to taking reckless, thoughtless risks and having monstrously unachievable targets and ambitions. As ambitions go high, moderation of accompanying risks should also be considered.

Legs: This part of the anatomy ensures that the entrepreneur who seeks to succeed stays through tough times. This is especially true for an entrepreneur who is in business for the long haul; who genuinely desires to create wealth; and who would love the business to outlive him. He uses these “legs” to tweak strategy to ensure survival when conditions are tough and rough; and also con-

solidate on current successes and grow the business when conditions become favourable.

In discussing issues relevant to today’s entrepreneurs and SMEs, I posited that macro issues included global and domestic economic situations, government policies, taxation, ‘recruitment crisis’ (arising from poor, not-fit-for-purpose graduates produced by our higher institutions), and the “trust conundrum” (i.e. the constant distrust of potential and current employees by the entrepreneur on account of fraud and other forms of malfeasance). I also stated that micro issues related to capacity, structure/governance/record keeping, sustainability/legacy/‘going concern’ status of the business, finding the “raison d’etre” (answering the “why” or “purpose” question; i.e. is it wealth for its sake, lack of alternative owing to unemployment, real productivity, or passion and commitment?).

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The strange case of the US$1 billion fund to revive Ajaokuta

Anthony Osae-Brown For feedback, send Whatsapp message to 08152060502

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trange things happen in government all over the world but stranger things do happen in the Nigerian government.

On Thursday, November 13, the Senate ‘strangely’ passed a bill to provide for the withdrawal of $1billion from the Excess Crude Account (ECA) for the completion of the Ajaokuta Steel Company.

The bill, which had earlier been passed by the House of Representatives, also makes provision that additional appropriation can be made from the budget, and also loans and grants can be taken by the federal government to complete the Ajaokuta Steel mill. Effectively, the federal government is being given almost a blank check to get Ajaokuta working again. Even more strangely, the bill also put a stop to any plans by the government to concession the Ajaokuta Steel plant.

Built in 1979, it is estimated that the federal government has spent US$8 billion so far on the plant even though it is yet to produce an ingot of steel for which it was built. Ajaokuta was built to be the nation’s turning point for industrialisation but it has more or less become sinking hole of government spending. Located

TEMPLE EZEBUIKE Ezebuike is a Lagos-based legal practitioner with focus on Energy, Finance and Real Estate. He can be reached on templeezebuike@ gmail.com. He tweets via @ templeezebuike.

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t a telecoms conference in Cape Town, South Africa, Rob Shuter, the CEO of the MTN Group, stated that the Group will put in an application for a Payment Service Bank (PSB) licence in December, and may launch the bank in second quarter of 2019.

PSB is an offshoot from the initiative of the Central Bank of Nigeria (CBN) to drive financial inclusion in the country.

The Nigerian population is reported to be about 190 million.

The adult population is about 55% of the total population. CBN in its National Financial Inclusion Strategy defines financial inclusion as “…when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at an affordable cost.”

These are bank services, which may include payments, savings, loans and guarantees. Currently, the unbanked stands at 37% of the adult population; as such, the percentage of financial inclusion is 63% of the adult population. In Comparison

on a 24,000 hectares of ‘sprawling greenfield’, the steel plant itself occupies about 800 hectares.

Ajaokuta is a grandiose dream that has become a nightmare.

Sadly, the Nigerian government is failing to wake up from the Ajaokuta nightmare. For most private businesses, when they make a bad investment, the first advice is to cut your losses and run. In the Nigerian government case, it is obvious that there is no cap on the losses that the government can make on an investment before deciding when to cut and run.

It is difficult to understand the rationale behind the National Assembly’s decision to pass a special purpose bill to complete Ajaokuta. Why do you need a bill to complete a plant? When the plant is completed, what happens to the bill? Even more concerning in the bill is the provision that the federal government must complete the repairs of the plant and make sure it starts ‘production at a very significant stage’ before it can be concessioned. In this case, the National Assembly is assuming that, the purchase price of the Steel Mill would be enough to cover whatever cost of repairs are incurred. This is a very faulty assumption because a buyer would pay a market price for the plant, which would be based on projections of potential returns on the plant and not based on what the government has spent getting the plant into shape, if it ever gets into shape.

This means that, even where the US$1 billion plus is sunk into repairing the plant, there is no guarantee that the government would be able to recover the

‘

A bill that sets up a fund for the completion of Ajaokuta makes no sense. … There is no rationale for the government to put money in ventures that the private sector would be happy to put money into.

Ajaokuta’s full potential can be realised with private sector investment not with public sector funds that will breed unhealthy control that ends up not being productive but creates a conduit pipe for corruption

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money at the point of sale or even the US$8 billion that has been sunk into the plant from construction to date. Why this insistence on throwing good money after a bad investment?

Sadly, this attitude of holding onto a bad investment is not totally strange. It is the same rationale that has inspired the federal government holding onto the refineries despite the fact that they have been making losses for more than two decades now. For more than two decades, the federal government has consistently shown that it has no capacity to make the country’s

refineries work. This is despite several commissioned turnaround maintenance that ends up swallowing billions of naira but fails to deliver refined products from the country’s three refineries located in Port Harcourt, Warri and Kaduna with a combined capacity to refine 445,000 b/d.

As at August, the combined capacity utilisation of the three refineries was 3.02 percent. In the 12 months to August 2018, the highest combined capacity utilisation of the refineries has been 26.99 percent. The refineries have been making losses, not only this year, but almost for as long as they have existed. Yet, this is another asset, the government, especially the National Assembly has resisted all attempts to sell.

Like Ajaokuta, the federal government is also sourcing for money to repair the refineries which from history, they have not shown any capacity to run profitably. If past trends are anything to go by, this is another investment about to go down the drain.

It must come to a point when the government must accept that it has no capacity to run some of these assets that it keeps holding on to. What is the benefit to the government and the people of Nigeria that the government is holding on to assets that are consuming money that could be used to provide other social needs like healthcare and education, when it could easily dispose of those assets and allow the private sector to turn it into a money-making venture that creates lucrative jobs for Nigerians and boost revenues going to the government?

Indorama Petrochemical plant

Eleme, Port Harcourt, Rivers state was a loss making subsidiary of the Nigerian National Petroleum Corporation (NNPC) until it was privatised. Today, the company is not only creating quality jobs, it also paying significant taxes to the government and has become a pillar of support to its immediate community in Eleme.

A bill that sets up a fund for the completion of Ajaokuta makes no sense. It is likely to end up as another drain pipe on already pressured public revenues. There is no rationale for the government to put money in ventures that the private sector would be happy to put money into. Ajaokuta’s full potential can be realised with private sector investment not with public sector funds that will breed unhealthy control that ends up not being productive but creates a conduit pipe for corruption. If the government has US$1 billion to spare, it should use it to set up an education and health fund. That is much needed than a fund to repair a steel plant that can easily and happily be done by the private sector under the right conditions.

Besides, the federal government has had almost 40 years to make Ajaokuta work. It has not been able to. The issue is not just money. It is also about capacity and competence. The federal government has not shown it has both when it comes to Ajaokuta and the refineries. It should just hand them over to the private sector instead of throwing in more money, most of which will end up being unaccounted for.

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Payment service bank: The lows and effect on retail banking to Kenya (75%) and South Africa (70%), the percentage of financial inclusion is almost abysmal.

Hence, the CBN has outlined a strategy under its National Financial Inclusion Strategy (NFIS), to take the figure of banked adults up to 80% in 2020.

The NFIS is to ensure that 80% of the bankable adults in Nigeria have access to financial services by 2020.

This is on the back of the abysmal financial inclusion return-rate of other CBN initiatives, like microfinance banking, agent banking and mobile money operation. This has led the CBN to provide for the licensing and operation of Payment Service Banks (PSBs) in Nigeria.

PSBs look to leverage on mobile and digital services to improve financial inclusion and stimulate economic growth at the informal sector. PSBs also look to enable high-volume low-level transactions in remittance services, micro-saving and withdrawals in a secured technologically-driven environment. What these set out to do is to cater for retail financial services– for sole or family businesses and SMEs– which make up 65% of the economy.

PSB is similar to the Kenyan M-PESA, which is a mobile money transfer service launched by Ken-

yan’s largest mobile phone operator, Safaricom, in 2007. Its software application allows people without bank accounts to send money via mobile messaging to contacts on their phone, or to pay for goods and services. M-PESA facilitates the remittance of cash between users via a combination of its software and a GSM provider, bypassing traditional bank software. It is not controlled

by Kenyan’s banking central switch, unlike PSBs, which are under the Nigerian Central Switch, operated

by Nigeria Inter Bank Settlement System (NIBSS), which connects inter-bank financial transactions.

This advantage places M-PESA’s operations outside reach of Kenyan banks, and disconnects M-PESA from any perceived disadvantage it may face if regulated by a central switch.

In 2009, the total mobile money accounts in Kenya eclipsed the number of total bank accounts.

Although banks through competitive innovations later outnumbered mobile money accounts by more than 30%, the independence of MPESA is commendable. On the home front, the lack of independence of PSBs will mean that they will be financially hamstrung by the CBN’s regulation on PSBs. Based on the exposure draft CBN

guideline for licensing and regulation of PSPS 2018 (CBN Regulation), PSBs are structured in such a way that they shall: • Operate mostly in rural areas and unbanked location, with not less than 50% access points.

• Establish ATMs in some of these areas.

• Be at liberty to operate through banking agents.

• Use other channels including electronic platform to reach out to customers.

• Set-up consumer help desks at main offices or coordinating centres to attend to customer-related issues.

• Maintain savings account and accept deposits from individuals and small businesses.

• Issue debit and pre-paid cards.

• Operate electronic purse.

PSBs, however, are precluded from granting loans and trading in FOREX. The share capital for PSBs is pegged at an outrageous N5 billion, and owners of a PSB shall be banking agents, telecommunication companies (Telcos) through subsidiaries, retail chains (supermarkets), and mobile money operators (MMO).

From the Bureau of National Statistics, 2017 year-end, Nigerians owed the banking sector about N15.93 trillion in loans. About

N13.1 trillion of the total loans borrowed from the banks were lent to 3,891 customers: hyper-upper class business owners. While the data does not distinguish between individual and corporate customers or separate unique customers, it suggests that less than 2% of Nigerians (including businesses) actually accessed credit from the banking sector, or were fortunate to have been advanced credit by banks.

Nigeria has about 50% of its population living in extreme poverty. Fairly, one may have thought that the PSB initiative was aimed at availing credit facilities to economic bustlers at the grassroots; or aimed at bridging the creditaccessibility gap between hyperupper class business owners (or their businesses) and low-income individuals/small businesses in the informal sector. This thought has been dashed by the Exposure Draft CBN Regulation on PSBs, as PSBs are prohibited from granting loans to individuals and small businesses.

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comment GrowthView with

Christina Wehbe Wehbe is passionate about helping others and fighting poverty & injustice. She is the founder of GrowthView. She writes from Zurich, Switzerland, via christina. wehbe@gmail.com E: christina.wehbe@urbanemerge. com Cell: +41 79 950 4760 https://www.urbanemerge.com/ people https://www.qeh.ox.ac.uk/alumni/ christina-wehbe

G

rowthView is the first social and economic column. We take a positive, non-biased and relevant angle to sustainability, impact investment and public growth - to make this world more prosperous for all.

We build on c-level conversations, government relations and investor actions to shift people’s thinking and corporate action.

Why is GrowthView compelling for readers?

GrowthView is the first publication that combines social and economic strategies towards sustainability and positive impact. The aim is to share knowledge and build

OKECHUKWU KESHI UKEGBU

U

ndoubtedly, corruption has been the bane of Nigeria’s development for decades now. Both the military and the civilian administrations in this country have not spared efforts to put this monster at bay.

Efforts to rid the country of corruption formed basis of the military coups in the past. One remarkable effort that deserves mention is the reasons advanced by Major Chukwuma Kaduna Nzeogwu in his bid to justify the 15, January, 1966 coup that overthrew the government of First Republic. He said: “Our enemies are the political profiteers, the swindlers, the men in high and low places that seek bribes and demand 10 per cent; those that have corrupted our society and put the Nigerian calendar back by words and deeds.”

Since Nzeogwu rendered this thought-provoking statement, corruption has remained recalcitrant, and could be likened to Wole Soyinka’s ogbanje child – in his epic poem, Abiku – who kept re-incarnating, visiting untold hardship and discomfort to the parents.

Because of the severe consequences of corruption on Nigeria’s image, both locally and internationally, and the negative pressures it is exerting on the nation’s economy, subsequent administrations have no option but to design one campaign or the other to fight the malaise.

The present administration led by President Muhammadu Buhari is no exception. In the president’s thought, “if the nation does not kill

Monday 17 December 2018

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Send 800word comments to comment@businessdayonline.com

GrowthView: What to expect corporate strategies that are meaningful for people. The information and questions are angled positively with a focus on people as well as corporate organisations.

Let’s speak about your view on prosperity and financial drivers. The values we share is what connects us and money markets reflect this.

Why is it important?

It is important to have a neutral, non-biased view of the world so we all become better at what we do.

Markets are becoming inefficient and governments are flipping strategies to protect national interest. That’s why we need to find a balance again, that is driven by people, markets and human values - to make this world a better place for all.

What is different about GrowthView? It is positive, it is digestible and it is relevant - we call upon metaphors, financial tools, experiences in developing countries and market actions. The aim is to help others reflect on our current economic and social environment - and shift practices.

It is written and reflects markets as much as people. From the corporate leader, to the man and woman on the street and the younger generation looking for answers on how to make an impact.

We focus on the win-win in our circular economies between governments, businesses, and societies. We take a logical approach to problems and social situations.

What are some of the questions in GrowthView?

‘

GrowthView makes us think about, reflect on and helps us identify corporate and social strategies for a more sustainable future together

’

GrowthView takes the approach of asking its readers’ questions.

These topics are to help them on their own social and economic path.

The questions have depth, relatable and strategic to enable governments and companies adapt their business model NOW for a sustainable FUTURE. We share intel and pose tactical questions on sustainability, social considerations, human-behaviours that impact our economy.

We focus on individuals and financial-incentives that are the money-changer towards prosperity. » What does a change in the economy mean for you, as an individual? » How do your social and economic choices foster impact? » What is the role of corporates towards the changing landscape of sustainability? » What do you as an individual value and what is missing for you to

achieve it? » How will investment strategies, ROI, CSR funds catalyse new priorities and business models around the world? » What does the buzz around impact investment tangibly mean for you, your community, organisation or country and where is the opportunity?

GrowthView offers View into the future with a market Growth priority.

What are the Social and Economic chapters to come?

GrowthView will have 5 chapters to shift positive actions on sustainability, prosperity and money markets.

1. Set the scene & ask questions - to get people thinking, what is impact investment, what are the 17 Sustainable Development Goals (SDGs), how is political, social and economies tied so closely together.

What is the language and how do we each define it.

2. The economic theories - what are possible solutions we as a society, corporates or funds can do. How to create greater gains and incorporate social considerations.

3. The market product for sustainability - what will be the sustainable product of the future which will attract the most capital? Who will be the market leader in this space?

4. Re-evaluate - is this really what people want and is it sustainable?

Re-evaluate the theories and get direct feedback.

5. Partner with the United Nations (UN) - corporates, banks and

governments as UN partners with tangible metrics and comparative advantages.

In sum, this is the journey to sustainable and impact growth which is mirrored by our GrowthView columns: Does GrowthView have personal insights?

I grew up understanding quickly what “social help” and “social support” means. Having lived it myself - my personal growth story evolved into my professional journey in finance and international development around the world. I evolved and learned year after year. I worked in Wealth Management for top-tier private banks in NYC and Geneva for UHNW clients. Thereafter, I went into strategy consulting particularly in technology and change for large investment banks. I combined my academic background in Politics and International Development to work in Sub-Sahara Africa and the levant.

With the aim to facilitate GDP growth and employment opportunities that will help poor communities and build inclusive businesses.

GrowthView is bringing back the social component that most newspapers, magazines and academic journals are missing.

Our column takes a social and economic angle to address poverty and achieving the UN Sustainable Development Goals (SDGs).

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Media and fight against corruption corruption, corruption will kill the nation.”

One tool that has been proved veritable over the years - in the successful mounting of any public campaign - is the mass media. The mass media can be referred as channels of communication through which information, knowledge, ideas, culture, and norms are passed or communicated to a heterogeneous audience that are sparsely distributed and spontaneously receive this message. The mass media can be print, which include newspapers and magazines, among others; or the electronics, which comprises the radio or television. There is also a recent brand of the mass media which is referred to as the new media. The new media, according to Wikipedia.org, refers to content available on demand through the internet, accessible on any digital device, usually containing interactive user-feedback and creative participation. Common examples of new media include websites, such as online newspapers, blogs, wikis, video games and social media. One of the defining characteristics of the channel of mass media is dialogue.

The new media transmit content through connection and conversation. It enables people around the world to share, comment on, and discuss a wide variety of topics.

The question that agitates the mind here is: “Why should the mass media be adequately deployed in the current fight against corruption?” The answer is not far-fetched.

It is in controvertible that the media play a critical role in a country’s development. The media were at the forefront of the struggle for independence across African countries.

A typical example is Nigeria, where elder statesman, Dr Nnamdi Azikiwe and other nationalists deployed the media maximally in their struggle for the nation’s independence. Because of the notable roles of the mass media in a nation’s development, a renowned scholar, Edmund Burke, conferred the media with the title of “Fourth Estate of the Realm.” Though not constitutionally guaranteed, the media checkmates other arms of government, such as the executive, legislature, and judiciary. The media is also referred to as the “watchdog” of the society, because it strives as the mirror with which the masses keep a tab on the society, basically the ruling class. Without the media, the society cannot function properly, and anything that affects the media negatively touches the heart of the society.

It is important to note that the media has made immense inputs in political reforms and nation building. The media has been deployed to effect political changes such as the collapse of Union of Soviet Socialist Republic (USSR), agitations for political reforms in China and pro-democracy struggles in Nigeria.

The roles of the media in any society cannot be over emphasised.

They include carrying of ideas; presenting representative pictures of the society; classifying the values and goals of the society; monitoring the government and making it accountable to the people; promoting the concept of accountability, integrity, honesty, fairness and equity. Others are giving voice to the voiceless; agenda setting; fostering national unity and integration; promoting society’s culture and the moral value systems; and promot-

ing sustainable national interest at all times. It is unambiguous to note here that if the current fight against corruption is to succeed, the media must be deployed effectively.

In addition, for media men and women to discharge their duties effectively in this current fight against corruption, the media ethics should be upheld religiously. It is an open secret that the ethics of the media of recent have been eroded embarrassingly. Webster New Collegiate Dictionary defines ethics as the discipline that deals with what is good and bad with moral duty and obligation; a set of moral principles and values; the principles of conduct governing an individual or group; and conforming to accepted professional standard of conduct.

The ethics of the media are some principles and codes of conduct that guide the journalist in the discharge of his duties and are as important as inner directives for the individual decision-making in various situations that arise in the course of performing his professional duties.

The Nigerian press ethical codes of conduct include the respect for the truth; the respect for the freedom of the individual; the respect for constituted authorities; avoidance of publication of bad taste in language and pictures; avoidance of libel and sedition; avoidance of malicious publication; not settling personal quarrels on the pages of newspapers and airwaves; not promoting sectional interest; respect away from bribes, including brown and black envelopes (sic; protecting your source of information at all times; not reporting about protected areas or zones; and maintaining good image both in conduct and

appearance.

For the purpose of the current fight against corruption, few ethical codes and conduct should be emphasised. It will be recalled that the press has been seriously lampooned because of the black envelope syndrome. It is generally alleged that this syndrome induces journalists to slant stories in the interest of their benefactors. Though this assertion deserves a thorough argument, it is a known dictum that “he who pays the piper dictates the tune.”

A contradictory argument which tends to support the brown envelope syndrome expresses concern over the conditions of service of media practitioners, especially those in privately-owned establishments. It is no longer news that journalists are owed arrears of salaries, upward of one year, by proprietors of media houses in the country, including the notable. Indeed, bribery (brown envelope) is serious ethical issue of the media and should not be treated with kid gloves. But to effectively deemphasise it, media practitioners should be adequately remunerated and their salaries should be paid as at when due. If we achieve this, the fight against corruption would have been substantially achieved.

In the words of late Moshood Abiola, publisher of the defunct Concord Newspapers, “if you fail to pay your workers, someone else will pay them and they will work for the person.”

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Publisher/CEO

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

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Editorial

Taxation and accountability in Lagos state

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axation is a difficult issue for any government, but most especially for governments in res ource-rich nations whose citizens do not have a culture of paying tax. The situation is also compounded by the corrupt and rapacious nature of the leadership in such resource-rich countries where accountability is absent and exiting taxes are whittled down or completely dismantled to prevent the development of a civic culture where the citizens not only pay tax but also strongly demand accountability from the leadership on how taxpayers’ money is utilised.

This is the context in Nigeria and Lagos state in 1999 when the then governor, Bola Tinubu, decided Lagos needed a different model of governance – a model where the people would help fund their government and the government will, in turn, be accountable to the people from whom it draws its resources. Lagosians grudgingly accepted the charge

and over the last 18 years, the IGR of Lagos has risen from a mere N600 million monthly in 1999 to a declared figure of N34 billion in 2017.

Consequently therefore, at a time when most of the states of the federation are battling with bankruptcy and unable to meet basic responsibility such as payment of workers’ salaries following the decline of oilderived federally distributable revenue, Lagos state is soaring high outpacing economic growth in other parts of the country, as the state’s non-oil revenues help sustain increased investment in infrastructure and other social amenities.

In 2016 alone, the Lagos state government declared that it raked in N287 billion in internally generated revenue. This is well above the total budget size of more than 20 of Nigeria’s 36 states. Going by the average monthly revenues in 2017, the state should have generated well above N400 billion. And, if the revelation by the governor that only about 600, 000 out of about 22 million Lagosians dutifully pay their taxes is true, then there is still room for im-

provement and with a robust tax enforcement mechanism, Lagos could still raise enough tax to enable it transform the state to a megacity as dreamed by key stakeholders in the state since 1999.

However, rather than intensify its tax compliance advocacy and strengthen its enforcement mechanisms, the state government chooses to introduce new round of taxes, charges and other sundry bills that is turning Lagos into one of the most difficult places to live and do business in Africa.

The increase of the Land Use Charge by about 400 percent (now reduced by 50 percent after intense protest), the introduction of borehole and other permits and a proposed increase in vehicle registration and licensing rounds, ultimately denied by the Lagos state government, prove the point. Besides the sheer impunity and hubris behind the move, the huge increase and new raft of taxes and charge will create more problems for the state, cripple businesses, deepen poverty and helplessness, and ultimately prove

uncollectable.

But just as the Lagos state government is increasing the tax burden on residents of the state, it has been failing in its duty to account for the taxes so far collected. Although it has its account audited and it produces financial statements for each year, its financial statements are notorious for being opaque, containing very little useful information. Equally, the state government, despite many court judgements, has refused to respect the freedom of information law by releasing detailed information into how it uses tax-payers’ money.

That cannot be the action of a transparent government.

It cannot continue to collect tax-payers’ money while refusing to account for same. That is not in consonance with the contract entered into between the government and the people in 1999. It stands the whole idea of the social contract on its head. Lagosians must demand for new terms of engagement that sufficiently respects the tax-payer and compels the government to render account of the monies collected.

HEAD, HUMAN RESOURCES Adeola Obisesan

EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo

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In Association With

Congo’s election

Credit Investingcomes and thelater super-rich

How the 0.001% invest

A puppet is set to replace the president Joseph Kabila will still pull the strings after stepping down

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The family offices through which the world’s wealthiest 0.001% invest are a new force in global finance that few have heard of

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E WANT ELECTION day to be a party, not a day people lose their lives,” says President Joseph Kabila (pictured). After a ballot scheduled for December 23rd, he is planning to step down, he says. Having ruled the Democratic Republic of Congo for 18 years, he is constitutionally required to. Entertaining foreign journalists (a rare event) at his farm east of Kinshasa, the capital, he is mild-mannered. He chuckles at tough questions, and wanders off topic when disinclined to answer. Asked if the election will be free and fair, however, he is direct: “No question about that.” Few outside his circle concur.

Still, it will be the first time that Congo has ever changed its leader at the ballot box. Mobutu Sese Seko, a kleptocrat who grabbed power in 1965 and used public cash to swill pink champagne and charter Concorde to go shopping in Paris, fled his palace moments before it was ransacked by soldiers in 1997. The man who toppled him, Laurent Kabila, was shot dead by a bodyguard in 2001. His son has ruled ever since, locking up critics and crushing protests. In recent years thousands have died violently.

The election has been a long time coming. The constitution required Mr Kabila to step down in 2016. He tried to change it, failed, and stuck around for two more years anyway.

The Catholic Church, one of Congo’s few well-functioning institutions, organised peaceful protests calling for him to step down. On three Sundays, congregations in Kinshasa marched out of church after mass waving palm fronds and placards. The police sprayed them with tear gas and bullets, killing 18 people and dumping bodies in the river.

Mr Kabila probably will step down, having been pressed to do so by Angola, South Africa and other African states that fear chaos if he lingers. But it would be foolish to expect voting day to be jolly. More than 100 rebel groups are at large. A jihadist militia, reportedly with links to Islamic State, is terrorising an eastern area that is also being ravaged by Ebola. Many Congolese will be too nervous to vote.

Few trust the electoral commis-

Monday 17 December 2018

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HINK OF THE upper echelons of the money-management business, and the image that springs to mind is of fusty private banks in Geneva or London’s Mayfair, with marble lobbies and fake country-house meeting-rooms designed to make their super-rich clients feel at home. But that picture is out of date. A more accurate one would feature hundreds of glassy private offices in California and Singapore that invest in Canadian bonds, European property andChinesestartups—andwhosegilded patrons are sleepwalking into a political storm.

Global finance is being transformed as billionaires get richer and cut out the

sion, widely believed to be in Mr Kabila’s pocket. Polling booths may well go up in flames. Two people were killed by police at an opposition rally in the capital on December 11th. Some 105,000 electronic voting tablets from South Korea have been nicknamed machines à voler (stealing machines). Delivering them to 84,000 polling stations, many in remote areas accessible only by helicopter, boat or motorbike, will be tricky. If batteries go flat, it will be hard to recharge them.

Only 1% of people in rural Congo have access to electricity.

“Voting takes a minute,” says Corneille Nangaa, the commission’s head. It may take rather longer. JeanPierre Bemba, an opposition leader and former warlord barred from standing, says it will take an average of six minutes, partly because so many voters are unused to technology. If so, Congo’s 40m voters (in a population of maybe 82m) would need at least two days to cast their ballots. Mr Nangaa says voting must not exceed 24 hours.

If the election is too obviously flawed and enough people in and outside Congo complain, it could be invalidated and put off yet again— leaving Mr Kabila in power. If not, the winner is likely to be Emmanuel Ramazani Shadary, Mr Kabila’s handpicked successor, a former interior minister. The EU has just renewed

sanctions against him for the part he played in suppressing protests in 2016 and 2017, so he will not be able to visit it.

“Congo is as big as the European Union, so Shadary will have so many provinces to cover,” says Mr Kabila breezily. “I don’t think he will miss Europe.”

Mr Shadary faces a weak opposition. Two of his most serious rivals, Mr Bemba and Moïse Katumbi, a former governor, were prevented from running. The rest of the opposition has splintered. In a short-lived moment of hope last month, seven opposition leaders said they had chosen a single candidate, but within a day two of them peeled off to form a rival coalition.

Mr Kabila says he will keep himself busy spending time with his mother.

He will also lend a hand to Mr Shadary (or any other winner). He may even try to run again for president next time around, as the constitution allows, perhaps having pulled Mr Shadary’s strings for five years. He is studiously vague about this: “2023 is way away.”

At a summit in August he told leaders that he would not say goodbye but rather “à bientôt” (see you soon). Did this mean he plans to return? “I was paraphrasing a movie I have seen very often...when Arnold Schwarzenegger says ‘I’ll be back’. So don’t take lots of my jokes out of context.”

Mr Kabila has stayed in power by keeping friends and rivals weak. The army is often without ammunition, save for the presidential guard. Mr Kabila’s loyalists have been slotted into the constitutional court and electoral commission. Anyone who becomes too popular is in danger. Denis Mukwege, the winner of this year’s Nobel peace prize for treating victims of wartime rape, survived an assassination attempt in 2012. An army general with a big following was murdered in 2014.

Mr Kabila will want his successor to protect the wealth he has accrued.

He and his family have interests in mines, banks, real estate, farms and airlines. Their companies have permits for diamond mining that extend along Congo’s southern border with Angola. His farm at Kingakati adjoins a game park teeming with imported giraffes, rhino and lions.

“What happens when the lizard becomes the crocodile?” is a Congolese adage. Could Mr Shadary, once in office, bare his teeth at Mr Kabila?

If Mr Shadary were to follow the example of Angola’s president, João Lourenço, he could tell the taxman to take a hard look at his predecessor’s family. However, lacking a base of his own, most notably in the army or security services, Mr Shadary is unlikely to do so.

middlemen by creating their own “family offices”, personal investment firms that roam global markets looking for opportunities. Largely unnoticed, family offices have become a force in investing, with up to $4trn of assets—more than hedge funds and equivalent to 6% of the value of the world’s stockmarkets. As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power and feed inequality.

The concept is hardly new; John D. Rockefeller set up his family office in 1882. But the number has exploded this century. Somewhere between 5,000 and 10,000 are based in America and Europe and in Asian hubs such as Singapore and Hong Kong. Though their main task is to manage financial assets, the biggest offices, some with hundreds of staff, undertake all sorts of other chores, from tax and legal work to acting as high-powered butlers who book jets and pamper pets.

The costs of bringing such expertise in-mansion means that they generally make sense only for those worth over $100m, the top 0.001% of the global pile.

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How the 0.001% invest

The middle domino

Burkina Faso, west Africa’s linchpin, is losing its war on terror Attacks are intensifying, but the authorities have no idea who is behind them

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HE CAPPUCCINO patisserie in the centre of Ouagadougou, Burkina Faso’s capital, offers freshly baked croissants and that rare delicacy in west Africa, a decent Italian coffee.

Its other features are less charming: a thick security barrier and two twitchy soldiers with assault rifles guard its patrons.

This was the place where jihadist terrorism first came calling three years ago. Jihadists attacked Cappuccino and the nearby Splendid Hotel. Thirty people were killed and dozens

were injured. A conflict that had been raging next door in Mali had just jumped into a linchpin state.

Burkina Faso has borders with six other west African countries; instability there could create a corridor by which jihadism might spread from the Sahel into states along the Gulf of Guinea. A longoverlooked country of 20m people is now seen as a vital battleground.

And the fight is not going well.

Since January 2016 there have been more than 230 attacks in Burkina Faso. In 2017 jihadists killed 18 people in an attack on Aziz Istanbul, a Turkish restaurant.

Another 16 people (including eight assailants) were killed in attacks on the French embassy and army headquarters in March.

The conflict is concentrated mainly in two zones, along its northern border with Mali and in the east towards the border with Niger (see map). In both areas the jihadists are mobile and heavily armed. Their primary targets are generally government offices and military outposts. More than 250 people have been killed.

Less clear is who is behind the fighting. Some attacks, such as the one on Cappuccino, have been claimed by al-Qaeda in the Islamic Maghreb, a jihadist group that operates across large parts of the Sahel. Others have been claimed by a variety of similar groups including Nusrat al-Islam, Islamic State in the Greater Sahara and Ansarour Islam. But more than 90% of the attacks remain unclaimed and unattributed.

Forensic work offers some clues. Brigadier General Oumarou Sadou, the chief of staff of Burkina Faso’s army, says that there are similarities in the home-made bombs used in the north and east, suggesting that the attacks are linked. But beyond that, General Sadou is puzzled as to the identity of the attackers, particularly in the east.

Some suspect former members of the security services loyal to Blaise Compaoré, who ruled the country for 27 years before being toppled in a people’s uprising in 2014. His fall led to the dissolution of his 1,200-strong presidential guard. Many of its members are disgruntled at having lost their

privileges. There is no hard evidence of their involvement.

However, Mr Compaoré’s henchmen had long-standing links to the jihadists. The International Crisis Group, a think-tank, says that his regime cut deals with armed groups in the region, giving them support in exchange for a promise not to attack Burkina Faso. This truce unravelled in 2013, after jihadist rebels took control of the northern half of Mali. France sent in troops to push them back and Mr Compaoré was forced to deploy 1,000 soldiers to the border with Mali.

Now Burkina Faso itself needs assistance, particularly air support, says General Sadou. “Mali was asking for help before they had their crisis. No one listened,” he says. “If we do not get more help, I see the situation definitely getting a lot worse.”

Neighbours including Togo, Benin and Ghana have sent troops to their borders near Burkina Faso and have raided suspected militant outposts. But it is not clear whether Burkina Faso will get much direct support. France has already committed 4,500 troops to the region, yet they are stretched thin. The G5 Sahel, a counter-terrorism force consisting of 5,000 troops from Mali, Mauritania, Chad, Niger and Burkina Faso, which was established to deal with just this sort of threat, is struggling to get troops into the field.

Aziz Istanbul has yet to reopen since it was attacked. Its shattered windows and walls pocked by bullets offer a worrying vision of where the country may go.

Continued from page 14

Asian tycoons such as Jack Ma of Alibaba have created their own fiefs. The largest Western family offices, such as the one set up by George Soros, an investor and philanthropist, oversee tens of billions and are as muscular as Wall Street firms, competing with banks and privateequity groups to buy whole companies.

Every investment boom reflects the society that spawned it. The humble mutual fund came of age in the 1970s after two decades of middle-class prosperity in America. The rise of family offices reflects soaring inequality. Since 1980 the share of the world’s wealth owned by the top 0.01% has risen from 3% to 8%.

As the founders of family firms receive dividends or the proceeds of initial public offerings, they usually redeploy the cash.

But since the financial crisis there has been a loss of faith in external money managers. Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked.

These trends are unlikely to fade, as our Briefing explains. The number of billionaires is still growing—199 newbies made the grade last year. In the emerging world older entrepreneurs who created firms in the boom years after 1990 are preparing to cash out, while in America and China younger tech entrepreneurs may soon float their companies, releasing a new wave of cash to reinvest. Family offices’ weight in the financial system, therefore, looks likely to rise further. As it does, the objections to them will rise exponentially. The most obvious of these is the least convincing—that family offices have created inequality. They are a consequence, not its cause. Nonetheless, there are concerns—and one in particular that is worth worrying about.

The first is that family offices could endanger the stability of the financial system. Combining very rich people, opacity and markets can be explosive.

LTCM, a $100bn hedge fund backed by the super-rich, blew up in 1998, almost bringing down Wall Street. Scores of wealthy people fell for a Ponzi scheme run by Bernie Madoff that collapsed in 2008. Still, as things stand family offices do not look like the next disaster waiting to happen. They have debt equivalent to 17% of their assets, making them among the least leveraged participants in global markets. On balance, they may even be a stabilising influence. Their funds are usually deployed for decades, making them far less vulnerable to panics than banks and many hedge funds.

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Charlemagne

Europe’s summiteers have little to celebrate, besides not being British Franco-German dysfunction makes it impossible to clear Europe’s roadblocks

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REXIT MAY be tearing Britain’s political establishment apart, but the 27 remaining states of the EU have held firm. The European Commission’s red lines— principally the insistence that there can be no deal better than EU membership—have withstood the talks. As The Economist went to press, Theresa May was on her way to the European Council summit to beg for further concessions from EU leaders. They had ruled out any renegotiation of the Brexit deal and suggested only presentational tweaks, just stopping short of offering to repeat it more slowly and with pictures. Though few in Brussels relish the chaos in London and all are heartily sick of the Brexit saga, continental leaders allow themselves a little satisfaction at the competence with which their side has handled matters.

That, however, is to cling to a qualified success amid many failures.

When not listening to Mrs May’s pleas, the 27 looked set to stumble through an agenda that reads as a gazetteer of roadblocks: problems where progress is proving glacial but which, if left unresolved, could ultimately fracture the union. All indicate the increasing dysfunction of the Franco-German relationship.Above all, this was meant to be the summit to fix the euro zone.

The election in May 2017 of Emmanuel Macron, a German-friendly French president, fuelled hopes that Angela Merkel and her colleagues might at last work with Paris to fix the common currency’s structural flaws. That would mean completing a common banking union, to break the

self-reinforcing link between wobbly sovereigns and wobbly banks, and creating quasi-federal fiscal tools to support struggling economies in downturns. Mr Macron proclaimed his vision last year, but has come off much the worse from his subsequent collision with the German political class. The consolidation of a hawkish “New Hanseatic League” of fellow northern states and the formation of a populist, expansionary government in debt-laden Italy have only buttressed the Teutonic wall into which the French president has crashed.

Leaders will probably approve some modest new powers for the European Stability Mechanism, the EU’s bail-out vehicle, and leave the door open to a tiny euro-zone budget. But they remain split on whether this pot should be used to stabilise stricken economies. And the common insurance of bank deposits, the foundation of a coherent banking union, remains a distant prospect.

Mr Macron despairs of Mrs Merkel’s marmoreal intransigence. The president’s announcement on December 10th that he would increase wage subsidies and make overtime taxfree threatens to lift his country’s deficit above the EU’s limit of 3% of GDP. His previous obedience to it had been totemic of his bid to woo the German establishment and thus sell his reform proposals, so the shift suggests a president downgrading or even ditching that fruitless charm offensive. It also hands the Italian government an invitation to escalate its own budgetary battle with the EU

institutions.

Also on the agenda in Brussels is migration. Here the EU is edging towards expanded controls on its southern borders. But it lacks robust mechanisms to deal with future movements of people, including ways to share out those with valid claims to asylum in the EU and lighten the burden on Mediterranean states. Lastly, the leaders were due to ponder the EU’s next budget, covering the years 2021 to 2027, where disagreements over regional payments to illiberal member states and old bugbears like the wasteful common agricultural policy (CAP) make a final agree-

ment before 2020 unlikely. Future shocks—the next euro-zone crisis, a new migration surge, a military crisis on Europe’s fringes or a breakdown in east-west relations in the EU—will expose the heavy cost in unity, prosperity and security of the union’s failure to achieve more.

Yet the outlines of a grand bargain are not so hard to discern. It might see defence laggards like Germany contribute more to common security; illiberal governments like that of Poland reinstate democratic norms and co-operate more on migration; northern “Hanseatic” states like the Netherlands tolerate more euro-zone inte-

gration and contribute to managing migration flows; debtor states like Italy accept write-downs of risky loans and greater common budgetary oversight; and big farming states like France accept a trimming of farm handouts in return for extra spending on regions, migration management and common defence. With compromises like this, the union could theoretically break its roadblocks and prepare for future crises. Such mega-compacts have helped advance Europe in the past.

In the 1960s Germany got industrial integration in return for the CAP. In the 1990s France got the euro in return for German reunification.

Paying for rain

In Africa, agricultural insurance often falls on stony ground The continent’s crop-farmers and pastoralists remain to be convinced

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ACKSON LEWANGU looks up at the clouds scudding above the dry plains of northern Kenya. And, somewhere higher still, a satellite looks down on him. Since 2012 Mr Lewangu, who keeps goats and cattle, has bought insurance designed by the International Livestock Research Institute, based in Nairobi. The satellite monitors vegetation; when it is unusually scarce, he gets a payout. He can then buy food for his animals or pay a rancher for access to grazing land, without which his cows would die.

Insurance could bring peace of mind to Africa’s pastoralists. It could also help the continent’s crop farmers, whose fields are almost entirely rain-fed. But Mr Lewangu’s neighbours are unconvinced. The satellite gives false information, says one woman; there is no payout in good years, complains another.

Such scepticism is typical. Although schemes have proliferated in the past decade, almost all are subsidised by governments or foreign donors. Insurers and farmers are “not speaking the same language”, says Rahab Kariuki of ACRE Africa,

a Kenyan firm that works with both.

Lack of demand has muted the hype around index insurance, an innovative way to cover smallholders. Data on rainfall or sample yields are crunched; a payout is triggered when an index falls below a threshold. That is cheaper than assessing farmers’ losses, or checking if nomads’ cows have died. And since farmers cannot control the rain, there is less “moral hazard”: changes in their behaviour cannot make a payout more likely.

But the models make assumptions, for example about when farmers plant or how rainfall affects yields. And no model can capture all risks. Buyers may lose their crops and still get nothing, ending up worse off than if they had been uninsured. Such flaws may be sufficiently serious to mean that the most risk-averse farmers will buy less insurance, argues a 2016 paper

by Daniel Clarke, then of the World Bank. Demand is lower from pastoralists in Kenya whose losses have

been underestimated by the index in the past.

Insurance is an unfamiliar concept in rural Africa. It is also an unsettling one, asking buyers to pay in advance for a return they hope not to need. That is a problem where trust is low, fraud common and the law remote. Another barrier to take-up is that premiums are typically paid before planting, when farmers are poorest. One trial offered insurance to sugar-cane growers in Kenya.

Only 5% signed up when they had to pay the premium upfront. More than 70% did when payment was deducted from their sales at harvest, even though they had to sign up at planting time, before knowing whether they would need it.

Some firms are finding clients.

Pula, a startup, bundles insurance with other products. In Zambia and Malawi it is in partnership with Bayer, which sells seed. Farmers register by phone, using a unique number attached to each bag of seed; some 130,000 are expected to do so this season. For now Bayer absorbs the cost. But trials by Pula in Nigeria, this time with fertiliser, sug-

gest that farmers will pay more for insured bags. The extra cost seems small to those already forking out for inputs, says Thomas Njeru, one of Pula’s founders.

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Standard Chartered launches Visa credit card

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

SOLID MINERALS

Mining booms as foreign, local companies ramp up investments ODINAKA ANUDU

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oreign and local companies are acquiring new mining sites in Nigeria to tap from a cashspinning sector that has been largely under the radar since the crude oil boom.

“Investments, mainly from foreign companies, are taking place in the sector right now.

The reason is that the mining environment is getting more attention from the government and better too,” Shehu Sani, president of Miners Association of Nigeria (MAN), told BusinessDay in a telephone interview.

The mining sector grew 21 percent in the third quarter of 2018, according to the National Bureau of Statistics (NBS), confirming the increasing activity in the space.

Symbol Mining, an Australian publicly listed company, recently commenced mining high-grade zinc and lead in Bauchi State.

Symbol has two local Joint Venture projects— Tawny in Nasarawa State and Imperial in Bauchi State, with total tenements spanning over 500km2.

The company is not particularly new as it commenced operations in 2012 in Nigeria, but it has been expanding operations recently, completing over 12,000m of exploration drilling, according to Tim Wither, CEO of Symbol Mining

during the Mining Week in Abuja, earlier in the year.

“Symbol’s strategy is to generate early cash-flow from open pit mining at the Macy Deposit, which will facilitate further exploration activities at Imperial and Tawny, and potentially expand our resource base to grow the company,” Wither said.

Also, PW Nigeria Limited is currently mining lead and zinc for Symbol Base Metals Limited at their Macy Base Metal project in Bauchi State. This project is fully mobilised and ore extraction has commenced.

“We have acquired a number of licences the majority of which are in Niger state and are currently carrying out a detailed exploration programme,” said Martin O’Boyle, director of PW Nigeria Limited, at the Mining Week.

Next is Minutor International, which is mining gold, zinc, lead, lithium and copper in many parts of Nigeria.

“Nigeria has amazing bluesky opportunities in the solid mineral industry: from IOCG deposits to hydrothermal and epithermalgolddeposits,copper porphyries,sedimentarycopper deposits,highgradebatterymineralsincludinglead,zinc,lithium and graphite to name but a few,” Riaan van der Westhuizen, MD, Minutor, said in an interview at the Mining Week.

“The main challenge is security. Certain areas in the country are inaccessible to

exploration crews and this has a direct impact on the speed of development of the solid mineral industry,” he said.

African Industries, which has 12 subsidiaries that operate mainly in the steel sector, now has mining sites that will enable it get raw materials directly from ore. Similarly, Mines Geotechniques Nig. Limited, an Australian firm, and Northern Numero Resources Ltd. from the UK mine gold in Kebbi State.

Moreover, Segilola Nigeria Ltd. and KCM Mining Ltd, two Australian firms, mine gold in Osun and iron ore in Kogi.

Recently, the federal government issued Nigeria’s first gold refining licence to Kian Smith Limited. The company’s licence came on the back of its participation and presentation at the economic growth and recovery plan (EGRP) Focus Labs and it is breaking ground today on a new Gold Refinery located in Ogun State.

Julius Berger is also in this game, according to industry sources.

The owner of a twitter handle @andrewfootie, who works for a South African banking group that raises capital for African focused investors, said on Twitter on Tuesday that funding for a new Nigerian mining complex will be in place by early 2019.

“Final investment Decision (FID), for an integrated mining complex for iron ore and steel

L-R: Lucy Rahal, global head, PEP and Sensitive Clients, Standard Chartered Bank; Umar Mohammed, director of operations, Economic and Financial Crimes Commission; Bola Adesola, chief executive officer, Standard Chartered Bank Nigeria; Ahmad Abdullahi, director, banking supervision department, Central Bank Of Nigeria, and Ahmed Ghali, head, bank fraud section, EFCC, at the Standard Chartered Bank Conference themed “Countering Financial Crime” in Lagos.

in Nigeria will be sanctioned by early next year and supported by international banks,” @ andrewfootie said.

Nigeria has at least 44 known mineral assets that include precious minerals, base metals, gold, iron ore, barite, bitumen, lead, zinc, tin and coal, among others.

The sector lacks bankable data and suffers from state government interference.

Small-scale miners often lack funding to operate as they complain of their inability to access governments N5 billion fund domiciled in the Bank of Industry.

Just 18 of some 30 steel manufacturers in Nigeria are active, producing about

2.2 million tons a year and leaving the government with a $3.3 billion annual import bill, former Solid Minerals Development Minister Kayode Fayemi said last year.

The government is talking with companies including Russia’s Technopromexport and Ansteel Group Corp. of China to complete and start production at the Ajaokuta Steel plant.

It also plans to create a $1 billion mining exploration fund from state and private capital to improve data on Nigeria’s mineral wealth.

Each exploration project will be supported with about $5 million.

Nigeria also aims to in-

crease mining’s contribution to gross domestic product to 7 percent within a decade, from 0.3 percent in 2017.

“The new money being invested only represents two or three percent of what should be happening in this sector,” Babatunde Alatise, chairman of Lagos Chamber of Commerce and Industry Mining Group, told BusinessDay on the phone.

“The question is, how do we make artisanal miners to make up 95 percent of this sector? We do not have commodity exchange, which makes it difficult to know exactly how bankers can check international prices of solid minerals,” he added.

FINANCE

Eczellon Capital lends helping hand to manufacturers Hope Moses-Ashike

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czellon Capital is willing to help manufacturers in Nigeria exploit alternative means of accessing capital, especially with the current lending rate hampering the growth of the real sector in the country.

Diekola Onaolapo, chief executive officer of Eczellon Capital, a Pan African investment bank made this known during a courtesy visit to the leadership of the Manufacturers Association of Nigeria in Lagos on Friday.

The manufacturing sector is the engine of growth for leading economies around the world, but in Nigeria it contributes less than 10 percent to GDP despite the abundant opportunities for it to contribute more to economic growth and job creation.

Two major challenges fac-

ing the sector is poor access to funding and infrastructure.

Eczellon Capital has a plan to help manufacturers in Nigeria address some of their major challenges, especially access to funding.

“Manufacturing is at the core of what we need to get right as a continent,” Diekola Onaolapo, CEO of Eczellon Capital said in a statement, adding that capital is one of the major pillars that will help Africa and indeed Nigeria, grow its manufacturing sector.

“We are in the business of creation and allocation of capital; one of the most important tools for any economic activity and even economic development,” he added.

“One of the issues we found there is for companies in Nigeria and Africa has been the inadequacy of capital, whether it is in a wrong mix or , lack of access to it in its efficient

form; in a way that it can facilitate economic activities.

That is the problem we have dedicated ourselves to solving for governments and private sector corporates in the last 8 years and we have been able to achieve some remarkable feat for both the public and private sector,” the Eczellon Capital boss said.

Director General of MAN Segun Ajayi-Kadir welcomed Diekola Onalapo and his team who visited the MAN House located in Ikeja, Lagos. He specially thanked the CEO of Eczellon Capital for his refreshing ideas at a time the organization was in search for alternative sources of financing.

“There is no nation on earth that can be wealthy if they are not industrialized,” the MAN DG said.

“In Nigeria where we have a population of 180 – 200 million, you cannot have people

fully engaged by the government. The surest way for you to ensure that people are employed is through manufacturing,” Ajayi-Kadir added.

He wondered why the manufacturing sector has not been given the attention it requires by successive governments in the country.

“Manufacturing is not a vocation; it’s a decision you have to make. Government has to say I want my country to be industrialized and then you do certain things,” he said, explaining that there are some deliberate steps the government has to take if it truly wants to encourage manufacturing in Nigeria, one such is financing.

He cited interest rate, which is currently above the inflation rate, as one of the challenges manufacturers face in Nigeria.

“We compete with markets

where interest rate is sometimes below 1%,” he stressed.

“For instance, Nigeria sells power to Ghana at N26 per kilowatt-hour, but they sell to manufacturers in Nigeria at N42-N44 per kwh. Ghana is just 45mins away and you operate a Trade Liberalisation Scheme that means they can import to Nigeria free of

Edited by LOLADE AKINMURELE (loladeakinmurele@gmail.com) Graphics: CHINEDUM ONYEMA

duty. Only a stupid man will set up here.”

He thanked Eczellon Capital for its readiness to partner with MAN to help Nigeria industrialise, noting that MAN is open to such collaborations that could help its members maximize their capacity and contribute more to the growth of the economy.

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COMPANIES & MARKETS MARKET COMMENTARY

Share dilution limits upside PHILLIP ANEGBE & TAJUDEEN IBRAHIM, Chapel Hill Denham

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C N N ’s s h a r e s outstanding may e x p a n d by 1 0 . 5 x post-merger. Cement Company of Northern Nigeria (CCNN) recently released its Scheme of Merger for the proposed deal with Kalambaina Cement Company Limited.

Among other key information, the document revealed total Kalambaina shares outstanding of 60,000,000 of N1 each. This implies that the share exchange ratio of 100,000 CCNN shares for 19,811,372 Kalambaina shares could require the issuance of 11,886,823,200 new CCNN shares to the scheme shareholders (holders of Kalambaina shares), which brings total shares of the emergent entity to 13,143,500,970 (c. 10.5x CCNN’s current outstanding shares of 1,256,677,770).

Based on the proposed exchange ratio, Kalambaina and CCNN shareholders will own 90.44% and 9.56% of the emergent entity respectively.

Revenue is likely to rise to N67.24bn in FY-19E. According to the scheme of merger document, revenue is likely to rise by 139.4% yoy to N46.89bn in FY-18 proforma (CHD FY-18E: N46.01bn).

Our revenue projection is supported by combined FY18E production expectation of 1.04MT on new capacity

of 2MTPA, with Kalambaina only contributing to volume in H2-18E. Management disclosed that the Kalambaina plant is currently running at c.70% capacity utilisation while CCNN has operated at over 90% capacity utilisation in the last three years. Management is also looking to increase capacity utilisation to 80% at the Kalambaina plant in the coming quarters, with a view to exporting cement to neighbouring countries such as Mali, Burkina Faso, Niger, and Benin Republic via the border, which is 180km away from the plant. We, however, model a slightly cautious 70% capacity utilisation for Kalambaina in FY-19E and 95% utilisation by FY-22E. Our relatively cautious view is underpinned by rising competitor activities in the North West and the targeted country markets. Currently, CCNN sells 80% of its total cement production in the North West market with the balance of 20% sold in neighbouring Nigerian states.

We believe premium price advantage has narrowed to c.

2.0%. Going by our latest market research, retail price of cement is c.N2,500 per 50 kg bag of cement in the North West (vs. N2,450 to N2,480 in the South Western states such as Lagos). The industry leader, Dangote Cement, notably serves the market through over five main depots. According to the management of BUA Group, the slight premium

CONSUMER GOODS

Nigerian Breweries to appeal court judgment, counsel says IHEANYI NWACHUKWU

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ounsel to Nigerian Breweries Plc, Godfrey Airemen has disclosed that the Company would appeal against the judgment of the Edo State High Court sitting in Benin City, whereby the Company was ordered to apologise to one of its consumers, Ernest Izevbigie for what the Court described as “wrongful inscription of low sugar” on the bottle of the Company’s Amstel Malta brand.

Airemen faulted the judgement, which he said his Client would appeal against. According to him, the inscription on the Amstel Malta label was not misleading, as decided by the Court in the judgment.

Airemen, the Princi-

pal Partner of Airemen and Company, noted: “I am glad that the Court stated in the judgment that the sugar content of the product is within the range approved by the relevant regulatory agency, and that the information on the label was not deceitful.

“The inscription admits that the product contains a certain level of sugar. It does not imply that there is no sugar.

Whether you choose low or lower sugar, it is a matter of semantics.

“My Client is socially and legally responsible, with credible and verifiable operational standards. It cannot mislead its consumers and the general public. So, my Client has decided to appeal against the judgement. This is the logical way forward.”

in North West cement pricing is a reflection of the high cost of transporting cement from the closest competitor plant (Dangote Cement’s Obajana), which is 900km away. This premium appears to have narrowed to 2% from c.10% previously, with the industry leader likely taking up greater proportion of the transport burden to sell at a competitive price in the market. Leaving ex-depot prices relatively stable at N44,060 per tonne, we forecast fiveyear revenue CAGR of 33.7% for the combined business (i.e. from N19.59bn in FY-17 to N83.76bn in FY-22E).

We are positive on Kalambaina’s energy mix and forecast FY-19E EBITDA margin of 42.9% for the combined entity. According to management, Kalambaina’s kiln is currently 100% coal fired and 2.5x more cost efficient than CCNN’s 500KTPA plant.

In addition, management also revealed that 50% of

the currently utilised coal is imported while the balance is sourced from the domestic market. The plant also has the capability to run on other alternative energy sources such as LPFO. This cost efficiency, alongside expected growth in output, is likely to drive EBITDA margin of the combined entity to 42.9% in FY-19E (vs. CCNN’s 25.1% EBITDA margin in FY-17), in our view. A longer-term strategy for the business could also see it mothball CCNN’s 500KTPA LPFO-fired plant, given its potential margin dilutive impact (Kalambaina’s FY-19E EBITDA margin: 51.5%). We also note that unexpected NGN depreciation is a downside risk to our EBITDA margin expectation, given Kalamabaina’s FX exposure on the energy cost front. EPS is, however, likely to decline to N1.30 in FY18E (N1.95 in FY-19E) from N2.57 in FY-17 due to share dilution.

Interest burden is expected to reduce while Free Cash Flow to Equity (FCFE) is likely to improve postmerger. Since Kalambaina has no debt in its books, we expect leverage ratios of the merged entity to get better upon merger. Specifically, Debt-to-EBITDA will likely be 0.09x in FY-19E (vs. 0.19x in FY-17). We also expect CCNN’s interest coverage ratio to improve to 99.6x in FY-18E and 981.4x in FY19E (vs. 32.0x in FY-17). We believe the merger will significantly improve the FCFE of the combined entity on projected robust growth in operating cash flow (over five-fold yoy to N18.19bn in FY-18E and 48.4% yoy to N26.99bn in FY-19E), lower capex intensity of 5.0% (vs. average of 10% in the last 5 years for CCNN), and mild net-debt repayment. That said, on a per share basis, we see material operating cash flow dilution for the

merged entity. Precisely, the per share value of operating cash flow is likely to decline to N1.38 in FY-18E (N1.69 in FY-19E) from CCNN’s N2.89 in FY-17.

We derived a 12 month TP of N15.18 (vs. N13.00 previously) using a blend of DCF and multiples (PE and EV/ EBITDA) approaches for the combined entity. Our DCF valuation approach assumes a risk-free rate of 13.6%, beta of 1.2, and WACC of 19.6%.

While the absence of debt in the books of Kalambaina and other potential merger benefits (i.e. the over five-fold rise in operating cash flow in FY-18E) are positive, we note that the 10.5x increase in outstanding shares has a material dilutive impact on valuation. We see a total return of 3.8% relative to the stock’s last market price and therefore upgrade our rating on the stock to a HOLD (vs.

SELL previously).

BUSINESS DAY

Monday 17 December 2018

COMPANIES & MARKETS

23

INTERVIEW

BANKING

Standard Chartered launches Visa credit card IHEANYI NWACHUKWU

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hartered Bank Nigeria Limited has partnered with Visa to issue a Visa Credit Card. Dubbed the 360° Rewards, customers will redeem points earned from a variety of local and international brands.

Through this partnership, the Bank’s customers with credit cards can earn loyalty points whenever their cards are used across payment platforms including Point of Sale (POS) or online for transactions.

The Rewards Platform is an end to end solution managing both earning and usage of reward points via a comprehensive rewards catalogue. The program will reward Credit Card users with

points based on every N100 and N200 spent for Platinum and Gold credit card respectively. This is the first of its kind in Nigeria and a critical value adds for our customers.

Speaking on the launch, Ebby Momoh, head of Retail Banking, Standard Chartered Bank Nigeria Limited, said, “We are pleased to partner with Visa on this extraordinary initiative. With the rewards initiative, all our clients can access over 200,000 items ranging from hotel and travel booking payments to shopping online and can conveniently do so anytime and anywhere while earning points on the go. All clients with credit cards will automatically earn points when they use their cards for various transactions and can use these pointstoenjoymoreopportunities such aspaying for services or prod-

ucts across various platforms. This is a first of its kind reward system and one of the many ways we continue to reiterate to our clients that we are here for good.”

The bank customers will be required to create a profile and registertheircreditcardstostartredeeming items from the new platform. This will enable cardholders to manage their points with more flexibility and involvement. The self-service rewards portal also allows customers to track points and redeem directly.

The Bank’s credit card is enhanced with an additional layer of security through the Verified

by VISA service. Through the VISA secured network, the cards are even more protected against unauthorized use and fraudulent activity while transacting online.

L-R: Carol Ufere, chairperson, BoT QRC Alumnae, Lagos; Nkechi Obi, vice chairman, Techno Oil Ltd; Rear Admiral Itunu Hotunu (Rtd); Rev Sis Maria Chijoke Nwankwo, Principal, QRC Onitsha; Hon. Oseloka H. Obaze, and Dr Mrs Obaze; Chizor Malize, outgoing president QRC Alumnae Lagos Chapter, Idu Okwuosa, president, QRC Alumnae Lagos Chapter, at the 2018 Alumnae Red Ball/Fund Raising event recently in Lagos.

AWARDS

Terragon bags Employer of the Year award JOSEPHINE OKOJIE

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erragon, a data and marketing technology company, has emerged winner of the Future of Workplace “Employer of theYear2018”awardsaheadofother reputable companies like Procter & Gamble, Fidson Healthcare Plc and Sanofi-Aventis Nigeria.

TheFutureofWorkplaceAwards is an initiative of HR Summit and Expo West Africa, which recognizes the outstanding achievements of individuals,departments,teamsand organizations that have contributed to the growth and development of

the West African HR Industry.

Terragon was also nominated in the Best Employee Engagement Programme and Best Graduate Recruitment Programme award categories.

Commenting on the award, Founder and CEO of Terragon Group, Elo Umeh, said: “As an organisation, we take conscious steps to ensure that our Talent Management Processes reflect and cater to the needs of a 100% millennial workforce. In the last few years, we have taken strategic steps to ensure we attract the right talent, and we remain commit-

ted to engaging, motivating and retaining them to do absolutely great work, while ensuring that their individualities and unique competences are respected”.

The Head of Talent & Office Resources at Terragon, Fadekemi Fowowe, added “Through the years, we have been very intentional about hiring young people and giving them the liberty to create and define greatness.

Our Graduate Recruitment Programme for instance, is by far the most impactful, practical and life-changing programme that I know of.

L-R: Associate Professor in Agricultural Economics, University of Port Harcourt, Prof. Peter Ekwunwe; Edo State Commissioner for Wealth Creation, Cooperative and Employment, Bar. Emmanuel Usoh; Chief Operating Officer, Nosak Group, Mr. Thomas Oloriegbe and Edo State Permanent Secretary, Ministry of Agriculture, Com. B. S. Kadiri during the official opening ceremony of the Edo Food and Agric Fair in Benin City recently.

L-R; Afiniki Barau, facilities manager, Midel Group; Gigi Adoghe, md/ceo and Josephine Roland during the 10th year anniversary of Midel Group in Abuja.

Pic by Tunde Adeniyi.

L-R: Femi Akintunde, group managing director, Alpha Mead Group; Morgan Crowley, head, workplace experience IMEA Market Area, Middle East & Africa, Ericsson; Karen Dampier, Client Unit Lead - South & East Africa, CBRE (Ericsson Workplace Solutions); and Wole Olufore, managing director, Alpha Mead Facilities during CBRE and Ericsson visit to Alpha Mead Group Corporate Head Office in Lagos.

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Monday 17 December 2018

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National Sectoral and Fiscal Realities in Nigeria 2. Fiscal Realties

1. Sectoral Realities a. Structure of Gross Domestic Product (GDP) b. Structure of Agriculture c. Structure of Industry i. Structure of Manufacturing ii. Structure of Utilities iii. Structure of Solid Minerals d. Structure of Services 2. Fiscal Realities a. Revenue b. Spending i. Total ii. Capital iii. Recurrent c. Balances i. Current ii. Overall

a. Total Revenue As the Federation’s Total Revenue declined by 45.5 percent from a peak of about N9.75 trillion in 2013 to a low of N6.7 trillion in 2016 before recovering by 32 percent to N8.87 trillion in 2017, the Federal Government’s Revenue climbed from 41 percent to 51 percent of the Federation’s total revenue, while States’ Revenue fell from 40 percent to 34 percent and LGs’ Revenue fell from 19 percent to 15 percent. FG’s Revenue increased from N4 trillion in 2013 to 4.5 Trillion in 2017, after declining steadily to 3.1 trillion in 2016. States’ Revenue declined from N3.9 trillion in 2013, almost at par with FG’s, to 3 trillion in 2017, 33 percent less than FGs. LGs Revenue also declined from N1.8 trillion in 2013 to 1.3 trillion in 2017.

iii. Financing d. Debt i. Domestic ii. Foreign iii. Total e. Debt Burden i. Domestic ii. Foreign

iii. Total 3. Fiscal Depth a. Revenue b. Spending c. Deficits d. Debt c. Debt Burden

b Spending i. Total Spending As Total Spending in the Federation declined by 13.75 percent from N11 trillion in 2013 to N9.67 trillion in 2016, before recovering by 22 percent to N11.8 trillion in 2017, Federal Government’s Total Spending increased from 47 percent of the Federation’s total in 2013 to 58 percent in 2017, just as states’ share declined from 37 percent to 31 percent and LGs share declined from 16 percent to 11 percent. FG’s Spending increased from N5.2 trillion in 2013 to 6.8 trillion in 2017. States’ Spending declined from N4 trillion in 2013 to 3.7 trillion in 2017. LGs Spending also declined from N1.8 trillion in 2013 to 1.3 trillion in 2017, in line revenue as LGs seem excluded from debt markets.

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ii. Recurrent Spending Recurrent Spending in the Federation increased steadily by 28 percent from N6.4 trillion in 2013 to N8.2 trillion in 2017, having sured by 40.5 percent at the Federal level and 30.5 percent at the State level, but dwindling by 15 percent at the LGs level, to leave each tier largely with the shame shares in 2013 and 2017.

1. Sectoral Realities As Nigeria’s nominal Gross Domestic Product (GDP) increased by 42 percent from N81 trillion in 2013 to N114.9 trillion in 2017, Services increased by 51 percent from N42.4 trillion in 2013 to N64.1 trillion in 2017 to remain the leading contributor to GDP, accounting for 56 percent of GDP in 2017, up from 53 percent in 2013. Over the same period, Agriculture increased by 42 percent from N16.8 trillion to N23.9 trillion, to remain the second largest contributor to GDP, maintaining its 21 percent contribution to GDP in both 2017 and 2013. Non-Oil Industrial Output increased by 45 percent from N10.56 trillion to N15.3 trillion, remain the third largest contributor to GDP, slightly increasing is share of GDP from 13 percent in 2013 to 14 per cent in 2017. Oil output stagnated at N10.4 trillion in 2017, having recorded N10.29 trillion in 2013, to remain the fourth and

Gross Domestic Product in 2013

2017 Gross Domestic Product

Gross Domestic Product in 2013 100%

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2017 Services

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least contributor to GDP, with a 9 percent share in 2017, down from 13 percent share in 2013. Breaking the sectoral data down across the 36 States and the FCT revealed that about half of the states were even more dependent on services than the country, up to 90 percent in some cases, while about one-third of all states were dependent on agriculture in 2016, up to 80 percent in some cases. Linking the States’ sectoral structures with their fiscal realities, we find that States with the highest IGR/Total revenue ratios are service-led, suggesting that growth of the service sector offered resilience, and that services are easier sources of revenue than agriculture or industry. Many of the states with the lowest IGR/Total revenue ratios are agriculture-led, suggesting the need to learn how to generate more revenue from buoyant agricultural sectors.

Trade; Information and Communication, and Real Estate are the leading services in the country, while 10 other services including Professional Services, Finance and Transportation are upcoming.

With N21.1 trillion output in 2017 Crops account for a staggering 88 percent of Nigeria’s agricultural sector, dominating the economies of about one third of all the states, Livestock output was N2 trillion or 8 percent of the sector, fishing was N624 billion of 3 percent, while Forestry was 257 billion or 1 percent.

With an output of N10 trillion in 2017, Manufacturing is the dominant non-oil industrial activity in Nigeria, especially Food, Beverage and Tobacco, which accounts for two-thirds of all manufacturing activity, but also Textile, Apparel and Footwear, which accounts for 10 percent.

With an output of N67 billion in 2017, Electricity and Gas dominates the Utilities, contributing 80 percent of the sector. With N16 billion Water was 20 percent of utilities.

N11 billion Solid minerals, was a paltry 1 percent of Non-Oil industrial output in 2017, 86 percent of this came from Quarrying and Other Mining; 8 percent from Coal Mining; and 6 percent from Metal Ores.

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iii. Capital Spending Capital Spending in the Federation declined by 53 pecent from N3.6 trillion in 2013 to N2.35 trillion in 2017, with the steepest decline happening at the States where capital spening fell by 50 percent from 2 trillion to 1 trillion, followed by the LGS where it fell by a similar percentage from N392 billion to N144 billion, falling only slightly from N1.1 trillion to N1.01 trillion at the Federal level. c. Current/Overall Balances i. Current Surpluses, excess of total revenue over recurrent spending, in the Federation fell from N3.2 trillion in 2013 to N530 billion in 2017. The was largely due to the fall in States’ and FCT’s Current Surpluses from N2 trillion in 2013 to N460 billion in 2017. The Federal Government’s Current Surplus of N343 billion in 2013 gave way to Current Deficit of N975 billion by 2017. Local Governments’ Current Surplus was halved from N396 billion to N144 billion over the period. ii. Overall Deficits of about -N1.39 trillion in Federation in 2013 ballooned to -N3.06 trillion in 2017 as Federal deficits doubled from -N1.15 trillion in 2013 to -N2.28 trillion in 2017, and States’ deficits also increased from -N141 billion in 2013

to -N710 billion in 2017. iii. Financing Deficits as a share of Federal Government’s total revenue rose from 28.6 percent of total revenue in 2013 to 50 percent in 2017, while States’ overall deficits rose from 3 percent in of total revenue in 2013 about 25 percent in 2017. Local Governments don’t borrow. The share of Federal Government’s total spending funded with deficits increased from 22 percent in 2013 to 33 percent in 2017, compared to a rise from 3.5 percent to 19.3 percent in States, while deficits as a fraction of capital spending increased from 104 percent in 2013 to 195 percent in 2017 at the Federal level, compared to a jump from 6.7 percent to 68.3 percent in the States. d. Debt Stocks i. Domestic Debt Stock Domestic Debt in the Federation jumped by 86 percent from N8.665 trillion in 2013 to N16.2 trillion in 2017, with the Federal Governments debt surging by 77.5 percent from N7.1 trillion in 2013 to N12.6 trillion in 2017 and States debt more than doubling from N1.54 trillion to N3.3 trillion over the same period. ii. Foreign Debt Stock The Federation’s Foreign Debt increased fourfold from N2.8 trillion in 2013 to N11.6 trillion in 2017, with the States and the FG splitting the stocks equally then and now. iii. Total Debt Stock Total debt accrued in the Federation has more than doubled from N11.44 trillion in 2013 to a N27.73 trillion in 2017, with the Federal Government holding 60 percent of the total debt,

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while State governments hold the remaining 40 percent. e. Debt Burden i. Domestic Debt Burden Domestic debt burden, measured as debt stock as a percentage of total revenue, has risen from 70.9 percent in 2013 to 151.5 percent 2017 for the Federation, from 176.6 percent in 2013 to 277 percent in 2017 for the FG, and from 39 percent in 2013 to 111 percent in 2017 for the States, LGs’ was less than 1 percent from 2013 to 2015; is now 165 percent in 2017. ii. Foreign Debt Burden Foreign Debt Burden has increase from 22 percent in 2013 to 108 percent in 2017 for the Federation, from 34 percent in 2013 to 127.5 percent in 2017 for the FG, and from 35.5 percent in 2013 to 193 percent in 2017 for the States.

States and FCT. iii. Total Debt Burden Total Debt Burden increased from 93 percent in 2013 to 260 percent in 2017 for the Federation, from 210 percent in 2012 to 404 percent in 2017 to, from 74.9 percent in 20123 to 305 percent in 2017 for States, while rising from zero percent in 2013 to 16.5 percent for LGs in 2017.

3. Fiscal Depth Keeping the illusion of nominal fiscal expansion aside, government revenue and all categories of spending has been contracting steadily as a percentage of GDP at the Federation and at all tiers. Deficits and debts have however been rising relative the GDP, especially at the Federal and State levels. a. Revenue Depth Revenue in the federation account has been declining relative to GDP, and this is affecting revenue at the disposal og each tier of government. b. Spending Depth Total, Recurrent, and Capital Spending are dwindling steeply relative to GDP, this is more so at the States and LGs who have much less access to domes-

100%

tic debt markets than FG, and the declines are steepest in capital spending at all tiers.

c. Balances Compared to 2013, current balances have declined relative to GDP but overall deficits

25

have grown bigger as a fraction of GDP. d. Debts Debts as percentages of GDP are on the rise, especially at the Federal Level.

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An economic analysis of the South East and 1. Economy

Structure South-East’s estimated Gross Regional Product (GRP) in 2017 was N4.3 trillion or 3.8 percent of Nigeria’s GDP in 2017, and the 6th among the regions. Services contributed 73 percent of this, Agriculture, 12 percent, Non-Oil Industry, 9 percent, and Oil, 6 percent.

Forestry was Nil. South-East’s N278.8 billion Oil output in 2017 was 2.1 percent of total oil output in the country, 3rd largest among the three oil producing regions in Nigeria.

100% 200% N373.5 billion Non-Oil Industry in the South-East was 2.5 percent of all regions’ Non-Oil Industry, 5th in the country, and 3rd in Southern Nigeria. N242.1 billion in ManuStucture of South-Eastern Stucture of South-Eastern Industry (excl. oil) Manufacturing 200% facturing (mainly Food, Beverage and Tobacco, Textile, Apparel, and Footwear, and Wood and Wood Products) dominated the region’s Non-Oil output with 65 percent 100% 100% share, N116.5 billion in Construction accounted for 31 percent, 4 percent is shared between Utilities and Solid Minerals.

Services output of N3.2 trillion in South-East’s agricultural output of N500 billion in 2017 was 2.1 percent of all regions’ South-East was 4.9 percent of seragricultural output, 6th among the six regions. vice output of all the 6 geopolitical 92 percent, N460.6 billion, of the region’s agriculture came from Crops, zones, 5th in the country, and the 7 percent, N34.4 billion, from Livestock and, 3rd in Southern Nigeria.

1 percent, N4.8 billion, from Fishery.

Stucture of South-East Economy

South East Summary

• Economy SE contributed 3.8 percent or less than a twenty-fifth of Nigeria’s GDP in 2017, the 6th among the regions. Services contributed 73 percent of this, Agriculture, 12 percent, Non-Oil Industry, 9 percent, and Oil, 6 percent.

• Endowments SE’s Land Area is 3.2 per cent or also less than a twenty-fifth of Nigeria’s land mass, and 6th among the regions. South-East has neither a boarder nor a coastline, being encircled in the west, east, and south by the six States in the coastal South-South Region, and in the North by two States, Kogi and Benue, in the equally landlocked North-Central Region.

• Wellbeing South East’s Population was 11.7 percent or nearly one-eighth of national population in 2017, and 6th among the regions. SE is the most densely populated region in the in the country. South-Easterners are the 3rd most literate in the country. Life expectancy of 50 years in the South-East is the 2nd in the Country. Male life expectancy of 48 years is the 2nd in the country, though Female life expectancy of 52 years is the 4th in the Country. South-East’s Per Capita GRP of N186 thousand is the 5th in Nigeria, and third in the South.

• Budget South-East accounts for 9.1 percent or nearly one tenth of regions’ total revenue, 6th; 8.1 percent of spending, 6th; 4 percent of the deficits, 6th, and 8.1 percent of the debt, 4th.

Southeast urgently requires functioning rail links to the coast to gain the competitiveness needed to exploit its natural endowments (in particular, having highest population density in the country, large solid mineral deposits especially coal and metal ores, and commercially lucrative boundaries with four of the six States in the South-South region and two of the States in the North-Central region), and grow its share of the national economy, boost its share of government revenue, reduce debt burdens, and do more to raise the wellbeing of its residents.

Stucture of South-Eastern Agriculture

Stucture of South-Eastern services

Inter Regional GSP – SE

Inter Regional GRP

GSP 100%

GSP 100%

With a Gross Regional Product (GRP) of N4.3 trillion in 2017 was 3.8 percent of Nigeria’s GDP in 2017, South-East has the 6th largest economy in Nigeria. To provide perspective, it is necessary to compare SE’s shares across the other three main attributes.

South East’s Population of 24 million in 2017 was 11.7 percent of national population, and 6th among the regions in the country.

South-East’s Land Area of 29,000 is 3.2 per cent of Nigeria’s land mass, also 6th among the regions. South-East’s Total Revenue of N272.7 billion in 2017 was 9.1 percent of all regions’ total revenue placing it the 6th highest among the 6 regions in the country.

2. Endowments Land Area

Land Area

Land AREA (sq km) 100%

South-East Geo-Political Zone is made up of five States, Abia, Anambra, Enugu Ebonyi and Imo. South-East has neither a boarder nor a coastline, being encircled in the west, east, and south by four of the six States in the coastal SouthSouth Region, and in the North by two States, Kogi and Benue, in the equally landlocked North-Central Region.

South-East’s land area of 29,000 per km2 is 3.2 percent of Nigeria’s land mass, 6th among the 6 geo-political zones, 3rd in the Southern regions.

4. Budget

4.1. Fiscal Realities of South-East 1. 2018 Aspirations

N800 billion 2018 budget of South-East is 8.3 percent of total budgets by all regions, and the least in the country.

2. 2017 Realities Land Area

7.500.0

4,900.0 4,900.0

6,400.0 5,300.0

2.1 Revenue South-East’s actual total revenue of N272.7 billion in 2017 was 9.1 percent of all regions’ actual total revenue, and the least among the regions. The revenue components in 2017 were: • Statutory Allocations of N145.7 billion was 10 percent of regions’ total, and the least among the regions.

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how it compares with other regions 3. Wellbeing

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3.

2013-2017 Trends South-East’s Revenue: South-East’s Total Revenue declined from a N337 billion in 2014 to N272.7 billion in 2017, Gross statutory allocations (GSA)fell from N200 billion in 2014 to 145 billion in 2017 and internally generated revenue fell from 64 billion in 2014 to N48 billion in 2017, as value added tax proved resilient in the face of global oil price slump and concomitant recession in the national economy.

SE’s Spending: South-East’s Total Spending fell by 22 percent from N384 billion in 2014 to N300 billion in 2017, despite the recovery in revenue in 2017, reflecting reduced capacity to incur deficits. Recurrent spending grew by 9 percent from N206 billion in 2014 to N222 billion in 2017, while capital spending fell 56 percent from N177.9 billion in 2014 to N78.3 billion in 2017.

South-East’s Revenue Use: SE consistently maintained current surpluses as revenue declined between 2014 and 2017 and still incurred overall deficits and a growing debt stock.

Population

Population 100%

South-East’s Financing: SE consistently funded the bulk of its capital spending rom current surpluses, making minimal recourse to deficit financing.

• Revenue financing: deficit of 13.5 percent of total revenue in 2014 gave way to an overall surplus of 1.5 percent of total revenue in 2015 but a deficit of 12.7 percent in 2017.

• Spending finance: deficit of 11 percent of total spending in 2014 gave way to an overall surplus of 1.5 percent of total spending in 2015 but a deficit of 9 percent in 2017.

• Capital budget finance: deficit of 25 percent of capital budget in 2014 gave way to an overall surplus of 4.9 percent of capital budget in 2015 but a deficit of 35 percent in 2017.

South-East’s Debt

• Domestic debt stock grew threefold from N72.7 billion in 2013 to N238.4 billion in 2017; rising from 21.6 percent of revenue in 2013 to 70.9 percent in 2017.

• Foreign debt stock rose more than fourfold from N33.6 billion in 2013 to N136.6 billion in 2017; rising from 9.9 percent of revenue in 2013 and had grown to 50 percent in 2017.

• Total debt stock rose threefold from N106 billion in 2013 to N327.5 billion in 2017, from 31.6 percent of revenue in 2013 to 120.1 percent in 2017.

South-East’s Population of 23.4 million people in 2017 was 11.7 percent of national population, and 6th among the regions in the country. With a population density of 805 people per square kilometre relative to regional average density of 219 people per square kilometre, SE is the most densely populated region in the in the country. South-Easterners are the 3rd most literate in the country. Life expectancy of 50 years in the South-East is the 2nd in the Country. Male life expectancy of 48 years is the 2nd in the country, though Female life expectancy of 52 years is the 4th in the Country. South-East’s Per Capita GRP of N186 thousand is the 5th in Nigeria, and third in the South.

• Internally Generated Revenue of N42 billion was 5.5 percent of regions’ total, and the least among the regions.

• Value Added Tax of N51 billion was 10.8 percent of regions’ total, and the least among the regions.

2.2. Spending South-East actual total expenditure of N300.7 billion in 2017 was 8.1 percent of total spending by all regions, and the least among the regions. The spending components in 2017 were: Recurrent Spending of N222.2 billion was 8.4 percent of regions’ total, and the least among the regions.

Capital Spending of N78.3 billion was 7.5 percent of regions’ total, and the least among the regions.

2.3. Deficits SE’s overall fiscal deficit of N27.9 billion was 4 percent of regions’ deficits, the least in Nigeria.

2.4. Debt SE’s total outstanding debt of N374.6 billion was 8.1 percent of regions’ debts, and 6th in country.

• Domestic Debt of N238.4 billion was 7.1 percent of regions’ total; and the least in Nigeria.

• Foreign Debt of N136.3 billion was 10.9 percent of regions’ total, and the 4th in Nigeria.

Revenue Structure

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Spending Structure

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Total Debt Spending Structure

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Monday 17 December 2018

29 PHOTO SPLASH BUSINESS DAY

Participants at the BusinessDAY breakfast meeting with Director of Public Relations, Corporate Communications, Press and Procurement of MDAs held in Abuja.

L-R: Ummukhursum Sani, assistant manager, Corporate L-R: Patt Uyanne, director, Procurement Ministry of L-R: Onuwa Lucky Joseph, ceo, Earl Glow Communication communications NIMC, with Loveday Chika Ogbona, head, Communications with Ali Sule Tanimu, deputy corps, public with Mark Chieche, ceo Pbimc Solution Limited. corporate communications, National Identity Management education officer FRSC. Communication (NIMC).

L-R: Ani Deborah, advert manager, Leadership Newspaper Group; John Osadolor, director, BusinessDAY Media Limited; John Ogbamgba, head, media Setraco Nigeria Plc; Oyinye L-R: Bede Anyanwu, acting head, Strategic Communication, Directorate Fiscal Responsibility Commission, Chinemerem L-R: Franklin Alao, general manager, corporate communications Nwachukwu, bureau chief, BusinessDAY Media Limited Abuja Ugoh, head protocol, FRC and Charles Chukwuemeka, head NIPOST with Haruna Ibrahim, head, press and public relations, and Chinwe Obioha, senior advert manager, Leadership Ministry of Industry, Trade and Investment.

Newspaper Group. lega, investigation and enforcement FRC.

L-R: Dada Olumide, line manager, BusinessDAY Media Limited Abuja; Emma Ehihi, advert manager, BusinessDAY L-R: Arthur Ejiofor with Rasak Omokide both of Nigeria Social Media Limited Abuja and Durojaiye Hassan, head, business Insurance Trust Fund (NSITF).

Development Nort BusinessDAY Media Limited.

L-R: Uham Bass, information officer, NBRRI; Iloefe Ugochukwu James, head, public relations, Nigeria Electricity Liability Management Limited, GTE (NELMCO) and Hadiza Umar, head, corporate affairs/external relations NITDA.

L-R: Edeki John Enesi, head administration, Agric Research Council of Nigeria (ARCN); Adamu Musa Pinchiga, head, L-R: Abraham Gideon, procurement department, Ministry of Victor Chinemerem Muruako, chairman, FRC. procurement ARCN and Tony Ailemen, BusinessDAY Media Interior with Sani Datti, head media and public relations, NEMA. Limited State House.

L-R: Henshaw Ogubike, Ministry of Communications with L-R: Sanni Onogu, cps to Senate President with Edegbe Ejibumi Ahmed Olabanji, Nigeria Law Reform Commission.

Odemwingie, assistant director, publicity APC.

L-R: Teliat Sule, BRIU, BusinessDAY Media Limited with John Osadolor, director, BusinessDAY Media.

Pics by Tunde Adeniyi.

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From farm to factory: The local input revolution

ODINAKA ANUDU

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atima Abu counts her money and finds that she has made N4, 000. It is 12.35 pm, so she will keep N2, 000 in a local bank and reserve the remaining for domestic use.

She has supplied 40 litres of raw milk to FrieslandCampina WAMCO, a Dutch dairy maker in Nigeria, for use as input. In return, the company has paid her N100 for each litre (keg).

Her husband owns 40 cows. So, she wakes as early as 4am to milk them. By 5.30am, 40 kegs will have been ready. She is not the only person in the business. There are more than 3, 500 other farmers, mostly women, who wake earlier than her to milk cows. The higher the number of kegs they produce, the more the money they make.

Before now, Abu and other Fulani women would produce raw milk and sell it as Nunu (sour milk), Kindirmo(sour yogurt) or Wara (Yoruba cheese). And they earned less than N30 from a keg. But the story has changed.

Abu, who hails from Fashola community in Oyo State, often takes the keg to a FrieslandCampina collection manager, who examines the milk to ensure it meets stipulated standards.

The rules are clear to all Fulani milk suppliers: No sediments, no bacteria, no debris.

The dairy company does not take milk brought to it without subjecting it to thorough scientific examination.

Adekunle Olayiwola John is in charge of this process at Fashola. He first runs a coagulation test to determine the amount of bacteria in it and whether or not the milk is still fresh.

After coagulation test, he proceeds with Resazurin test to ascertain the milk’s quality. In fact, his biggest job is to check for wholesomeness as well as for bacteriological and chemical quality of milk.

“The point is that they already know whether the milk will pass the tests or not,” John says.

“Milk rejections have fallen flat now because we train them on what we require,”

Cassava ready for onward processing at Psaltery Nigeria Limited

he adds.

Abu and other Fulani women in the business already understand that milk must be hygienically handled. They are constantly being trained

by FriedslandCampina WAMCO’s partners from the Netherlands, who take them through the nittygritty of cow milking. The partners are mostly dairy farmers who are doing the same business in a more advanced and integrated way in Europe.

The dairy company is not doing this programme, which it calls Dairy Development Programme (DDP), in Fashola alone. It has extended tentacles to other four communities in Oyo State: Maya, Iseyin, Akele and Saki. After running this programme for eight years, the company has achieved about 10 per cent local input content in its milk.

Due to this trend, many professionals now combine dairy farming with their jobs.

One of these professionals is Funke Majaro, a teacher in a secondary school in Oyo State. Majaro runs F&F Farms and rears cattle. Like Abu, she is a small-scale milk supplier, but the difference is that she understands farming better than Abu. She has 30 cows, but they are more productive as a result of cross-breeding.

Through the assistance of FrieslandCampina WAWCO, she crossbreeds her cows with Sokoto or Asha species and produces 1.5 litres or 2 litres a day from one cow, rather than 1 litre.

By definition, crossbreeding is a method of producing an animal or plant by mating or two different species or breeds. Experts say the major advantage of crossbred cattle is that they exhibit the strengths of all breeds from which they descend.

“When I was introduced to rearing cows, I didn’t have the intention of collecting milk until I came in contact with FrieslandCampina.

They organised artificial insemination and allowed me to cross-breed my cattle.

“I didn’t know a farmer can make money from milk,” she says.

While sourcing its raw milk, FrieslandCampina has built a model that guarantees peace in the communities in which it has collection centres. Naturally, the Fulani, who are mainly nomadic herdsmen, move around the North-East and North-West

part of Nigeria with their cows. But a combination of climate change and gradual dry-up of Lake Chad are pushing them southward.

This, however, is not without consequences, as these movements often lead to destruction of farmlands and consumption of farm produce by cows.

Nigeria has 36 states and the Federal Capital Territory.

More than 15 states have experienced killings and destruction by herdsmen.

Findings show that these herdsmen are angry that their cows are not allowed to graze in the southern and the central part of the country. In revenge, they move their cows into farms. The cows graze on crops planted by farmers. Any protest by farmers is usually met with force and violence, findings show. This is happening in states such as Benue, Delta, Enugu, Nasarawa, and Kogi,

Processing machine at Psaltery Limited

among others.

About 230 Tiv people have so far been killed in Doma, Keana, Awe, Obi and Lafia local government areas of Nasarawa State, a NorthCentral state in Nigeria, said Thomas Gaar, interim President of Mdzough Tiv, a social-cultural organisation, Nasarawa State chapter.

In January this year, 73 people were killed by marauding herdsmen in Benue.

The killings are still on-going in many communities today.

FrieslandCampina WAMCO’s model is helping to prevent this ugly situation in Oyo State. It keeps communities together in Oyo State by putting herdsmen and their cows in a particular settlement. The Fulani herdsmen speak the local Yoruba language, eat the local food and are now part of the communities. The cows too are healthier as experts say that movement of cows from place to place reduces their productivity levels.

NB is in too FrieslandCampina WAMCO is not the only company sourcing local raw materials from farmers. Nigerian Breweries (NB), the country’s biggest brewer, is also in it. Naira is getting weaker against the dollar, so rather than keep importing barley, an essential raw material for making beer and malt drinks, the company is partnering local players for regular supply of sorghum, which is a viable substitute.

The brewer also needs processed cassava (starch), having entered into an arrangement with local farmers for constant supply of it. One of such partners is Psaltry In-

ternational Limited, based in Alayide village, Ado Awaiye near Iseyin, Oyo State.

The cassava processing firm has today become the biggest revelation coming out of the backward integration story. Oluyemisi Iranloye, MD/CEO of the firm, says the firm has created a supply chain of up to 5,000 farm families, including more than 2,000 registered and unregistered out grower farm families, marketers, transporters and retail input suppliers.

“We have two lines producing 20-30 metric tons per day, which is a total of two trailer loads every day.

The annual capacity is 10,000 metric tons but we are doing 6,000 metric tons now,” she says.

Nigerian Breweries is the biggest buyer of her cassava starch, followed by Nestle Nigeria Plc and Yale Foods, Ibadan.

Jordi Borrut Bel, managing director of NB, plans to raise NB’s local input preference from 50 to 60 percent.

Cassava starch is used by manufacturing companies as binder and to produce maltose (a form of sugar).

Psaltry International Limited is also impacting socioeconomic development of the farming communities.

Busari Amusa, Baale of Alayide, the host community, believes that the company is making positive impact on the people.

“It is a dream come true.

We have electricity, boreholes and the roads are also opening up for accessibility between our farms and the factory. My story has changed. Today, and less than two years of this cassava business, I have a new house, a car and four of my children are in higher institutions of learning. This is unbelievable,” he says in an interview.

Nestlé is involved too “We are happy that Nestlé is changing our story,” says Hamzat Abdulraman, one of the maize farmers in northern Nigeria, where Nestlé gets some of its inputs.

Nestlé Nigeria, a food manufacturing giant, sources 80 percent of its maize, sorghum, millet, soya, cassava starch, cocoa powder, and palm olein from more than 41, 600 local farmers and processors scattered across the country. These crops serve as inputs for

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real sector watch the Fast-Moving Consumer Goods (FMCGs) giant.

Nestlé Cereals Plan project has over 30,000 farmers who supply 100 percent of the grain requirement for Golden Morn Maize. Through its Sorghum and Millet in the Sahel (SMS) project, now called Nestlé Nigeria & IFDC / 2Scale Project Sorghum & Millet, the food and beverage giant has engaged up to 10,671 farmers.

“The Industry has huge needs and we must help farmers improve their yields to meet them. To achieve real success with connecting farmers to industry, a 360 degree approach which will include the aggregators, processors, and logistics suppliers must be considered within this value chain,” says Mauricio Alarcon, CEO of Nestlé Nigeria Plc. The Flour Mills’ formula Nigeria’s biggest flour miller Flour Mills of Nigeria Plc has its own farms and engages local farmers to work as partners. It, therefore, sources local raw materials from its own farms.

Its subsidiary Agri Palm Limited located at Iguiye and Ugbogui near Benin City (with 4.500 hectares of oil palm plantation) supplies palm oil, olein and other by-products of palm oil to the group.

Another subsidiary— Agro-allied Syrups Limited—which has cultivated 800 hectares of cassava in Shao, Kwara State, in the last 16 months, supplies starch to the group. However, some of its wheat flour is sourced from northern Nigeria.

Dufil is also part of the game Any time you eat Indomie noodles, you are eating over

90 per cent of local vegetable oil and flour. De-United Foods (Dufil) is noted for sourcing local maize from farmers. The firm started oil palm plantations in 2013 as part of its backward integration.

Unilever is also in the game Unilever, a FMCG firm, sources palm oil for its BlueBand and soaps. The company is also getting local herbs and spices for its seasoning cubes. Currently, it is investing in backward integration in this area.

Under its ‘Partner to Win’ initiative, it partners local farmers and intermediary companies to source inputs.

“A l r e a d y , w e h a v e achieved over 90 per cent in local sourcing of packaging materials. The aim is to achieve 100 per cent by the end of 2019 and overcome the current challenges of local vendor’s capacity to meet up with global standards. In agro-allied sector, Unilever is partnering with intermediary companies, for the supply of cassava and starch,” Thomas Mwanza, procurement director for Unilever West Africa, says.

Promasidor too Promasidor Nigeria Limited, makers of Cowbell Milk, Loya Milk, Miksi Milk, Onga seasoning, and Top Tea are also sourcing some of its inputs locally. It recently unveiled Nigeria’s first zip-lock packaged ready-to-go cereal.

Anders Einarsson, managing director of Promasidor Nigeria, says 75 per cent of the product’s inputs are sourced locally, adding that the decision to look inward for raw materials is informed by the company’s desire to contribute to the growth of

Milk collected in aluminium cans for onward supply to Friesland Campina collection plant at Maya

agricultural value chain.

“The raw materials of SunVita are about 75 per cent sourced locally. This demonstrates our commitment to backward integration and local capacity utilisation in line with the economic need of the country.”

Technology is also involved Amaete Umanah returned from the United States in 2014. He has set up several companies since then, including Inseckp. This firm has developed a solution for poultry farmers by using insects to produce animal feeds.

The cost of a bag of feed for layers is over N3,500 in major markets, but this solution costs half this price.

“The birds are also bigger than those fed with feeds in the market,” Umanah tells me.

Numbers do not lie Local input content, which measures the rate at which

Fulani dairy farmers pouring raw milk into aluminium cans for supply at Iseyin

manufacturing companies in Nigeria source local raw materials, rose to 60.72 per cent in the first half of 2017 from 46.3 per cent recorded in the corresponding half of 2016, data from the Manufacturers Association of Nigeria (MAN) say. It further rose to 63.2 per cent in the second half of 2017 as against 51.1 per cent in the same period of 2016.

There was a slight reduction in the first half of 2018 as utilisation of local raw-materials by manufacturers stood at 56.6 per cent.

Why local sourcing is gaining traction Before 2015, manufacturers had been looking more outwardly for inputs. However, crude oil price dropped from $100 per barrel to less than $50 in 2016 and part of 2017, resulting in low dollar inflows into the Nigerian economy.

Nigeria depends on crude oil for 90 per cent of its foreign exchange and 75 per cent of its revenue. So, drop in crude oil price meant low dollar inflows for local manufacturers seeking to buy raw materials from abroad. Given the situation, manufacturers began to seek local alternatives to save costs and reduce pressure on the Naira.

Frank Udemba Jacobs, former president of MAN, told BusinessDay in 2016 that manufacturers were changing their machines to suit local inputs.

“We are increasingly looking inwards, embracing resource-based and importsubstitution industrialisation. While we keep exploring local inputs, we know this could need retooling and adjusting of machinery. We encourage those with the capacity to go into backward integration due to foreign exchange challenges,” Jacobs,

who is the chairman of Jacobs Wines, had said.

Not just in Nigeria In Mozambique today, SABMiller produces beer known as Impala from cassava sourced mainly from local farmers.

Also, Kenya Breweries Limited (KBL) sources its sorghum locally. It has acquired 30,000 acres of farming land, providing farmers with 80 tonnes of seeds and advisory support to achieve 100 per cent local input content.

Similarly, Africa Improved Foods (AIF), which is behind the Nootri range of fortified foods for infants and breast feeding mothers gets 5,000 tonnes of maize and 500 tonnes of soya beans from local farmers and cooperatives in Eastern and Southern African countries.

“Therefore, the more we source locally, the better for the company as it reduces the cost of doing business,” Prosper Ndayiragije, the company’s country manager for Rwanda, says.

Economy is better for it African countries are wellknown for export of raw materials.

These raw materials are sold at very low prices to Europeans, Americans and Asians, who in turn convert them into finished goods.

“The prices of these finished goods are often five to ten times the raw materials’,” says Attah Anzaku, an exporter.

In 2013, the Netherlands bought sheep, goat skins and leather worth $622,407 from Nigeria. Italy, known widely as producer of quality shoes and leather products, spent $355.63 million buying these commodities from Nigeria, according to Nigeria’s non-oil export data.

Also, Spain bought the commodities worth $51.67 million, while India spent $24 million buying them from Africa’s largest economy. In a similar fashion, China bought Nigeria’s leather worth $93.8 million. Incidentally, this was the only major non-oil product bought by China from Nigeria, according to the data.

Shoe makers in Nigeria accuse traders of selling animal skins, their main input, to the highest bidder, pushing them to seek inferior ones from China.

“Once the tanneries are through with production, they export the entire thing to the detriment of local leather works manufacturers. This is affecting the finished leather sector in Lagos, Onitsha and especially the Aba cluster,” Ken Anyanwu, national secretary, Association of Leather and Allied Industrialists of Nigeria (ALAIN) tells BusinessDay. Experts say increased raw materials sourcing by manufacturers, when done sustainably, will not only create a number of value chains and jobs, but will also bring huge foreign exchange and development.

“We need to ensure that we have the capacity to support effective value- addition to enhance our revenues position on the international market. This calls for policy harmonisation, coordination, and effective collaboration between the public and private sectors to drive effective and time tested industrial framework to fully utilise our natural resource to the best of international expectations,” Yaw Osafo-Maafo, senior minister in Ghana said, while addressing Nigerian manufacturers.

Quality is still the issue Manufacturers complain that local inputs sometimes do not measure up with the quality they need.

A senior staff member of a manufacturing sector in Lagos says cassava flour processed locally may alter the taste of his firm’s products.

“We still need to invest more in local inputs,” says Patrick Eguakhide Oaikhinan, professor of ceramics engineering and chief executive officer (CEO) of Epina Technologies Limited.

“Some of our inputs are not yet fully developed, which is why sometimes companies still look outside.

So, we need to invest in processing or beneficiation for mineral inputs.We also need to attract foreign investments in this area.”

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Why Nigeria’s fruit juice industry booms ODINAKA ANUDU

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iger ia’s demography comprises mainly young people who drink a lot of beverages.

With over 50 percent of the population below the age of 30, fruit juice makers have an opportunity to keep up with margins’ rise, analysts say.

Apart from demography, work pressure in cities and hot weather are also key drivers of the industry.

Nigeria has a huge number of fruit juice makers such as Chi Limited, Dansa, C-Way, Danico, Suntory, Frutta Juice, UAC Foods, Coca-Cola and Scoa.

Others are Fumman Agricultural Industries, Boulos Foods & Beverages, Rite Foods, Jamil, Abel Sell, Acreage Integrated Food, and Amiable Farm Produce, among many others.

The Raw Materials and Research Development Council (RMRD C) estimates Nigeria’s annual demand for fruit juice at 550 million litres, while supply by local firms is just 135 million litres, representing 24.5 percent.

The country produces 930,000 tonnes of citrus fruits annually from three million hectares of land, according to RMRDC. Fruit juice comes in different packs and sizes. It

can be made from orange, mango, guava and other fruit types.

Firms in the industry are expanding rapidly, introducing new products to consolidate competitive edge or stave off competition. Coca-Cola announced 40 percent stake in Chi Limited, one of the key leaders in the industry, in 2016.

Coca-Cola, in December 2017, launched the pineapple, mango and apple variants of Five Alive.

Suntory took over GlaxoSmithKline (GSK)’s Lucozade and Ribena in 2016.

The drinks maker is targeting a double of its N20

billion revenue over the next five years, according to Bloomberg.

In 2016, Denna Rossi Limited introduced five brands served as both red and white cocktail drinks.

More so, Rite Foods has made N30 billion investment in Ijebu in Ogun State, raising daily production of its soft drinks to 120,000 packs from 30,000 in 2017, the company said.

“We started with one production line in 2016.

Now, we have four lines, and by November 2018, we’ll add two more lines,” Seleem Adegunwa, managing director, Rite Foods, told

BusinessDay. More investments are going on in the industry as each firm devises measures to deal with an increasingly health-conscious consumer base.

Nig e r i a n c o n s u m e r s are seeking products with less sugar and chemicals, prompting some firms to focus on natural drinks.

Nigeria’s government once mandated firms to ensure they have 40 percent of natural fruit content. BusinessDay cannot confirm how much this directive is being adhered to.

Consumers are becoming increasingly conscious,

seeking healthier drinks that will nourish their bodies. With this shift in tastes, firms are responding rapidly, emphasising more on health benefits rather than taste.

In 2014, Kano-based Myer Industries Limited introduced natural fruits with eight variants.

“The health-conscious segment of the Nigerian population is growing rapidly and more Nigerians are in search of fruit juice that will improve their wellbeing. They are now very conscious of what they eat and drink. Many now opt for less sugar, healthy drinks, which Myer range of fruit juice is made essentially to offer,”Aisha Funsho, sole distributor in Lagos State, said then.

In 2015, Dansa, a member of Dangote Group, launched Kally Drink, a blend of natural fruits.

Euromonitor International, in March 2018 report on Nigerian fruit juice industry, says that reconstituted 100 percent juice had the worst performance in juice in 2017, with a rapid decline in total volume terms.

The report adds that products in this category are generally more expensive than in other juice categories and so suffered, owing to the low consumer purchasing power in 2016 and 2017 as a result of economic stagnation.

Chi Limited was the

leader in 2017, with the best value share gain in off-trade terms, a recovery from a similar share loss in 2016 when high unit prices led to consumers moving to cheaper brands, according to Euromonitor, an international research firm.

“Coca-Cola Nigeria held second place in juice in 2017. It used its strong distribution network within carbonates to position itself well in juice, with its 5 Alive brand being quite popular,” Euromonitor explains.

Despite positives, the industry is still hurt by farmers’ inability to farm all-year round, making fruit availability throughout the year difficult, analysts observe.

There is still low research and development (R&D) to improve this phenomenon.

Production of concentrate is still a major problem in the industry. Key manufacturers want the government to strengthen the National Horticultural Research Institute (NIHORT) and other relevant research institutes to enable them provide appropriate technology for fruit preservation in order to encourage local production of concentrate.

In a statement obtained from the Manufacturers Association of Nigeria (MAN), key players in the sector say they want continuation of import prohibition on fruit juice in retail packs to safeguard investments and jobs.

major economies, manufacturing output rose by 4.2 per cent in Germany and 4.6 percent in Italy. However, the performance of France was much weaker, at 2.0 percent.

A number of European Union (EU) economies achieved high manufacturing growth in the first quarter of 2018. Manufacturing output rose by 6.4 per cent in Austria, 5.8 per cent in Estonia and 9.3 per cent in Slovenia.

Among non-EU economies, high growth was observed in Belarus: 9.9 percent and Serbia 6.0 percent, while growth was marginal

in Norway and the Russian Federation.

The manufacturing output of the United States rose by 2.5 percent in the first quarter. In East Asia, manufacturing output rose by 2.6 per cent in Japan and 5.2 per cent in Malaysia. However, manufacturing output dropped in the Republic of Korea.

Among emerging industrial economies, India performed well, with 7.0 percent growth. Among other fast growing economies, manufacturing output rose by 5.5 per cent in Indonesia and Vietnam.

How global manufacturing sector performs ODINAKA ANUDU

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he United Nations Industrial Development Organisati on ( U N I D O )’s World Manufacturing Production Statistics for Quarter I, 2018, says that Nigeria’s manufacturing output rose by just two percent in the first quarter of this year.

The report says that there was lower growth in major African economies, with manufacturing output rising by 1.1 percent in Egypt, 2.0 percent in Nigeria and 1.5 per cent in South Africa. This

shows that Nigeria is not, after all, a laggard in manufacturing on the continent.

Estimates based on limited data showed some slowdown in Africa, where manufacturing output rose by 1.9 percent in the first quarter of 2018, lower than 2.3 percent in the last quarter of 2017.

According to estimates, global manufacturing output rose by 4.2 percent in the first quarter of 2018, which was slightly lower than 4.7 per cent of the last quarter of 2017.

The manufacturing output of industrialised econo-

mies rose by the lower rate of 2.9 percent in the first quarter of 2018, compared to 3.5 per cent in the last quarter of 2017. The manufacturing output growth of China, which accounts for a quarter of global manufacturing production, also fell marginally, to 6.3 percent in the first quarter of 2018 from 6.8 percent in previous quarter.

According to UNIDO’s World Manufacturing Production Statistics for Quarter I, 2018 report, the full impact of tariff uncertainties on the dynamics of global manufacturing is yet to be seen as the

first quarter figures indicate only a marginal slowdown.

Observed growth rates are still high but deceleration is visible in all country groups, including the developing and emerging industrial economies where manufacturing output increased by 4.8 percent in the first quarter of 2018 compared to 5.3 percent in the previous quarter.

The manufacturing of European industrialised economies, which hit record high growth of 5.0 percent in the last quarter of 2017, rose by 4.1 percent in the first quarter of 2018. Among the

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Currencies

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Week Ahead

Monday 17 December 2018

Watchlist

SHORT TAKES

economy

The Banking Industry: A tale of the Large and Small BALA AUGIE

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he gap between the big banks and the small banks is widening in terms of profitability, balance sheet and market capitalization.

Analysts attribute the disparity to inability of the small banks to undertake bigger deals because they have higher cost of funding. They added that the Tier 1 lenders are able to utilize assets in generating higher profit, which is why their share prices are overweight small cap lenders.

The big players have access to better loan quality. When you have better ROE then share pr ices are bound to be higher. The market capitalization is always a function of ROE, according to Gloria Fadipe, Head of Research at CSL Stock Brokers Ltd. The combined net income for 5 Tier 1 lenders- Zenith Bank, Guaranty Trust Bank (GTBank), Access Bank, First Bank Holdings Plc, and United Bank for Africa (UBA)- that have released third quarter results was N455.95 billion, this compares N117.31 billion combined profit of 9 Tier 2 lenders. See Charts.

The combined total assets of the 5 Tier 1 lenders stood at N22.92 trillion in the period under review, this compares to N8.38 trillion asset base of 9 small and mid-sized banks.

Total market capitalization of 5 big players stood at N2.47 trillion as at 2:00 pm on Friday, this compares to N904.38

P.E

$8.134 billion In August, the central bank ordered MTN and its banks to bring $8.134 billion back into Nigeria, sending the company’s shares plummeting. The regulator alleged the firm had sent the funds abroad in breach of foreign exchange regulations.

14 percent Nigeria’s central bank kept its main interest rate at 14 percent on Thursday, its governor Godwin Emefiele said.

25 years Nigeria emerged from its first recession in 25 years in 2017 but continues to suffer from sluggish growth and high inflation.

1.50 percent

billion combined figure of the small players.

An industry expert who doesn’t want his named mentioned said s ma l l a n d m i d s i z e d banks are less efficient

with capital, adding that more and more customers continue to move to the big banks.

He also said that the big ones use money to attract top talents, and

that the small ones will have to pay more to allure such quality workforce, hence operating expenses could spike.

Global ratings agency Flitch said earlier in the

year that a number of Nigeria’s tier-2 banks will fall below the capital adequacy ratio of the Central Bank of Nigeria should the naira depreciate to 450/USD.

Economic growth dipped to 1.50 percent in the second quarter, continuing a slowing trend that began in the first quarter.

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

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

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Markets Intelligence

Insurers’ low valuation indicates value play opportunity for investors BALA AUGIE AND OLUWASEGUN OLAKOYENIKAN

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While Nem Insurance Plc has a P/B ratio of 1.2472 as at the close of business on Friday, November, 2018, Axa Mansard Insurance, the biggest insurance company by market capitalisation, posted a P/B ratio of 1.0249. The P/B ratio of Continental Insurance Plc, another highly capitalised insurance company, stood at 0.9144 the same day.

Shares of Axa Mansard have lost as much as 19.18 percent to N1.98 per share; Niger Insurance shed 56 percent; while those of Cornerstone Insurance and Mutual Benefits Assurance depreciated by 60 percent since December 2013, respectively.

Most of the stocks have their shares currently trading below 50 kobo at the local bourse. In fact, the shares of companies like Niger Insurance, Regency Alliance Insurance, Universal Insurance Company fell steadily to 20 kobo from 50 kobo after the NSE officially reviewed its 50 kobo minimum floor policy for stocks trading on the exchange. This is an indication that the stocks were trading above their intrinsic values but also an opportunity since valuations have since come down.

Nigerian Banks Suffer Lower Efficiency despite Profit Growth

Cost-to-income ratio gives a clear view of how efficiently the bank is being run, and is calculated by dividing the operating expenses by the operating income generated. Cost-to-income ratio is important to determine the profitability of a bank. The lower the ratio, the more efficient the bank is.

The combined total perating expenses of the 10 lenders grew by 6% to N1.02 trillion in September 2018 from N962.75 million the previous year. The 6.27 percent increase total operating expenses figure is lower than November inflation figure of 11.28 percent.

Third quarter combined expenses are 51 percent of revenue, as non-interest income such as fees and commission income and foreign exchange revaluation gains underpinned operating profit.

igerian insurers have low price to book ratio, which could indicate a value play opportunity for investors.

The price-to-book (P/B) ratios of most of the insurance companies listed on the Nigerian Stock Exchange (NSE), excluding those of Nem Insurance Plc and Axa Mansard Plc, are trading at less one times book value, indicating investors are unenthusiastic about the stocks.

Little wonder the stock price of most of them are stock at N0.50- except AXA Mansard, Continental Re and NEM Insurance- while others have been trading below N0.50 since NSE removed cap.

“Investors will be willing to pay more for the shares if they perceived the company as being profitable,” said an industry expert, who doesn’t want his name mentioned.

Markets and Intelligence data shows that the cumulative average return on equity of 19 largest listed insurers fell to 7.47 percent in September 2018 from 7.78 percent as at September 2017.

BALA AUGIE AND ISREAL ODUBOLA

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igerian banks have not been able to minimize cost, and will have to intensify their costcontrol strategy as they are spending more to generate each unit of revenue but they were able to magnify profit.

Major drivers of costs were on Asset Management Corporation of Nigeria (AMCON) charges, litigation provision investment, investment in technology and digitalization, as these banks continue to seek aggressive expansion with a view to delivering a high return on shareholders’ investment.

Of course, the low-yielding environment since the beginning of late last year marks the end of free money for Nigerian banks, and here lies

the need for them to be more cost-effective to boost future profitability.

Johnson Chukwu, Managing Director/Chief Executive Officer of Cowry Asset Management Limited said that the inability of Nigerian banks to minimize cost might be connected to the fact that their revenue is not growing proportionally with cost.

He said that some costs are market-driven and impacted by inflation. He stated that the country’s inflation rate have been in double digits for some time, and will always reflect in cost, no matter how banks strive to manage cost.

“Given the slow economic recovery growth of 1.81% recorded in 2018 Q3, we are not seeing the expansion of the economy that will trigger growth, boost revenue and

reduce inflation”. He believed that that sluggish economic growth and fairly high inflation rate (in double digits) are the reasons for the drop in banks’ efficiency,” said Chukwu.

The cumulative average cost-to-income ratio of 10 lenders that released their third quarter performance result increased to 62.62% from 62.50% in the same quarter of previous year.

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NSE now 2018 sixth worst performing market in the world IFEANYI JOHN

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rom a high position of third best performing market a year ago with a 42 percent rally, Nigerian Stock Exchange All Share Index dropped 0.24 percent yesterday, pushing year to date return to -20.07 percent.

This poor performance earned the NSE the position of sixth worst performing market in the world this year.

Despite improved economic growth in the country from 0.8 percent achieved in 2017 to an average of 1.75 percent in 2018, bearish market sentiments have driven most equity prices on the local bourse to a year low as rising uncertainty continues to shroud the investment landscape in the country.

Not surprising to most investors, the world worst performing market this year is the IBC Caracas index which tracks the Caracas Stock Exchange in Venezuela. The IBC Caracas declined 40.26 percent year to date, twice as bad as the closest poorly performing index. Venezuelan economy has struggled all year with sky rocketing inflation, unstable currency and high unemployment in the country.

The country has been battling economic depression in recent times as the economic policies have failed in recent times especially after the crude oil price slump which is the main source of revenue for the government and a key source of foreign exchange earnings.

Behind the IBC Caracas is the ISEQ index which tracks the Irish Stock Exchange. ISEQ re-

turned -21.34 percent. The Irish market index slid to its lowest level since UK voters decided in June 2016 to quit the EU, as fears mounted over the prospect of the United Kingdom crashing out of the European Union without a deal after the country’s prime minister, Theresa May, delayed a key parliamentary vote. Continued uncertainty about the Brexit deal has hurt

Gupta completes $500m deal for Dunkerque smelter

I

ndustrialist Sanjeev Gupta has completed the purchase of Europe’s biggest aluminium smelter from Rio Tinto for $500m, as he looks to build a manufacturing business in northern France supplying the automotive industry.

Mr Gupta’s Liberty House group is funding the deal with equity and a $350m, five-year loan, provided by a group of banks, including Bank of America Merrill Lynch, BNP Paribas, Natixis, Barclays and Trafigura, one of the world’s biggest commodity traders, according to people with knowledge of the transaction.

Announced in January, the purchase of the 285,000 a tonne a year Dunkerque smelter comes as Mr Gupta’s finances face increased scrutiny in the wake of a string of deals that has seen the entrepreneur build an industrial empire spanning four continents, with

$17bn in turnover, in just a matter of years.

The latest deal is part of a plan to build a manufacturing business in northern France producing components for the automotive industry. Earlier this year, Liberty House group bought AR Industries, France’s only remaining producer of aluminium vehicle wheels.

Carmakers are set to use more of the metal in the next decade, as they look to produce light vehicles that are more fuel efficient and have a lower carbon footprint.

“Today is a real milestone in our European investment journey and the fulfillment of our promise to establish a firm foundation for a new vibrant and integrated industrial business in France that will create high-value products that sustain high-value jobs,” Mr Gupta said.

“Liberty Aluminium Dunkerque

and Liberty Wheels France provide excellent facilities, expertise and skilled workforces that enable us to grow strongly through long-term investments.”

The plant is four times bigger than Lochaber smelter Liberty acquired from Rio in December 2016.

With the Dunkerque deal complete, Mr Gupta can now focused on listing part of his steel business on the Sydney Stock Exchange.

For Rio, the sale of Dunkerque is part of a plan by the miner to focus on its best performing assets.

In aluminium that means the company’s Canadian smelters, which have a low carbon footprint because they are powered by hydro-electricity. The AngloAustralian miner has already said it would return to the proceeds of the sale to shareholders.

J&J shares dive on report company

J

ohnson & Johnson is on track for its biggest one-day drop in 16 years, with shares dropping more than 10 per cent on Friday after a media report said the healthcare company knew for decades about the presence of asbestos in its baby powder.

The sharp move wiped $42.2bn from the market capitalisation of the company, one of the biggest in the world, reducing its valuation to $354.3bn.

The issue of asbestos in one of J&J’s most well-known products has already been the subject of numerous personal injury lawsuits against the company, but the most recent revelation could make it more difficult for

the group to avoid liability.

Following the examination of legal documents and testimony from plaintiffs in trials, Reuters reported on Friday that “from at least 1971 to the early 2000s, the company’s raw talc and finished powders sometimes tested positive for small amounts of asbestos”. Despite this being known to employees from the executive level down, the company failed to disclose this to regulators or consumers.

J&J, in an emailed response to the Financial Times, said its baby powder was “safe and asbestos-free” and described the Reuters article as “one-sided, false and inflammatory”.

The company said it would continue to defend the safety of the product.

Asbestos is a naturally occurring mineral that saw wide historical application in fireproofing and building insulation, but inhalation of its fibres or dust can cause serious fatal illness.

J&J shares were down 10.2 per cent just before midday on Friday, putting them on track for their biggest one-day drop since July 19, 2002.

Shares had been down as much as 11.9 per cent earlier today.

The move has also seen J&J shares take out their 50-, 100- and 200-day moving averages, which are closely watched momentum levels. Until today, J&J had been one of the most resilient stocks in the S&P 500 in the wake of the tech-led sell-off that started in October.

market performance in Ireland and other parts of UK. Costa Rica Indice Accionario is the third worst performing market with the IACR index declining by 20.98 percent this year. The economic slowdown in the economy due to lower export figures continue to drive down investor’s confidence in what was once a thriving emerging market.

Other markets that have had it worse than NSE index this year were the Turkish XU 100 index and the Chinese Shanghai composite index which had declined 20.76 percent and 20.35 percent respectively in the past year. Both countries have had their fair share of friction with United States which has caused investors to exit the markets for fear that both countries will continue to record strong economic growth in the middle of an economic war with the world’s largest economy, United States.

Both the Turkish lira and Chinese renminbi have both declined significantly this year due to investors’ loss of confidence in the countries after American sanctions kicked in earlier in the year. As trade tensions between America and China begin the ease, it is not unlikely that Shanghai Composite index may enjoy a yearend rally.

With the second worst performing market down by 21.34 percent, Nigerian equity market which declined 20.07 percent year-to-date is not so far off from becoming the second worst performing market in the world if things get worse here or better elsewhere.

Facebook faces Irish probe after photo leak Bug let developers see the private images belonging to up to 6.8m users

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acebook has been hit with the broadest data protection investigation yet in Europe after the social media group revealed another leak of private photos belonging to millions of people.

The Irish data protection commission said it had opened a new investigation into Facebook because of its high number of data breaches this year.

The social network said on Friday that it had discovered a problem with the way hundreds of third-party developers accessed photos using its app platform. The flaw leaked private photos that Facebook users had uploaded but not chosen to share publicly.

“Because of this bug, some third-party apps may have had access to a broader set of photos than usual for 12 days between September 13 to September 25, 2018,” Facebook’s engineering director Tomer Bar said. “Currently, we believe this may have affected up to 6.8m users and up to 1,500 apps built by 876 developers.”

The Irish data protection commissioner said in response to Facebook’s revelation that it had opened an investigation into the Silicon Valley company’s compliance with the EU’s General Data Protection Regulation — not just on the latest leak but on the broad spread of privacy issues this year.

“The Irish DPC has received a number of breach notifications from Facebook since the introduction of the GDPR on May 25, 2018,” a spokesperson said. “With reference to these data breaches, including the breach in question, we have this week commenced a statutory inquiry examining Facebook’s compliance with the relevant provisions of the GDPR.” Facebook has been left reeling from a series of privacy and security problems in the wake of the Cambridge Analytica scandal, which has prompted investigations from regulators in the US, Europe and the UK. In September, Facebook disclosed a cyber attack that it said could have exposed the personal information of tens of millions of its users.

Under GDPR, companies must inform regulators of any data breach within 72 hours of its discovery. Fines can run to as much as 4 per cent of a company’s global revenues for the prior year.

Facebook said it was “sorry” the latest photo breach had happened and would release a tool next week to help developers determine which users had been affected. “We will also notify the people potentially impacted by this bug via an alert on Facebook,” it said.

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Ezekwesili to reform oil sector, provide tax waivers for tech start-ups

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by Ezekwesili, presidential candidate of the Allied Congress Party of Nigeria (ACPN), outlines her plans to fix the oil sector and boost start-ups. Read on.

“A difficult reform which we are committed to implementing is the oil sector reform. When I read that the minister of state for petroleum resources, Ibe Kachikwu, disclosed that the federal government spends about N1.3 trillion annually on under-recovery, which is the new name that this government has given to fuel subsidy, I was shaken.

N1.3 trillion! Let me put that figure in context for you. The former minister of finance told us some months ago that the total amount the federal government released for capital expenditure in 2017 was N1.3 trillion. Can you imagine that?”

“The amount of money this government spent on subsidising fuel is about the same amount it spent constructing roads, stocking hospitals with medicines, funding our universities, working on power, and all other infrastructure & capital expenditure needs put together.

What sort of corrupt callousness is that? The same fuel that ends up in neighbouring countries. The same fuel the poorest among us in several states across the country pay substantially more for. Some people are feeding fat and buying private jets on our commonwealth.

Oby Ezekwesili

That is why this unwholesome fuel subsidy must go. It is stagnating our economy and impoverishing our people. Just imagine for a second how much good an @ ACPNHOPE government can do with an extra N1.3 trillion to spend on our mission to pull out citizens from poverty.”

“It is not enough for the fuel subsidy to go: Our @ACPNHOPE government will also deregulate the entire oil sector, including the NNPC, and ensure it is subjected to the competition and discipline

of the market. I have no interest in becoming the president of the NNPC when there are more important things begging for attention.

Countries are moving away from oil. In fact, in less than 20 years, there are convincing projections that most of the oil would have dried up, so how can a reasonable government be so bothered with signing oil licenses when there is fire on the mountain?. Oil will come and go, the Nigerian people will remain. Oil will not build this country, it is the Nigerian people

that would build it. That is why the Nigerian people would always be the priority of the @ACPNHOPE government.”

“Setting up a US$1.5 billion infrastructure fund and US$1 Science Tech and Innovation Fund When subsidies are removed, we would set up a $1.5 billion Infrastructure Fund for which we would give annual reports to the Nigerian people and also sign binding Service Level Agreements (SLAs) on performance and accountability. We would also set up a $1 billion Science, Technology and Innovation (STI) Fund to ensure that science, technology and innovation become the enabler for socioeconomic development and structural transformation. Our target is to set in motion the work of becoming Africa’s number one innovation and knowledge economy and stand up to be counted in the world.”

“We already know that the problem is not our people. Nigerians are among the most gifted and accomplished people in almost every country in the world. So if it is not working here, it is because we have allowed the worst of us to lead the rest of us for far too long. The STI fund will support building a robust national innovation system, carry out reforms and reorganization of existing institutions, fund scale up of SMEs and startups in the technology space, research and development, knowledge transfer,

among others.

The fund will be a partnership between the government and the private sector. We will also design and implement policies that will ensure the increase of technology start-ups in the country by at least 40 percent in four years.”

“We will provide tax waivers to incentivise investment in technology. Part of our curriculum review in our schools will see the incorporation of coding and entrepreneurship into the education system. My government will also provide the legal framework to support alternative investment sources like crowd-funding. We would also create an office for a Chief Innovation Officer to manage all innovation initiatives of the government and a Chief Data Officer to manage all data initiatives to make government smarter and boost innovation in Nigeria.

I have said it before and I will repeat: My government will prioritise support to our young people to unleash their creativity in the fields of new, smart, disruptive technologies from Artificial Intelligence to Quantum Computing to Big Data & the Internet of Things.”

“The future is here already and we believe that technology holds the key to solving our poverty crisis, environmental disasters, low level of productivity and competitiveness, healthcare crisis, infrastructure decay, and even the corruption affliction.”

Kriz David to reduce unemployment to 3.5% by aligning education with industry ...To establish ministry of talent management KELECHI EWUZIE

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riz David, presidential candidate of Liberation Movement, has promised to reduce unemployment to 3.5 percent by shaping and aligning the educational system with industries. He also plans to craft innovative policies that would transfer medium-sized companies into mega quoted companies.

David also promised to establish Ministry of Entrepreneurial Development that will pursue and cater for macro and small businesses, create a virile and sustainable mortgage system, reposition the financial service industry to service the real or manufacturing companies and reduce interest rate to seven percent.

He stated that under his proposed arrangement, he will establish the Ministry of Talent Management to transform sports into mega business

in Nigeria, craft innovative policies that would transform the automobile industry, energy industry, tourism and agriculture.

He also promised to create a fair tax system that will greatly reduce the burden on individuals and companies.

This is one of the key points in the statement made available to BusinessDay by the Liberation Movement presidential flag bearer which details a timeline in which he intends to deliver on his campaign promises.

David observed that some candidates have been mentioning figures of the number of jobs they will create in Nigeria but may not be able to fulfil the promises. According to him, “With over 25 million unemployed youths in the country and over two million job seekers being added to the labour market every year, If you create seven million jobs every year, have you solved the unemployment problem?

Absolutely no.”

He further stated that vocational politicians do not create jobs, but make campaign promises and in attempt to fulfil the promises, create ministries and agencies with duplicating functions.

On his plans to tackle corruption, David a forensic expert, said he has developed a model not to only fight corruption, but to create a corruptionfree Nigeria.

According to him, “Security means intelligence, and insecurity means lack of intelligence. Curbing crime in any society requires data gathering and analytics, to constantly be ahead of robbers, insurgents and terrorists”.

To him, “It is old fashioned to invest solely in batons and guns to curb crime. Crime prevention is procuring and applying superior intelligence; therefore, you must have the best minds to man the security architecture to achieve a crime free

society” he said.

He opines that insecurity in Nigeria has two connotations – the conspiracy of the political elites and the commercial opportunities. Hence, solving the insecurity challenge in Nigeria would require the removal of the current governing and non-governing political elite and the security officers’ cohort. The Liberation Movement presidential flag bearer said if elected he will organise a fiscal and monetary summit where we shall define the vision for each sector of the economy and ensure alignment among the various sectors.

“Sound and sustainable macro policies framework would be developed to address energy, tourism, agriculture, learning and innovation, automobile, solid minerals, etc. The financial services industry will be repositioned to favour financial inclusion especially developing innovative insurance policies that would trans-

form the large informal sector, asset transformation and attract foreign investors”, he said.

On the present government Change mantra campaign, David said that the change mantra was a deceit, and the 2019 mantra or slogans of ‘Progress’, ‘Next Level’, ‘Nigeria First’ and ‘Nigeria Working Again’ are all deceits.

According to him, “These slogans are copied from America including ‘Take It Back’. These vocational politicians have mastered the art of salesmanship, so the come up with enticing slogans to deceive electorates”.

“Nigeria is in a dire situation.

Slogans will not take us from the quagmire that Nigeria is in. That is why I am offering Nigerians ‘Smart Government’ to shape a nation that offers Nigerians a promise and get all Nigerians ride progressively in the path of prosperity”, he said.

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Meet Amaete Umanah, serial entrepreneur ODINAKA ANUDU

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f you are looking for an upwardly mobile entrepreneur who has founded many businesses in Nigeria, you have found the right person in Amaete Umanah.

He can best be described as a serial entrepreneur, having founded Silicon Africa, Pontaba Inc and Honeyflow Africa. He is also the brain behind Kamila, the first company that digitalised the popular ‘Whot’ game.

“In Silicon Valley, I started a gaming company. One day I went to a friend’s place in Los Angeles, United States, and we decided to play ‘Whot’, which was quite interesting. I thought that it would be awesome to turn it to an ‘app’.

I checked play store but did not see it. So, I decided to be the first person to bring Whot to IOS and Android and after a year of hard work, I was able to accomplish it.

That gave me some publicity and recognition in tech scene abroad and in Nigeria. This made me start a secret group on Facebook known as Silicon Africa because I noticed that a lot of us were trying to do different things and learn new things. So, I started the group on January 29th, 2012.

As of yesterday, there were 9,800 members from different nationalities,” he recounts.

The entrepreneur, who hails from Akwa Ibom State, was born in Atlanta Georgia, the United States. He studied Electronics Engineering and worked in an oil and gas company. He also worked in the manufacturing

Amaete Umanah

sector, after which he went to the Silicon Valley.

Amaete got the necessary education and wings needed to properly set up a business. He ran several businesses in the United States, which gave him the opportunity to understand why businesses fail or succeed, having himself had a fair share of failure like many entrepreneurs.

Through Honeyflow Africa, the entrepreneur is creating an ecosystem that will revolutionise the agriculture sector.

First, he has identified fluids in plants that can attract beneficial insects. What this does is that it prevents the farmer from

spending on insecticides and pesticides. Second, he has done extensive studies on bees. His plan is to build billion-dollar bees/honey company that will compete world over, in Nigeria.

Third, he uses insects to produce local feed for poultry farmers. The feed is much cheaper and the birds (output) are often healthier than those fed with feed in the Nigerian market.

“I am a farmer. So, basically, I started three years ago with trying to come up with sustainable ways to cheaply grow crops and raise livestock because feed is expensive and energy to process the food is also a problem. So, I

tried to figure out how to solve that. As a farmer, I grow crops, rear livestock and do greenhouses. So, I incorporate technology info farming,” he says.

“At a time, poultry feed was N3, 700 for a bag, which was expensive. So, I thought of ways to create the feed myself which I was able to do by fermenting the feed. You can take the seed, soak it for three days and it will ferment, giving it a bunch of enzymes and amino acids which you can use to feed your chickens.

“It is cheaper and more beneficial, and it saves cost. That is what I have used for my livestock in Port Harcourt,” he explains.

He says that there is a need to reorientate farmers and teach them to make more money by buying low-cost inputs like the fermented feeds for poultry, and also for a quick germination of seeds.

“Instead of waiting for five or seven days to germinate, you can just get a paper towel, wet it, put seed in it, fold it, put it in a zip lock bag, blow some air into it, seal it up and within 48 hours the seed will germinate and they can transfer it to the soil. All these are simple technologies you can do to ease farming. This can be taught to farmers,” he says.

“Dealing with pests, we know that some farmers cannot afford pesticide, while some are strict organic farmers. What they can do is to plant specific flowers that will attract beneficial insects, like bees, lady bugs, and praying mantis, among others, which will, in turn, kill the pests.

Unfortunately, most farmers don’t know this.”

He states that there is a need to grow beneficial plants and crops that can fight off some of these pests by teaching farmers technology that will add to the bottom-line of what they do.

Amaete says he decided to leave the United States for Nigeria because he saw enormous opportunities in the country.

“I have always wanted to come back to Nigeria. In October 2013 when I lost my father, I was still at Silicon Valley, but I came back to Nigeria for the burial in November, after which I decided to stay back for a year exploring different opportunities Nigeria had to offer. After a while, I decided to go with agriculture and incorporate technology into it,” he says.

How easy has it been for him doing business in Nigeria?

The entrepreneur replies that the country is an interesting place to do business.

“Henry Ford said, ‘If you think you can you are right; if you think you can’t you are also right.’ So, I always ask myself, ‘Are you teamcan or team-can’t? I say to myself, ‘I am team-can. Nigeria can be frustrating but not impossible.

People set up businesses here without godfathers and they are doing fine. So, I will not give up. I have a plan and I have to make it work. So, I have learned to manage my expectations.”

The entrepreneur is enjoying positive perception and reviews from investors who have also pumped money into his business.

Invest in South-East, Arthur Eze tells Igbo entrepreneurs Josephine Okojie

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oncerned about the high rate of youth unemployment in the South-East region, Arthur Eze, president of the Ndigbo Lagos Association, has urged all Igbo indigenes who are captains of industries and industrialists to invest in the region to create jobs.

Arthur Eze who spoke at the business round table between SouthEast governors and Lagos-based businessmen from the region said it is imperative for Igbo indigenes to invest in the region to drive economic growth and stimulate job creation.

“This is a clarion call for the indigenes to extend their industries and skills to the South-East region to establish satellite and cottage industry, among others, to employ our own youths and develop our economy,” he said.

“The region is gradually down the drain unless we do something urgently to change the narrative or

else things may be a little bit late in the next five to 10 years,” he added.

He noted that reduction of unemployment rate in the region will translate into increased development of Igbo youths and reduction of poverty in South East.

Eze stated that the huge infrastructural deficits and insecurity in

the region have remained the major factors deterring Igbo industrialists and entrepreneurs from investing in the South East.

He said that the essence of the business dialogue was to address such challenges.

“There are constraints that prevent some of them from investing

L to R: Pius Ayim Pius, former secretary to the Government of the Federation; Ike Ekweremadu, Deputy Senate President; David Umahi, Executive Governor of Ebonyi State and Prince Arthur Eze during 2018 Ndigbo Lagos Business Forum in partnership with the South East governors and the celebration of Arthur Eze’s 70th birthday in Lagos recently.

and that is why we have put up this business dialogue between the industrialists in Lagos and the governors and at the end there will be an MoU and follow it up so that the talk does not just end here but it is translated into action.”

He noted that the Dave Umahi, governor of Ebonyi State, has begun driving investments in the region through the provision of start-up capital for youths, saying that he hopes other governors would follow suits.

Gathered at the business round table where all the eastern state governors and representatives, including Ike Ekweremadu, deputy senate president.

Also in attendance was Pat Utomi, former governors, deputy governors, retired military generals from the region and top local and international business tycoons as well as captains of industries.

The association also used the opportunity to celebrate and acknowledge Prince Arthur Eze for his contribution to Ndigbo Lagos, Igbo

land in Nigeria and the diaspora. The Grand Patron of Ndigbo Lagos was conferred on him as he was adopted to Ndigbo Lagos Patron Hall of Fame, which was instituted on the night.

The group also marked and celebrated Eze’s 70th birthday.

The event was put together by Ezinne Ezeani of ZK Signature.

Start-Up Digest Team Odinaka Anudu Editor

odinaka.anudu@businessdayonline.com 08067478413

Reporters Josephine Okojie Bummi Bailey Gbemi Faminu Joel Samson Graphics

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Start-Up Digest

Oyedeji Adedolapo: The Nigerian mixologist Faminu Gbemi

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ome months back, Nigeria’s president said that the country’s youths were lazy. However, a quick glance at the economy and the business world gives a contrary view to that assertion. Gone are the days when youths took their credentials from one place to another in search of jobs. These days, while in school, many of them become millionaires venturing into one business or another. Now is the era of fashion designers, cobblers, caterers, event planners, hair stylists, and many more.

Adedolapo Oyedeji is one of those transforming the entrepreneurial space. He is a mixologist and chief executive officer (CEO) of D’Oye Edibles, which mixes and makes different kinds of drinks and quick edibles such as popcorn and other snacks.

Though a graduate of the University of Ilorin, she started her business on a part-time basis in November 2017 while still serving. After her National Youth Service, she went on to fully establish her business.

She started with N150, 000, which she got from her savings and grants from friends and families.

Adedolapo was motivated to establish this business for want of freedom. She also wanted to become her own boss, having control

Oyedeji Adedolapo

over her life and time.

“I cherish my freedom. I saw entrepreneurship as a way of having more control over my life and time by becoming my own boss and not waiting to get a white collar job to earn a living, while at the

same time fulfilling my passion.”

Speaking on some of the major challenges confronting her business, she complained about the problem of electricity, saying that there is barely seven hours of it a day.

She pointed out that this has extremely increased her production cost as she runs her business mostly on diesel.

“The economic crisis does not create any problem for my business because my products are affordable and I usually get them in Lagos major markets. I get them from wholesalers, which reduces the cost price, and my products are always unique because I make use of special ingredients. I also operate under a very clean environment to avoid the risk of making harmful products, given that my goods are consumables.”

When asked about plans to expand her business, the entrepreneur stated that he has a strong expansion plan.

“I am excited about the current position of the business so far and in the coming years, God willing, I hope to incorporate full catering and event management services, although this is a long-term goal.

My short-term goal is to see the business boom and become the best at what it was established for, compared with other companies.

“I am also working on acquiring certificates and attending trainings to gain more knowledge and expertise that will help my business grow.”

“Currently, I do not have any employee, but I look forward to getting a bigger place for production and sales and also becoming an employer of labour, so as to reduce the rate of unemployed

youths in my own little way.”

“However, it will require extra funds and resources; but hopefully, I can achieve it with the help of a loan or a grant, maybe from the government, consumer organisation or a bank.”

“Initially, when I started, it was not easy, as I did not have any prior knowledge of business before. But overtime, it has become a piece of cake and I am really enjoying it, especially as sales gets better every day, which is encouraging.

I also listened to and read stories on Folorunsho Alakija and Aliko Dangote who are my role models, and I also held on dearly to my values which include making right choices, remaining committed and consistent, having respect, and being able to tolerate anything and anyone, and it has paid off.” she told Start-Up Digest.

She asked the government to make the environment more business friendly to ease most of the strains that come with setting up businesses in Nigeria, especially for small and medium scale enterprises. The entrepreneur also urged the authorities to make policies that will aid start-ups, beckoning on the government to provide stable electricity and necessary infrastructure for effective and easy production.

On advice to other entrepreneurs, she said, “Always believe in your dreams, remain focused, adhere to your values and never listen to negative comments.”

‘I am working to leave legacy on fashion world’ Ayangbade Seyi Philip is a fashion designer and graduate of Computer Science. Ayangbade says he has been in the fashion industry since birth. However, he officially started his brand—OmOAyan Concept— eight years ago. In this interview with JONATHAN ADEROJU, the entrepreneur tells his story.

What inspired you to set up this business? y father has always been my inspiration because he taught me the basics about fashion and I am still open to learning from him till date. He used to be tailor back in the days in early 60s and late 90s.

started eight years ago. I have learnt more about this business and have more clients for myself.

Nevertheless, I am still working to leave a legacy and a trademark in the fashion world.

What was your initial start-up capital and how where you able to raise the fund?

I started with zero capital. All I did was do delivery for my dad whenever he wanted to deliver cloth to his client. My dad sewed strictly for the Customs, the Immigration Service and Quarantine officers. So, I learnt with my dad’s machines and then convinced his clients that I could do other men’s wear apart from uniform wear.

That was how I started.

Where do you source your raw materials from?

Most times, I just improvise, but basically I get from Lagos Island and and also from Benin Republic because materials are cheap to get over there.

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How would you say the business has grown since you started?

I have really grown from how I

machines.

How can government address some of these challenges?

If the government can work on

Do you have employees?

Yes, I do have employees. Now, I have two people working for me.

What are some of the challenges confronting your business?

There are many challenges, but electricity has been the major factor for me, because I try to use industrial machines to work and you need light for them. Absence of electricity reduces my delivery time. Most times, the generator sets I have cannot power the

electricity in the country, I am so sure they will put smiles on everyone in the fashion world and also in every area of business in the country.

Why should anyone buy your product?

I know I am the best at what I do. I spend a lot of time thinking about new designs to entice my customers and for the past eight years, I have never disappointed my customers. I have a slogan that says ‘Try us and you would delete your fashion designer ASAP’.

What are some of your expansion plans?

I hope to establish a brand that not only sews but produces fabrics for consumers in the fashion field. I also hope to start having exhibitions sooner.

Ayangbade Seyi Philip

What’s the biggest piece of advice you can give to other start-ups?

I will use the words my father used to push me up the ladder. Never stop loving what you do and survey the market you are about to go into. Do something different in your field.

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‘SMEs struggle to attract right talents due to poor structure’ ODINAKA ANUDU

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unke Susan Medun, director at Leapworld Limited, a firm helping micro, small and medium enterprises (MSMEs) access funding and write good bankable business plans, says MSMEs struggle to attract and retain the right talents owing to their poor structures.

“Attracting and retaining talent for MSMEs is a major problem confronting them. Because of the way MSMEs are structured, it is challenging to attract and retain good talents needed to grow the business. At the initial stage of the business, it might be challenging to afford highly skilled staff and retain talents that believe in you and can endure the survival phase looking at the big picture,” she says.

“From the internal processes, a lot of small businesses do not have the system and structure in place to access needed finance to grow their businesses, and this is a huge barrier,” she explains.

Medun says that financial institutions always want a guarantee that small businesses have the capacity to repay back loans, stressing that small business owners need to keep good books.

“You can’t provide what you don’t have. MSMEs need to start keeping proper records and there is a need to also separate the expenses of the owners from the business so that the business can have a life of its own,” she explains.

She adds that information is not available to a lot of MSMEs. “Lagos state is doing great with the Lagos State Employment Trust Fund (LSETF), and I think other states should emulate them. You would be shocked to know that a lot of businesses that operate in Lagos do not know about LSETF. Some are aware but do not know the criteria needed to access it. Some believe the fund is only meant for businesses whose operators are

Funke Susan Medun

indigenes of Lagos State.

“Some also believe that it is a national cake so they do not have to meet the criteria to access the fund. There are lots of low-interest funds for MSMEs, even grants, but all these barriers have prevented small and medium enterprises from accessing available funds.

MSMEs should constantly seek strategic information to leverage for growth.”

She points out that most startups fail to build capacity in the industry in which they operate, which has increased their failure rates.

“You need the right skills to scale up your business and if it is

lacking, the growth of the business would be limited. Applying the method you used for your survival stage at your growth stage will not grow the business sustainably,” she counsels.

She does not encourage startups to go for high interest loans.

She insists that start-ups should source their funds from their family, friends and also seek grants or equity investments.

“There are a lot of grants available for MSMEs such as from the FGN World bank funded growth and employment (GEM) project, and Tony Elumelu Foundation, amongst others. If they have to take

Experts task entrepreneurs on corporate governance, ethics

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xperts in the micro, small and medium enterprises (MSMEs) have charged e nt re p re n e u r s i n t h e country on the need to take corporate governance and ethics seriously.

The experts who spoke at the BusinessDay Top 100 Fastest Growing SMEs event held recently in Lagos weekend stated that start-ups can only scale their businesses when they take up the issue of corporate governance and ethics seriously.

“We have to take our corporate governance and ethics very seriously. We must have purpose-led organization” Uyi Akpata, country senior partner, PWC said.

Uyi urged entrepreneurs to try and diversify their business especially their customer base.

Citing recent studies by PwC

in the UK, Uyi stated that less than five percent of businesses transform from the status of SME to a large firm for failure of taking corporate governance and ethics seriously.

He stated that SMEs in Nigeria accounts for 96 percent of businesses and contributes 48percent to GDP of the country in the last five years while adding that it accounts for between 10-15percent of manufacturing output.

Also speaking, Abayomi Aw o b o ku n , o f f i c e A d m i n i s tar tor, Enyo Retail and Supply-guest speaker, counselled entrepreneurs to compete in areas they have comparative advantage.

“Do not build your business to compete with other businesses where you have no strength. Do not compete according to terms

a loan, I think a low single-digit interest rate is ideal for them,” she discloses.

On how Nigeria can grow a large pool of entrepreneurs, she says the country needs to overhaul its curricula.

“We need to introduce entrepreneurship to schools and overhaul our curriculum. Entrepreneurship should not be taught or seen as ‘everybody must start their own business’. If we all embrace the spirit of enterprise, whether as an employee (intrapreneurship) or employer we would all help businesses to grow and the economy at large.

“Intending entrepreneurs

should seek knowledge and build capacity. Do not rush to start your own business; you can learn first by working for others, serve then learn to lead. I believe there is a lot to learn during apprenticeship,” she says.

“It’s good that the government is making efforts at improving the ease of doing business in Nigeria, putting in place funding interventions and the Made-in-Nigeria initiative is great, but it can do more. We need not just have lots of MSMEs but we need them to cumulatively contribute a good percentage to our GDP as in other emerging economies in the world.”

She says market linkage and access remains one of the biggest challenges confronting most Nigerian businesses.

“Most small businesses complain about sales. The small businesses have fantastic products but do not have access to the right market to sell or export their products. MSMEs can leverage several low- cost sales channels, starting with the social media platforms, e-commerce and the like.”

She further says that access to finance is still a major issue limiting MSMEs growth in the country, adding that huge infrastructural gaps are also negatively impacting business.

“Poor power supply has continued to increase production cost for businesses. Also, government bureaucracy for MSMEs that need regulatory approvals and unfair competition with cheap low quality imports are key issues,” she says.

“Multiplicity of taxes and levies is another major issue confronting small enterprises in Nigeria. There is so much in tax that needs to be addressed. Maybe there should be a graduated tax system or holiday for small businesses. These challenges have made entrepreneurship a daunting task in Nigeria and the government must start addressing them.”

Maduka wants entrepreneurs to embrace hard work GODFREY OFURUM, Aba of the competitor but according to what you believe,” Awobokun said.

Frank Aigbogun, publisher and CEO of BusinessDay urged entrepreneurs to have proven expenditure to be able to access finance easily.

“You will make raising money easier when you have a proven expenditure,” he said.

“If the government should make it possible for each of the 38 million SMEs to employ a Nigerian, that will mean 38 million jobs created.”

“SMEs contribute 48 percent to Nigeria GDP but they get less that 10 -30 percent of government attention,” he said He noted that Businessday will continue to have a great deal of engagement with SMEs operators in the country.

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osmos Maduka, chairman and chief executive officer, Coscharis Group has advised entrepreneurs to embrace the culture of hard work and engagement in legitimate business that demands determination, to achieve success.

Maduka, who was the guest speaker at the maiden edition of the total life empowerment conference, held in Aba, the commercial hub of Abia State, also noted that enduring business is not a product of chance, stressing that an entrepreneur must have a clear vision of the organisation he/she wants to build.

He advised anyone with a dream of creating a big enterprise or developing a programme not to wait a moment longer before taking the next step.

He advised such budding entrepreneurs to translate the dream to action, by picking and remain-

ing focused in the business they thoroughly understand, find seed capital and religiously keep to commitments and get the banks to support the company.

The executive director of Coscharis advised that they should not spend too much money in office space and self ser ving activities, defining gratification and resisting temptation to show, by outward appearance that they have arrived.

Maduka, an astute entrepreneur also advised that they should keep proper and complete record of all transactions and keep track of all activities in the organisation, hire professional managers and make sure there is a clear job description for each of them.

“We must understand the reason why we are called entrepreneurs. Our ability to create wealth and make the world a better place to live and the education we profess should be for peace and progress,” he said.

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Fact checking the vice presidential debate DIPO OLADEHINDE

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n Friday evening, five vice presidential candidates from the about 79 parties participating in the 2019 national elections lined up to defend their ideas on how they plan to take Nigeria forward from 2019.

Lined up for the debate were the vice presidential candidates of the Allied Congress Party of Nigeria (ACPN); Alliance for New Nigeria (ANN); All Progressives Congress (APC); People’s Democratic Party (PDP), and Young Progressives Party (YPP).

The vice presidential candidates that participated in the debate were Ganiyu Galadima of ACPN, Khadija Abdullahi of the ANN, Umar Getso of the YPP, Peter Obi of the PDP, and incumbent Vice President Yemi Osinbajo of the APC. In a bid to push their positions, the vice presidential candidates reeled certain facts and figures, some wrong and some true.

Vice President Yemi Osinbajo at the debate said

Nigeria was now producing 90 percent of the rice that it consumes and now importing only 2 percent of what we used to import. This is largely untrue. Data from the Bloomberg terminal show that rice production in Nigeria has increased more than 50 percent since 2012 to 3.7 million tons in 2017.

However, domestic demand has also risen 4 percent to 6.7 million tons in the 2017-18 year that ended in May. This means that Nigeria produces only about 55 percent of its rice demand. The balance of demand is filled mainly with smuggled rice from Benin Republic, a country that imports more rice than its population can consume. It is a common knowledge that most of the rice imported into Benin Republic is destined for the Nigerian market.

“You can’t have a thriving economy if you allow the kind of grand corruption that took place in the past 16 years. The government of President Muhammadu Buhari has spent N2.7 trillion on infrastructure, the highest in the history of Nigeria,” Osinbajo said. This is also largely untrue. The vice president

refers to capital releases in the last two years.

Actual capital expenditure, according to CBN figures, in the last two years stands at N1.61 trillion. The highest actual capital expenditure since 2004 happened in 2009 when the Federal Government spent N1.15 trillion.

It is also untrue when Osinbajo said the Federal Government was getting 60 percent less in revenues than previous administration. CBN figures show that FG’s retained revenue at N4.62 trillion in 2017 was the highest since 2004.

While oil prices have fallen since 2015, the almost 50 percent devaluation in the naira means that the Federal Government is getting more revenue in naira terms than previous administration.

Osinbajo also said at the debate that Nigeria had a social investment policy, possibly the largest ever in the history of our country.

This is largely true. This is the first time the Federal Government is going all out to dish cash handouts to Nigerians. However, there are questions about the long-term sustainability of this social investment

scheme.

On the other hand, Peter Obi of the PDP said in 2015 Nigeria generated $41 billion in Foreign Direct Investment, but now, we attracted only $12 billion last year. This is largely untrue.

Data from the National Bureau of Statistics (NBS) show that total FDI in 2015 stood at $1.45 billion. As of 2017, this has dropped to $982 million. So, while it is true that FDI has dropped within the period, Obi exaggerated the magnitude of the decline.

“Even our stock market has lost over N2 trillion in one year. You can’t shut down your shop and be chasing criminal,” Obi said.

This is true about the stock market but depends on how you calculate the drop in the stock market.

Stock market capitalisation fell from N12.23 trillion in September 2017 to N11.97 trillion in September 2018, a drop of N260 billion. In dollar terms, the decline is steeper, declining from $39.99 billion to N32.9 billion, representing a decline of $7.09 billion or N2.55 trillion, using the market exchange rate of N360, which is line with the figures given by Peter Obi.

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Sterling Bank powers West Africa’s largest food festival

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terling Bank has promised to light up Lagos this festive season as it brings together the best of African and international cuisine and mixology at the critically acclaimed #EatDrinkFestival.

The new two-day event format has been scheduled for December 26th & 27th at the Lekki Coliseum from 12pm to 8pm daily.

Presented in partnership with Eat.Drink.Lagos, the festival features live demonstrations from top chefs and mixologists as well as pop up shops from a selection of the city’s finest food vendors. The event which started out in 2014 to showcase local culinary enthusiasts has become the favourite curation of food and drinks in West Africa.

Chief marketing officer of the bank, Ibidapo Martins, said the goal of the festival is to create an unmatched culinary experience of Lagos’ best foods and drink brands, remarking that the bank’s decision to deliver the event was to ensure that residents in Lagos and its environs enjoyed the best flavours the city had to offer during the festive season.

Folayemi Agusto, cofounder, Eat.Drink.Lagos, said the festival was created as a platform for local food vendors to connect with their

customers without the limitation of their physical locations.

“There were a number of food vendors from which I ordered lunch to my office daily, but many people didn’t know about them. The idea we had was to give these vendors a platform to meet their customers in person without having to own a storefront – because the cost of one is prohibitive for many of these small businesses.

“We expanded this year’s edition to a two-day format to accommodate a wider selection of exhibitors and have also put plans in place to make the experience hassle free for all our guests,” Folayemi said.

The festival team also disclosed that a careful vendor selection process was put in place to ensure that the experience was unique for each attendee regardless of dietary restrictions, allergies or cravings.

Beyond the vendors, the fifth edition will showcase over a dozen unique events for guests looking for an experience that is more intimate and immersive. These experiences include lunch and dinner pop-ups by top local and international culinary talent, bar battles, spirit tastings, live demonstrations, cocktail master classes, Sterling VIP lounge among others.

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National Discourse Voter education: A missing link in Nigeria’s electoral process CHUKA UROKO

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ducation, it is said, breaks ignorance and liberates the mind.

Education is a very important component of an individual’s and even organisation’s development. In every field of human activity and in all processes, including elections, leading to man’s development and progress, education is important.

In Africa, democracy is still tottering because elections and electoral processes which are the hallmark of democracy, are largely tainted, not credible, free and fair, and in some cases, fraught with violence. In Nigeria, the continent’s big brother, the story is not different and the reason is not far-fetched. The

voter is not educated which is a missing link in the country’s electoral process.

Voter education means providing citizens of a democracy with basic information about participating in elections. In an electoral system, it is important that citizens know how their votes will contribute to the final result of an election. Appropriate voter education should provide citizens with sound knowledge of elections and, unlike what obtains in Nigeria, the focus should be on how to vote rather than who to vote for.

By February 2019 which is about 60 days away, Nigeria will be holding general elections and apparently, nobody is talking to anybody. Voter education which ought to have started, at least, two months ago, is not happening anywhere in the country. If any, it must be on how to vote for a particular individual, rig elections by whatever means possible, or cause trouble if the result goes against a preferred candidate.

Writing on ‘INEC and Voter Education’ in the recent edition of ThePointer magazine, Efe Adams notes, “voters’ education

ensures that voters are ready, willing, and able to participate fully in the election process.

Voters’ education is essential in ensuring that voters are wellinformed and can effectively exercise their voting rights and express their political will on election day”.

In mature democracies, there are always government departments and agencies that focus on voter education. This calls to mind an agency like MAMSER— an acronym for Mass Mobilisation for Self Reliance, Social Justice, and Economic Recovery. This was an exercise in political orientation in Nigeria undertaken by President Ibrahim Babangida as one of the recommendations of the Political Bureau headed by Samuel Joseph Cookey.

In the present political season, Nigerians need this kind of agency which did so well in educating and re-orienting Nigerians on democratic norms, especially on electoral process, during the period of transition from military to democratic government. Though MAMSER has since metamorphosed into the National Orientation Agency

(NOA), nothing is coming from that quarter as a result of the name change.

The Independent National Electoral Commission (INEC) which has the statutory responsibility of educating the electorate on the forthcoming elections is failing in this duty. But it is understandable why INEC is not educating Nigerians on the electoral process. “The commission is a stooge of the government in power and it should not be seen to working against its pay master”, Olufemi Kadri, a public affairs commentator, said on phone.

Kadri further said it is not difficult to understand why voter education is not happening in Nigeria’s electoral system. It is deliberate. The political class is not only predative, but also self-serving. As much as possible, they don’t want to hold the electorate down and keep them in the dark so that they can continue to exploit the political system”.

Unarguably, politicians know that voter education is very essential in any democratic system as a proper orientation of the electorate on the essence of

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cline of 33.8percent this year.

Some of these stocks may witness further dip amidst growing political concerns ahead 2019 elections and the absence of a positive market trigger.

Linkage Assurance Plc which trades at 60kobo has lost 9.1percent of its value this year; Livestock Feeds Plc share price at 47kobo represents a decline of 43.4percent; Mutual Benefit Plc trades at 20kobo (-60percent); Meyer Plc at 59kobo has lost 15.7percent of its value; Multiverse Plc at 20kobo (-60percent); Neimeth Pharmaceuticals Plc is down by 24percent this year to 57kobo.

Niger Insurance Plc at 21kobo has lost 58percent of its value, and Prestige Assurance Plc trades at 47kobo (-6percent). Also, Regency Alliance Plc stood at 21kobo as at December 13, 2018, which implies 58percent decline; Royal Exchange at 20kobo has declined by 60percent this year; while RTBriscoe at 38kobo represents a decline of 24percent.

“Penny stocks are like a surgical knife. If used by a doctor (experienced), it could save lives (make money). On the other hand, if used by a goon (amateur) it could kill (make you bankrupt). In my opinion, penny stocks can only be a good lesson rather than a potential earning source,” said Rohit Dalal, a New Delhi-based finance analyst.

Penny stocks get their name from the fact that they are cheap and a lot of people when starting out on investment tend to go in for

cheaper stocks as their first investment. They do this because they are deemed to have higher returns when things go according to plan.

Some of these securities which hitherto did not trade above 50kobo for a long time were targets of ‘Pump and Dump’ investors recently.

“Some investors will continue to tread carefully in the equity market, particularly because of election considerations. We reiterate that the market has strong growth potential for investors with a medium-tolong-term view,” said research analysts at Lagos-based FSDH. Barely on year ago, the price floor for listed companies was 50kobo but with the implementation of the Par Value Rule the price floor became one kobo. It was expected to increase market liquidity and improve price discovery especially for lowly priced stocks.

“The amended stratification of price movements, price limits and tick sizes aims at improving liquidity, narrowing spreads, and ensuring that all price improving (up/down) transactions are material, making the market more efficient for all participants,” the NSE had said.

The price of every share listed on the Exchange is now determined by the market, except that no share trades below a price floor of one kobo. Since this year, the total value of stocks listed on the NSE has decrease by over N2trillion, fuelled among others by record free fall of many penny stocks.

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Bank Limited said.

He said it is also worrisome to note that the country recorded deficit in its current account balance during the period as payments for imports increased significantly while exports increased marginally.

“The development also calls for urgent measures to make the Nigerian economy more productive, attractive, and to develop non-oil export oriented sectors,” Akinwunmi said in an emailed response to BusinessDay. The financial account balance indicated an increased net incurrence of financial liabilities of $10.72 billion in the review period as against $2.57 billion recorded in the preceding period.

The current account indicated a negative outcome during the review period, recording a deficit of $3.10 billion as against surpluses of $4.45 billion and $1.97 billion in the previous quarter and corresponding period of 2017, respectively.

This development was largely attributable to the increased payments for imports.

Johnson Chukwu, managing director, Cowry Asset Management Limited, said new capital flows is diminishing as portfolio investors exit the country on

heightened political risk due to the upcoming general elections.

Chukwu who spoke with BusinessDay by phone said the development may reverse after the elections but for the meantime, the country should expect further deficit in balance of payment. “This will last till first quarter of next year,” he added.

Portfolio Investments inflow to the economy decreased significantly to $1.79 billion in Q3 2018 from $4.23 billion and $3.32 billion in the preceding quarter and the corresponding period of 2017, respectively, according to the CBN’s report.

The report revealed that Direct Investments inflow increased by 0.7 per cent to $438.84 million when compared with the preceding quarter of 2018. It however, indicated a decline of 45.0 per cent when compared to the corresponding period of 2017.

Furthermore, the deficit in the income account (net) increased by 6.7 per cent to $4.16 billion in the review period from a deficit of $3.89 billion recorded in the preceding quarter. When compared with the level in the corresponding period of 2017 it indicated an increase of about 39.5 per cent.

The surplus in the current transfers (net) decreased by 1.2 per cent to $5.95 billion in Q3

Monday 17 October 2018

casting vote and getting involved in the democratic system of the country. More importantly, they also know that voter education brings about a high level of motivation and encouragement in the electorate just as it makes them have confidence in government. Yet they don’t want this education to happen because that will work against their illconceived and ulterior motives.

The implication of this, however, is that the political system is put under intense pressure and the electoral process remains warped, leading to high a level voter apathy and the birth of an ‘arrangee’ government that cannot be said to be truly democratic.

Lack of voter education is the reason for the non-participation of a large army of youths of voting age in the country’s elections.

This explains why on an election day, these youths take to playing football or drinking at beer parlours instead of going to voting centres to vote and elect their leaders.

The wider implication of this is the emergence of charlatans, self-seekers, rent-takers and in some cases, fraudsters who run governments that are inept, insensitive, visionless, clueless and impervious to criticism.

Executive arrogance and impunity run through the entire administrative structures and the electorate are generally helpless because they did not elect those in government.

2018 when compared with the preceding quarter. However, the level of surplus was 2.7 per cent higher than the level recorded in the corresponding period of 2017.

The surplus in the goods account decreased significantly to $2.12 billion in Q3 2018 from surpluses of $7.51 billion in the preceding quarter and $3.42 billion recorded in the corresponding period of 2017.

Export earnings rose by 2.8 per cent to $16.21 billion in Q3 2018 when compared with Q2 2018. It also indicated an increase of about 35.3 per cent when compared to corresponding period of 2017. Earnings from crude oil and gas, which accounted for 94.4 per cent of total export earnings during the review period, increased by 9.5 per cent to $15.30 billion in Q3 2018 when compared with the preceding quarter.

According to the report, earnings from non-oil and electricity exports decreased by 49.3 per cent to $909.04 million in Q3 2018 when compared with the preceding quarter.

Available data showed that payments for import of goods (fob) to the economy in the review period increased by 70.5 per cent to $14.08 billion above the level recorded in the preceding quarter. This was largely as a result of 79.7 per cent increase in the imports of non-oil products.

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46 BUSINESS DAY NEWS Benedict Peters: For making Nigerians love their...

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Eagles.

This partnership saw the Group emerging as the NFF’s Official Optimum Partner. This support effectively eliminated the plethora of problems the teams were experiencing from funding salaries through to game-day support. By common admission, this intervention was regarded as the biggest catalyst of Nigeria’s emergence as the first African nation to qualify for the 2018 FIFA World Cup in Russia.

Aiteo and Peters did not stop there.

Aiteo expanded its participation in the country’s football industry with another N2.5 billion deal to sponsor the Federations Cup, Nigerian’s version of the English FA Cup and the oldest cup competition in the country.

At the time, the tournament had not held for a couple of years and was losing relevance. The result of this deal was that the Federation cup was renamed the Aiteo Cup. The 2017 final emerged as one of the most publicised and attended in the tournament’s history.

Relevance returned to the competition especially as large financial rewards introduced, re-injected interest and participation from teams.

The 2018 version produced one of the most absorbing football games in recent memory in Nigeria. With Pe-

ters’ support, Nigerians are once again falling in love with their local football; an unquantifiable contribution to Nigeria’s development, if sustained.

Aiteo’s interest has also extended to club football. Aiteo recently became the official sponsor of former Nigerian Professional Football League team, Nembe City FC, based in Bayelsa State, making it the first official corporate sponsor for a local football team. Ironically, its upstream interest is located in the same area where the football team is based, demonstrating its commitment and involvement in developing the local environment within which it operates. This has set the platform for other corporate bodies to take an interest in local football.

Off-field, Aiteo has demonstrated the importance of appreciating those previously involved in the game.

Aiteo sponsored the maiden edition of the Nigerian Football Federation Awards which was aptly named the 2017 AITEO-NFF Awards. Aiteo also took up exclusive sponsorship of the 2017 CAF Awards.

Usually, businesses are rewarded for investments in their core business. But it takes unique acumen and commitment to make investments outside its primary area of activity that have huge social impact.

This is what Peters has led Aiteo to do, linking its business to a social need that has direct effect and impact on millions of Nigerians and Africans.

Peters has always recognised that football is not just a game. His vision

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of the game at its most impactful is most evident in his belief on the game’s influence on the development of youth across the world. Writing in 2017, Peters shares this vision..

“Africa’s young are already shaping today and redefining tomorrow with their creativity, passion and innovation. I believe that the greatest gift that our generation can give them is to continue to provide platforms for aspiration, recognition and inspiration. But ideas like “opportunity” or “potential” can be an abstract enough concepts for adults, never mind the younger generation –– many of whom have been overlooked by the decisions of their governments not to allow funds raised from investors to trickle down into stronger education systems, apprenticeships and advancement.”

“In football, the notion of opportunity is far from abstract. Football has always been a unifying factor and a greattoolforpromotingintegrationand development. But more than that, it is a global currency –– a language spoken in the U.K. as much as it is in Brazil, China and Nigeria. And in football, we see most tangibly the bold young role models and ambassadors of Africa who are inspiring others and have set the pace in their pursuit of excellence.”

Peters ventured into business in 1999 and has since grown Aiteo into a major player in the nation’s oil and gas space. His investments now span oil, gas, mining, power and agriculture. At inception, Aiteo’s main focus was in the downstream sector of the Nigerian oil and gas sector. However,

L-R: Olawale Ajai, professor of legal studies and political environment of business, Lagos Business School; Robert Sola, attorney specialising in credit reporting litigation, USA; Taiwo Ayedun, founder, Credit Registry and father of Credit Reporting in Nigeria; Anthony Idigbe, senior partner, Punuka Attorneys and Solicitors, and Jameelah Sharrieff-Ayedun, managing director/CEO, Credit Registry, at the just concluded credit reporting as the foundation for credit infrastructure workshop organised by CWAG/ AAP in partnership with Lagos Business School and Credit Bureau Association of Nigeria (CBAN), at LBS campus in Lagos.

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ing costs and the CBN’s interest payments to skyrocket, investors who parked substantial cash into treasury bills and bonds made significant profit without risk.

The zero default risk of lending to a government is the reason why yields on sovereign bonds are usually in low single digits and high single digits in most developed and emerging markets respectively.

And so, investors embraced Nigerian debt with opened arms.

By the end of 2017, foreign portfolio inflows surged 305 percent to $7.3 billion in 2017 from $1.8 billion in 2016.

Even the commercial banks

made a killing, booking over N500 billion in profit from investing in government securities.

The higher yield environment however came at a heavy cost for the country and the debate of whether the pain it took to lure foreign portfolio inflows was worth it, still rages on.

Not only did it dissuade companies from investing in the economy or banks from lending to the real sector, it piled pressure on an economy that had exited recession by the skin of its teeth with increased oil prices and production to thank.

It also caused the federal government’s interest payment as a percentage of revenue to balloon by a recordhigh of 66 percent in 2017, with the

total debt stock rising three fold.

The high yield environment also took a toll on the CBN’s interest expense which jumped by 192.8 percent to N1.3 trillion from N459.3 billion the previous year on the back of a 44.7 percent rise in Open Market Operation (OMO) auctions to N11.3 trillion in 2017 from N7.8 trillion in 2016, according to the bank’s annual report.

Average OMO yields increased to 19.43 percent in 2017 as against 14.60 percent, feeding directly into the higher interest expenses.

The Central Bank has reverted again to aggressive OMO auctions since May, after what seemed like a slowdown at the start of the year when oil prices rallied and external reserves were growing rapidly.

The justification for the renewed aggressive OMO auctions

Monday 17 October 2018

as Peters once shared in an interview with the media, “I pushed my group to start thinking outside the box and told them that it was time to develop more capacity across the entire value chain and that it was time to now play in the E&P sector and not just be leaders in the downstream sector.”

In 2015, his oil and gas subsidiary, Aiteo Eastern Exploration and Production Company Limited (AEEPCo), won the bid for the largest onshore block in sub-Saharan Africa (OML 29) at US$2.85 billion from Oil Major, Shell following divestment of some of its onshore assets. Aiteo got the operatorship of a major crude evacuation pipeline with the deal. Peters leveraged on local content capacity to ramp up production from 23,000 barrels per day(bpd) to 90,000bpd in less than two years of operation. Three years after, the company is set to hit a peak production of 100,000 bpd as the largest indigenous producer. Peters currently has plans to inject $4.3 billion into the acquisition of additional offshore assets and a projection to increase oil production capacity to 250,000 bpd in the short term.

Peters has since expanded his businesses, extending transformational operations to different countries across Africa and beyond. Employing over 10,000 direct and indirect employees, Aiteo boasts of a strong international presence, with existing and prospective business operations in Congo, Ghana, Guinea, Liberia, Nigeria, Zambia, Zimbabwe, and offices in Geneva, London and Paris. With the aim to provide African industries with the raw materials to advance cleaner energy sources, technology and innovation, he is involved in copper and cobalt production in some parts of Africa.

He has also invested heavily in floating solar energy power projects within the sub-Saharan region. Aiteo’s downstream business, which is the pioneer subsidiary in the group is also still very active. Its services across borders include bulk petroleum products storage and the trading, marketing and distribution of refined products.

Throughanotherofhiscompanies,heis exploring gas-to-power technology, to develop a pipeline of power generation projects, leveraging on the available gas resources from his upstream business.

He also chairs the Joseph Agro Foundation,whichhefoundedin2014aspartof his contribution to the development of agriculture in Nigeria. The Foundation has invested over $150 million in the large-scale cultivation of Africa’s mostconsumed staple food, rice. It is also addressing social and environmental issues such as unemployment and water shortage in the sector.

Forallhisexertions,especiallyinenhancing Africa’s ability to take charge of itsnaturalresourcesandindependently develop itsenergyinfrastructure,Peters has been recognised, acknowledged and notably honoured by some of the country’s and world’s leading organisa-

tions.In2014,hewasgiventheMarquee Award for Global Business Excellence at the Africa-US Leadership Awards in 2014. In the same year, he won the “Leadership CEO of the Year”. In 2015, Peters received the Dr. Martin Luther KingJr.LegacyAwardsinthe“Economic Empowerment” category. He was listed as one of the ‘50 Most Influential Nigerians in 2017’ by BusinessDay. In a most decisive recognition, in 2018, he was named Forbes’ Oil and Gas Leader of the Year 2018. He also won ‘Oil and Gas Man of the Year’ at the 2018 Guardian Awards. These are besides numerous awards and recognition that Aiteo Group has received for its outstanding performance in the Oil industry in the short period of its involvement.

Through his companies and foundations, Peters provides selective grants, donations and seed capital to local individuals and groups. In 2014, he was named the 7th richest person in Nigeria and 17th richest in Africa by Ventures Africa with a net worth of US$2.7 billion. Peters is now commonly mentioned amongst Africa’s most successful corporate leaders. His success in the oil and gas sector has continued to inspire millions of Nigerian entrepreneurs who look to model his accomplishments in achieving global excellence and impacting society.

He holds a degree in Geography and Urban Planning from the University of Benin. He started his career in the early 1990s with a short stint in national service at Union Bank and then Ocean and Oil Limited (now Oando Plc). He subsequently moved to MRS Oil Nigeria Plc as Group Executive Director where he rose to become the Managing Director. He left MRS in 1999 to Aiteo Group.

Recognitions Benedict Peters and Aiteo have won a number of awards that include: • Benedict Peters as Africa’s Oil and Gas Leader at the Forbes Best of Africa Awards in September 2018 • Aiteo as Oil and Gas Company of the Year (Upstream Indigenous) and Oil & Gas CSR/Sustainability Company of the Year (Upstream) at the Guardian Awards in June 2018 • Benedict Peters given Marquee Award for Global Business Excellence at the Africa-US Leadership Awards dinner hosted by the African Energy Association in 2014 • Aiteo as Indigenous Oil and Gas Company of the Year at the Nigerian Oil and Gas (NOG) Awards, in July 2018 • Benedict Peters as the Leadership Newspaper’s ‘CEO of the Year 2014’ award for championing a local content and bolstering Nigeria’s greater capacity to manage its oil assets • Benedict Peters given the prestigious Dr. Martin Luther King Jr. Legacy Awards in Washington, DC, in 2015, for driving “Economic Empowerment” in Nigeria.

is to fend off pressure on the exchange rate, as emerging market assets from currencies to equities suffer due to rising interest rates in the United States that has triggered foreign portfolio outflows.

Though the naira has depreciated marginally from mid-2018 levels, it has largely outperformed most emerging market currencies given the CBN’s focus on exchange rate stability.

And the CBN won’t rest on that fight now, as exchange rate stability is often used as a political tool in canvassing for electoral votes in Nigeria which heads to the polls in February 2019 with incumbent President Muhammadu Buhari seeking a second term.

The CBN allowed higher OMO bill yields to slow portfolio outflows after the naira came under

relative pressure and external reserves fell from May-highs of nearly $50 billion to a little over $42 billion. The naira has weakened to around N364 per US dollar from N360 at the Investors and Exporters window.

The Abuja-based bank’s commitment to exchange rate stability means yields may go even higher between now and February, as Emefiele has taken every chance to reinforce the bank’s unwavering commitment to keeping the value of the naira steady.

Emefiele is working his talk.

Despite lower oil prices in recent weeks, the CBN has continued to provide consistent FX liquidity and investors told Business Day that the track record of FX convertibility this year has been good, which should anchor confidence.

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INVESTIGATION

Dying in instalment: Foreign buyers pile pressure on polluting company (2) Two weeks after blood tests confirmed a link between lead acid battery recycling by Everest Metals Nigeria Ltd is poisoning Ipetoro community in Ogun state, the investigation shifts to foreign car makers who buy lead ingots from the company. When confronted with evidence of the company’s dangerous operations, they rethink their business relationships, writes ISAAC ANYAOGU.

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hen confronted with evidence of the company’s dangerous operations, the buyers of lead ingots from Everest Metals Nigeria Ltd, the company whose lead battery recycling operations in Ogijo is contributing to lead pollution in the community, have begun to rethink their business relationships with Everest.

We tracked the final destination of lead ingots recycled from Everest Metals in Ipetoro, Ogijo, Ogun state to car makers in Europe. The company operates as part of the Indian conglomerate, Kejriwal Group, which incorporated Suryadeep International FZC in Dubai, as a sister company involved in the lead business.

Everest Metals ships its lead ingots sourced from Nigeria majorly to WITL Ltd registered in Manchester, UK. Posing as dealers, we contacted Philip Gottlieb, the company CEO who said he gets lead from Nigeria.

He said he delivers to Germany through Weser Metall.

Weser Metall, based in Nordenham, Lower Saxony, is part of the Paris-based Recyclex Group and is the third-largest European lead recycler processing over 100,000 tonnes annually. The raw material for the lead paste is mainly sourced from Nigeria. In 2017, it sourced 109,700 tonnes and 2018; it fell to 62,600 tonnes, company’s records show.

Weser Metall is also one of the largest suppliers of US-based Johnson Controls who in turn supplies car makers like BMW, Daimler and Volkswagen. Having established the route through which Everest Metals Nigeria ships its lead, we presented the buyers with proof the company’s poor practices.

Shock, outrage Upon receiving evidence of the company’s dangerous operations including secret pictures of unsafe work practices, tests carried out by an environmental non-profit indicating contaminated soil, and results from blood tests conducted in the community, the reactions were fast and furious.

“Johnson Controls was just made aware of the relationship between one of its lead suppliers purchasing a portion of lead from a Nigerian source.

We immediately initiated an investigation with the supplier and will take appropriate actions,” the company responded on November 27.

Heike Rombach, international business communications Mercedes-Benz Cars responded on November 27 saying Daimler supply chain is complex, “However, we take your advice very seriously and consider it our social responsibility as a global mobility provider to take immediate action here, even if Weser Metall and Everest Metal Nigeria Limited are not direct suppliers of Daimler AG.” Matthias Compes, managing director of Weser-Metall wrote on November 27 claiming it was no longer doing business with Everest Metals.

“Weser-Metall GmbH has identified only one of its suppliers based in the United Kingdom, which is owned

by Everest Metals Nigeria Ltd., had related material. We did not engage in direct commercial transactions with this Nigerian company and

Rain water mixed with lead acid flows into Ipetoro community. Photos: Adetona Omokanya

Acid waste from Everest Metals drips into Ipetoro community.

have not been notified by our supplier of any infringement or misconduct of this company. For your information, we do not buy any more material from this supplier.”

But on November 30 Volkswagen, who gets supplies from Johnson Controls, who in turn is supplied

by Weser-Metall, responded, “We were not aware of the connection and business relationship in the 4th stage of our supply chain...We do not accept these violations, and the practices are a clear violation of our contractually-defined sustainability requirements.

“Due to the seriousness of the allegations, an immediate stop of the purchase of lead from the subcontractor in Nigeria was obtained.

Until the end of the investigations, Volkswagen will be in constant communication with the main supplier and will be informed about all steps and results.”

‘Please let’s meet’ Faced with threat to its bottomline, Everest Metals invited us for a meeting and an inspection of the factory. We agreed to the meeting but

the inspection was no longer necessary. On November 24, Vikas Das, the company’s managing director and the BusinessDay reporter met at Mama Cass Restaurant in Palm Grove, Lagos where he presented the company’s side.

Das denied his company was responsible for the lead in the blood of residents of Ipetoro claiming there were other companies around the area also recycling lead batteries and his factory is farther.

However BusinessDay has established that this is not true, as the company is in an industrial area that is right inside the community.

Das showed pictures of a tank where he claimed the acid content of the recycled batteries were deposited. He was shown a picture of watery acid content dripping into the community behind the factory.

Das further presented a picture of a borehole project his company was planning to build for the community this December. We confirmed assertion by residents that the project was initiated two years ago and had been abandoned.

Everest Metals European affiliate shuts website.

Das further presented four different environmental monitoring reports prepared by Batmol Environmental Consultancy Services that basically said the company’s operations were within the limits set by the Ogun State Environmental Protection Agency (OSEPA).

“The state does not have the resources to fund the tests, so we paid for it,” Das said in response to a question on how the tests were funded.

OSEPA mandates manufacturing companies to submit environmental monitoring report every quarter but regulation is weak. Residents in Ipetoro remember only two visits in the last four years and after the officials visited the company, they hear nothing again about their complaints.

Everest Metals further presented an exporter registration certificate issued by the Nigerian Export Promotion Council (REF. NO 0003356) valid till 16/02/2020 and several receipts of purchases of PPE equipment which were mostly dated between October and November this year and an environmental approval by OSEPA which expired March 18 this year.

Das pointed out that his company only resumed operations in August this year after being shut for most of the year due to lack of batteries.

Andreas Manhart, environmental scientist, at the Öko-Institut, who has carried out audits of battery recycling facilities saw pictures of working conditions taken inside Everest Metals and said, “This is totally improper storage and handling of used lead-acid batteries, an extremely lax handling of occupational safety up to a probably highly contaminated working environment.”

Das was asked for response and he countered, “We provide workers with personal protective equipment but you know workers, some rarely use it.”

In 2011 Das, along with four other officials of the company were arrested in Nigeria for illegal exports of scrap metal. The company boss said it was a misunderstanding.

“Yes, we were arrested and charged to court but the case was straightened out in three days.

What happened was, the metals we exported had mud on them and the authorities thought perhaps they contained lead. So they seized the container but when it was tested and clarified the case was dropped. In a few months we were given our license to operate.

The matter is over for a long time,” Das said.

Curiously, Vikas Das presented an envelope filled with cash begging that he be ‘assisted’. This was promptly rejected.

‘I challenge the authenticity of your report’ On his part, Vinod Jindal, the managing director of Metalworld Recycling, in Oshodi, whose battery recycling facility had workers without personal protective equipment and had high levels of lead in their blood, fired an angry mail refusing to accept responsibility.

“If that is a report from my factory I challenge the authenticity of your report, and if it is from our warehouse, then you have to tell me from which part of land you have taken a sample. Did you know within the compound there (is) two units working in battery scrap. Moreover the pictures you send of my warehouse some does not belong to us. I expect truthful behaviour at your end about our company.

“If you have taken the soil sample from the gate of our warehouse near the scale you may understand what shall be the result. Check your findings first before to conclude my dear friend of environment,” Jindal said.

Our investigation however, showed his claims are false. Both companies operating from the same vicinity are culpable. Vincent Nwodo, a Nigerian and the head of Battery Recyclers Association of Nigeria, who operates the second unit, admitted their operations could be improved and submitted for the test which indicated blood lead levels of 44.6 micrograms. However, Metalworld has the biggest operation.

Soil samples taken by non-profit SRADEV also showed high volumes of lead in the soil.

‘We’ve fixed the problem’

By December, Everest Metals and its parent company Kejriwal were feeling the heat. Their biggest customers, European car makers were cancelling contracts; banks were calling their loans, and Anil Kejriwal, the global managing director, sent a panic mail.

“Following your mail concerning environmental, health, safety and other issues raised by you, we have taken additional measures to fix all issues in our factory,” Kejriwal wrote in an email sent on December 6.

“We invite you and your team to inspect our facilities at the soonest possible. If any additional corrective measures need to be taken, we will implement the same immediately.

“Our orders from our clients have been suspended in the meantime and this will affect the direct and indirect employment given to hundreds of people of local area in addition to stress on our company to repay bank loans.

“We are willing to make any and all corrective changes in our company so that we comply with all local and international norms. We request your kind cooperation and guidance,” he wrote.

Residents in the community say they were yet to see changes. The only change is that the company has shut down its website.

The next part of this investigation will highlight the regulatory failures that led to the tragedy in Ipetoro.

This investigation was supported by the European Centre for Journalism and the Bill and Melinda Gates Foundation. Petra Sorge, freelance journalist from Germany assisted with the research for the story.

48

BUSINESS DAY

Monday 17 December 2018

BUSINESS DAY

Monday 17 December 2018

49

CITYFile

Police uncover fake drugs factory in Lagos, arrest 4

T

he Inspector-General of Police Intelligence Response Team (IRT) has arrested four persons operating an illegal fake drug production factory in Lagos.

Jimoh Moshood, the public relations officer of the Nigeria Police Force (NPF) said at the weekend that the suspects operated the factory from a four-bedroom building located at No. 2 Okunnenye Street, Ikotun Egbe area of the state.

Parading the suspects at the factory premises, Moshood said the IRT operatives raided the secret factory on Thursday, following a tip off.

According to him, large quantities of suspected fake drugs were seized during the raid.

“Recovered from the scene were cartons of different fake drugs, large quantities of unprocessed chemical substances used in manufacturing drugs, several machines fabricated for processing, manufacturing and packaging of the fake drugs.

“Also recovered are forged pharmaceutical papers, plastic buckets of different types suspected to be fake. The building has been sealed and will remain sealed till the determination of the matter by a court.

“The I-GP has advised members of the public to be weary of where they procure food, drugs and drinks as many of them are fake and may cause outright death or physical and mental disability,” Moshood said.

The police spokesman said I-G Ibrahim Idris commended the IRT and the Lagos State Police Command for bursting illegal manufacturing factories, especially where food, drugs and drinks were produced.

The principal suspect later told journalists that he owned the factory, stressing that he learnt the trade from a friend who died four years ago.

“Although I am not a pharmacist or a chemist, but the medications are not totally fake as I use quality chemicals to produce them.

“My market is at Onitsha Anambra State, I don’t supply in Lagos. I distribute only in Onitsha and they in turn know where they distribute to. I have not really made too much money but at least, I have made little money.

A’Ibom: 46 prison inmates regain freedom ANIEFIOK UDONQUAK, Uyo

A

bout 46 inmates have regained freedom in Akwa Ibom on the orders of the state chief judge, Godwin Abraham. Six of the 46 inmates were released on bail The chief judge said the release of the inmates was in line with the exercise of his powers and to help in decongesting the prison.

The session which took place inside the Uyo Prisons was witnessed by top judicial officers, prison officials, officials of the directorate of public prosecution, lawyers, prosecutors, non-government organisations, the police and officials of the Nigerian Bar Association (NBA).

Controller of Prisons, Akwa Ibom State command, Alex Oditah thanked the chief judge for the timely visit, saying it would help to reduce agitation and restiveness among the inmates during this festive period.

He also solicited for more support from the state government as 99% of inmates in custody are indigenes of the state.

Idu Owuosa (in glasses ), founder of LasGidis Recyclers with a cross section of staff of the company, during the grand opening ceremony in Lagos.

Pic by Pius Okeosisi

Group condemns demolition of Badia-East communities ... as several locals displaced JOSHUA BASSEY

S

paces For Change (S4C) has condemned the latest demolition of Badia-East community in Apapa local government area of Lagos State, saying the exercise which rendered several locals homeless, amount to a violation of affected residents’ fundamental rights.

The group alleged that officials of the Lagos State government backed by armed policemen invaded the community on December 12, and employed brutal force in chasing the residents out of their homes, as they demolished their houses.

“Over 100 persons, comprising women, the aged, minors, were arrested during the demolition exercise and detained beyond constitutional limits at the state detention centre at Bolade, Oshodi, Lagos. The demolition crew continued the attack, aided by heavy bulldozers, Black Maria vans and caterpillars.

They broke into homes, assaulted residents and finally demolished the entire community, leaving behind rubbles and ruins.

With no fewer than 1,000 homes destroyed, women, children and hundreds of families were rendered homeless and their livelihoods wrecked. Not less than 10 persons sustained severe bodily injuries as a result of the brute force from the combined forces of security

operatives and demolition officials. Through the serial demolition exercises and destructive interventions in Badia-East, Lagos State authorities have inflicted pains, agony on hapless residents, while pushing them deeper into poverty,” the group said.

For a long time now, Badia-East has been thrust into contentious land disputes between various actors, including federal and state agencies, private companies, a chieftaincy family, and the local residents.

The group alleged that competing claims over the ownership of land in Badia-East have led to various lawsuits in Lagos courts.

According to S4C, on Monday, December 10, 2018, one such legal action, which Badia residents initiated for the enforcement of their fundamental rights, came up for hearing at the Lagos State High Court, Igbosere, but defendants, including the Lagos State Government and Commissioner of Police Lagos State were absent.

“What crime have poor communities in Lagos State committed to deserve the constant harassment and brutality from the very government that ought to protect them? The group queried.

It lamented that whereas most communities in Lagos State face challenges of insecurity among other urban problems, state actors characteristically brand informal communities

FCTA develops N162 bn 5-year health plan JAMES KWEN, Abuja

T

he Federal Capital Territory Authority (FCTA) has developed a N162 billion Strategic Health Development Plan (SHDP) between 2018 and 2022 to provide policy direction for its health sector the next five years.

The strategic plan would be funded through budgetary allocations, internally generated revenue from health services, international donors such as the World

Health Organisation, (WHO), United States Department for International Development, (USAID), United Nations International Children Emergency Fund (UNICEF), among others.

Adamu Bappa, secretary, FCT Health and Human Services Secretariat, who briefed news men on this, also announced that N7.9 billion has been spent on healthcare delivery in the FCT this year.

According to Bappa, N200 million was spent on recapitalisation of the drug revolv-

ing fund, N1.3 billion on drugs and medical supplies distributed to various FCT hospitals and commodities for control of HIV cost N2.5 billion.

He also explained that N15.3 million has been spent on tuberculosis control, family planning consumables gulped N20.7 million and vaccines programmes cost N3.7 billion for the year 2018.

Bappa, however, disclosed that the secretariat generated N114.1 million internally, with N60.3 million generated by

like Badia-East as havens for criminals.

It argued that under national and international law, states bear the responsibility to provide critical public infrastructure, including adequate housing for its citizens, adding: “Justifying illegal evictions in the name of insecurity plus the negative labelling of informal settlements are popular strategies often deployed to evade responsibility of governmental neglect and the continuing failure to provide basic amenities that enhance liveability.”

It said residents of informal communities like Badia-East, continue to live in abject poverty, without schools, health care and recreational facilities, despite the huge resource allocations and revenues that accrue to the state.

The group therefore called on the state government and the Nigeria Police Force (NPF) to halt the persistent attack on the predominantly poor inhabitants of Badia-East.

“We demand for the release of those arrested during the demolition on Wednesday, who continue to languish in detention without a formal charge in a court of law. We further demand that the persons rendered homeless, especially women, children, the aged, minors and other vulnerable populations, be given immediate humanitarian assistance, including temporary shelter, while long-term solutions are in process,” said the group.

private health establishment registration and monitoring committee while Abuja central medical store generated N53.7 million.

He highlighted some achievements of the secretariat to include establishment of public health emergency operation centre with support from Nigeria centre for disease control, ongoing construction of 12 primary health centres and 12 solar powered boreholes in the six FCT area councils, establishment of public health laboratory for routine screening for food handlers as well as construction and equipping of 220-bed Gwarinpa district hospital at 30 percent completion.

50

BUSINESS DAY

Monday 17 December 2018

Monday 17 December 2018

BUSINESS DAY

51

52

BUSINESS DAY

Monday 17 December 2018

Access Bank Rateswatch Market Analysis and Outlook: December 14 - December 21, 2018

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.81

Q3 2018 — Higher by 0.31% compared to 1.50% in Q2 2018

Broad Money Supply (M2) (N’ trillion)

25.71

Increased by 1.73% in Oct’ 2018 from N25.28 trillion in Sept’ 2018

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

22.72 1.97

Increased by 0.72% in Oct’ 2018 from N22.56 trillion in Sept’ 2018 Increased by 2.07% in Oct’ 2018 from N1.93 trillion in Sept’ 2018

Inflation rate (%) (y-o-y) Monetary Policy Rate (%) Interest Rate (Asymmetrical Corridor) External Reserves (US$ million) Oil Price (US$/Barrel) Oil Production mbpd (OPEC)

11.28 14 14 (+2/-5) 42.83 59.71 1.75

Increased to 11.28% in November 2018 from 11.26% in October’ 2018 Raised to 14% in July ’2016 from 12% Lending rate changed to 16% & Deposit rate 9% December 12, 2018 figure — an increase of 1.56% from December start December 14 , 2018 figure— an increase by 1.27% from the prior week October 2018 figure — a decrease of 0.96% from September 2018 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

NSE ASI Market Cap(N’tr)

Friday

Change(%)

14/12/18

7/12/18

30,681.50 11.21

30,866.82 11.27

(0.60) (0.55)

0.34

0.18

89.65

Value (N’bn)

2.38

1.56

53.26

MONEY MARKET NIBOR Friday Rate

14/12/18

1-week Change

YTD Change

(%)

Volume (bn)

Tenor

Indicators

Friday Rate

Change (Basis Point)

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Silver ($/t oz.)

Copper ($/lb.)

(%)

59.71 3.95

1.27 (7.28)

(7.37) 29.25

2226.00 103.70 79.26 12.71 531.50

3.87 (2.67) 0.30 0.00 2.75

14.98 (20.35) 2.27 (17.09) 22.61

1238.82 14.63 273.60

(0.17) 0.90 (0.98)

(5.98) (14.89) (16.53)

(%)

(%)

14/12/18

7/12/18

OBB

24.57

24.33

24

O/N CALL 30 Days

27.21 17.33 15.05

26.08 7.43 14.75

113 990 30

Tenor

14/12/18

7/12/18

90 Days

15.24

14.97

27

1 Mnth 3 Mnths

15.01 14.55

14.24 14.29

78 26

Friday

1 Month

6 Mnths 9 Mnths 12 Mnths

14.29 16.77 17.47

14.14 16.64 17.35

15 13 12

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

(N/$)

Rate (N/$)

14/12/18

7/12/18

14/01/18

Official (N) Inter-Bank (N)

306.90 359.70

306.85 359.87

306.70 360.99

BDC (N) Parallel (N)

0.00 364.00

364.50 366.00

363.50 363.00

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS Friday

Change

(%)

(%)

(Basis Point)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

BOND MARKET AVERAGE YIELDS Tenor

Friday

Friday

Friday

Change

(%)

(%)

(Basis Point)

14/12/18 Friday

Friday

Change

(%)

(%)

(Basis Point)

14/12/18

7/12/18

3-Year 5-Year

0.00 15.41

0.00 15.40

0 1

7-Year 10-Year 20-Year

15.54 15.51 15.69

15.56 15.54 15.77

(2) (3) (7)

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

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

Index

2,675.75

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

8.40 5.21

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

8.93 -46.83

7/12/18 2,673.86

0.07

8.35 5.18

0.59 0.50

8.85 -46.88

0.08 0.05

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

Amount (N' million) 24,372.79 23,157.66 103,071.72

Rate (%)

11.2045 14.0155 16.8829

Date

28-Nov-2018 28-Nov-2018 28-Nov-2018

Global Economy In the US, job growth slowed in November, data released by the Bureau of Labour Statistics (BLS) showed. Nonfarm payroll employment rose 155,000 in November, below consensus for growth of around 200,000. Data for September and October were revised to show 12,000 fewer jobs added than previously reported. Unfavourable winter weather reduced November payrolls as reflected in slower job growth in the construction and leisure and hospitality sectors. The unemployment rate remained unchanged at 3.7%. In a separate development, the European Central Bank (ECB) left its interest rates unchanged last week and confirmed that it will end its four-year long EUR 2.6 trillion Asset Purchase Programme in December. The ECB says it can phase out the stimulus at year end because the economy is growing at a steady pace and inflation is near its goal of just under 2%. By exiting the program, the ECB is joining a retreat by the US Federal Reserve and the Bank of England from stimulus efforts deployed in the years following the global financial crisis of 2007-2009 and the Great Recession.

Elsewhere, India's factory activity in November expanded at the fastest pace this year, buoyed by a rise in domestic and foreign demand. The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, strengthened to 54.0 in November from 53.1 in October. This is the 16th consecutive month that the manufacturing PMI remained above the 50point mark. A reading above 50 indicates expansion, while one below that threshold points towards a contraction.

Domestic Economy The National Bureau of Statistics, NBS, last week said the total value of investment inflows into Nigeria in the third quarter of 2018 was estimated to be $2.85 billion. According to a new report tagged Nigerian Capital Importation (Q3 2018), when compared to the $5.51 billion that the economy attracted in the second quarter of 2018, the figure represents a decline of $2.66 billion, or 48.21%. The report further revealed that the largest amount of capital importation by type was received through portfolio investment, which accounted for $1.73 billion or 60.5% of total investment inflows, followed by “other investment”, which accounted for $601.53 million or 21.07% of total investments. The report also stated foreign direct investment followed as it accounted for $530.63 million or 18.58% of total capital imported in the third quarter. In terms of country of destination, the NBS report revealed that the United States emerged as the top source of capital investment in Nigeria in the third quarter of 2018 with $911.33 million, accounting for 31.91% of the total capital inflow in the third quarter of 2018. In a separate development, the Consumer Price Index (CPI) which measures inflation rose by 11.28% yearon-year in the month of November 2018, which is 0.02% points higher than the 11.26% recorded in October 2018. The food index increased by 14.80% (year-on-year) in November, slightly lower than 15.36% recorded in October, thus indicating declining pressure in the prices of food items. The core sub-index, which excludes prices of farm produce slid by 0.1% to settle at 9.8% in November 2018 from last month's figure of 9.9% year-on-year.

During the month, the highest increases were seen in the prices of potatoes, yam and other tubers, bread and cereals, milk, cheese and egg, vegetables, fruits, oil and fats, fish, meat.

Others are hospital services, domestic and household services, fuels and lubricant for personal transport, dental services, vehicle spare parts, medical services and footwear.

Stock Market Bearish sentiments resurfaced on the trading floor of the Nigerian Stock Exchange (NSE) last week. Accordingly, the All Share Index (ASI)

shed 185.32 points or 0.55% to close at 30,681.50 points. Also, the market capitalisation of listed equities declined by N60 billion to close at N11.27 trillion from N11.21 trillion recorded at the previous week's close.

This week we anticipate market performance will remain largely bearish as sentiments remain soft.

Money Market Cost of borrowing at the money market rose last week, cost of funds rose sharply following aggressive liquidity mop up by the Central Bank of Nigeria (CBN) to the tune of about N503 billion. Data from the FMDQ showed that interest rate on Open Buy Back, OBB lending rose by 24 basis points (bps) to 24.57% at the end of last week from 24.33% the previous week. Similarly, interest rate on Overnight lending rose by 113 bps to 27.21% last week from 26.08% the previous week. Longer tenured rates such as the 30-day NIBOR and 90day NIBOR also closed higher at 15.05% and 15.24% respectively from 14.75% and 14.97% in that order the prior week. This week, we expect moderation in cost of funds as inflows from maturing T-Bills hit the system.

Foreign Exchange Market The local currency recorded mixed movement across the various market segments last week.

In the Parallel window, the naira gained N2 as the indicative exchange rate settled at N364/$ at the end of trading last week from N366/$ the previous week. Also in the Interbank market, the naira recorded a weekly appreciation of 0.05% to close at N359.70/$ from N359.87/$ the previous week. In contrast however, at the official market, the local unit suffered a depreciation of N0.05k to N306.90/$ from N306.85/$ the previous week. This week, we expect rates to continue to trade within a tight band as the CBN sustains its intervention program.

Bond Market Bond yields trended lower across all maturities as a result of buying interest from local institutional investors. Yields on the five-, seven- and twenty-year debt papers settled at 15.41%, 15.54% and 15.69% from 15.40%, 15.56% and 15.77% respectively the previous week. The Access Bank Bond index increased marginally by 8.98 points to close at 2,684.73 points from 2,675.75 points the previous week.

This week, we expect yields to inch slightly higher as participants maintain a cautious outlook on bond yield ahead of the last bills and Bond Auction for the year.

Commodities Crude oil price (Bonny Light) registered a weekly gain of 1.30% to close at $59.71 per barrel last week. Oil prices drew strength from the decision of OPEC and allies to cut production by 1.2 million barrels per day with effect from January 2019. In contrast, precious metals prices came under selling pressure last week following the uncertainty surrounding the ECB decision to end its 4-year bond-buying program. Gold slipped $2.11 or 0.17% to $1,238.82 per ounce, while silver gained 13 cents or 0.9% to end at $14.63 per ounce. This week, oil prices are likely to rise further buoyed by export cuts from Libya following a declaration of force majeure on exports from its largest oilfield. For precious metals, prices are likely to take a cue from the outcome of the US Fed Federal Open Market Committee meeting holding this week.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Dec’18

Jan’19

Exchange Rate (Interbank) (N/$)

363

364

365

Inflation Rate (%)

11.31

11.33

11.37

Crude Oil Price (US$/Barrel)

60.04

62.81

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

Feb’19

63.12

Monday 17 December 2018

FT

C002D5556

BUSINESS DAY

FINANCIAL TIMES

53

World Business Newspaper

Pressure mounts on May to let MPs vote to end Brexit impasse

Liam Fox is first Brexiter minister to call for free indicative vote in parliament David Bond and George Parker

T

heresa May is coming under increasing pressure from senior members of her cabinet to end the deadlock over Brexit by testing different versions through a vote in parliament, as momentum for a second referendum on Britain’s membership of the EU appears to be growing.

International trade secretary Liam Fox on Sunday became the first Brexiter in Mrs May’s government to publicly back calls to offer MPs a free vote on how to end the impasse after EU leaders last week rejected the prime minister’s appeal to amend her withdrawal agreement.

“Personally I wouldn’t have a huge problem with parliament as a whole having a say on what the options were,” Mr Fox told the BBC’s The Andrew Marr Show. “When you look at the options that we have, we have got to recognise that there are a limited number of real world options here.”

Education secretary Damian Hinds earlier said he was open to the idea of “flushing out” the different options, which could include a no-deal Brexit, Mrs May’s deal or a second referendum.

Mr Hinds proposed the idea in a cabinet conference call with Mrs May last Monday and was backed by fellow remain supporting ministers, including the chancellor Philip Hammond, business secretary Greg Clark and work and pensions secre-

tary Amber Rudd.

While some senior cabinet figures believe a second referendum may be the only way out of the impasse, they believe that all other options must be tested first.

However, the prime minister rejected the suggestion amid concerns that Labour could use any so-called indicative vote to further undermine her minority government and hand more influence over the Brexit process to MPs. On Sunday, Downing Street officials played down the prospect of testing the options, insisting Number 10 remained focused on finding a legally binding solution to the question of the Northern Ireland backstop and then taking Mrs May’s amended withdrawal deal back to parliament.

Mrs May is due to update MPs on Monday following her latest bruising encounter with the European Council, which concluded on Friday with no clear solution to the stalemate over Northern Ireland.

The prime minister will then hold a cabinet meeting on Tuesday, with ministers expected to urgently step up contingency planning for Britain crashing out of the EU without a deal next March.

But two members of Mrs May’s inner circle were forced on Sunday to deny reports in the Sunday Times that they were discussing plans with opposition parties for a second vote on Brexit.

Cabinet Office minister David Lidington, de facto deputy prime minister, and Mrs May’s chief of staff

Liam Fox, left, on the BBC’s ‘The Andrew Marr Show’. He said: ‘When you look at the options that we have, we have got to recognise that there are a limited number of real world options here’ © PA

Gavin Barwell, both took to Twitter to dismiss the claims, insisting another referendum could cause further division.

“Happy to confirm I do *not* want a 2nd referendum . . . because it would further divide the country when we should be trying to bring people back together,” said Mr Barwell.

He later added in a second tweet that he was also not planning “a 2nd referendum with political opponents”.

Mr Lidington meanwhile tweeted a transcript of comments he made last week in parliament. “Those who champion a second referendum have to confront the fact that such an outcome would certainly be divisive

but could not guarantee to be decisive in ending this debate.”

He added that a second vote could damage “already fragile public confidence in our democratic institutions”.

However, government officials confirmed Mr Lidington had held meetings with opposition MPs to discuss Mrs May’s Brexit deal and to understand their views.

Persuading Mrs May to support a second referendum — even in the face of overwhelming support in the House of Commons — could prove difficult with the prime minister determined to deliver on the result of the 2016 referendum.

On Saturday, she attacked the

former Labour prime minister Tony Blair for advocating a second vote, calling the move “an insult to the office he once held and the people he once served”.

She added: “We cannot, as he would, abdicate responsibility for this decision. Parliament has a democratic duty to deliver what the British people voted for.”

Mr Blair responded by saying: “It is not irresponsible or insulting to put forward an alternative way to achieve resolution. The sensible thing is now to allow parliament to vote on each of the forms of Brexit canvassed including the prime minister’s deal. If they can’t reach agreement then the logical thing is to go back to the people.”

UK toppled as Europe’s biggest private equity market

US retail stocks on track for biggest sell-off since 2008

Brexit uncertainty sees Netherlands record highest deal value in past year

Alistair Gray

Javier Espinoza

T

he UK has lost its crown as Europe’s biggest private equity market by deal value for the first time since 2011, as buyout executives have postponed big investments as they await greater clarity surrounding Brexit.

Deal value in the UK, which dropped by a third to €21.4bn across 187 deals in the year to December 7, was exceeded by a total value of €23.5bn in the Netherlands, according to a new study by the Centre for Management Buyout Research at the Imperial College Business School.

The UK had more than three times the deal volume of the Netherlands, the researchers said.

But of the top 10 largest European buyouts this year, just one — Silver Lake’s £2.2bn acquisition of internet property search company Zoopla — was in the UK. “The UK has been the pillar of deal flow but people are favouring Europe for large transactions,” said Callum Bell, head of corporate and acquisition finance at Investec, which sponsored the research along with private equity group Equistone.

He pointed to Washington-

based Carlyle’s acquisition of Akzo’s speciality chemicals unit and rival KKR’s purchase of Unilever’s spreads business — both in the Netherlands — as a sign that giant funds were looking beyond the UK. Other European countries have also benefited from inbound buyout activity, including France that saw a 35 per cent rise in value to €20.1bn, from a total of 114 deals, the research found.

The findings come at a time when private equity executives are increasingly worrying about a lack of clarity around Brexit.

Mr Bell said he expected global funds to be even more cautious about pursuing deals in the UK during the first half of next year.

He said buyout funds were in wait-and-see mode. “They believe there are better opportunities tomorrow than today.”

The European head of a large private equity group in Europe said he would expect the dynamics to change once “there is clarity one way or another on Brexit”.

He said: “People hate selling at low prices unless they have to. With all the uncertainty in the UK, most sellers especially in consumer led Continues on page 54

Investors turn negative in spite of bullish Christmas sales forecasts

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hares in US retailers are on course for their biggest quarterly sell-off since the financial crisis, putting the sector at the sharp end of Wall Street’s mounting concerns about the global economy and President Donald Trump’s trade wars.

In a sudden reversal of the cautious optimism that had crept in this year over the industry’s ability to cope with the ecommerce revolution, S&P’s index of 95 leading listed retailers has dropped 17 per cent so far this quarter.

The market downturn has gathered pace just as the festive shopping season gets into full swing, in spite of a series of upbeat predictions about Christmas sales. Jack Kleinhenz, chief economist at the National Retail Federation, has nudged his forecast for the holiday period higher after commerce department figures on Friday showed core retail sales surged in November by the most in a year.

Investors said the sell-off, which puts the sector on track for the steepest quarterly decline since the final three months of 2008, reflected worries about gathering storm clouds for retailers next year.

Luxury, middle market and budget retailers have all been hit hard.

S&P 500-listed losers include upscale jeweller Tiffany, down 36 per cent for the quarter so far, and mass market

chain Target, off 23 per cent.

Concerns include retailers being forced to shed stock at hefty discounts, in part because they have accelerated shipments through ports to avoid being subjected to higher tariffs, which the Trump administration has since put on hold.

Chad Kessler, global brand president at American Eagle Outfitters, said rivals were still being “pretty promotional” since the Black Friday sales. “It seems like a lot of retailers have kind of maintained their Thanksgiving week promotions through the month so far,” he said.

Even companies thought to have successfully weathered the rise of Amazon have been caught up in the rout, including electronics retailer Best Buy, which is down 30 per cent.

The sell-off has erased all gains from earlier this year, when investors drove a rally in retail stocks on signs that a strong US economy and tax cuts were helping bricks and mortar companies deal with the online threat.

“People went from saying the mall is dead to the mall is back with a vengeance,” said Simeon Siegel, analyst at Instinet. “The reality is that it never died — but it was also never as healthy as people thought.”

The US economy remains robust and Mr Kleinhenz now anticipates retail sales for the season to come in at the high end of the National Retail

Federation’s previously issued forecast of a year-on-year rise of 4.3-4.8 per cent.

However, Michael Arone, chief investment strategist at State Street Global Advisors, said: “Investors are concerned more about the longerterm outlook for retail — and the broader structural trends, such as the shift online.”

Weak economic data from Europe and Asia — figures on Friday showed retail sales in China grew at the slowest pace in 15 years in November — have meanwhile added to fears about a global downturn.

Analysts also pointed to concerns that trade tensions would force US retailers to either risk volumes by raising consumer prices or absorb higher costs themselves, especially if higher tariffs were implemented next year.

Executives have sought to reassure investors that they can minimise the impact on profits. Jack Calandra, chief financial officer of men’s clothing company Tailored Brands, said last week it was halving the proportion of products it sourced directly from China from 30 per cent to 15 per cent.

Shares in Amazon have dropped 20 per cent for the quarter so far, paring its market capitalisation to $778bn. S&P’s Select Retail Index is equal-weighted, meaning the decline in Amazon’s stock has not had an outsized impact.

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transactionswon’tsellandwillwait until things settle down as buyers require a discount for the uncertainty risk.”

The survey also revealed the value of exits this year came at €93bn, below the total value of new investmentsat€100.7bnforthefirst time in almost a decade.

Separately, private equitybacked initial public offerings fell by half in terms of value to €7.5bn in2018asinvestorswerespookedby volatilepublicmarkets,theresearch showed.

Crisis group chief questions safety of sending staff to China Canadian Michael Kovrig is being held without charge or access to lawyers Chris Giles

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ompanies should think twice before sending staff to China, the head of the International Crisis Group said on Sunday following the arrest and detention of its employee Michael Kovrig.

Speaking to the FT at the Doha business forum in Qatar, Robert Malley, chief executive of the ICG, a non-governmental organisation that aims to defuse and resolve conflicts, warned that the detention of Mr Kovrig last week was likely to have “a chilling effect” on foreigners working in China.

“I would think from a Chinese perspective, the last message they would want to send right now is that [foreigners] are not welcome for business, for engagement,” Mr Malley said.

“This is not just about somebody who works for Crisis Group, this could be a business person, this could be an academic, this could be anyone who now would have to ask the question — is it safe to go there.”

China detained Mr Kovrig last Monday and he has been held without charge or access to lawyers. He saw the Canadian ambassador at the end of last week, but such consular visits are allowed only monthly, according to Mr Malley.

The Canadian former diplomat and another Canadian citizen were detained following the arrest in Canada of Meng Wanzhou, Huawei’s chief financial officer, who is fighting extradition to the US on charges of violating sanctions on Iran.

Mr Malley said he would not speculate on the reasons behind Mr Kovrig’s arrest but rejected any “innuendo” that he was engaged in anything other than dialogue with Chinese officials with the aim of preventing conflict on the Korean peninsular.

“On our website you’ll see [Mr Kovrig’s] work because everything we do is published. He talks to Chinese officials about foreign policy with the goal of preventing and resolving deadly conflict,” Mr Malley said.

Mr Kovrig is under investigation for “activities that harm China’s national security”, the Beijing News reported last week, an accusation that would preclude any requirement for public evidence or transparent process.

“The notion that he’s endangering Chinese national security — I think everyone realises is a canard,” Mr Malley said. “There are other reasons behind it and we hope it will be resolved very quickly because it is an unjust and a very difficult situation he and his loved ones are going through.”

Monday 17 December 2018

Up to 5,000 positions to go as Britain’s largest carmaker rolls out £2.5bn cost savings plan Peter Campbell

J COP24 President Michal Kurtyka celebrates at the final session of the 2018 UN climate talks, where about 200 nations signed up to a single rule book © Reuters

Deal struck at climate talks to put Paris pact into action

Almost 200 nations agree global rules on measuring and reporting emissions Leslie Hook

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he rules that will govern the world’s most ambitious climate pact were approved on Saturday by the nearly 200 countries that signed the Paris climate agreement, following two weeks of tense negotiations that at times appeared to be deadlocked.

China, the US and EU reached a compromise over a single set of rules that will govern how countries measure and report their emissions and their climate targets, as they seek to limit global warming to well below 2C. The rules will eliminate an earlier distinction between developed and developing countries over their commitments, however, the final deal failed to include provisions on a global carbon market mechanism.

As the gavel was banged at 10pm on Saturday following all-night negotiations in the Polish city of Katowice and numerous delays, ministers and delegates broke into applause and hugs.

Xie Zhenhua, China’s climate chief and an architect of the Paris agreement, welcomed the deal. “Climate change is the greatest challenge of mankind, in front of it no country is spared, and destinies are shared,” he said.

Mr Xie added that the agreement “is a victory of multilateralism”.

The US announced last year that would pull out of the Paris climate pact, although it cannot formally do so until 2020. In the meantime, it continues to take part in the annual UN climate talks.

“Now we have a rule book and finally the Paris agreement is complete,” said Ola Elvestuen, Norway’s environment minister. However, he added that the hardest part — reducing actual emissions — was still ahead. “We have the system, but the work starts now.”

The Paris climate agreement approved in 2015 aimed to limit global warming to well below 2C but left the rules on how to achieve that to be worked out later. That was the main task of the negotiators gathered in Katowice.

Some environmental groups criticised the deal for failing to demand more urgent cuts to emissions.

Earlier in the week, objections from the US, Saudi Arabia, Russia and Kuwait over a recent scientific report from the Intergovernmental Panel on Climate Change sparked a heated debate that resulted in watered down language used to describe the study.

Alden Meyer, policy head at the Union of Concerned Scientists, said that the deal was “a bit of a mixed bag”.

“When you turn to climate ambition it is a fairly weak response to the clarion call from scientists just over two months ago,” he said. “If you look at the IPCC report, it really constitutes a declaration of planetary emergency.”

Under the terms of the Paris agreement, which takes effect in 2020 and has no end date, countries will be able to set their own climate targets.

The deal passed this weekend includes a universal system for measuring and reporting emissions, whereby all countries will abide by the same rules that will take effect in 2024.

The rules also include on a global “stocktake” every five years, starting in 2023, which will measure whether emissions are on track to keep global warming within the limit.

The biggest sticking point in the final hours of the Katowice meeting was over carbon markets — a provision for a global scheme that would allow countries to trade emissions reductions. The article related to this issue was largely deleted from the final agreement due to opposition from Brazil, with the carbon market discussion delayed to next year.

Catherine McKenna, Canada’s environment minister, said that getting the carbon market right was important to help channel investment into projects that reduce emissions.

Forced labour being used in China’s ‘re-education’ camps

Elements of gulag-style system resurrected as Beijing cracks down on ethnic minorities Emily Feng

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hen Abel Amantay, an ethnically Kazakh citizen of China, returned to the western Chinese region of Xinjiang last year to register his Kazakhstan green card, he was detained and sent to Jinghe county’s “re-education centre” in Bortala prefecture.

After finally obtaining permission this month to visit the Xinjiang facility, Mr Amantay’s father saw his son and learnt that he was employed in the centre’s textile factory earning Rmb650 ($95) a month. Mr Amantay is now allowed to make brief, twicemonthly supervised calls to his wife in Kazakhstan.

“He does not say much and just said he is learning a lot. But every time he calls, he asks for the children’s names, ages, which grade they are in,” said Aiytkali Ganiguli, Mr Amantay’s wife and a Kazakh citizen. “He sounds like he has

severe memory loss.”

Before its abolition in 2013, China’s gulag-style laojiao system of re-education through work forced millions deemed to be political dissidents to perform hard labour. The emergence of a forced labour system within Xinjiang’s internment camps this year suggests Beijing is resurrecting elements of laojiao, with Mr Amantay becoming one of its latest victims.

“The similarities between what is happening to Uighurs and what happened to people with unwanted political backgrounds in the Maoist period are striking . . . except [this time] only members of particular minority ethnic groups are targeted for this extralegal form of forced labour,” said Darren Byler, an anthropologist at the University of Washington who specialises in Xinjiang.

In early 2017, Chinese authorities began using extralegal detention against Uighur Muslims and other minorities, including

Kazakhs, in internment camps.

The UN estimates least 1m people are being held in such facilities and China has been condemned internationally.

Beijing has recast the internment camps as “vocational education centres” intended to eradicate supposed extremist tendencies in detainees by teaching them Communist doctrine and the Mandarin language.

Chinese authorities have taken that further by constructing forced labour facilities within internment camps as Xinjiang expands the scope of its mass detention system.

In interviews with the families of six Uighur and Kazakh detainees, relatives said detainees have been employed at textile factories with little to no pay after “graduating” from the region’s detention centres. They are not allowed to leave the factories and communication with relatives, if permitted, is heavily monitored.

aguar Land Rover will announce plans to cut thousands of jobs early in the new year, as part of a £2.5bn turnround plan to revive the fortunes of Britain’s largest carmaker.

JLR, which employs 40,000 people in the UK, has been stung by sliding demand for diesel, poor sales in China and costs of preparing for Britain’s departure from the EU. In October, after posting a loss of £90m for the three months to September, it outlined plans to find savings of £2.5bn, including £1bn of cost reductions within 18 months, without specifying how many jobs would be lost.

During January the company will outline the short-term part of its plan, which will include job losses that run into the thousands, according to several people close to the company.

The group has already shed 1,000 roles at its flagship plant in Solihull, and reduced working hours at other sites amid falling demand for its diesel vehicles and saloon cars.

Analysts are pencilling in up to 5,000 roles that may be lost, as the business is forced to take an axe to its workforce in order to survive.

“It’s do or die at the moment,” said Robin Zhu, an analyst at Bernstein in Hong Kong who covers JLR and its parent company, Tata Motors. “JLR has been seriously mismanaged in recent years, with cost runaways, products disappointing in the market, and hedging issues costing it billions.

“Meanwhile there’s arguably been a lack of accountability in the management ranks.”

Tata Motors has drafted in Boston Consulting Group to draw up turnround plans, according to three people.

There are two strands to the plan — the shorter-term Project Charge, and the medium-term Project Accelerate.

Charge is a three-year plan that will focus on generating costs savings within 18 months.

JLR said that it had in September announced plans “to improve its business performance through the ongoing Charge and Accelerate transformation programmes, targeting £2.5bn of cost, cash and profit improvements over the next two years. As a matter of policy, we do not comment on speculation and rumours about potential measures that might form part of these plans.”

The group, which has recorded its first six-months of losses in a decade, aims to reduce costs by £1bn, investment by £1bn and other savings by £500m. It has already implemented an immediate hiring and nonessential travel freeze, and begun reviewing its use of agency staff.

The longer term plan is expected to reduce JLR’s often-competing range of models.

The company’s Jaguar brand sells several sports utility vehicles that compete directly with its Land Rover models, while two of its mid-range Range Rover vehicles — the Velar and the Range Rover Sport — have significant overlap.

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US credit markets dry up as volatility rattles investors December on course to be first month without junk bond sale since Lehman crash Eric Platt, Colby Smith and Joe Rennison

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S credit markets have ground to a halt with fund managers refusing to bankroll buyouts and investors shunning high-yield bond sales as rising interest rates and market volatility weigh on sentiment.

Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market, according to data providers Informa and Dealogic.

In the leveraged loan market, two transactions were postponed last week after Barclays, Deutsche Bank, UBS and Wells Fargo failed to find buyers for the debt packages, a rarity in what has been one of the hottest corners of credit markets this year.

The deals could be the first of several transactions pulled from the market this year, bankers and investors said, as mutual funds and managers of collateralised loan obligations — one of the largest buyers of leveraged loans — wait out the uncertainty.

“This is clearly more than yearend jitters,” said Guy LeBas, a strategist at Janney Montgomery Scott.

“What we’re seeing now is pretty typical for end-of-credit-cycle behaviour.”

A prolonged period of low interest rates since the financial crisis a decade ago has seen companies binge on cheap debt. However, as financial conditions have tightened, the high level of corporate leverage has raised widespread concern among regulators, analysts and investors.

Increased market volatility and rising uncertainty about the global economic outlook in recent weeks has further stirred concerns heading into the end of the year.

A broad index tracking the $1.3tn leveraged loan market has fallen nearly 3 per cent since hitting a highwater mark in October, as investors have pulled billions of dollars out of loan mutual funds, according to S&P and the LSTA. Yields on junk bonds have climbed by more than 100 basis points since the middle of September, when equity markets set an all-time high, data from ICE BofAML Indices showed.

As prices in the loan market have slumped over the past two months, banks that committed to finance highly leveraged buyouts earlier this year have struggled to find investors to back the deals. Some lenders, including JPMorgan Chase and Goldman Sachs, have offered loans at substantial discounts to entice investors. But others, including Barclays, Deutsche Bank, UBS and Wells Fargo, have had to pull deals altogether.

Technology services provider ConvergeOne postponed a $1.3bn leveraged loan offering that backed its takeover by private equity group CVC last week.

Deutsche Bank and UBS had marketed the deal to investors in a package that included senior and subordinated loans, with the junior debt expected to yield as much as 12 per cent in November when prices were first floated. While the banks attracted some bids for the debt, orders failed to surpass the overall size of the deal, which was postponed to the new year, according to people with knowledge of the transaction.

Davos bows to Moscow pressure to lift ban on Russian trio Russia had threatened to boycott World Economic Forum over action against oligarchs port from the Swiss government, we Henry Foy are able to host business and political leaders from all G20 countries,” he World Economic Forum in said Alois Zwinggi, managing direcDavos has bowed to pressure tor and head of compliance at the from Moscow and gone back WEF. “This is an essential condition on its decision to ban three Russian to ensure that the World Economic businessmen subject to US sanc- Forum, as an impartial platform for tions from the exclusive conference, constructive dialogue, can play its following high-level diplomacy role in defining a much-needed involving the Swiss government. new global architecture.”

Russia had threatened to boycott The Financial Times in October January’s event after its organisers revealed that the three men had barred aluminium tycoon Oleg been informed they were not welDeripaska, industrialist Viktor come at Davos. All three had been Vekselberg and state bank head prominent members of Russia’s Andrei Kostin, who are all subject business delegation in recent years. to wide-ranging sanctions imposed In re s p o n s e, Mo s c ow ha d

by Washington. threatened to completely boycott The about-turn by the presti- the event. “If so, nobody will go gious mountain-top business and there,” prime minister Dmitry political conference is likely to Medvedev said at the time. irritate US authorities who have On Sunday, Mr Zwinggi said he sought to use the sanctions to pun- was pleased to learn that Russia ish Moscow for “malign activities” would be sending “a high-level including the annexation of Crimea governmental delegation to Daand alleged meddling in the 2016 vos.” He added: “Should the delUS election. It is a victory for the egation include individuals under Kremlin and its attempts to show sanction, all necessary measures that Russia remains a powerful have been undertaken to ensure global player despite the western that their presence would be fully restrictions, which have been in compliant with current legal conplace since 2014. ditions.”

“I am pleased that after discusSpokespeople for Mr Vekselberg, sions with all relevant parties, care- Mr Deripaska and Mr Kostin deful consideration of international clined to comment when contacted legal frameworks and strong sup- by the Financial Times.

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Margarita Louis-Dreyfus defends family buyout Russian-born heiress on cusp of taking full control of agriculture trader Neil Hume

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he life of Margarita Louis-Dreyfus reads like a classic rags to riches story.

Orphaned at an early age; raised by a grandparent; finding love on a transatlantic flight; a bitter family feud played out in the courts and press; a $900m buyout to seize control of a 167-yearold storied company; and a promise fulfilled. It has it all.

But Ms Dreyfus, now the majority shareholder of Louis Dreyfus Company, one of the world’s biggest traders of crops and foodstuffs, is keen to separate fact from fiction.

In a rare interview weeks after the 56-year-old Russian-born heiress secured financing to complete the buyout of the group from family members, she hit back at suggestions she was squeezing the commodity trader for cash.

“We’ve got a very solid repayment plan that in no way damages the business,” she said.

Once the buyout is complete in the next couple of months, Ms Louis-Dreyfus will cement her control over the company founded in 1851 by Léopold Louis Dreyfus, allowing her to reposition it and strike strategic partnerships.

Today LDC is one of the world’s biggest traders of grains, soyabeans, coffee and cotton, employing about 17,000 people across the globe. Its turnover in the first six months of 2018 was almost $19bn.

“It is a big relief, not only for me personally but also for the company,” added Ms Louis Dreyfus, whose rise from circuit board seller in the former Soviet Union to the majority shareholder of LDC is one of the most remarkable stories in the natural resources industry.

Born in 1962, Margarita Bogdanova was orphaned at the age of 11 when her parents died in a train accident. Raised by a grandfather in Leningrad (now St Petersburg), she graduated with a diploma in accounting from the local school of commerce.

She met Robert, the great grandson of Leopold, in 1988 on a flight between Zurich and New York. They married three years later and had three sons.

(Ms Louis-Dreyfus also has twin girls with her partner Philipp Hildebrand, former chairman of Swiss National Bank).

Before Robert’s death in 2009, Ms Louis-Dreyfus promised she would safeguard the business. Since then she has steadily strengthened her

grip, becoming chair of LDH in 2011.

Sometimes portrayed in the press as a mysterious Russian who married into wealth, the determined heiress was soon at loggerheads with other members of the Dreyfus clan, including two of Robert’s sisters.

As Ms Louis-Dreyfus became more involved in the business, they exercised a clause in a shareholder agreement forcing her to buy most of their remaining shares in LDC’s parent company Louis Dreyfus Commodity Holdings BV (LDH).

A long-running saga ensued.

After several years of legal wrangling, the two sides finally agreed a value for the shares and Ms LouisDreyfus revealed in November that she had secured a loan to finance the buyout. This will see Akira, her family trust, own more than 95 per cent of LDH, up from 80 per cent.

“Robert always said it was preferable to have a strong shareholder than to serve the interest of multiple shareholders,” said Ms Louis-Dreyfus.

A successful businessman in his own right, Mr Louis-Dreyfus returned to the family company in 2006 at the age of 60 and led a radical restructuring. He was worth an estimated €7bn when he died.

Novartis weighs reinsurance tie-up to fund ultra-expensive drugs Pharma group explores routes to finance ‘curative’ treatments for once-fatal diseases Sarah Neville and Ralph Atkins

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wiss drugmaker Novartis is exploring working with the global reinsurance industry to help health systems bear the cost of a new generation of personalised therapies as the industry comes under pressure to devise funding models for ultraexpensive medicines.

Vas Narasimhan, chief executive of Novartis, said the company was “brainstorming” alternative financing possibilities for drugs that offer the prospect of curing patients of once-fatal diseases, potentially saving substantial healthcare costs down the line — but requiring enormous upfront outlays.

These options could include a “reinsurance model” in which a third party underwrites “the catastrophic case of a child having one of these conditions”, Mr Narasimhan told the

Financial Times.

Such deals could prove attractive for the insurance and pharmaceuticals industries. Novartis and other drugmakers are betting increasingly on specialised cell and gene therapies as future growth drivers — despite their eye-wateringly high costs.

For reinsurers, which act as a backstop for conventional insurers, helping health authorities or governments smooth the cost of such treatments could provide an alternative revenue source. Big reinsurers such as Swiss Re and Germany’s Munich Re face increasing competition from rival sources of risk capital.

Reinsurers could make financing easier by pooling the costs of treatments provided by different drug companies and also across countries.

They already provide a backstop to employer health insurance plans, and have signalled a willingness to expand

into the medical sector.

Mr Narasimhan said: “I think of it as delivering cures; delivering transformation. And if we can deliver transformation, I have to believe we will find the appropriate value proposition.”

In response to the Ebola crisis in west Africa, the World Bank last year teamed with reinsurers to provide cover against future pandemics, so outbreaks could be tackled quickly.

Swiss Re has since the start of the decade worked with Roche, another Swiss drugmaker, on financing cancer treatment in China.

Discussions between drug companies and reinsurers about funding the new generation of therapies — which may require only a single infusion but at large cost — are understood to be at the concept stage but the “reinsurance option” could work for state-funded health systems such as in the UK, as well as private insurance based systems.

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ANALYSIS Eurozone bank supervisor Danièle Nouy: building a team from scratch The outgoing head of the eurozone banking watchdog had to overcome national antipathy Claire Jones and Patrick Jenkins

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Italy: pinning the blame on Brussels Matteo Salvini has transformed the League into a major political force and shifted Italian attitudes to Europe Miles Johnson

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incenzo D’Amore, a 34-yearold buffalo mozzarella maker from the small town of Carinola outside Naples, is exactly the type of young business owner who would be expected to celebrate Italy’s membership of the EU and a single market that allows him to sell his products across the continent.

Last year, he converted the farm founded by his great-grandfather at the start of the last century into a modern cheese factory, using his 800 buffaloes and 36 hectares of land to make around 500kg of mozzarella a week. However, he says his business has been hurt by cheaper competition from lower cost producers elsewhere in Europe.

“With the prices of some types of mozzarella sold in the European supermarkets, you would not even be able to repay the cost of milk, how can such a product even be on the market?” he says. “I’ve always liked the idea of calling myself European, but now I feel abandoned.

I’m losing faith in Europe.”

Mr D’Amore is part of a rising number of Italians who, after two decades of economic stagnation, no longer believe that being part of the EU has been good for their country. Research this year by the European Parliament found that 45 per cent of them believed that on balance Italy had not benefited from its membership of the union, a higher level than even recessionravaged Greece or a Britain that voted for Brexit.

This collapse of Italian faith in the EU has contributed to a surge in support for the Eurosceptic and anti-migrant League party led by the charismatic 45-year-old Matteo Salvini.

A native of Milan, Mr Salvini does not go so far as to call for Italy to leave the euro — let alone the EU. But his pledge to stand up to a European establishment that he argues has failed Italy has helped transform the stature of his party.

Once considered little more than a fringe northern separatist party, since March’s election the League has become a national political force that polls indicate could make Mr Salvini prime minister if a poll were held in the near future.

The disillusionment of Italians with the EU marks a profound generational shift for a country that once viewed closer integration with Europe as a solution for many of its ills. In 2000, around 80 per cent of Italians said they welcomed the country’s entrance into the single currency, at a time when only half of Germans held the same opinion.

Since joining the single currency Italy’s average annual rate of economic growth per head has been zero, according to the Bruegel think-tank. This compares with a rate for Spain of 1 per cent, France at 0.8 per cent and Germany at 1.25 per cent. Now, with the broader European economy slowing down, Italy risks tipping into a technical recession by the end of this year after its economy contracted in the third quarter.

For Marcello Messori, director of the LUISS School of European Political Economy in Rome, the collapse in Italian belief in the European project is partly a consequence of a stagnant economy in which the pain has been felt disproportionately by the young.

In a country where a fifth of young people are unemployed, only 23 per cent of young Italians say they expect to achieve a better socio-economic status than their parent’s generation, the lowest level in the EU according to the research group Census.

“There is a clear difference between generations of Italians in their attitude to Europe,” says Mr Messori.

“For my generation our idea of Europe was to be free, to have a wider world around Italy. This is changing.”

The recent dip in the economy has only increased anger towards the EU. At a rally this month in Rome’s Piazza del Popolo, Mr Salvini told tens of thousands of supporters, many waving flags with his party’s “Italians first” slogan, that he would to stand up to Brussels.

“We are afraid of nothing and nobody,” he told the cheering crowds.

“Someone has betrayed the European dream, but we will put blood and strength back into the veins of a new European community.” He warned that further austerity imposed on Italy from Brussels would result in riots like those seen in recent weeks in France.

Mr Salvini’s willingness to take on Brussels is most tangible in the clash between Italy’s coalition government and the European Commission over its budget plans, which envisage a sharp increase in public spending. Rome initially estimated this would create a budget deficit of 2.4 per cent, breaking EU guidelines. A proposal that would shrink that figure to 2.04 per cent was not immediately accepted by Brussels when it was proposed last week.

It leaves the European Commission needing to find a balance between being seen to hold Italy to account for what it has called an “unprecedented” breach of its budgetary rules while being careful not to provide Mr Salvini with more ammunition to attack Brussels. The coalition has said it will stick to its flagship spending

policies.

The sense of injustice in Italy that different standards are being applied by Brussels to other capitals has been inflamed by President Emmanuel Macron’s announcement of higher spending in France to calm angry protesters, a move that will sharply increase the country’s budget deficit.

Rather than alarming Italian voters, Mr Salvini’s clash with Europe, which has seen him launch tirades against the “Brussels bunker” and forge alliances with other hard-right politicians such as France’s Marine Le Pen, has boosted his party’s popularity.

Mr Salvini has successfully transformed the one-time Northern League into a national party targeting support in the centre and south of the country in a way that would have been unimaginable five years ago. Ahead of European elections next May, the League, which shares power with the anti-establishment Five Star Movement, is now polling at above 30 per cent — a number that if achieved at the polls would make it the largest party in the country.

A strong result in the European elections would see Mr Salvini solidify his party’s new-found status as the dominant force on Italy’s political right, a position that had been occupied by Silvio Berlusconi’s Forza Italia for two decades.

It would also raise the prospect of an avowed Eurosceptic taking power in a large eurozone member for the first time in the single currency’s history.

Susanna Ceccardi, the 31-yearold League mayor of the small Tuscan town of Cascina near Pisa, is representative of a generation of young Italian politicians who have taken a more hostile stance towards Brussels as a means of protecting what she sees as “Italian values”. While an earlier generation of Italian rightwing politicians was likely to embrace openness with Europe, Ms Ceccardi, who was just 12 when the euro was launched in 1999, says she and her supporters feel little affinity with the modern EU. “I feel European from the point of view of history, but I do not feel European from an administrative and management point of view, because it is a Europe that contradicts itself and its values,” she says. “Any citizen who hears the question of identity, does not want to suddenly see the historical centres full of Islamic veils, schools where you cannot eat pork . . . this is far from our culture. That is why people feel far from the EU, because it does not defend the values of the common European people, of our people.”

n January 2 2014, Danièle Nouy arrived at work to survey rows of unused computers and empty desks laid out across the 14th floor of the Japan Centre, one of Frankfurt’s many skyscrapers.

At that time, Mrs Nouy had just four people in her team. By the end of that year she would need a further 1,000 to join her in a monumental challenge: to make the eurozone’s banks safe again.

“It felt like a movie scene. I had left behind my job in Paris, where I had been responsible for 1,150 people. And now I just had two assistants, one counsellor and the person who would

north-west France, Mrs Nouy always longed to escape. “The department is called Finistère, which means the end of the earth. Beyond it you are in the sea,” she says. “For me, it was too far away from everything. I wanted to be in big cities, to be where things were happening — Paris to start with — as soon as possible.”

After training in political science and law, she joined the Banque de France in 1974 and began a career as a supervisor.

Her European credentials were clear from early on. “I was born in 1950,” she says. “So close enough to the war to know people that remembered it.”

A committed European and internationalist, her career in-

Danièle Nouy: ‘If you want people to give you their best contribution, they need to see your face’

become the secretary of our supervisory board,” Mrs Nouy recalls.

Almost five years on, Mrs Nouy, 68, is about to step down as chair of the Single Supervisory Mechanism, the eurozone’s chief banking watchdog that keeps an eye on 118 lenders with total assets worth about €21.2tn. The EU set the body up as a wing of the European Central Bank in autumn 2013 to avoid another big banking crisis. The twin aims were to make banks safer and level the playing field to ensure the region’s most important banks were supervised in the same way.

“When I heard about the SSM I thought ‘I cannot miss this’. Throughout my career Europe and supervision were my passions, [and] now I had the chance to combine the two,” Mrs Nouy tells the Financial Times from her office in the Eurotower, the supervisor’s current headquarters a short walk away from the Japan Centre.

But first she had to find the right people to join her. “When I think back to that first day, it was like being part of a tiny start-up operating within this powerful incubator of the ECB. Everything was ready for us to begin recruiting.”

Growing up in Brittany,

volved global roles, including running the influential Basel Committee on Banking Supervision, which designs global banking rules — and chivvies national governments to adopt them.

The early relationship between the SSM and national supervisors was far from smooth.

Under the new regime, the watchdog’s staff would head joint supervisory teams made up of officials from Frankfurt and local regulators would play second fiddle. But it was also snapping up those local regulators.

Insiders say antipathy towards the SSM was particularly severe from middle and senior managers, often earning much less than Frankfurt-based counterparts.

Mrs Nouy sought to counter discord by visiting all 19 members states at least once a year.

“Distance can be a good thing for decision-making, but it is not so helpful in encouraging people to co-operate. People were exhausted by the [financial] crisis and, when they have lost colleagues to you, it becomes even more challenging for them,” Mrs Nouy says. “If you want people to give you their best contribution, they need to see your face.

I have to explain that there is no national bias and why we need to be European.”

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Monday 17 December 2018

In association with

The growing business of helping customers slow down Giana M. Eckhardt & Katharina C. Husemann

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e are living in an age of acceleration. How are people coping? Increasingly, by seeking out opportunities to slow down. This desire to decelerate is a major trend with implications for companies, organizations and society.

To explore why and how people can achieve deceleration, we studied another extreme version of it: We immersed ourselves among people walking the Camino de Santiago in Spain, an

ancient pilgrimage route that has been drawing ever larger crowds, of varied ages, religious backgrounds and countries of origin, over the past two decades. We identified three key dimensions to slowing down: Embodied deceleration, which is the physical slowing down of the body. Technological deceleration, which is not giving up technology, but carefully controlling its use. And episodic deceleration, which is engaging in only a few activities per day — in our data, walking, eating, sleeping — and, crucially, reducing the amount of consumption choices to be made.

In general, all three dimensions speak to ideas such as simplicity, dematerialization and authenticity.

Companies are beginning to provide spaces where consumers can decelerate on all three dimensions. In the retail sector there’s “slow shopping,” the creation of calming, relaxed, private yet interactive experiences. In the tourism sector, while embodied and episodic deceleration has long been encouraged as part of luxury hotels’ wellness focus, we are beginning to see the absence of Wi-Fi marketed as an amenity.

We expect interest in

such experiences to rise exponentially in coming years. Recognizing our existential need to occasionally slow down can be the basis for winning consumer strategies.

(Giana M. Eckhardt is a professor of marketing and director of the Center for Research in Sustainability at Royal Holloway University of London.

Katharina C. Husemann is senior lecturer of marketing at Royal Holloway University of London.)

How to ensure the success of a position your company hasn’t had before Sukhbir Sandhu and Carol T. Kulik

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any current organizational roles are likely to be disappear in the coming years, only to be replaced by new ones.

You may already be seeing these changes in your organization. Does your organization have a data analytics manager yet?

How about a social media specialist? A sustainability manager? Organizations are increasingly hiring people into novel positions, but often struggle to support these new roles.

To better understand the tension between control and freedom in new roles, we analyzed more than 4,000 pages of interview

data, company documents and media reports from 21 organizations that recently established a “sustainability manager” position and appointed someone to the role. Our research found that or-

ganizations vary in how tightly they structure new positions, but they fall into one of three configurations: — TOO LOOSE: Organizations with this configuration have the least for-

malized commitment to sustainability. The managers struggle to access organization resources and have limited discretion.

— TOO TIGHT: Organizations with this configu-

ration have highly formalized and centralized sustainability programs driven down from the corporate level. Sustainability managers’ roles in these organizations are tightly orchestrated with low discretion.

— JUST RIGHT: Organizations with this configuration have a broad overall commitment to sustainability, but the specific sustainability initiatives are not rigidly formalized. Sustainability managers in this configuration have considerable discretion to launch and champion innovative social and environmental initiatives. Managers in this configuration feel empowered. They see themselves as music con-

(C) (2017) Harvard Business Review. Distributed by New York Times Syndicate

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ductors who work with their colleagues to co-create a sustainable future.

If new roles are structured too loosely or too tightly, they are unable to provide the best outcomes for their functions. Organizations with these configurations can, over time, evolve to the “just right stage,” but it is not simply a case of natural progression. This evolution demands organizational and managerial maturity and can take decades.

(Sukhbir Sandhu is a senior lecturer at the University of South Australia Business School. Carol T. Kulik is a research professor at the University of South Australia Business School.)

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In association with

What multinationals need to do to succeed in Africa Acha Leke and Mutsa Chironga

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frica shows every sign of being the world’s next big growth market.

It is home to more fast-growing economies than any other region, hundreds of successful big companies and an urbanizing consumer market whose spending outstrips that of India.

How can companies navigate Africa’s many challenges and translate its growth trends into profitable, sustainable enterprises? Our research highlights two essential requirements: the imagination to see the continent’s unmet needs as opportunities for growth, and the long-term commitment to build businesses of meaningful scale.

One compelling case study is that of SABMiller, the beer maker. SABMiller’s insight was simple yet powerful: Like consumers the world over, Africans like beer. When they can start spending a portion of earnings on nonessentials,

one of the first luxuries they turn to is an upgrade from home brews to commercial brands.

To capitalize on that opportunity, SABMiller adopted a bold long-term strategy for Africa. One element was an aggressive program of brewery building across the continent.

Another was creating a diverse portfolio of African brands tailored to local markets.

In Nigeria, for example, SABMiller developed a new brand, Hero. It designed the label

with a rising sun, a favorite symbol of the Igbo people, an ethnic group native to Nigeria. And in a country where it can take up to six hours to earn enough to buy a halfliter of beer, SABMiller priced the brew 25 percent below its main competitor. Hero turned out to be one of the company’s most successful brands ever.

Many successful firms have created new products and services — and sometimes whole categories — that are targeted at African needs, tastes and

spending power. They have also innovated to solve the problem of last-mile delivery: Africa is a vast continent with generally poor transport infrastructure and big gaps in communications, where many millions of people lack formal postal addresses or even a street name.

Consider the story of Indomie noodles — one of Nigeria’s most successful consumer products. Sold in single-serving packets for less than 20 U.S. cents, the noodles can be

cooked in under three minutes and combined with an egg to produce a nutritious, convenient, low-cost meal.

Dufil Prima Foods introduced them to Nigeria in 1988. It has a vast “feet on the street” distribution network of more than 1,000 vehicles including motorcycles, trucks and threewheelers. When distributors can’t go any further by vehicle, they continue by foot — making sure the noodles are available in the thousands of small, informal outlets that dominate retail in Nigeria.

To turn the African growth opportunity into gold, companies must be ready to shape and execute targeted strategies that reinvent products, services, markets and business models for local needs.

(Acha Leke is the chair of McKinsey & Company’s Africa practice. Mutsa Chironga is an executive at Nedbank, a South African banking group.)

The coalitions that could hold the EU together Douglas Webber

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hat the EU remains largely intact is due in no small part to Germany. It has, to a certain extent, been Europe’s hegemon, an ancient Greek term designating the dominant member of an alliance or confederation. Unfortunately, it’s a role that Germany has had increasingly to shoulder alone — and that is unsustainable.

If the EU is to survive the onset of a new crisis it will need stronger, more inclusive leadership than Germany has provided on its own.

There are three conceivable options: — A REVIVED FRANCOGERMAN COALITION: Franco-German cooperation can still be a powerful magnetic force in the EU and a bilateral Franco-German bargain can often provide a template for a larger Union agreement. This time

around, however, it is likely the traditional roles would be reversed, with Paris looking to accelerate the speed of change, and Germany seeking to slow it down, particularly among those initiatives aimed at raising the volume of financial transfers between Eurozone member states.

— A WEIMAR COALITION: An expanded coalition that

includes Poland, a nominal partner of France and Germany in the “Weimar Triangle” founded after the end of the Cold War, could have greater legitimacy. However, as long as the conservative and euroskeptic Law and Justice Party remains in office in Poland, such a coalition will not materialize.

— A NEW HANSEATIC COALITION: The third conceiv-

able coalition is named after the medieval association of trading cities stretching from the Netherlands in the west to the Baltic Sea in the east. This coalition would include Germany and the eight northern European member states whose finance ministers began to meet in early 2018 to discuss reforming the eurozone. On monetary, fiscal and EU budget poli-

Brought to you courtesy of First Bank Nigeria

cies these states are closer to Germany than Germany is to France.

The nationalist and euroskeptic trend, which began in the 1990s and gained momentum during the recent refugee crisis amid public opposition to mass integration and long-standing fears about dilution of national identity and globalism, has crystallized into a major political force. Particularly in the wake of Brexit, Europe needs a new champion and without strong support from a politically dominant hegemon or hegemonic coalition, the risk that the union will fall apart in new crises is very real.

(Douglas Webber is a professor of political science at INSEAD.)

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This is M NEY A daily guide to your Personal Finance

Monday 17 December 2018

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

How have you fared in 2018? ney, will, trusts) • Investments (stocks, bonds, mutual funds) • Tax documents (income tax returns, charitable giving) • Employment records (retirement benefits, Curriculum vitae) • Educational Documents (certificates, professional qualifications, NYSC Certificate) • Home related documents (warranties, receipts for major items, renovation receipts) • Medical and health records (Latest health check, recent appointments, medical bills or payments) • Legal documents (passports, personal records, marriage license, birth certificates, national ID) Many Nigerians find themselves victims of fraud and identity theft, in which personal documents are stolen and the data is used fraudulently.

Your financial information is very personal and it is essential that you maintain confidentiality to protect yourself from fraud. When your rubbish is picked up, you don’t know exactly where it ends up. Don’t just carelessly discard old financial statements; all those old bills, bank statements can become prime targets for thieves.

Consider buying a shredder so that you can immediately shred any sensitive documents that you no longer need; this

‘

When you are investing, your time horizon, your risk appetite, your immediate and medium to long-term needs should be taken into account

‘

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i t h Christmas alm o s t here, the last thing you want me to tell you to do is to review your financial year especially with the spending binge you might be about to embark upon! It seems easier to just push things forward to next year but do consider making just a few money moves before 2018 runs out.

How have you fared in 2018? Did you start a new job or leave a job? Did you get married this year?

Did you get divorced or widowed? Did you start a family or have a new baby?

Did you retire? Whether there have been notable changes in your personal or professional life, or even if it has been relatively uneventful, your personal finances need periodic attention say at least once a year for you to get a clear view of your current financial situation.

Where are your important documents?

An important part of managing your personal finances is keeping your financial records organized. Where are your documents? If you suddenly had to produce one of them, would you struggle?

Whether it’s a utility bill to show proof of address or your Tax Clearance Certificate, there may be times when you need to locate a financial record or document fairly quickly. Save yourself the stress and be organised.

If you are one of those that keeps everything because “you might need it someday,” you are probably overwhelmed with paper everywhere that you don’t need. Paperwork consumes our offices and homes and our lives. All those paper bills and statements tend to pile up, and they need to be destroyed or stored securely. One of the best ways to store and

backup your data is to invest in a document scanner and scan your critical personal and financial documents.

We all have some sensitive personal documents such as a passport, birth certificates, title documents, stock certificates, educational certificates or your marriage license; you need to scan or photocopy these documents for your household files. Ideally, the original documents should be stored in a sturdy fireproof filing cabinet or a small fireproof safe.

List out all the contents and make copies to be kept with your lawyer or other reliable family member or friend. It is important to protect these from the risk of fire, flood or other disasters. Don’t go overboard in trying to create Fort Knox at home, but at the same time don’t leave things lying around in cardboard boxes at the bottom of your wardrobe for an unscrupulous house keeper to rifle through whilst you are at work.

Putting documents in categories helps keep you organized.

• Financial management (bank statements and loan agreements) • Insurance documents (policies for your car, health, life) • Real Estate documents (Title documents, rental agreements etc.)

• Estate Planning documents (Powers of attor-

way you can minimise the chances of the wrong person getting at the information.

Embrace technology.

Why not organise your finances electronically?

Advances in personal finance software have made it possible for anyone with a computer and regular internet access to create budgets, pay routine bills, manage bank accounts, track every day finances, and monitor investments.

If you haven’t already done so, register with your bank’s e-banking services and most of your regular transactions can be handled electronically. There are also personal finance apps that make money management a breeze.

How are your investments doing?

When last did you re-

view your short, medium and long-term financial goals to see if you are on track? Is your portfolio of the right mix to make it possible for you to realise those goals? If your circumstances have changed, there may be a need to review things and make some adjustments.

When you are investing, your time horizon, your risk appetite, your immediate and medium to long-term needs should be taken into account.

Your investments should be matched with goals and time frames; saving for a new car, or family vacation or for your children’s education, etc.

Sit with a financial advisor, stockbroker, real estate expert, insurance advisor and take a look at your investments; what are the prospects? Should you continue to hold them all? Should you take advantage of the dip in the capital market to buy some more of a particular stock since some are trading significantly below their true value?

What is your networth? Have you ever considered what you are worth? Ideally your networth should increase each year showing that you are making progress and that your financial decisions are actually working. By tracking your assets and your liabilities you have a fair indication of where you stand financially. If you can, compare it to your networth at the same time last year to see how it’s changed; what has worked and what hasn’t. This information can influence your plans

for 2019.

Give your insurance some attention Things happen; circumstances change. How has this year changed?

Most significant life events have financial consequences that need action.

Any significant changes such as a new baby, a marriage, divorce or a death in the family, may mean that your insurance coverage will need to be re-evaluated.

Do you have an estate plan?

An estate plan has as much to do with life, as it has to do with death. If there have been some major life events this year, a review of your estate planning documents, including your will and trust are important. This is simply to ensure that your family can be taken care of according to your wishes for them.

Join us on Saturday 12th January 2018 at “Financial Resolutions for 2019” to formulate your financial goals with a definite plan to achieve them.

Register at www.moneymatterswithnimi.com/financial-resolutions-2019.

Together we will look at important financial goals and resolve to execute on them.

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

For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

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ABUJACITYBUSINESS COMPREHENSIVE COVERAGE OF NATION’S CAPITAL

Navy decries spate of maritime terrorism, vandalism STELLA ENENCHE, Abuja

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he Nigerian Navy has expressed concern over maritime terrorism, resource theft and sabotage within the maritime domain.

Chief of the Naval Staff (CNS), Vice Admiral Ibok-Ete Ekwe Ibas stated this during the decoration of 10 newly-promoted Rear Admirals at the Naval Headquarters in Abuja.

Ibas further said that other maritime crimes such as seaborne trafficking in humans, narcotics and arms, and the incidents of smuggling, were pervasive.

The CNS noted that the suspected criminals perpetrate the heinous acts through unregulated movements in the sea.

He nonetheless assured that the Navy will continue to re-strategize, with a view to denying the perpetrators freedom of action, while ensuring the safety of the nation’s maritime domain.

Ibas enjoined the senior officers to be more innovative and judicious, in the face of limited resources, even as he reminded them that too whom much was given, much was expected.

“Additional to our counter insurgency responsibilities in the North East, these include maritime terrorism, resource theft and sabotage of their supporting infrastructure.

Other notable threats are piracy and armed robbery, which target

maritime trade, and therefore the economy of the nation.

“The use of unregulated movements at sea for seaborne trafficking in humans, narcotics and arms, and the incidents of smuggling are pervasive and remain issues of grave concern.

“The perpetrators of these ills have remained relentless in ingeniously devising ways to circumvent the security measures deployed.

“It needs no profound analysis to connect the inverse effect of their successes with serious injury to the nation’s wellbeing,” the CNSsaid.

He reminded the officers of the additional responsibilities thrust upon them by the promotion, stressing that they will certainly be expected to give account of themselves.

According to Ibas, the country, being a littoral state, depended highly on the safety of maritime environment for her economic survival.

“As a littoral State, Nigeria has a high dependence on the maritime environment for her economic survival of shipping activities, exploitation and exploration of maritime resources as we use of port facilities have over the years been responsible for major portion of the revenue that drives the nation’s budget.

“However, because of the numerous other competing needs, you would not be expecting that you would be proportionately resourced, either by derivation or size of threat,” he noted.

Opposition parties engage consultants to churn out fake news, confuse gullible public - Minister OYIN AMINU, Abuja

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ederal Government has accused the opposition parties of engaged consultants from other parts of the world whose only duty is to churn out fake news at intervals and confuse the gullible public preparatory the 2019 general elections.

Lai Mohammed, Minister of Information and Culture, observed this at the sideline National Council of Information Conference (NCI), held in Abuja, argued that fake news strategy is the single potent weapon being used by the opposition not issue based.

“Their campaign is not getting any kind of traction, they should take on issues and debate. Nigerians are not stupid, if they think that Nigerians will vote for them to come and continue where they stopped, where the country was ruined, where we were not amongst the community of international nations, Nigerians are more determined more than ever to ensure Mr. President continue on the successes he has recorded in the last three and a half years.

“There is no limit to their absurdity of fake news. I was reported a few days ago that I said ‘Mr. President does not know his way to his office because he has lost his memory’. They credited to me that Mr. President can no longer speak Fulfulde because he has lost his memory during the surgery and nobody ever bother to ask when and where I said this and it was shared by thousands of people.

“We have it on good authority that the opposition has engaged consultants from other parts of the world whose only duty is to churn out fake news at intervals and confuse the

gullible public.

“Another one they said was when Nnamdi Kalu suddenly re-appeared from where he was hiding and they did not see me make any comment, they were worried. They now said, I said Nigeria was going to send missiles. Now all these are false. What they have done in recent days is to distract us, I can go on and on,” said Mohammed.

Speaking on the theme: ‘Tackling fake news and hate speech to enhance peace and national unity’, Mohammed noted that fake news and hate speech have the capacity to alter the course of an election and trigger legitimacy problem for the winner of an election come 2019.

“As the 2019 general elections is just a little over 60 days away, and there is no issue that is more relevant to the election than the issue of fake news and hate speech. This issue transcends political party lines, religion, ethnicity, and even nationality.

“If left unchecked, fake news and hate speech constitute the biggest threat to the forthcoming elections.

We are not just saying it now, we said so as far back as 2017.”

While noting that hate speech was a catalyst in the 1994 genocide in Rwanda, which left at least 800,000 people dead, the Minister tasked State Governments to join in the fight against fake news and hate speech.

In his remarks, Governor Nasir el-Rufai of Kaduna State said the national council on information conference theme: ‘Tackling fake news and hate speech to enhance peace and national unity; is apt in addressing the dangers of fake news in the country ahead of the forthcoming 2019 general election.

L-R: Honesty Odia, head finance, Africa Network For Environment Economic Justice (ANEEJ); David Ugolor, executive director, ANEEJ, and Omowunmi Asani, M & E Consult, MANTRA Project, during a press briefing to mark the commencement of the monitoring of returned $322.5 million Abacha loot held in Abuja. Picture by Tunde Adeniyi

Experts task Presidency on inauguration of Council on Public Procurement KEHINDE AKINTOLA, Abuja

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ohammed Aliyu, Registrar, Chartered Institute of Purchasing and Supply Management of Nigeria (CIPSMN) has called on President Muhammadu Buhari to closely monitor the activities of the Bureau of Public Procurement (BPP) to avoid economic waste.

Aliyu who gave the charge at the Annual General Meeting (AGM) of the Institute held in Abuja, noted that government can effectively supervise activities of BPP with the inauguration of National Council on Public Procurement, as required by law.

He also applauded the present administration for involving the Institute in the implementation of the National Economic Recovery and Growth Plan (NERGP) 2012-2020, the planning and execution of projects, promotion of Nigeria Content in contracts, science, engineering and technology.

“BPP has gone beyond their

brief and their respective mandate in the law as created because when you look at the content of the act establishing them, you will see that their function is tied to the whims and caprices of the national council.

“The council is supposed to regulates the activities of the BPP but you ask yourself why it has not been inaugurated till today to check the activities of BPP. “Immediately this administration came on board, we tabled the matter so that we can operate optimally and play our role as it should and as enshrined in the law establishing the BPP and CIPSMN. “This could have helped the present government right the wrongs of past governments. They showed the willingness to inaugurate the council but up till now, nothing has happened; it is just like giving a goat to somebody and then, you still hold the rope back. That is what we see playing out,” Aliyu said.

According to the Registrar, efforts to draw the attention of members of

the National Assembly who enacted laws establishing BPP did not yield any meaningful result as the lawmakers are yet to act.

Aliyu called on government to ensure that professionals and competent people were saddled with the responsibility of superintending public offices to avoid waste.

In his remarks, Abdul Mamman, CIPSMN Zonal Coordinator (North Central) regretted that the activities of the institute founded in 1974 and registered10yearslater,wasbeingnarrowed because of the nonexistence of the National Council on Public Procurement.

He pointed out that the proliferation of bodies in the profession had also hindered its activities which ordinarily would have been managed by the national council.

“National Council on Public Procurement is key to realising the set goals of BPP and CIPSMN because we have a law that which states that the National Council on Public Procurement must have a composition including the Minister of Finance.

Need for Abuja elected Mayor resurrects at 27 anniversary JAMES KWEN, Abuja

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he need for Abuja, Nigeria’s Federal Capital Territory to have an elected Mayor like its counterparts in other countries resurrected at the celebration of the 27 anniversary of the movement of the country’s capital from Lagos to Abuja on December 12, 1991 by the military junta of Ibrahim Babangida.

Agitation for Abuja elected Mayor was one of the major considerations of the 2014 National Conference which recommendations have been discarded by the administration of President Muhammadu Buhari.

Following the strong representations from the original inhabitants and indigenous people of the Federal Capital Territory on the issue of political inclusion, the 2014 confab recommended that: “there should be an elected Mayor for the inner nucleus of about 2000sqm of the Federal Capital Territory.

Martins Oloja, Executive Head,

Editorial Board of The Guardian Newspaper in a keynote address titled: ‘Abuja @ 27 and the Majesty of Democracy’ delivered at the event, called for the urgent need to put in place an elected Mayor for Abuja for complete democratization of the Territory.

Oloja noted that, democracy is convoluted in Abuja where all representatives of Abuja at the National Assembly, comprising one Senator and three members of House of Representatives are elected; the Chairmen and Councillors of the Six Area Councils are elected but the Minister in charge of the Capital of the Federation is unelected.

According to him, “the most critical element here is accountability to the people who should elect their Governor or Mayor when such people are elected. But as things stand in Nigeria’s capital, the democratisation here is inconclusive - as long as the Minister or Governor is unelected.

“No doubt, most capital cities in most of the important cities in the

world are run by elected Mayors, most of whom have visited Abuja for meetings of World Council of Mayors.

“Democratization of Abuja should be completed, especially now that the nation is debating restructuring even as the National Assembly is tinkering with the second amendment of the constitution.

“Sections 297-304 of the Constitution should be redrafted to allow democracy in the choice of FCT Chief Executive and City Council. Nothing is basically wrong in the National Assembly making laws for the Territory but an elected Mayor is needed to enhance the majesty of democracy in the Territory, so that the World Council of Mayors can properly admit Nigeria’s capital city Mayor.

“Certainly, the world has gone beyond the ‘military arrangement’ in Abuja where the Minister is accountable to only the President. That is the Next Level all stakeholders in Abuja should agitate for. That is the political restructuring Abuja needs,” he maintained.

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Unity Bank wins CBN’s ‘Sustainable CBN confirms payment of N10.456bn into NASS’ TSA account Afreximbank launches $1bn programme Transaction of the Year in Agriculture’ Award … as workers issue notice on four-day warning strike to promote Nigeria-Africa trade HOPE MOSES-ASHIKE

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nity Bank plc has won the Central Bank of Nigeria’s (CBN) 2018 sustainable banking award for ‘Sustainable Transaction of the Year in Agriculture.’

The bank won the award for its compliance with the Sustainable Banking Principles as it relates to the management of Environmental and Social Risk set out by the CBN for adoption by Nigerian banks, Discount Houses and Development Banks.

At the just concluded Bankers’ Committee held in Lagos, the CBN, while presenting the award, commended the effort of bank in promoting the Anchor Borrowers Programme (ABP), Rice Farmers Association of Nigeria (RIFAN) project, adding that the lender deserved the award because of the role it played in actualisation and management of this projects.

The active involvement of the bank in various financing schemes has resulted in creating huge social and economic impact on the income of households involving over 270,000 participating small holder farmers thereby boosting not only the gross domestic product

but also helping to achieve self-sufficiency in food production.

Commenting on the development, Tomi Somefun, managing director/CEO of Unity Bank, dedicated the award to all farmers and businesses in agriculture value chain, saying: “We have successfully on-boarded over 90,000 hitherto financially excluded farmers and generated bank verification number for them to facilitate financial and banking transaction. Capacities of about 60 agro input suppliers were expanded through provision of facilities and financial advisory services.’’

The bank’s Environmental and social Management Programme covers comprehensive business operations that minimises adverse impact on the environment in the scope of its business activities.

According to Somefun, the bank’s environmental management policies and strategies comprehensively cover priority areas that encourage bio-diversity, green initiatives, recycling of waste, reduction of carbon emission geared towards promoting sustainability, conservation and environmental protection.

KEHIDE AKINTOLA, Abuja

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acts emerged at the weekend that Central Bank of Nigeria (CBN) paid a total sum of N10,455,891,967.43 billion into the coffer of the National Assembly.

This was contained in a letter titled: ‘Confirmation or balances,’ dated October 21, 2018, and addressed to Sani Omolori, Clerk of the National Assembly, cosigned by CBN’s director of finance department and director, banking and payments department.

“In connection with the audit of our financial records, we would appreciate your confirming direct to our external auditors, within one week of receipt of this letter: Ernest & Young Services and KPMG Professional Services the following regarding our balances above N5 billion with us as at 30 October, 2018. TSA Account No. 002068142065 the sum of N10,455,891,967.43.

“Please state below whether or not the information given above is in agreement with your records. If not, please furnish any additional records which you have that may assist in reconciling the difference,” the one page letter read.

Delayed liberalisation of downstream sector slows economic growth - oil marketers STEPHEN ONYEKWELU, with wired services

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igeria’s oil marketers’ recent industrial action demanding from the Federal Government N800 billion in arrears of subsidy payments has re-triggered conversations around full deregulation of the downstream sector to spur economic prosperity.

A Nigerian National Petroleum Corporation’s (NNPC) document presented to the Senate during the January 2018 subsidy probe exclusively obtained by BusinessDay showed that between 2006 – 2015, the NNPC claimed N170.60 billion as under recoveries in 10 years while it claimed N632.20 billion in two years (2017 and 2018), representing 217 percentage difference.

Subsidies have tended to discourage the much-needed investment inflows into Nigeria’s downstream oil and gas sector because it distorts the market by impairing the mechanisms of demand and supply needed to drive price movements. A cap on petrol price at N145 per litre when the landing cost per litre is N171 means the NNPC loses money on every litre of petrol it sells.

To correct this situation, oil marketers have urged the Federal Government to fully deregulate the downstream

subsector of the oil and gas industry to preserve the country’s dwindling foreign reserves and enhance economic growth. “NNPC imports petrol at a landing cost of N171 per litre and sells at N145 per litre at filling stations. Importation of diesel was deregulated and this has created avenues for marketers to import and sell at competitive prices,” Olufemi Adewole, executive secretary, Depot and Petroleum Products Marketers Association (DAPPMA), told the News Agency of Nigeria in a recent interview.

The marketers said the immediate removal of the fuel subsidy remained the best option to grow the oil sector, saying over N1.3 trillion was paid on subsidy with little or no benefits to the most vulnerable members of society.

Adewole said full liberalisation of the downstream sector would address inflation, better the economy and ameliorate the economic uncertainty that characterised the polity, and urged the government to make consultations on the subject and decide on the ideal approach to achieve deregulation.

“If we embark on deregulation today, petrol prices will be different across the country; the price may be significantly high at the early stages, but it will reduce gradually as

we move on,” Adewole said.

“Petrol prices will fluctuate throughout the year, for example, in December and January prices tend to be a lot higher.

This is the case in most countries around the world,” he said. Between November 2017 and May 2018, subsidy claims rose by 662 percent when compared with June and October 2017, according to BusinessDay analysis of NNPC under recovery claims presented in its monthly operations and financial reports published August 2015.

Deregulating the downstream sector will also enhance development of Nigeria’s refining capacity which is at an all-time low of below 30 percent four all four refineries combined. The refineries are not working because government tends to regulate prices.

“Some conditions are necessary to get the refineries working again. Access to funds is critical because Nigeria does not have the money to revamp those refineries. Deregulation of the downstream sector is critical too because no private investor will put down for as long as the sector remains as it is,” Henry Ademola, team leader, Facility for Oil Sector Transformation (FOSTER), a project under the Oxford Policy Management, an international development consulting firm, said.

Meanwhile, the aggrieved workers under the aegis of Parliamentary Staff Association of Nigeria (PASAN) have issued a fresh notice for fourday warning strike to press home the demand for payment of 28 percent increment and implementation of new condition of service.

According to the letter addressed to the Senate president, Bukola Saraki, the strike action is coming three days to the laying of the 2019 budget proposal before the joint session of the National Assembly

by President Muhammadu Buhari. The warning strike notice was contained in a letter dated December 14, 2018, titled: ‘Notification of a fourday warning strike.’

While responding to inquiry on the action taken so far by the leadership of the National Assembly, Abdulrasak Namdas, chairman, House Committee on Media and Publicity, assured that necessary consultation was ongoing.

“We are intervening and we are still on the matter, we even invited and interacted with the Minister of Finance yesterday (Friday) and the interaction was to know why the money that was supposed to be released to the workers was not released.

… signs $1.235bn MoU for industrial parks HOPE MOSES-ASHIKE

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he African ExportImport Bank (Afreximbank) on Friday in Cairo signed an agreement with the Nigerian Export Promotion Council (NEPC) and the Nigerian Export-Import Bank (NEXIM), launching a $1-billion Nigeria-Africa Trade and Investment Promotion Programme (NATIPP) aimed at promoting and expanding trade and investments between Nigeria and the rest of Africa.

In a second signing ceremony, Afreximbank entered into a memorandum of understanding (MoU) with the Nigerian Ministry of Industry, Trade and Investment to jointly develop industrial parks and special economic zones worth $1.235 billion in Nigeria.

The signing ceremonies, which took place during the Nigeria Day at the ongoing inaugural Intra-African Trade Fair (IATF), was witnessed by the Nigerian Vice President, Yemi Osinbajo, who led the Nigerian delegation to the trade fair.

Benedict Oramah, president of Afreximbank, signed the NATIPP agreement on behalf of the bank, while Segun

Awolowo, CEO of NEPC and Abubakar Bello, managing director of NEXIM, signed on behalf of their two organisations.

Under the terms of the programme, Afreximbank will work with NEPC and NEXIM to identify, prepare and appraise trade transactions and projects; explore co-financing and risk-sharing opportunities; and share knowledge, with particular emphasis on intra-African trade§§2 matters, through technical cooperation, staff exchange, research and joint events.

Kanayo Awani, managing director of the Intra-African Trade Initiative at Afreximbank, signed the memorandum of understanding on behalf of the Bank while Femi Edun, Special Adviser to the Minister of Industry, Trade and Investment, signed on behalf of the Ministry.

Both NATIPP and the memorandum of understanding with the Ministry of Industry, Trade and investment are being implemented in pursuance of Afreximbank’s strategy, Impact 2021: Africa Transformed, which prioritizes intra-African trade, industrialisation and export manufacturing.

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OPEC, geopolitics, Sino-US trade truce moderate oil market STEPHEN ONYEKWELU

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atar’s exit from OPEC to focus on gas development targeting the United States of America and the easing trade relations between China and the US are some of the factors set to drive oil demand and market in 2019.

Even before taking over Qatar’s energy policy in a government reshuffle last month, Saad al-Kaabi, Qatar Petroleum (QP) CEO, had long wanted the Gulf state to leave the OPEC. Kaabi was concerned OPEC membership could be a stumbling block for QP’s ambitions in the US, where it has one of the world’s biggest LNG terminals, and a distraction as Doha doubles down on gas production, three industry

sources said.

Proposed US legislation known as NOPEC (No Oil Producing and Exporting Cartels Act) could expose members of the oil exporters club to antitrust lawsuits, a risk for QP at a time it is planning to invest billions more in the United States.

The sources said Qatar’s exit had been in the works for months, driven

by Kaabi’s desire to focus on Qatar’s strength in liquefied national gas (LNG) rather than OPEC, where Doha has little say anyway because it doesn’t produce much oil.

“It takes Qatar out of the whole debate within the US Congress on whether or not OPEC is a cartel,” said James Dorsey, a senior fellow at the S. Rajaratnam School of International Studies. “If anything it puts Qatar in America’s good books.”

The decision to leave after 57 years just two days ahead of a crucial OPEC output policy meeting in Vienna last week also struck many as a shot at Saudi Arabia, which along with the Bahrain, Egypt and the United Arab Emirates has imposed a boycott on Qatar since June 2017.

The absence of Qatar’s emir from an annual Gulf Arab summit in Saudi Arabia on Sunday was then seen as a sign there is no end in sight to the dispute and that Qatar is set to go it alone – outside a six-nation Gulf Arab bloc fractured by the rift.

Qatar would nevertheless still welcome the lifting of the trade and transport boycott which has hit national carrier Qatar Airways, companies with interests in boycotting states and demand from regional investors and banks.

But the risk of possible legal action under NOPEC has become a concern for Doha as it aims to cement its rank as the world’s biggest LNG producer, the industry sources told Reuters.

State-owned QP is the majority owner of the huge Golden Pass LNG terminal in Texas, with US oil companies Exxon Mobil Corp and ConocoPhillips holding smaller stakes.

“We don’t have enough weight in OPEC to have an effect,” he told reporters on the eve of his first and last meeting as the head of Qatar’s OPEC delegation.

Oil prices steadied in the week ending 14 December, under pressure from high inventories but buoyed by a drawdown in US crude stockpiles and indications that the trade war between the United States and China may be easing.

Laure Beaufils,British Deputy High Commissioner during a visit to the campaign headquarters of JK Agbaje, the Lagos governorship candidate of the PDP

N150bn loan disbursement earns Credit Direct CEO Harvard Alumni awards HOPE MOSES-ASHIKE

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anaging director of Credit Direct Limited, Akinwande Ademosu, has won the Harvard Business School Association of Nigeria (HBSAN) leadership awards for General Management for lending over N150 billion to more than 1.5 million beneficiaries across Nigeria.

According to the company, the recognition is also for the company’s excellent service in the financial lending space. The awards was presented to Ademosu during the Harvard alumni Grand Ball held in Lagos.

It could be recalled that the company pioneered unsecured consumer lending

in Nigeria eleven years ago.

Speaking on the awards, Ademosu said: “It is a very proud moment for me and I am particularly delighted.

This is another form of motivation to always do more.

This recognition is to the relentless effort and commitment of every member of staff at Credit Direct Limited, who always gives their best to achieve an excellent result. This win is for us.

Thank you for the award and recognition.

“Being a member of this community gives me joy as we have over the years shown ourselves as role models and inspired different generations. We will continue to impact our immediate communities and show our relevance in the

society.”

The Harvard Business School mission is to educate leaders who make a difference in the world regarding relevant growth and development within their immediate community and business landscape. Over the years, Harvard Alumni have recognised several outstanding men and women with this honour of the Alumni Achievement Award.

These are individuals who throughout their careers have significantly added value to their companies and communities while upholding the highest standards of the prestigious institution. Ademosu received the award this year for his outstanding leadership at Credit Direct Limited.

Monday 17 December 2018

Explainer

Why airlines have long wait time for new planes IFEOMA OKEKE

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hree months ago, Air Peace, a private Nigerian airline established four years ago, announced that it had signed a deal with US-based airplane manufacturer, Boeing, for the purchase of 10 new aircraft. However, the new airplanes are yet to be delivered, raising concerns about the veracity of the claim.

But this is by no means an isolated occurrence. Another private airline who placed an order with Boeing for the acquisition of 200 Max 737 airplanes some years ago took delivery only months ago, an airline official with knowledge of the negotiations told BusinessDay. Aviation experts say manufacturers building new planes always take longer than they thought. This is largely due to unforeseen issues during research and development, and how quickly it can get materials for all the parts it needs. For most orders, the planes are built from scratch.

All over the world, airlines have placed 500 orders for new Max 737 airplanes with Boeing. New orders join a waiting list and deliveries are made on first come, first served basis. Boeing follows a rigorous process as an international organisation to deliver a certain number of aircraft over a period of time.

There is also the matter of costs. One of the Boeing 737 MAX costs an average of $113 million. This will amount to $1.130 billion for the 10 aircraft ordered by Air Peace.

Also, one Boeing 737 MAX employs about 500 people and 10 of these aircraft will employ over 5,000 people.

However, fresh concerns are been raised as to whether the recent Lion

Air Crash that occurred few weeks back involving the same Boeing 737 MAX, would delay the delivery of Air Peace’s order, especially after Indonesia’s Lion Air is threatening to cancel its aircraft orders from Boeing after a statement from the plane maker suggested that the carrier was to blame for the recent crash that killed 189 people.

Questions surrounding the crash of a two-monthold 737 Max have hovered over the Chicago-based manufacturer and weighed on its shares. The stock has declined 4.7 percent since the October 29 accident.

US pilot unions have questioned why flight crews weren’t alerted to new antistall software installed on Boeing’s newest models of the 737, a single-aisle workhorse that is the company’s biggest source of profit.

Chris Iwarah, corporate communications manager of Air Peace, corroborated this view, saying the new aircraft were not off-the-shelf items, which means that new aircraft are not built and kept in the store, rather they are built on order.

Iwarah explained that the only time an operator can get an airplane in few months is when they buy a second-hand plane but once it is a new plane, operators have a long process to go through. Not a single airplane in the world that is brand new is delivered within a short period of time.

Since Air Peace signed the deal with Boeing, the company said it has had several meetings with Boeing in Nigeria. During these meetings, the airline said it explained to them how they want the new aircraft to look and Boeing has also made their own suggestions.

VPs’ debate: Buhari’s anti-graft war crippling economy - Obi INIOBONG IWOK

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he Vice Presidential candidate of the main opposition People’s Democratic Party (PDP), Peter Obi, criticised the anti-graft war of the All Progressives Congress (APC)-led administration, saying it was crippling investment into the nation’s economy and responsible for the increasing job losses.

Obi stated this at the Vice Presidents debate last Friday, organised by the Broadcasting Organisation of Nigeria (BON) and the Nigerian Election Debate Group, noting that foreign direct investment in the nation’s economy had significant reduced while employment opportunities had also reduced since the advent of the Buhari’s administration.

Obi, who was a former governor of Anambra State, criticized several polices of the current administration and berated the administra-

tion for not initiating policies on how to salvage the economy, which had been negatively affected by the anti-graft campaign.

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BUSINESS DAY

Bearish sentiment characterises last week’s trading as market sell-off continues SEGUN ADAMS

T L-R: Deputy Director of Music, MUSON, Emeka Nwokedi; Director of Music, MUSON, Banke Ademola; Director, MTN Foundation, Dennis Okoro; Nonny Ugboma, executive secretary, MTN Foundation, and a cross section of MUSON Scholars at the MTN Foundation sponsored MUSON Donors Appreciation Concert held at the MUSON Centre, Onikan, Lagos.

Nigerian engineers tasked to understudy modern railway systems to reform rail transport MIKE OCHONMA, with NAN

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ith the December 2018 completion date of the Lagos-Ibadan standard gauge rail project being handled by the Chinese Civil Engineering and Construction Company (CCECC) no longer feasible, the Nigerian Society of Engineers (NSE) has called on local engineers to understudy the different standards and designs in countries that have modern railways to revolutionise Nigeria’s rail transport.

It would be recalled that Rotimi Amaechi, Nigeria’s transport minister, had in September during his monthly inspection tour of the Lagos-Ibadan railway project expressed dismay with the slow pace of work along the corridor.

The $1.6 billion project, which is a deal with the Chinese government, is expected to be commissioned

by President Muhammadu Buhari this month. The Federal Government has already paid N72 billion counterpart funding for the project.

When completed, the Lagos-Ibadan-Kano 1,800-kilometre distance standard gauge rail line is expected to hasten movement of goods and services between the northern and southern parts of Nigeria, improve commerce, reduce the pressure on roads and boost economic and social activities along the corridor.

Meanwhile, the NSE has called on the private sector to take advantage of the huge investment opportunities in the rail sector to increase local earnings, create jobs and ensure rapid industrialisation.

It urged the engineers to always insist on quality during contract awards and project execution to ensure durable infrastructure in the country.

Members of the society disclosed that more Nigerian engineers needed to go into politics so as to evolve the

right policies to ensure rapid infrastructure delivery.

They spoke against the backdrop of the 2018 Annual Dinner and Induction of new members by the Apapa branch of the NSE, recently.

Anthony Onyokoko, director, Civil Engineering/New Lines, Nigerian Railway Corporation (NRC), Lagos, said there was need for local engineers to understand the designs running the railway system in order to make impact.

Onyokoko said there were huge investment opportunities in the rail sector, which government could not handle alone and therefore, local engineers must understand the various design standards.

He said all the designs could be used together irrespective of their ages, arguing that, the sector was ripe for investments in various aspects, which the private sector should partner government to harness.

The NRC official explained that when the corporation was established in the

FG tasks employers on decent work JOSHUA BASSEY

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ederal Government of Nigeria has charged employers of labour to shun the temptation of compromising decent work conditions. The government said exploitation and other inhuman conditions and treatments often meted on employees should be avoided in line with the International Labour Organisation (ILO) conventions and agenda.

Minister of labour and employment, Chris Ngige, gave the charge when he received in audience the executives of Road Transport Employers Association of Nigeria (RTEAN) led by the president, Osakpamwan Eriyo, in Abuja at the weekend.

Decent, according to the

ILO, entails employment that respects the fundamental rights of the human person, rights of workers in terms of conditions of work safety and remuneration as well as respect for the physical and mental integrity of the worker in the exercise of his/her employment.

Asides the provision of better environment, decent work also involves opportunities for work that are productive and deliver a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organise and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.

Ngige, while speaking with the RTEAN executives, stressed the need for them to anchor their conditions of employment on the provision of decent work agenda in line with the ILO’s agenda.

“Try to provide decent work because the ILO agenda now is Agenda for Decent Work,” he said, while also charging them to ensure a proper documentation of their employees by creating a database so as to simplify their recruitment process as well as help the country manage its internal security system.

On his part, Eriyo pledged the association’s support to the government. Eriyo, represented by the deputy national president Musa Mohammed, acknowledged the effort so far made by the government in ensuring peace in the country.

18th Century, it started with the British technology and along the line, other countries made inputs, contributing new designs. Nigeria was currently using the Chinese standard for its ongoing new rail projects.

“The only thing is that there are multiplicity of standards, what we need to do as engineers is to adapt to these standards and see how we can come out of the woods without having too much problems in the operations.

“Through Private Public Partnership (PPP), they could try to remodel the stations. We have a lot of stations and they need to be updated,’’ he said.

While delivering a lecture, entitled “The Nigerian Railways: Challenges and Prospects,” Onyokoko, who was guest speaker, said the Federal Government had a 25year plan to resuscitate the railway, saying the Olusegun Obasanjo administration began the implementation, which had been sustained.

he NSE All Share Index fell to 30,672.79, shedding 0.63 percent or 194.03 points WtD at the close of Friday, December 14 trading session to extend the year-long bearish run in the local bourse by a negative growth of 19.80% YtD. The week’s performance resulted in investors losing N16.8 billion week on week following the depreciation of market capitalisation by 0.58% WtD to settle at N11.204 trillion at the close of the week as a result of sustained sell-off in market bellwether stocks.

Trading activities improved in the week as a total of 1.169 billion shares worth N14.762 billion were traded on the floor of the exchange in 14,554 deals. An increase in both value and volume compared to the preceding week’s volume of 1.107 billion shares that were exchanged in 14,430 deals valued at N11.192 billion.

Owing to the appreciation of large cap DANGCEM stock by 0.5 percent in the week, the Industrial Goods index outperformed all sectors indices gaining 0.81% to lead Insurance and Banking Indices, which gained 0.20% and 0.18%, respectively, while the poor performance of Consumer goods sector (-2.79%) and Oil and gas (-0.84%) put a downward pressure on the All Share Index, erasing the gains in the other three sectors.

Leading the Top 10 gainers for the week was Forte Oil, which moved up by 33.89% or N6.10 to close at N24.10 per share. John Holt held second spot having gained 20% as share price increased by 8k to close at 48k per share. Veritas Kapital Assurance gained 19.05% as share price moved 4k up to close at 25k per share.

Other gainers in the chart were CAP plc (+18.25%), Union Bank (+14.02%), Eterna plc (10.71%), with First Aluminium Nigeria, Berger Paints, Japaul Oil and Maritime Services plc, and Niger Insurance plc all gaining 10% each.

11plc led the Top 10 losers chart with 10.41% fall in its share price, having lost N18.20 to close at N156.60. Conoil plc lost 10% or N2.25 to close at N20.25 per share. CUTIX was part of the weeks with a loss of 19k or 9.64% to close at N1.78 per share.

Other laggards were Livestock Feed (-9.62%), CHAMS plc (-9.09), Cornerstone Insurance (-9.09), Daar Communications (-9.09), Mutual Benefits Assurance (-8.70), C&I Leasing (-8.25) and Associated Bus Company (-7.41) According to reports from Afrinvest, the market breath, which is the ratio of advancers to decliners, recorded a marginal increased to 0.9x to 0.8x in the previous week, indicating increased confidence of investors in the market.

Analysts at Afrinvest report that the contraction in capital importation into Nigeria in Q3 2018 by 31.1% y/y and 48.2% q/q was driven by a decline in portfolio investment, which had also fallen to $1.7 billion, having depreciated by 37.7% y/y and 58.2% q/q.

The reason they gave for the trend was that the political risks in the domestic economy and higher interest rates in advanced countries.

Owing to the fact that a large bulk of the capital in the Nigerian market comes from foreign investors whose negative sentiments are being priced into the market, sell-off in the local bourse may persist at least over the short term, analysts at Afrinvest forecast.

US tasks Nigeria on economic diversification

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S Ambassador to Nigeria, Stuart Symington, says there is need to diversify Nigeria’s economy toward pursuing deeper growth and development.

Symington made the remarks at the Nigerian-American Chamber of Commerce (NACC) Annual Dinner and Inauguration of Oluwatoyin Akomolafe as NACC’s 18th President in Lagos.

Symington, in a statement by Ebuka Ugochukwu, the Communication Manager, Nigerian-American Chamber of Commerce on Sunday said that Nigeria should reduce its dependence on crude oil.

“Let us make the Nigerian brand what God has made it which is the green and white. There is need to diversify the economy in or-

der to pursue development and a better future.

“The entire world is getting old while Africa and Nigeria is getting younger, because they are growing six times faster over the next three years, faster than even India or China.

“The question about this growth being a blessing or a curse, is dependent on us as a country,” he said.

According to him, Nigeria has the opportunity to leverage the very best of USNigeria relationship, joined together by ties of blood, education, investment and other factors to unite it.

“We all have a secret opportunity to do well alone and to do good together.

Nigeria is a land of the free and the home of the brave.

Changing the world and making it a better place is a

task left for us all to do,” the envoy said.

Also, Olusegun Osunkeye, a former chairman, Nestle Foods Nigeria, said Nigeria had to unearth the golden opportunities for economic growth and development with agriculture and ICT, which were viable alternatives to crude oil export. “Most African countries are boosting their agricultural sector in order to increase their benefits from African Growth and Opportunity Act (AGOA) and Nigeria should not be an exception.

“Lack of a supportive environment for agriculture in Africa in terms of infrastructure and high quality tools accounts for the reason why the continent’s agricultural products are not competitive.

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LegalPerspectives

With

Odunayo Oyasiji

Writing a will is not a death sentence- It aids continuity in business

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his is an aspect of law that people don’t like to talk about. Writing of a Will is often considered in our society as a death sentence. That is, it is meant for people who are about to die. That is the more reason why a lot of people will rather wait till they are old (Septuagenarians and Octogenarians) before writing a Will.

Unfortunately, life expectancy in Nigeria is under fifty years. Therefore, many people end up not writing a Will. It is more regrettable in a situation where notable business people die without leaving a Will (die intestate). In most cases, the businesses die due to disputes over who should be at the helms of affairs. Examples of such abound in our society.

What is a Will? A Will is simply a document that speaks after the death of its maker (it is a testamentary disposition of the assets of a person- liabilities also sometimes included). It is a document that a person writes while he is alive stating how is estate/ properties are to be distributed after his death.

It is essential that Wills are written in a way that the courts will

easily give effect to them after the demise of the maker. This is one of the reasons why most people approach a lawyer to guide and prepare their Will. An important legal requirement for the validity of a Will is that it must be signed by the testator in the presence of two witnesses who must be there at the

Monday 17 December 2018

same time. If previously signed by the testator, the testator’s signature must be acknowledged by both witnesses in the presence of each other. Where the witnesses were not present at the same time, the Will may be invalid.

Every person with a sound mind can make a Will. Section 3 of the

Wills Act of 1837 provides that ““It shall be lawful for every person to devise, bequeath, all properties or dispose of, by his Will executed in manner hereinafter required, all real estate and all personal estate which he shall be entitled to, either at law or in equity, at the time of his death, and which, if not so devised, bequeathed or disposed of, would devolve upon the heir at law...”.

Therefore, regardless of tribe and religion a person that has attained the required statutory age and who is of a sound mind can make a Will.

With regards to the right of a muslim to make a Will, it depends on the state where the person is domiciled (his residential home).

If the person is domiciled in a state that applies the Wills Act, then the person has unrestrained right to make a Will –an example is Lagos State. The Supreme Court of Nigeria confirmed the foregoing in the case of Adesubokan & Ors. v.

Yunusa (1971) All NLR 227. However, if the person lives in states where they have their own Wills Law and places restriction of muslim testators then such a person can only make Wills in line with

LOCUS CLASSICUS Addis v Gramophone [1909] AC 488 House of Lords

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he defendant employed the plaintiff as a manager.

However, the defendant terminated his employment contract and recruited another person to take over his position. This was done in a way that breached the contract between the defendant and the plaintiff. The plaintiff then instituted this action claiming for breach of contract and that the damages to be awarded should reflect the way he was dismissed as it has affected his prospect of getting other jobs.

The court held that the aim of contract law is to put parties in the position they would have been in if the contract had been performed as agreed between the parties. Therefore, the claim of the plaintiff can only be limited to his wages and loss of commission.

Contract claims does not give room for exemplary damages or damage to reputation. This can only be claimed under law of tort.

Payment Mechanisms in E-commerce Adetola Adeleke,

Lead Partner Crown Court Attorneys

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lthough e-commerce is considerably different from e-banking, ecommerce rides on the back of e-banking, since the aim of ecommerce is to transcend geographic barriers and exchange goods/services and payment on the internet. Now, the origin of e-banking in Nigeria may be traced to 1996 when the Central Bank of Nigeria approved the introduction of ‘a closed system electronic purse called Electronic Smart Card Account (ESCA)’ by the defunct Allstates Trust Bank PLC. This was followed by ‘Paycard’ in 1997 by Diamond Bank PLC and then Valucard in 1997 by a ‘consortium of leading Nigerian banks’ as an ‘e-payment service provider.’

Nigerians have since been

enabled to make payments via e-channels including mobile

banking. Like in every other jurisdiction, continued growth in technology has since set new trends in the Nigerian banking sector. Presently, all Nigerian banks operate at least one form of e-payment or the other.

Goods and services bought or supplied through the internet can be paid for through the internet in the same way that the internet can be used to make and accept offers.

Popular methods of effecting payments for goods bought through the internet include

the use of credit cards, smart cards, digital or electronic cheques or cash, and debit cards. The use of credit cards is still not very popular in Nigeria. The practice is therefore for the sellers to obtain bank guarantees or often insist on receiving and validating payments before providing services or releasing goods to customers.

If the goods are supplied and payment is not forthcoming through the bank guarantee, the seller has a right of action against the issuing bank that

has guaranteed payments.

There are many problems associated with obtaining bank guarantees in Nigeria for payments in respect of goods bought internationally or through the internet. This has greatly hampered the development of e-commerce.

However, with the increasing level of sophistication in information technology and the development of the telecommunication sector, the use of credit card and other payment facilities in e-commerce is becoming increasingly popular, and in the process, some of the problems associated with payment for goods and services in e-commerce will be reduced.

The various e-payment methods have been both a blessing and a curse, with some of the e-payment methods failing to stand the test of the mildest security challenges and/or network glitches. Cyber-attacks, e.g cyber-squatting, hacking, data diddling, copyright infringement, web jacking, salami attack, worm, trojan horse, cyber warfare and virus manufacturing, remain on the rise in spite of the Cybercrimes Act, 2015. ATM frauds, PIN/ Password hacking, spoofing also pose a significant threat e-payments. It is desirable for the Government to do more to make e-banking safe.

Monday 17 December 2018

LegalPerspectives

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With

BUSINESS DAY

67

Odunayo Oyasiji

Case Review

Atiba Iyalamu Savings & Loans Limited V. Mr. Sidiku Ajala Suberu & Anor (2018) Lpelr-Sc.154/2007

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What to note: his is a matter that was decided at the Supreme Court this year. It bothers on contractual issues like the essential ingredients of a binding contract, whether an oral/extrinsic evidence can vary a written contract and the effect of making a contract subject to the fulfilment of certain specific terms and conditions. It also touches on the concept of a legal mortgage.

Facts: The 1st respondent was the plaintiff at the trial court. He is the owner of Amusement International Guest House Ltd (a business centre). He took a loan of N600,000 from the appellant on September 10, 1996. The security for the said loan was his property at No. 11, Adamu Road, Off Taiwo Road, Ilorin covered by a statutory right of occupancy No. KW 7052. A deed of mortgage was executed in favour of the appellant. It was stated in the mortgage agreement that the interest on the loan will be per annum.

The 1st respondent stated that he had repaid the total sum of N826,476. He also contended that he had overpaid by the sum of N179,905 between October 1998 and March 1999.

The appellant on the other hand contended that the loan was supposed to be repaid within one year. However, the payment period was extended beyond one year. The appellant in its statement of defence at the trial court stated that the sum of N80,661.99 paid by the 1st respondent on October 28, 1996 was for a different facility. They claimed that the 1st respondent’s indebtedness to them as at May 31, 2002 stood at N1,466,802. They further contended that the 1st respondent never disputed the amount of its indebtedness stated in demand notices sent to him.

The 1st responded claimed that despite repaying the loan and the interest fully, the appellant and 2nd respondent still sought to auction the mortgaged property. He stated that the auction notice was published in Tribune Newspaper of February 2, 1999. He further contended that he approached the court and got an injunction order against the appellant and the 2nd respondent and same was served on the parties. Notwithstanding the foregoing, the 2nd respondent acting on the instruction of the appellant still pasted an

auction notice on the property on March 9, 1999. The second respondent claimed that the auction notice was pasted before the injunction order was served. At the trial court, judgement was given in favour of the appellant while at the Court of Appeal judgement was given in favour of the 1st respondent. The appellant being dissatisfied appealed to the Supreme Court.

auction notice on the mortgaged property. 5. Whether the 1st respondent proved any overpayment on his loan and dues on it to warrant the Court of Appeal’s Order for a refund of the sum of N179,805,00 to him by the appellant. 6.

Whether the 1st respondent?

Further and Better Amended Statement of Claim discloses any Reasonable cause of Action against the appellant.”

Issues for determination The appellant formulated six issues for determination. That is- “1. Whether the terms of the written offer, Exhibit D1, accepted absolutely and unconditionally by the 1st respondent on the basis of which appellant fully performed the contract for loan can without such an intendment be overridden by a Deed of Legal Mortgage, Exhibit D2, collateral to the primary agreement, not in existence at the time of appellants performance and the purpose of which is merely to secure the loan. 2.

Whether the Court of Appeal is vested with the jurisdiction to suo motu raise the issue of excessive usurious and illegal” interest rate not raised by parties and without citing any law, regulation or guideline which the interest rate contravened resolved the issue in favour of 1st respondent. 3. Whether the Court of Appeal was not in error in its casual holding that there is no evidence to back up the appellant’s counter-claim without considering in the slightest regard the evidence painstakingly evaluated and believed by the trial Court. 4.

Whether the Court of Appeal was justified on the evidence in its holding that the action of the appellant is condemnable and bad in law in pasting an

The 1st respondent also formulated six issues for determination. They are“1. Which of the loan contracts is binding between the parties? The one dated 04/10/1996 (Mortgage Deed) bearing 21% interest per annum and signed by both parties or the appellant’s letter of offer dated 10/09/1996 carrying 3% interest per month and also signed by both parties.

2. Whether the repayment of N826,426 to the appellant, the 1st respondent was still indebted to the appellant to warrant the auctioning of his property under the Mortgage Deed Exhibit D2. 3. Whether the Court of Appeal rightly dismissed the appellant’s counter claim against the 1st respondent. 4. Whether the respondent overpaid the appellant’s loan. And if so, whether he is entitled to a refund. 5.

Whether the Court of Appeal is not in order in holding that the interest rate of 3% per month is excessive, usurious and illegal in the circumstances 6.

Considering the totality of this case, whether the 1st respondent through his Further and Better Amended Statement of Claim did not disclose a reasonable cause of action at the trial Court.”

The court adopted the issues formulated by the ap-

pellant for the determination of the matter since the issues formulated by both parties are similar.

Arguments/Submissions The counsel to the appellant argued that the 1st respondent is bound by the terms of the agreement he signed as contained in the offer letter.

He contended that the interest rate in the deed of legal mortgage should not be the binding one. Rather, the offer letter should be followed. The counsel to the 1st respondent argued that the binding contract between the parties is the one in the deed of legal mortgage and effect should be given to same.

Counsel to the appellant also argued that the mortgage is a security for the payment of the loan and same transfers the property. He stated that without the full payment of the interest and loan the court will not stop the appellant from exercising its power of sale.

The counsel to the 1st respondent contended that a legal mortgage creates a temporary transfer and that upon full repayment (as he had fully paid) the appellant cannot exercise any right over the mortgaged property.

Judgement The court while upholding the judgement of the Court of Appeal held with regards to essentials of a binding contract that “It is trite, as rightly submitted by learned counsel for the appellant, that for there to be a binding contract between parties, they must be in consensus ad idem with regard to the essential terms and conditions thereof. The parties must intend to create legal relations

and the promise of each party in a simple contract, not under seal, must be supported by consideration. There must be a concluded bargain which has settled all essential conditions that are necessary to be settled and leaves no vital term or condition unsettled…It is equally settled that where a contract is made subject to the fulfillment of specific terms and conditions, the contract is not formed and not binding unless and until those terms and conditions are fulfilled.”

With regards to whether an oral or extrinsic evidence can vary a contract (since the appellants counsel relied heavily on the admissions made by the 1st respondent), the court held that “it is settled law that where the contract between the parties is reduced into writing, extrinsic evidence is not permitted to add, vary, subtract from or contradict the terms of the written instrument.”

On the effect of making a contract subject to the fulfilment of certain conditions, the court held that “It is equally settled that where a contract is made subject to the fulfillment of specific terms and conditions, the contract is not formed and not binding unless and until those terms and conditions are fulfilled.” The court then held that the terms in the deed of legal mortgage are binding on the parties. The 21% interest rate is therefore binding.

The court pronounced on the nature of legal mortgage as follows- “A mortgage is defined as the creation of an interest in a property defeasible (i.e. annullable) upon performing the condition of paying a given sum of money with interest at a certain time. The legal consequence of the above definition is that the owner of the mortgaged property becomes divested of the right to dispose of it until he has secured a release of the property from the mortgagee. Thus, in a legal mortgage, title to the property is transferred to the mortgagee subject to the proviso that the mortgaged property would be reconveyed by the mortgagor to the mortgagee upon the performance of the conditions stipulated in the mortgage deed and upon payment of the debt at the time stipulated therein. The mortgagor is liable to repay the loan as stipulated, otherwise the mortgaged property is foreclosed.”

The Appeal was unanimously dismissed.

BUSINESS DAY

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NEWS YOU CAN TRUST I MONDAY 17 DECEMBER 2018

fivethings

Insight Buhari’s ‘Next Level’: From broken promises to hollow pledges GLOBAL PERSPECTIVES

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

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resident Buhari’s choice of the phrase “Next Level” to describe his party’s manifesto for the 2019 elections is bold.Taking something to the next level presupposes success at the current level.According to the Oxford Dictionary, it means further developing something “that is already successful”.

Buhari’s “Next Level” statement asserts that his administration is successful in its first term and deserves to progress to a second term to take that success to the next level! “Over the past 3½ years”, the manifesto says, “we have laid the foundations for a strong, stable and prosperous country”.This is certainly a bold claim, and should be investigated.

Thus, President Buhari’s “Next Level” statement raises two analytical questions: Next level from where? And to where?

Democracy is a contractarian system; it’s analogous to a basic contract. In an electoral democracy, political parties make offers to the electorate in their manifestos.

The party whose offers are accepted by the majority is elected, that election is the equivalent of a consideration in contract law and creates a valid contract, a social contract in this case.The elected government is then obliged to fulfil its manifesto pledges in office.

Responsive politics dictates that if the party doesn’t perform,it would be punished at the next election.

Manifesto pledges are the underpinnings of a social contract between the elected and the electors and ensuring that they are kept is the essence of responsive politics and accountable democracy. In serious democracies, parties and politicians are judged by their manifestos, their electoral promises. For instance, in 1988, George H W Bush, who died recently, said during the US presidential election campaign, “Read my lips: no new taxes”. He won the election, but then raised taxes. Well, he never got a second term!

So, what did the APC’s 2015 manifesto look like? Well, it was probably one of the most statist party manifestos in history, laden with heavy spending commitments and a big government agenda.

Like all fiscally active socialist parties that make outlandish state-funded promises, the APC promised a Utopian state,pledging to tackle Nigeria’s socio-economic problems through “intensive and extensive investment”.

This column was active during the 2015 election campaign, analysing the main parties. For me, the APC came across as a fiscally irresponsible, statist and interventionist party that had a visceral

belief in the power of government to do everything,with the assumption that it could spend its way through any problem. In a piece entitled “The price of APC’s statist agenda” (BusinessDay, 2 February 2015), I wrote that “An APC-led federal government would either break its promises or run excessive budget deficits to fulfil them”.

Well, the Buhari government has done both. It has broken most of its electoral promises. A year ago, the Centre for Democracy and Development’s ‘Buharimeter’, which monitors Buhari’s election pledges, showed that: “Halfway through his first term, Buhari and his government had fulfilled just seven out of his 222 campaign promises and had made no progress at all on a further 96”. Yet, the Buhari administration has been spending heavily, running the highest budget deficits in Nigeria’s history, funded through excessive borrowings.

The APC described its 2015 manifesto as “An honest contract with Nigeria”.So,how much of the “honest contract” has the Buhari government kept? Let’s start with the economy.The APC promised to make Nigeria’s economy “one of the fastest-growing emerging economies in the world, achieving GDP growth, averaging 10% annually”, and to create a “post-oil economy”.

So, where are we with that promise? Well, the economy is growing at just 1.9%, and Nigeria in nowhere near becoming a “post-oil economy”! Misguided economic policies, lack of reforms and a president widely seen as anti-business have conspired to dampen the market dynamism needed to grow and diversify the economy.

On education, the APC promised to introduce free primary and secondary education to all and to extend that to tertiary level for women; it also promised to establish six new universities of science and technology. But where is the free education? Where are the six new universities? Even the existing bog-standard schools and universities remain in a state of neglect.

On health, the APC said it would increase the number of doctors from 19 per 1000 to 50 per 1000, but what do we have? Nigerian doctors are leaving the country in droves. Laughably, the party also promised to turn all Federal Government owned hospitals into “world-class standard within five years”.Well, today, Nigerian hospitals are still not good enough to treat the president, members of his family and government and, indeed, the Nigerian elite!

And what about the promise to “create additional middle-class of at least 2m new home owners in our first year in government and 1 million annually thereafter”?

In a country where 92.1% of the population live at below $5.5% a day, according the World Bank, where are the home-owning middle class? In any case, where are the 1 million housing units per annum that the APC promised to build? The APC also promised to generate at least 20,000 MW of electricity within four years.

Yet, in 2018, Nigeria still has the second worst electricity supply in

the world, with 57% of Nigerians having no access to electricity, according to the World Bank.

But, notwithstanding the broken promise, the minister of power, works and housing,Tunde Fashola, arrogantly said last week that “If you don’t have power it is not the

‘

:... it grates when President Buhari says his administration has “laid the foundations for a strong, stable and prosperous country”.The administration has done little over the past the past 3½ yearsto create the conditions for a strong, stable and prosperous country

,

Federal Government’s problem”.

So much for responsive politics.

Of course, at the heart of the APC’s 2015 manifesto was infrastructure development, with the party promising to undertake “massive infrastructure projects”, including constructing 3,000 km of Super highways and building up to 4,800 km of modern railway lines. President Buhari’s supporters regularly tweet pictures of roads, rail lines etc being built by his administration. But these China-backed projects are almost entirely state-funded and debt-fuelled, with virtually no private sector investment, which is not how nations should build infrastructures.

In any case, no government gets credit for building infrastructure when unemployment, poverty and inequality are deep and widespread. Unfortunately, the APC’s election promise to create 3m jobs a year has been truncated into employing 500,000 graduates in four years on a stipend of N30,000 a month under the so-called N-Power programme! What’s more, its promise to introduce a “massive social security scheme” that involves giving between N5,000 and N10,000 per month to the poorest Nigerians never saw the light of day. Even the promise of free daily meal for primary school children took almost two years of the administration’s 4-year term

to be introduced, and even so poorly implemented.

What about the promise to adopt a “zero-tolerance approach” to corruption? The reality is that the Buhari government’s anti-graft war lacks transparency, consistency and impartiality.Allegations of corruption are swirling around people connected with the government with little action taken. Or what about the promise “to destroy Boko Haram and any form of insurgency”? Clearly, with the continued spread and impunity of Boko Haram and the killer herdsmen the APC has not fulfilled its promise to keep Nigeria safe.

Given the above, it grates when President Buhari says his administration has “laid the foundations for a strong, stable and prosperous country”.The administration has done little over the past the past 3½ yearsto create the conditions for a strong, stable and prosperous country. Indeed, let’s face it, how can Nigeria be strong, stable and prosperous without being restructured?

The APC promised in its 2015 manifesto to “initiate action to amend our Constitution with a view to devolving powers, duties and responsibilities to states and local governments to entrench true federalism and the Federal spirit”. Can you believe that APC actually said that in its manifesto?

Of course, it did. Yet, President Buhari is viscerally opposed to restructuring, even arrogantly describing those calling for it as “talking lazily”!

So, we know that Buhari’s “Next Level” is from a position of poor performance, of broken promises.That’s not something to take to the next level. But, even, “Next Level” to where?

Well, it’s “Next Level” to the same old statist and fiscally active government. The APC’s manifesto for next year’s elections is similar to that for 2015; it’s a big government agenda, laden with huge spending commitments.

For instance, the APC promises to create two Governmentowned banks: People Moni Bank and Entrepreneur Bank; engage 1,000,000 N-Power graduates; create 5m jobs through agricultural policies; create 6 regional industrial parks and special economic zones and 109 special production and processing centres; increase children fed under the school feeding programme from 9.2m to 15m; and increase the number of those benefitting from theTrader Moniprogramme from 2.3m to 10m.

William Montgomery, a leadership expert, says that “The lens through which leaders view the world can help or hinder their ability to make good decisions”.

President Buhari believes in the power of the state to create jobs, to fund infrastructure etc. As I argued last week, this is the China Model, and it always ends in tears.

Buhari’s “Next Level” is from broken promises and to hollow pledges. Nigerians will decide next year whether his administration deserves to progress from the current level to the next level, and whether, indeed, the “Next Level” he promises is the one they really want.We shall see!

for your new week

Fascinating business facts

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$7bn

outh Africa’s power utility Eskom’s request for government to take up $7 billion of its debt could cause the country’s overall debt ratio to jump two percentage points from the current 55.8 percent, ratings agency Moody’s said on Friday. Moody’s, the last of the top three ratings firms to still rate Pretoria’s debt at investment grade, said in a research note dated Dec. 12 that granting Eskom’s request would have a neutral credit impact and was unlikely to accelerate the firm’s long-promised turn-around strategy.

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3 minutes

MW and Porsche have beaten Tesla by unveiling a charging station that can jolt electric vehicles with enough power to drive 100 kilometers (62 miles) in less than three minutes, scoring against Tesla Inc. in the race to make battery-powered cars more convenient.

The ultra-fast prototype charger has capacity of 450 kilowatts, more than triple Tesla’s Superchargers. Test vehicles developed to take that much power were recharged to 80 percent capacity in 15 minutes. Tesla’s stations need about 30 minutes for a similar charge, according to its website.

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audi billionaire Al Amoudi, is “still alive” and we now know and he will stand trial at some point for corruption and bribery, according to a palace official, who asked not to be identified. More than a year ago, he vanished into the Ritz-Carlton in Riyadh, along with dozens of Saudi princes and businessmen. What’s remarkable about his situation is that despite his prolonged detainment, a result of Crown Prince Mohammed bin Salman’s crackdown on graft in the Kingdom, the bulk of Al Amoudi’s global business empire has boomed.

Sales at his Sweden-based oil refiner Preem AB have surged more than 30 percent and his Stockholm office properties have risen in value. Since he was seized by security forces in Riyadh last year, his net worth has climbed by about 6 percent to $8.3 billion, according to the Bloomberg Billionaires Index, highlighting the contradictions and absurdities of being a wealthy Saudi.

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hinese retail sales grew at the slowest pace in 15 years in November and factory output was the weakest in nearly three years. This is the latest sign that economic stimulus measures enacted since the summer have failed to reverse flagging growth and the rest of the world is fretting. Even as Chinese exports have remained resilient in the face of US tariffs, weak consumer spending and slowing investment in housing construction are weighing on China’s economy. Friday’s data weighed on stock markets across the globe. The CSI 300 index of mainland Chinese equities dropped 1.7 per cent while Hong Kong’s Hang Seng lost 1.6 per cent. The Europe-wide Stoxx 600 was down 0.4 per cent while on Wall Street, the S&P 500 was 0.7 per cent lower in early trade.

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t the Coca Cola plant in Maiduguri, not far from the onetime headquarters of Boko Haram, the jihadi group that continues to terrorise north-eastern Nigeria, bottles of Sprite spin along a gleaming new production line. The facility opened last month and will more than double the 30-year-old plant’s capacity, adding 10,000 cases of plastic bottles a day to the 8,000 cases of glass bottles it already produces. The expansion is a sign of how multinationals — from consumer group Unilever to telecoms company MTN — are adapting to and banking on one of the fastest-growing markets in the world, which also happens to be one of the most dangerous.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Advert Hotline: 08034743892. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Anthony Osae-Brown. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.