BusinessDay 17 Jun 2019 by BusinessDay

Imperative of lifting 100 million Nigerians out of poverty

ne of the highpoints of President Muhammadu Buhari’s Democracy Day speech was the announcement

that over the next 10 years, the government would lift 100 million Nigerians out of poverty. For every informed Nigerian,

FRONT PAGE EDITORIAL whether rich or poor, there can be no better news to cheer.

news you can trust I *monDAY 17 june 2019 I vol. 15, no 333 I N300

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In 2018, Africa’s most populous nation was labelled the poverty capital of the world, which, as derogatory as it sounds, is

simply what having 91 million people, and counting, living in Continues on page 18

Foreign Reserve - $45.16bn Cross Rates - GBP-$:1.26 YUANY-N51.98 Commodities Cocoa

Gold

Crude Oil

US$2,496.00

$1,344.80

$62.01

APAPA GRIDLOCK L-R: Omobola Johnson, former minister of communications technology; Tunde Fowler, executive chairman, Federal Inland Revenue Service (FIRS); Okechukwu Enelamah, former minister of industry, trade and investment; Wanda Kramer and her husband, Dick Kramer, former managing partner, Arthur Andersen & Co., and Olaleye Adebiyi, managing partner, Andersen Tax Nigeria, at the sendforth for Dick Kramer organised by Andersen Tax in Lagos. Pic by Pius Okeosisi

L-R: Yakubu Gowon, former head of state; King Alfred Diete-Spiff, chancellor, Bayero University, Kano (BUK)/Amanyanabo of Tom Brass; Tony Elumelu, founder, Tony Elumelu Foundation/group chairman, United Bank for Africa (UBA); Ibrahim Gambari, chancellor/chairman, governing council, BUK, and Muhammad Bello, vice chancellor, BUK, at the conferment of honorary Doctor of Business on Elumelu by the institution in recognition of his contribution to Africa’s economic development through the promotion of entrepreneurship and philanthropy, in Kano at the weekend.

CBN’s life support to FG rises 780% to N8.12trn in 4yrs HOPE MOSES-ASHIKE, MICHAEL ANI & OLUFIKAYO OWOEYE

igeria’s quest to fund an ambitious budget despite gaping revenue shortfalls has led the Federal Government’s out-

standing loans/overdrafts owed to the Central Bank of Nigeria (CBN) to hit a whopping N8.1 trillion at the end of 2018. The amount surged as much as 780 percent from N922 billion in 2014, according to data obtained from the CBN’s statistical bulletin.

A breakdown of the lending by the CBN shows that overdraft to the Federal Government stood at N5.42 trillion as at December 2018, from N3.31 trillion in the previous year. Treasury Bills and TB rediscounts stood at N464 billion in 2018, as against N459 billion in 2017.

“Isn’t the ECOWAS norm for financing of the government budget deficit by the central bank capped at 5 percent of revenue? NGN8.12 trillion looks higher than that,” Razia Khan, Africa chief economist at Standard Chartered Bank, LonContinues on page 46

41 Governor Babajide Sanwo-Olu’s promise: “I will rid Apapa of gridlock in the first 60 days of my government.”

Neconde Energy Limited Refinances $640m facility with consortium of 7 banks …Access, Fidelity, Zenith, AFC inclusive HOPE MOSES-ASHIKE

s a demonstration of support for the commercial and financial operations of Neconde Energy Limited, a consortium of seven local and international lenders has signed Continues on page 46

Monday 17 June 2019

BUSINESS DAY

news CBN orders banks to begin lending to focal commodities …cocoa, cashew, palm oil, sesame seeds and Shea on list HOPE MOSES-ASHIKE

he Central Bank of Nigeria (CBN) on Friday directed all banks in the country to begin funding the focal commodities under the Export Facilitation Initiative (EFI). Under the initiative, the focal commodities for value chain development would be cocoa, cashew, palm oil, sesame seeds and shea. In a circular signed by Kevin Amugo, director, financial policy and regulation department, the CBN stated that the commodities are to be funded under the approved guideline of Agri-Business/Small and Medium Enterprises Investment

Scheme (AGSMEIS), Non-Oil Export Stimulation Facility (NESF), and Real Sector Support Facility-Differentiated Cash Reserves Requirement ((RSSF-DCRR) in line with the approved limits in the Export Facilitation Initiative Funding Framework (EFIFF). The Bankers Committee had at its 343rd meeting held in April 2019 approved the commencement of EFI to complement government efforts to gender growth in the non-oil sector of the economy as well as enhance foreign earnings and employment generation. The CBN said in the circular that the detailed operational requirements for the initiative would be released in due course.

Maikanti Baru (2nd r), group managing director, Nigerian National Petroleum Corporation (NNPC), inaugurating the office complex for Duke Oil, the Strategic Business Unit of the NNPC (a.k.a. NNPC Trading), at Maitama in Abuja. With him from left are: Samson Makoji, group general manager, public affairs division; Inuwa Waya, managing director, NNPC Trading Limited; Ndu Ughamadu, group general manager, Group Public Affairs Division, NNPC, and others.

Nigerians to pay more for Pressure mounts on Buhari to commodities over import duty hike submit list of ministers

...as importers, manufacturers suffer higher cost ...as old ministers, aides jostle to return …move could be CBN’s quiet way to adjust naira value Tony Ailemen, Abuja

ith President Muhammadu Buhari’s second tenure now in full throttle following inauguration of the National Assembly last week, pressure is mounting on the president to forward the list of his nominated ministers to the Senate for confirmation. Buhari, who was sworn in for a second term on May 29, had promised faster response to issues of governance this time around, unlike his first tenure that was characterised by snail-speed approach that earned him the sobriquet “Baba Go-slow”. “Well, all those who call me Baba Goslow will see whether I am slow or fast,” Buhari had said in a recent interview, hinting that he would act differently this time. Nigerians are now expectant that the ministerial list should get to the Senate within the first two weeks of its inauguration as the President is predictably expected to return many of those who served in his cabinet in the last four years. Mike Ozekhome, a renowned lawyer and Senior Advocate of Nigeria, said told BusinessDay in a recent chat that Nigerians were eager to see the President “appoint a

detribalised cabinet immediately”, unlike in 2015. It took Buhari over six months to appoint a cabinet after he assumed office in May 2015. In a chat with, Ozekhome advised Buhari to “forget his 97 percent/5 percent voting pattern and shun cronyism, prebendalism, nepotism and favouritism in his appointments”. The “97 percent/5 percent voters” is a reference to Buhari’s comment at the United States Institute of Peace (USIP) during his official state visit to the US in July 2015 where, in answer to a question on inclusive development, he had said, “I hope you have a copy of the election results. The constituents, for example, gave me 97 percent [of the vote] cannot in all honesty be treated on some issues with constituencies that gave me 5 percent.” This mindset would eventually hallmark Buhari’s appointments to key political offices in his first four years. “He should begin to see Nigeria as a pluralistic nation of many tribes, languages, cultures, etc, and not from the blurred clannish binoculars of a sectional leader,” Ozekhome said.

•Continues online at www.businessday.ng

AMAKA ANAGOR-EWUZIE & ENDURANCE OKAFOR

he move by the Central Bank of Nigeria (CBN) to raise exchange rate for import duty from N306 to N326 for goods coming into the nation’s seaports could raise cost of production and prices of commodities from bread to fabrics, with a capacity to increase an already double-digit inflation in Africa’s most populous nation. The development could increase government revenue by another N20, or about 7

percent, from whatever it is collecting as Customs duty before now, said Emma Nwabunwanne, a Lagos-based importer. But it could also result in the reduction of import volume because many people would be out of business due to lack of sufficient funds, he said. The rate adjustment by the CBN, no doubt, will pressure importers and manufacturers bringing in raw materials and other critical inputs for their production into sourcing for more funds to pay Customs as duty. For instance, if an importer is supposed to set aside N1 million for duty at N306, now

the exchange rate has been adjusted, it means the importer has to source for an additional N400,000 or more amounting to about N1.4 million to pay for the same goods at N326 exchange rate. “Import duty will increase by 6.54 percent, meaning that inflation will rise because importers paying higher duty recover their monies by increasing the market prices of goods and services. There must be a rise in inflation immediately because Customs has started the implementation,” said Tony Anakebe, managing director, Gold-

…Oil price seen falling as low as $45/b …opportunities for Nigeria’s non-oil export BALA AUGIE, STEPHEN ONYEKWELU & DIPO OLADEHINDE

lobal oil prices could fall to as low as $45 per barrel if tensions between the United States and China worsen. If this happens, it could throw the implementation of Nigeria’s 2019 federal budget

into disarray as the country relies on oil for two-thirds of its revenue and nearly all of foreign exchange earnings. Oil prices have been going downhill in recent weeks as investors become increasingly concerned about slowing demand. Appetite for oil is at risk of a further slump if the US and China fail to the resolve trade

differences, which will cause the global economy to weaken even more. The two world superpowers account for about 34 percent of the global crude oil. Risk for 2019 budget Thegovernmenthadbenchmarked the budgeton$60a barrel based on production of 2.30 millionbarrelsofoilperday.Ifoil prices fall lower than the budget

0.08

10 Y 0.00

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benchmark, the economy will go into shocks that will see the Central Bank of Nigeria apply emergency measures to keep the economy stable. Global oil prices could fall to as low as $45 per barrel if tensionsbetweentheUSandChina worsen, Rainer Michael Preiss, executive director at Taurus Wealth Advisors, told CNBC. Whenoilprices found a floor around $40 in the first quarter of 2016, the Nigerian economy slid into a recession and the CBN began restricting scarce forex for what it considers important items and began to artificially prop the naira to maintain exchange rate stability. The longterm effect of these controls is an economy with a weak growth.

NGUS may 27 2020 362.28

•Continues online at www.businessday.ng

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Continues on page 46

US/China tension could cast a pall on 2019 budget

businessday market monitor NSE

Link Investment Ltd, in a telephone interview with BusinessDay. There is also the likelihood that many Nigerian importers will divert their goods to other ports in the neighbouring countries like Togo or Republic of Benin, from where such goods would be smuggled into Nigerian markets through the land borders, thereby bringing down the volume of cargo coming in through the ports, market watchers say. “With the new development, Customs may likely

Buy

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$-N 358.00 361.00 £-N 457.00 465.00 €-N 402.00 408.00

Market I&E FX Window CBN Official Rate Currency Futures

($/N)

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fgn bonds

Treasury bills

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360.51 307.00

-0.35 10.96

NGUS aug 21 2019 360.93

6M 0.04 12.22

NGUS nov 27 2019 361.38

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Youth employment, remedy to Nigeria’s rising inequality Israel Odubola

espite the sustained increase in global wealth over the past two decades,inequalitypersists as per capita wealth declined or stagnated in most low-income countries across various income brackets. Economic disparity is a global reality. According to United Kingdom-based Oxfam International, the 26 richest people on earth in 2018hadthesamenetworthasthe poorest half of the world’s population, some 3.8 billion. The issue is prevalent in low-

income and emerging economy like Nigeria where less than 8 percent of the populace, the few rich, controls the bulk of the country’s resources. Economic inequality in Nigeria has reached extreme level despite the country’s abundant human capital that could lift millionsoutofpoverty.Lastyear,Nigeriaranked157outof157nations,in OxfamReducingInequalityIndex, reflecting government’s weak commitment to reduce the gap between the rich and poor. Thecountry’sunemployment figure of 23.1 percent is the 10th highest in the world, according

to Abuja-based National Bureau of Statistics (NBS). Sadly, youth unemployment rate (15-34 years) of 29.72 percent outpaces the general unemployment figure, an indication that unemployed individuals in Nigeria comprise mostly the youth. In a bid to ascertain the causes and proffer solutions to highincome inequality and mass unemployment in low-income and emerging economies, the Washington-based International Monetary Fund (IMF) conducted a research across 71 low-income countries and discovered that the solution to inequality lies in youth

employment. “We look at the impact of good and bad economic times on inequality through unemployment, access to finance and government spending. We found that in low-income and emerging marketcountries,unemployment, especiallyamongyoungpeople,is an important driver of inequality,” said analysts at IMF in their policy document. In good times, which signifies periods when a country has positive output per capita growth, their findings revealed that lower general unemployment accounts for 41 percent in inequality reduc-

tion in low income and emerging economies. However, youth employment explains more than 35 percent of that reduction, according to them. In bad times, which typifies periods when output per capita growth is negative, youth unemployment is associated with 28 percent rise in income inequality. Thelogicisbasedonthefactthat in the time of boom, young people workinghelpreduceinequality,but when growth slows down and jobs are lost, more young people will be out of jobs, which would consequently raise income disparity. The case is slightly different in

Lagos-Ibadan 156km rail project ready for use July MIKE OCHONMA

here are strong indications that the 156-km LagosIbadan standard gauge rail project will be ready to move passengers by next month. A visit to the ongoing project last week, the tracks had been laid up to 152km, leaving just four kilometrestocompleteit.Thisisas the Nigerian Railway Corporation (NRC)receivedtwotraincoaches, while more will be arriving soon. ‘’Yesterday (Thursday) two coaches got to Papalanto and hopefully by next month, we would be going for further inspection of another set and test. We hope by September more locomotive would arrive,’’ NRC managing director, Fidet Okhira, told journalists late Thursday during an inspection visit to the project. However, work on the project from Iju to the Apapa port which has become synonymous with trafficlogjamsaffectingbusinesses is still lingering for many months due to a multiplicity of challenges along the right of way. During an inspection tour of the project with transport journalistsThursday,IbrahimAl-Hassan, the new chairman of the NRC, expressed hope that by the end of July, both the second track which had reached 140km and the first one already at 153km, would get to the Ibadan station. ‘’We want to complete this as quickly as we can so that other ancillary services could continue and we could put the tracks to use. As soon as this is done, we will continue in other sections,’’ he stated. ‘’Laying the tracks is the most important. By the time we finish layingthetracks,wewouldbeable to move passengers from Lagos to Ibadan. Then the intermediary stations can come up later. We can have temporary stations if we need to,’’ the chairman added. Henotedthattherewereintrusions into the right of way on the corridor. While some had NRC’s approvals, others had none and would need to be relocated as quickly as possible to fast- track the pace of work. Okhira also disclosed that just like the Ikeja end, NRC had found a solution to some of the problems militating against the project from the Flour Mills end to the Apapa port, including the Oshodi corridor where there is a huge industrial and massive generator that is being evacuated. www.businessday.ng

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emerging economies where youth unemployment explains less rising inequality, as fewer jobs are lost in badtimescomparedtolow-income countriesduetohigherlevelofinformal sector in the latter. Nigeria have so much to worry about, with over 60 percent of its populationcompriseyoungpeople below the age of 35, it seems government at all levels are not taking cognizance of this fact. About 75 percent to 80 percent of youth are either unemployed or underemployed, which has made manytopredictthatNigerianyouthful population is like a time bomb waiting to explode.

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NERC says MYTO implementation begins Q1, 2020 … analysts warn electricity costs must not hurt consumers HARRISON EDEH, Abuja

he Nigerian Electricity Regulatory Commission (NERC) has confirmed that it is already working out a model as it embarks on widerstakeholderconsultationsto enable it effect the much awaited Multi Year Tariff Order (MYTO) early next year. The regulator says this has become necessary as a way of urgently addressing concerns of technical losses in power distribution to consumers as well as liquidity issues that have been the

bane of the power sector value chain of generation, transmission and distribution. The purpose of the MYTO is to set cost-reflective tariffs that will allow the power sector to be properly funded and functional. Adequate, cost-reflective‎ electricity supply is seen as the backbone of industrialisation, but has been a major constraint of the NERC,havingmissedimplementation of the policy six times post privatisation, resulting to some liquidity losses put at N1.4 trillion in the sector. BusinessDay understands

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that the NERC has commenced the review of Performance Improvement Plans (PIP) to be submitted by the Discos for the tariff period of 2019-2023. This comes as those who know warn that the cost review must be done in a way that poor consumers are not hurt. “We have embarked on an open-bookreviewwiththeDiscos. The open-book review enables us address concerns of technical losses on distributed power. You can also see that the Meter Asset Provider Regulations is currently ongoing with various Discos embarking on metering

consumers. We are also monitoring improvement of collection by Discos, as metering concerns is being addressed,” James Momoh, executive chairman of NERC, told BusinessDay exclusively. He also confirmed that the Discos ‎had been directed to submit their Performance Improvement Plan, and currently ongoing alongside minor tariff review. “I can reliably tell you that theseprocessesweareembarking upon would enable us effect the Multi-YearTariffOrderImplementation latest by first quarter of next year,” Momoh assured.

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AccordingtotheMYTORules, therewouldbea15-yeartariffpath for the Nigerian Electricity Supply Industry (NESI) with limited minor reviews each year in light of changes in a limited number of parameters (such as inflation, interest rates, exchange rates and generation capacity) and major reviews every five years, when all of the inputs are reviewed with stakeholders,butthishasnotbeen done since 2016. Although MYTO would entail an upward review of electricity costs, industry watchers say current pricing does not benefit the customerssincetheycannotenjoy quality service because they are

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compelledtopayatariffthatisless than the cost of production. It also threatens the capacity of the sector to benefit from loans from international institutions such as the World Bank. Chuks Nwani, an energy lawyer,toldBusinessDaythatthecommissionneededtofactorinvarious variables in the open-book review of Discos performance and minor review being embarked on by the commission to ensure it arrives at a fair and balanced cost. “The open-book review required Discos to submit their data - collections, remittances, technical losses and billing efficiencies submitted to NERC.

Monday 17 June 2019

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NEWS CBN to blacklist firms dumping FX-restricted items into Nigeria … banks to fund local production at single-digit interest rate Onyinye Nwachukwu, Abuja

entral Bank of Nigeria (CBN) will blacklist from the foreign exchange market and the banking industry anyone or firm caught smuggling or dumping any of the 43 items restricted from accessing foreign exchange into the country. This follows a Presidential Orderthatfurthergivesimpetusto the aggressive implementation of that policy, which holds promises for jobs and economic boost. Governor Godwin Emefiele announcedthisinAbujaonFriday at a meeting the CBN held with stakeholders of the palm oil industry as part of efforts to promote the development of that sector’s value chain. “The presidential directive that we received says that we must expand, seek to give support to people who want to expand the production of these products in Nigeria. Another part of that presidential directive says that we should blacklist from the foreign

exchangemarketandthebanking industry, all firms, their owners andtheirtopmanagementcaught smuggling or dumping any of the restricted 43 items into Nigeria,” Emefiele warned at the meeting. “The presidential directive that we have received is not for palm oil alone, we have received presidential directive to focus on the production of ten different commodities to be embarked on in the next couple of years, the products include: rice, maize, cassava, tomatoes, cotton, the entire textile value chain, oil palm, poultry, fish, livestock dairy and cocoa,” the governor stressed. Emefiele continued to insist that there is no going back on the rules against those restricted items, which now include all forms of textiles and palm oil, having gradually expanded to 43 since 2015 when that policy was first announced. “We are going to work very aggressively on this mandate,” the governor maintained. He

announced that the CBN economic intelligence department had started investigating the accounts of those who are involved in smuggling or dumping palm oil and the other restricted commodities into Nigeria. He told the palm oil stakeholders that the meeting was therefore to give them some heads-up and to show that government meant its words on the policy. “We have the names of those bringing in these products and we feel that before any action is taken against you, in terms of blocking you from the foreignexchange market or blacklisting you from doing banking in Nigeria, we must invite you to say that we are drawing a line that importation of palm oil in Nigeria must stop,” the governor stated. “Stopping it also means that weascentralbankandthe deposit money banks will create an opportunity for you to access credit to grow your plantations, but we will not allow any further impor-

tation of palm oil into Nigeria, we must create jobs in our rural communities.” Hesaidasidefromsupporting those who are interested in the industrial production, the CBN will also be supporting with its out-grower schemes, to be developed under some of the large companies. “This is because we want to make sure that we spread wealth in our rural communities,” the governor further explained. Encouraging the investors to takeadvantageoftheCBNopportunity, Emefiele stressed that “at this time, we have already done some kind of costing and the average cost needed to prepare, develop and plant a hectare is almost about N1 million to N1.2 million.Soifyouwant10,000hectares, you need up to N10 billion on the average.” He assured that the loan under the programme is long-term, single-digit interest rate with long moratorium, which should bring some comfort.

Kwara governor promises enabling environment for business community SIKIRAT SHEHU, Ilorin

wara State governor, Abdulraman Abdulrazaq, says his administration will create an enabling environment for businesses to thrive in the state. The governor stated this when he paid an unscheduled visit to Olam Grains and Cashew Processing Factory at Ogbondoroko in Asa Local Government Area of the state. In a statement by his C h i e f P re ss S e c re t a r y , Rafiu Ajakaiye, AbdulRazaq, who lauded the economic impact the factory offers the people of Kwara State and Nigeria at large, especially in the areas of job opportunity to a minimum of 1,500 people, assured that gov-

NCC goes hard on peddlers of unregistered SIM cards, arrests over 200 Stella Enenche, Abuja

here are indications that over 200 suspects have been arrested over the use of unregistered or pre-registered SIM cards, in a new clampdown effort by the Nigeria Communications Commission (NCC) across the country. Findings by BusinessDay show that the suspects, many of whom were being prosecuted before various courts, were apprehended between January 2017 and April 2019. A source at the NCC, who spoke on the condition of anonymity, said the arrests were made by the SIM Registration Task Force set up by the agency to arrest perpetrators of the act. The source, who lamented the threat unregistered SIM cards posed to national security, said the NCC’s monitoring department had continued to undertake sensitisation campaigns aimed at exposing the danger of indulging in such acts. “What we are doing now is scrubbing and verification of SIM cards that are circulating today. NCC has made arrests and some people are already in court. In fact, more than 200 people have been prosecuted. There are cases of prosecution going on and several arrests have been made. “O u r c o m p l i a n t a n d monitoring department is carrying out sensitisation campaigns in the regions to tell people about the dangers of using pre-registered or illregistered SIM cards, and the network operators too have been advised to disable every SIM card that has economic activity(ies) that is not registered,” the source said. BusinessDay learns from another source that the tar-

gets of arrests were the sellers of the unregistered/preregistered cards. His words: “People need to be aware because if there is no buyer, there would be no seller. That is why we are carrying out a nationwide campaign to educate the populace on the dangers of using unregistered, pre registered or ill properly registered SIM cards. “Those selling are the ones that have been arrested. So many criminal activities have been perpetuated with pre-registered and unregistered SIM cards. The issues of kidnapping, cattle rustling, abduction, are examples. “Now, someone can threaten you from an unregistered SIM card and there is no information about that caller. So, we are telling the societies of the danger of such cards; that is how far we have gone.” Recall that sometime in August 2015, the NCC handed mobile network operators a deadline to disconnect SIMs found to have failed the compliance test, by failing to fully conform to registration requirements. In 2017, a SIM Registration Task Force was set up to further harmonise registration practices across all networks. The mandate of the said taskforce culminated in the recent setting up of a joint Industry Working Group comprising senior representatives of the NCC, the National Identity Management Commission (NIMC) and MNOs. The Working Group was saddled with the responsibility of harmonising the subscriber registration process with the National Identity Card Registration Project. www.businessday.ng

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ernment would encourage the expansion of business across the state. While reacting to the complaints of the Association of Cashew Farmers and dealers, he promised to invite them for an interface at an appropriate time towards addressing their problems. Earlier, the plant manager, Olam Cashew Processing factory, Sajjad Hussein, stated that there were five stages involved in cashew processing and would take up to eight days before the end product was realised. The governor used the occasion to commission water project provided by the company for Ogbondoroko community, as part of its corporate social responsibility programme.

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Huge demonstrations have rattled the territory’s government—and the leadership in Beijing

HREE THINGS stand out about the protesters who rocked Hong Kong this week. There were a great many of them. Hundreds of thousands took to the streets in what may have been the biggest demonstration since Hong Kong was handed back to China in 1997. Most of them were young— too young to be nostalgic about British rule. Their unhappiness at Beijing’s heavy hand was entirely their own. And they showed remarkable courage. Since the “Umbrella Movement” of 2014, the Communist Party has been making clear that it will tolerate no more insubordination—and yet three days later demonstrators braved rubber bullets, tear gas and legal retribution to make their point. All these things are evidence that, as many Hong Kongers see it, nothing less than the future of their city is at stake. On the face of it, the protests were about something narrow and technical (see article). Under the law, a Hong Kong resident who allegedly murdered his girlfriend in Taiwan last year cannot be sent back there for trial. Hong Kong’s government has therefore proposed to allow the extradition of suspects to Taiwan—and to any country with which there is no extradition agreement, including the Chinese mainland. However, the implications could not be more profound. The colonial-era drafters of Hong Kong’s current law excluded the mainland from extradition because its courts could not be trusted to deliver impartial justice. With the threat of extradition, anyone in Hong Kong becomes subject to the vagaries of the Chinese legal system, in which the rule of law ranks below the rule of the party. Dissidents taking on Beijing may be sent to face harsh treatment in the Chinese courts. Businesspeople risk a wellconnected Chinese competitor finding a way to drag them into an easily manipulated jurisdiction. That could be disastrous for Hong Kong, a fragile bridge be-

tween a one-party state and the freedoms of global commerce. Many firms choose Hong Kong because it is well-connected with China’s huge market, but also upholds the same transparent rules that govern economies in the West. Thanks to mainland China, Hong Kong is the world’s eighth-largest exporter of goods and home to the world’s fourthlargest stockmarket. Yet its huge banking system is seamlessly connected to the West and its currency is pegged to the dollar. For many global firms, Hong Kong is both a gateway to the Chinese market and central to the Asian continent—more than 1,300 of them have their regional headquarters there. If Hong Kong came to be seen as just another Chinese city, Hong Kongers would not be the only ones to suffer. The threat is real. Since he took over as China’s leader in 2012, Xi Jinping has been making it clearer than ever that the legal system should be under the party’s thumb. China must “absolutely not follow the Western road of ‘judicial independence’,” he said in a speech published in February. In 2015 Mr Xi launched a campaign to silence independent lawyers and civil-rights activists. Hundreds of them have been harassed or detained by the police. The authorities on the mainland have even sent thugs to other jurisdictions to abduct people, including a publisher of gossipy books about the party,

snatched from a car park in Hong Kong and a tycoon taken from the Four Seasons hotel in 2017. The message is plain. Mr Xi not only cares little for the rule of law on the Chinese mainland. He scorns it elsewhere, too. The Hong Kong government says the new law has safeguards. But the protesters are right to dismiss them. In theory extradition should not apply in political cases, and cover only crimes that would incur heavy sentences. But the party has a long record of punishing its critics by charging them with offences that do not appear political. Hong Kong’s government says it has reduced the number of white-collar offences that will be covered. But blackmail and fraud still count. It has said that only extradition requests made by China’s highest judicial officials will be considered. But the decision will fall to Hong Kong’s chief executive. That person, currently Carrie Lam, is chosen by party loyalists in Hong Kong and answers to the party in Beijing. Local courts will have little room to object. The bill could throttle Hong Kong’s freedoms by raising the possibility that the party’s critics could be bundled over the border. It is a perilous moment. The protests have turned violent—possibly more violent than any since the anti-colonial demonstrations in 1967. Officials in Beijing have condemned them as a foreign plot. Ms Lam has been digging in

her heels. But it is not too late for her to think again. In its narrowest sense, the new law will not accomplish what she wants. Taiwan has said that it will not accept the suspect’s extradition under the new law. Less explosive solutions have been suggested, including letting Hong Kong’s courts try cases involving murder committed elsewhere. Anti-subversion legislation was left to languish after protests in 2003. There is talk that the government may see this as the moment to push through that long-shelved law. Instead Ms Lam should take it as a precedent for her extradition reform. The rest of the world can encourage her. Britain, which signed a treaty guaranteeing that Hong Kong’s way of life will remain unchanged until at least 2047, has a particular duty. Its government has expressed concern about the “potential effects” of the new law, but it should say loud and clear that it is wrong. With America, caught up in a trade war with China, there is a risk that Hong Kong becomes the focus of a greatpower clash. Some American politicians have warned that the law could jeopardise the special status the United States affords the territory. They should be prudent. Cutting off Hong Kong would not only harm American interests in the territory but also wreck the prospects of Hong Kongers—an odd way to reward its would-be democrats. Better to press the central government, or threaten case-by-case scrutiny of American extraditions to Hong Kong. But would this have any effect? That is a hard question, because it depends on Mr Xi. China has paid dearly for its attempts to squeeze Hong Kong. Each time the world sees how its intransigence and thuggishness is at odds with the image of harmony it wants to project. When Hong Kong passed into Chinese rule 22 years ago, the idea was that the two systems would grow together. As the protesters have made clear, that is not going to plan.

They will change it, and it will change them

NL ARGING THE European Union long ago fell out of fashion. No country has joined since Croatia became the 28th member, in 2013. As the leaders of Hungary and Poland attack the independence of their judiciaries it seems quaint to argue, as many once did, that negotiating membership would instil democratic habits in countries with long memories of dictatorship. How much harder to make the case in the Balkans: Kosovo and Serbia are at daggers drawn, and Bosnia is an ungovernable mess. But a happier story is unfolding in the country known, since Feb-

ruary, as North Macedonia. After years of authoritarian misrule the new government, led by Zoran Zaev, has started tackling corruption and reforming the judiciary. In an unhappy region, the country’s Slavic majority and Albanian minority enjoy good relations. And last year Mr Zaev’s government signed the Prespa agreement with Greece, ending a destabilising dispute over the country’s name. (Greece insists that “Macedonia” can refer only to a Greek region, but has grudgingly accepted “North Macedonia”.) Recognising all this progress, the European Commission wants the EU’s governments to open membership talks with North Macedonia. It was the promise of accession to the EU (and to NATO, which is going ahead) that helped Mr Zaev push through Prespa at home. In June 2018 his bid to start talks was kicked down the road for a year. Now, alas, further delay is likely. Opposition to the talks has come in part from France’s president, Emmanuel Macron, who argues that the EU should concentrate on deeper integration rather than adding new members. History, however, suggests that there is not Continues on page 15

Monday 17 June 2019

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Presidential credentials

Why Erkki Liikanen should be the ECB’s next boss

Mario Draghi’s successor must have expertise, judgment and political skills

NE OF THE biggest jobs in Europe is up for grabs: head of the European Central Bank (ECB). It sets interest rates across much of the continent, supervises banks and underwrites the euro, used by 19 countries with 341m citizens. The ECB’s outgoing boss, Mario Draghi, who steps down in October after eight years in charge, has done a sterling job in difficult circumstances. His tenure illustrates what is at stake. After a sovereign-debt crisis in 2010-12 threatened to sink the euro, it was Mr Draghi who ended the financial panic by pledging that the ECB would do “whatever it takes” to stop the euro zone from breaking up. Although he saved the euro, Mr Draghi leaves behind problems. The economy is faltering; a recession at some point in the next eight years is possible. There is little prospect of fiscal easing—Germany doesn’t want to borrow more and southern Europe can’t afford to. So monetary policy is the main lever to stimulate growth.

Unfortunately interest rates are close to zero. And the risk of another debt crisis bubbles away. Italy’s populists have been ignoring demands from the European Commission to take control of the public debt, now 132% of GDP. Europe’s political leaders will gather on June 20th and 21st to divide up the top jobs in Europe, including the ECB presidency. The temptation will be to make the centralbank position part of the horse-trading, picking the new chief on the basis of nationality. Instead, for Europe’s sake, the selection should be determined by three tests: economic expertise, political talent and sound judgment. Te chnical comp etence matters. Interest rates are so low that the bank’s toolbox may need to be expanded in creative ways. Political nous is more important than at other big central banks such as the Federal Reserve. The new boss must build support in the bank’s 25-strong rate-setting body, and across 19 national governments and their citizens. The bank must also make the case for further reform to the euro

zone, without which banking and sovereign-debt crises are a constant danger. And, if a crisis does strike, sound judgment becomes paramount. If the markets sniff equivocation or muddle from the ECB president, the financial system could rapidly spiral out of control, as panicky investors dump the bonds of weaker banks and countries. When Mr Draghi was appointed in 2011, he was already a strong candidate. Since then he has passed the three tests. He expanded the ECB’s toolkit by standing ready to buy up unlimited amounts of sovereign debt, known as outright monetary transactions, or OMTs (the promise was enough to reassure investors and the policy has never been implemented). He put his personal authority on the line and marshalled support outside the ECB. None of today’s leading contenders is as impressive (see article). Some risk undermining the bank’s hard-won credibility. Jens Weidmann, the head of the Bundesbank, opposed OMTs. In a crisis, markets might worry that he

would be prepared to let the euro zone collapse. Olli Rehn, the newish head of the Bank of Finland, could invite doubt, too. In a previous role in Brussels he was an enforcer of austerity on southern European countries, which might in the future need the ECB’s help. Benoît Cœuré, the head of the ECB’s market operations, is clever and impressive. But the bank’s fuzzy rules appear to bar him from a second term on its board. Erkki Liikanen, a former boss of Finland’s central bank, has the best mix of attributes for the role. Although he is less technically strong than some other candidates, Philip Lane has recently taken over as the ECB’s chief economist: the bank will not lack intellectual clout. Mr Liikanen was a vocal advocate of unconventional tools. His political skills have been tested both as a commissioner in Brussels and as finance minister in Helsinki. Mr Draghi has transformed the ECB, but 21 years after its creation, there are still nagging doubts about its strategy and firepower. With Mr Liikanen at its helm, they might be put to rest at last.

The EU must keep its promise to North... Continued from page 14

necessarily a trade-off between these goals. On the contrary, previous waves of widening have in the view of many required more deepening. Anyway, now that the European elections are over Mr Macron’s opposition seems to have lessened: he probably feared the issue would help Marine Le Pen, his nationalist rival. Other opponents of widening argue against admitting more eastern European countries in which democracy and the rule of law are weak. Bulgaria’s accession, it is said, has allowed its numerous criminal gangs free access to the union. That is a fair objection for Albania, with which the commission is also proposing membership talks after its progress in other areas. But not for North Macedonia which has been doing well under Mr Zaev. The commission’s original hope was for ministers to approve the two candidates’ EU bids at a meeting on June 18th. But resistance from MPs in Angela Merkel’s Christian Democratic Union makes that improbable: she needs a mandate from parliament before she can agree. A special summit could be called in July were North Macedonia’s bid sure to pass. But the Bundestag will soon begin its summer break, and another opportunity will not arise until October. By then the habit of delay may have become ingrained. Such treatment would be shabby, and dangerous. North Macedonia’s opposition is ready to pounce at any sign of failure. And by autumn Greece may well have a new centre-right government that will face strong pressure from anti-Prespa voters to stall the talks. More broadly, for the EU to break its promise to one Balkan state will boost leaders in others who say the Europeans cannot be trusted, and other powers sniffing around, from Russia to China to Turkey, will take note. Conversely, opening talks with North Macedonia will strengthen the hand of proEuropean reformers throughout the Balkans. Starting talks does not commit anyone to concluding them, as Turkey knows only too well. To reject North Macedonia without even trying to reach an agreement would be cruel, selfdefeating and wrong.

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Chained to tradition

Thousands of children are abused in Senegal’s religious schools Their parents sent them to learn the Koran. Their teachers beat and starve them

BAR LIFTS up his trousers and points at the marks where the chains wore his skin away. He was 11 when his father sent him from his village to a religious school on the outskirts of Senegal’s holy city of Touba. His teacher made him recite passages from the Koran in the morning. Then Mbar (not his real name) was sent out to the streets to beg for money for his master until night fell. If he misbehaved, he was beaten or starved. After two years Mbar ran home. But his father sent him to another school. This time he was not made to beg. Instead, he was chained to a wall. “I couldn’t move. They used to bring me a bucket to pee in,” says Mbar, in a cracked voice. Senegal is one of Africa’s more successful countries. It is peaceful. Its government functions relatively well and the economy is growing at 7% a year. But along the old boulevards of Dakar, the capital, thousands of talibé—the “seekers” attending nearby religious schools—beg for change. Some boys are as young as four.

Many families send their sons to such schools, or daaras, where they memorise the Koran. Some do so for religious reasons but, for many, daaras offer the only opportunity for children to get a basic education. Many marabouts, or religious teachers, respect children’s rights. And begging has long been accepted as a way of teaching talibés humility and funding their education. But the system is almost completely unregulated, and rackets flourish. A new report by PPDH, a coalition of Senegalese rights groups, and Human Rights Watch in New York, documents some of the abuse suffered by the estimated 100,000 children

who are forced to beg. Isolated and far from home, dozens of boys sleep in filthy rooms. They are given just enough food to survive. If they fail to meet their begging quota of about $1 per day, or try to escape, they may be beaten, starved or chained for weeks at a time. Many are sexually abused. According to a psychologist at Samu Social, a centre working with boys in Dakar, many children try to kill themselves or hurt themselves deliberately so they will need medical attention and can get out of the daaras. From 2017 to 2018, researchers recorded at least 16 incidents in which children died from beat-

ings, neglect or poor conditions. Suffer the little children Most of the boys come from farms or villages in Senegal, but some are also trafficked from the Gambia, Guinea Bissau and Mali. Agents go to rural areas and promise parents that the boys will study at the best religious schools in Senegal. The costs for the traffickers are minimal. They pay border guards about $1 a child to smuggle them in from Gambia, says Issa Kouyaté, who runs Maison de la Gare, a talibé shelter in Saint-Louis, a city in northern Senegal. Government officials have repeatedly pledged to deal with the problem, but their attempts have been half-hearted. The daaras are powerful and the marabouts can influence the way people vote in elections. Politicians compete for their support. In 2013 a law setting minimum standards for daaras was drafted. It has yet to be passed by parliament. In 2016 President Macky Sall spoke about taking the children off the streets and jailing those who forced them to beg. But official figures show that only about 300 children

were helped in 2018. Children often beg openly outside police stations. The marabouts who abuse them rarely face justice. All this may be storing up trouble for Senegal. “You have a large population of impoverished, abused children, isolated away from their families. I can’t think of a more perfect target population for criminals,” says Jeffrey Bawa of the United Nations Office on Drugs and Crime, a UN agency, adding that the boys were also likely to be future targets for jihadist recruiters. Mbar was chained to the wall for a month. An older, stronger boy kept the keys for the chains in his robe and disciplined the children when the marabout was away. One night he left his robe on the floor near Mbar, who found the keys and unlocked himself from the wall. He couldn’t find the key for the chains around his ankles but it was enough. He jumped out of the window. Strangers helped him out of his chains and took him to a shelter in Dakar. After almost a year of eating good food, he is beginning to grow again and dreams of becoming a footballer.

Love and the law

Botswana legalises gay sex

But more than 30 African countries still criminalise it

N ZIMBABWE “SODOMY” can land you in prison for a year. In Zambia “carnal knowledge against the order of nature” could mean seven or more years behind bars. Uganda passed a law in 2013 punishing gay acts with life imprisonment, though a court later struck it down. Botswana’s high court decided that such laws “deserve a place in the museum or archives and not in the world”. Judge Michael Leburu, who read out a unanimous verdict when the court struck down the country’s ban on gay sex, said: “It is not the business of the law to regulate private consensual sexual encounters.” This ruling follows the unbanning of gay sex in Angola in January and in Mozambique in 2015. So far, South Africa is the only sub-Saharan country that allows gay marriage. However, gay people are still persecuted by law in more than 30 African countries. In some, such as Sudan and Somalia, their love is punishable by death. Although such laws are seldom enforced, they leave people open to extortion and abuse.

despite the ban on their bedroom activities. And younger people in Botswana are more tolerant than their elders. Some 76% of 50-64-year-olds would object to a gay neighbour; only 48% of 18-29-year-olds would.

Anti-gay laws also reinforce a culture of intolerance in many countries. In May religious conservatives rejoiced when Kenya’s High Court upheld a law that criminalises gay sex. Judges found that it did not violate a constitu-

tional guarantee of freedom from discrimination, though it plainly discriminates against gay people. (Kenya’s constitution also promises everyone “adequate housing”, so perhaps the framers did not expect it to be taken literally.)

Botswana is a conservative place, too. Hereditary chiefs advise parliament, rather like hereditary lords do in Britain. But views about gay people are evolving. Discriminating against them at work has been illegal since 2010—

Monday 17 June 2019

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You cannot win the race on a stolen horse

Bashorun J.K Randle

he retired partners of KPMG who are still awaiting their gratuity and pension have been mandated to intervene in the dispute between Republican American President Donald J. Trump and his Democratic nemeses with Nancy Pelosi, Speaker of the House of Representatives as the leader of the pack who want the President impeached for grave crimes and misdemeanours. In her preliminary submission, Mrs. Pelosi has taken great pains to protest vehemently that contrary to the agenda and narrative which Donald Trump has been spewing, she is the one remonstrating with her fellow Democrats not to launch impeachment proceedings midstream of Trump’s tenure. She would rather bid her time and wait for the 2020 elections when, according to the polls, whoever is the presidential candidate of the Democratic Party is expected to trounce Trump. In any case, for the impeachment to succeed, it would require a two-thirds majority of the Senate which is under the control of the Republicans. Regardless, the caucus of the Democratic Party is hell-bent on going for Trump’s jugular now - before Trump inflicts irreparable damage on the United States of America and its allies. This totally unexpected honour and rare privilege, which came entirely out of the blue has put us in a huge quandary. This stupendous engagement unfortunately

conflicts with our previous commitment to honour a long-standing invitation from Mr. António Guterres, the Secretary-General of the United Nations to present our case to the General Assembly which unlike previous years will take all of the rest of this year – due to climate change!! While we are wrestling with the problem, other matters have crept up. Here is a random sample: Front page “The Guardian” newspaper May 3, 2019 i.) “UNEMPLOYMENT RATE TO REACH 33.5% BY 2020, SAYS FG” “Nigeria’s unemployment rate may reach 33.5 per cent by 2020, says the Federal Government. According to the News Agency of Nigeria (NAN), Minister of Labour and Employment, Chris Ngige, said this yesterday in Abuja while declaring open a two-day workshop on “Breaking the Resilience of High Unemployment Rate in the Country.” He said the incessant increase of unemployment in the country was alarming. According to him, the high unemployment rate of 23.1 per cent, and under-employment of 16.6 per cent by the National Bureau Statistics (NBS) of 2019 report was alarming. Ngige, who stated that various government social intervention programmes targeted at reducing youths’ unemployment and eradicating poverty had been implemented by different administrations since Nigeria gained independence, said that available records showed that between 1972 to date, about 14 different programmes had been implemented. He said these programmes included the National Accelerated Food Production Programme (NAFPP) and the current National Social Investment Programme (NSIP), which had been embedded in the National Economic Recovery and Growth Plan (ERGP) 2017-2020. He noted that the unemployment rate and poverty levels are on steady paths of

growth, indicating high resilience against the intervention efforts. The minister said that the workshop was aimed at presenting the outcome of some of government’s efforts and the commencement of another phase of the processes. He, however, called for a collaborative mechanism that would yield desired results while assuring that the recommendations from the workshop would receive prompt and sustained attention. Also, the Permanent Secretary of the ministry, Mr. William Alo, said the workshop was aimed at examining issues around the persistent high unemployment rate in Nigeria. “This workshop is very important to the Ministry of Labour and Employment due to the direct relevance of the theme to the ministry’s mandate. However, the fact remains that the consequences of high unemployment rate in Nigeria affect each and every one of us as individuals and as members of the Nigerian society,” he said. Meanwhile, while Mr. Dennis Zulu, Country Director, International Labour Organisation (ILO) in Nigeria, said that unemployment was a major concern to the organisation, especially in Nigeria, Director, Special Duties/Projects of the ministry, Mrs. Martina Nwordu urged participants to keep to the objectives of the workshop which aimed at achieving the goals of reducing high unemployment rate in Nigeria.” ii.) “RESIDENTS RESCUE TEENAGE GIRL FROM RITUALIST’S DEN IN LAGOS” “Providence yesterday saved a 17-yearold girl, Rachel, when she was rescued by some residents from the hands of a threeman gang of suspected ritualists, who abducted her along Ibasa Road, Alasia, Ijanikin, a Lagos suburb on Wednesday. The girl, an apprentice in a make-up studio, was sent on an errand when she was abducted by the kidnappers, who took her to

‘

The caucus of the Democratic Party is hellbent on going for Trump’s jugular now - before Trump inflicts irreparable damage on the United States of America and its allies

their shrine in an obscure area on Dan Ajayi Street, Alasia, Ijanikin at about 7:30a.m. It was gathered that the suspects had allegedly perfected the plan to kill the young girl for ritual, but luck ran against them when she suddenly regained consciousness and screamed “Blood of Jesus”. A neighbour, Tochukwu, said the suspects allegedly hypnotized the young girl before they took her away. It was learnt that the ritualists allegedly touched the girl with a charm, which made her to follow them unconsciously. It was further gathered that the suspects took the girl to a house, where they intended to prepare her for ritual sacrifice before the bubble bust. All three suspects escaped through the bush. Narrating what transpired, Tochukwu said Rachel followed her abductors like a ‘zombie’ without knowing where she was being taken to. “The suspects were already preparing the girl to be used when some neighbours heard her scream. The shrine, where they took her to was behind an isolated house on Dan Ajayi Street. The suspects took to their heels when they knew that the game was up,” the eyewitness said. Another witness, Chika Ugochukwu, alleged that the ritualists only moved into the area last year, adding that nobody took notice of their activities since where they reside was isolated from other houses. Chika added that she still could not believe that those who lived in the house along with others were ritual killers. She said ritual killers are no respecter of age, as both the young and the old fall prey to their hypnotism and knives, adding that she had often read of innocent adult and children who constantly fall victims. “Most vulnerable are school children, young ladies, especially undergraduates, pregnant women and the elderly,” she said.” Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Health financing, Nigerian banks and the basic health care provision fund

s defined by the World Health Organization (WHO), health financing is the “function of a health system concerned with the mobilization, accumulation and allocation of money to cover the health needs of the people, individually and collectively, in a health system.” It is a no brainier, that healthcare system in Nigeria is suboptimal, especially at the Primary health care level, which caters for the less privileged and people at the bottom of the pyramid. Several interventions have been deployed by Government and Development partners with little or no result. All effort seems to be like a drop in the ocean. The Primary Health Care System is driven by the Primary Healthcare Centres, which are encumbered with several issues limiting them from providing essential health services, such as; poor staffing, sub-optimal equipment, and lack of essential drugs, all which is tied to funding. With about 30,000 PHCs around the country, only 20 per cent of these facilities are functional. The inability of funds in reaching these healthcare facilities is a major hindrance to financing their activities, despite the appropriations of funds from different levels and donor to them. The monies diminish in one way or the other before they get to the health care centres. Though, some programs have designed health financing strengthening processes, to guide the flow of funds from the states to the health facilities, this model is yet to be fully adopted by all the programs under the PHC. Programs that have adopted this accountability framework in financial management strengthening have experienced improvement in the conduct of activities at the health facilities which has impacted positively on the health outcomes. Similar accountability framework in financial

management strengthening is what has been developed and instituted for the Basic Health Care Provision fund, which was brought to existence by the National Health Act. The National Health Act in Nigeria was signed into law to improve to Universal Health Coverage substantially by increasing available resources for Primary Health Care (PHC) services through the Basic Health Care Provision Fund (BHCPF) The Basic Health Care Provision Fund (BHCPF) was designed to help reduce out of pocket expenses and provide affordable and quality healthcare for Nigerians. The government currently sets aside 1 per cent of its yearly consolidated revenue and channels same towards the implementation of BHCPF, in addition to funds from donors. The BHCPF is being disbursed through 3 gateways, namely, National Primary Healthcare Development Agency (NPHCDA Gateway), National Health Insurance Scheme (NHIS Gateway) and Federal Ministry of Health (DHS/NCDC Gateway). All the Federal and State Government institutions involved in the disbursement of the Basic Health Care Provision Fund is expected to open a Treasury Single Account with the Central Bank of Nigeria for control and monitoring of all contributions and disbursements. With the steps taken by the government to jump-start health financing with guided accountability, it’s time for the commercial banks to make themselves available to support the initiative and tap into this opportunity. Firstly, all health facilities in Nigeria is expected to open bank accounts to receive and manage these funds, and this is the first step by the banks to engage on the initiative. The banks should work with the Local Government Authorities, and ensureall health facilities under the LGAs in www.businessday.ng

Nigeria have banks accounts to receive the Basic Healthcare Provision fund. Under the BHCPF model, designed by the Government under the Federal Ministry of Health, health facilities are to be strengthened to receive and manage their own funds, which is not limited to the BHCPF. The Health facilities are expected to prepare for other donors funding, which will support them in financing the activities carried out at the facilities. They are expected to develop capacity to develop annual business plans, carry out procurements, undertake internal and external audit exercises as the case may be, making them run like a business entity, so to say. Currently, most commercial banks in Nigeria carry out one form of CSR program or the other in healthcare sector and the outcomes have not made much impact. Supporting these health facilities under the BHCPF, will go a long way in strengthening their health outcomes and achieving the desired impact at the primary healthcare level. Most assuredly, the opening of bank accounts for these health facilities with minimum account opening requirements, will create ways for banks to cross sell other products like Agency Banking which will ultimately drive financial inclusion in addition to improving healthcare coverage across Nigeria. Therefore, the resolution for commercial banks will be firstly to commence discussions with LGAs across Nigeria, and begin opening of bank accounts for their health facilities, secondly, to look into plugging their agency banking solution into this model, and lastly, to commence product development for the undeserved and help reduce financial exclusion at the bottom of the pyramid. Ultimately, a well-designed health financing

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Olayinka Dada & strengthening framework will attract local and foreign donors to the healthcare space, which will better our health care systems at the grass root and also make money for the banks. Next steps for banks will be to partner with the Basic Health Care Provision Fund and provide their support by making account openings seamless for the health facilities, in addition to supporting capacity building for the health facilities to enable them manage their books and execute their annual business plans. It will not be out of place if banks can donate tools like computers and alternative power sources to assist these health facilities to become fully functional healthcare business entities. They are an SME hub waiting to explode if fully supported. Finally, though, the FGN will be providing 1 per cent CRF annually into the BHCPF basket account, in addition to other development partners, it will not be out of place for the banks to support with their widow’s mite in contributing financially into this basket fund, because a healthy people is a wealthy economy. Olayinka Dada, a Healthcare Development Consultant, he can be reached on 09090656935

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Monday 17 June 2019

BUSINESS DAY

EDITORIAL Publisher/CEO

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

Imperative of lifting 100 million Nigerians out of poverty Continued from front page

extreme poverty amounts to. We fully agree with and support the President’s intention to pull 100 million citizens out of absolute poverty over the next 10 years. The number is tragic; it’s equivalent to the populations of Ghana, Côte d’Ivoire and Niger Republic combined. The need is urgent; if nothing is done, more than 100 million Nigerians would be living in poverty before 2029. While the President’s intention – for this is what it is at the moment – should be applauded, it requires, in addition to purposeful leadership, recognising that government cannot do it

alone. It requires a clear understanding of the causes of this pervasive poverty level. One of the causes of poverty is lack of income, especially income generated from employment that people can depend on to meet their needs. And incomes are earned from jobs generated by businesses. Thus, above all, it requires a commitment to a private sector-led economic growth. As the past four years have shown, a government-only approach through social investment programmes won’t work. Neither more debt nor the recovery of Abacha loot will do. Lifting 100 million Nigerians out of poverty is thus a commitment to a private sector-led growth plan – a

credible plan that translates the President’s intention into concrete goals that can lift an average of 10 million Nigerians out of poverty every year for the next decade. The urgency and capital required to achieve this goal call for a mix of fiscal, monetary and industrial policies that can remove the bottlenecks in the economy and boost output of goods and services, and breathe life into comatose firms strewn around the country. It is these companies that will dent unemployment in the country which, according to the National Bureau of Statistics (NBS), was 23 percent as at the end of the third quarter of 2018. This excludes the high rate of underemployment.

Nigeria can take a cue from two countries, China and India. China, the world’s most populous nation, has stunned the world with its anti-poverty programme. In 1978, 90 percent of its population lived below the extreme poverty line; by 2014, 99 percent of the population lived above that line. China has set a target of eliminating extreme poverty by 2020, and to achieve this, it set to lift 10 million people out of poverty each year from 2016. Between 2005 and 2016, India pulled 270 million of its people out of extreme poverty through a rapid increase of goods and services produced to become a middle-income nation.

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Monday 17 June 2019

BUSINESS DAY

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Is there a method to the CBNs madness?

Patrick Atuanya

ver the June 1st weekend, the Central Bank of Nigeria (CBN ), dumped some pretty voluminous data from its most recent Statistical Bulletins about the state of Public Finances, external sector, domestic production, consumption and prices. Buried among the mountain of data was information on the CBNs monetary financing of fiscal deficits, or claims on the Federal Government (essentially money owed by the FG to the CBN). As at December 2018, such outstanding claims had hit N8.124 trillion, with overdrafts to the Federal Government (FG) alone at N5.415 trillion. What is alarming about this is the steep rise in the CBNs claims on the FG in just 3 short years (2015 – 2018). In the 20 year period between 1994 and 2014 the amount had never exceeded the N1 trillion level, according to CBN data. In 2012, the amount was N733 billion, it fell slightly to N678 billion in 2013, and rose to N922.3 billion in 2014, just before the slowdown and subsequent recession hit the Nigerian economy. As oil prices began to fall, with attendant slide in FG fiscal revenues,

CBN claims on the Federal Government more than doubled to N2.513 trillion in 2015. It doubled again at the end of 2016 to N5.2 trillion, stood at N5.87 trillion at year end 2017, and expanded to an unprecedented N8.124 trillion in 2018. Given the implications of unrestrained monetary financing of fiscal deficits through overdrafts and converted bonds facilities, there is cause to wonder if the CBN has a plan to unwind the huge expansion of its balance sheet that it has undertaken. Central banks sometimes finance government in period of temporary budget shortfalls, however what should be a temporary and small effort has become increasingly permanent with no end in sight in Nigeria. Large expansions of central bank balance sheets have implications both for the real and financial sectors of the economy. This is because any accumulation of assets implies an increase in corresponding liabilities, also expanding the CBN balance sheet in order to finance government spending often leads to inflationary outcomes. This also puts the CBN’s monetary tightening stance under in-

creased scrutiny, because it looks increasingly counterproductive. First the CBN has reduced banking sector liquidity by maintaining a high Cash Reserve Ratio (CRR), which mandates lenders to stash 22.5 percent of total customer deposits with the Central Bank at zero interest. It has also pushed short-term rates higher through open market operations (OMO), while at the same time pumping liquidity into the economy via its backdoor financing of the FG. The higher, the CRR, the less money commercial banks have for lending purposes, with negative consequences for the real economy. Bank lending to the private sector has been flat to down since 2016 moving from N15.85 trillion (2016) to N14.599 trillion (2018), according to CBN data. The CBN has in the recent past come out to justify its support for the Federal Government on the basis of its current revenue shortfalls. According to the third quarter 2018 budget implementation report, the FG could only manage N2.8 trillion in the first eight months of 2018, about half of the N4.77 trillion

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Given the implications of unrestrained monetary financing of fiscal deficits through overdrafts and converted bonds facilities, there is cause to wonder if the CBN has a plan to unwind the huge expansion of its balance sheet that it has undertaken

it should have raised in that period to meet a full-year revenue target of N7.165 trillion. Two straight years of lower than planned revenues in 2016 and 2017 pushed the government’s fiscal deficit to worrying levels. In 2016, the government budgeted N3 trillion but earned only 56 percent, with revenues of N1.7 trillion. In 2017, actual revenue of N2.7 trillion was only 54 percent of a N5 trillion target, according to data from the Budget Office. So it is somewhat understandably that the CBN feels obligated to provide support to the FG at such difficult times. However one key question the CBN must ask itself is whether the monetary support it is extending to the FG is causing more harm than good, and leading to greater distortions in the wider economy. With growth below trend, inflation elevated, and companies not creating enough jobs but barely surviving, the outlook is grim for any hopes of a surge in revenue collection by the FG, any time soon. This means that the value of loans/overdrafts extended by the CBN to the FG may continue to climb unrestricted, unless there is a deliberate change in policy or a hyperinflationary naira crises leading to an economic collapse, forces a halt! In that sense one hopes that there is some method to the seeming monetary madness going on within the Central bank of Africa’s largest economy. Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

The Nigerian Code of Corporate Governance, 2018 PRINCIPLE 7 – Independent Non-Executive Directors

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ndependent Non-Executive Directors bring a high degree of objectivity to the Board for sustaining stakeholder trust and confidence” -Principle 7 of the Nigerian Code of Corporate Governance 2018 (NCCG, 2018) According to the NCCG 2018 an Independent Non-Executive Director (INED) should represent a strong independent voice on the Board, independent in character and judgment and accordingly free from such relationships or circumstances with the Company, its management, or substantial shareholders as may, or appear to, impair his/her ability to make independent judgment. Whilst the meaning of independence may be contextual, the Code defines an Independent Director as that Non-Executive Director who meets the following criteria: • Holds not more than 0.01% of the paid-up capital of the Company; • Is not a representative of a shareholder that has the ability to control or significantly influence Management; • is not, or has not been an employee of the Company or group within the last five years; • is not a close family member of any of the Company’s advisers, Directors, senior employees, consultants, auditors, creditors, suppliers, customers or substantial shareholders; • does not have, and has not had within the last five years, a material business relationship with the Company either directly or indirectly • has not served at directorate level or above at the Company’s regulator within the last three years;

• does not render any professional, consultancy or other advisory services to the Company or the group, other than in the capacity of a Director; • does not receive, and has not received additional remuneration from the Company apart from a Director’s fee and allowances; • does not participate in the Company’s share option or a performance-related pay scheme, and is not a member of the Company’s pension scheme; • has not served on the Board for more than nine years from the date of his first election. The Code describes a reclassification of an existing NED into an INED on the same Board as undesirable. As such a sitting Non-Executive Director who otherwise satisfies the aforementioned criteria cannot be re-classified as an Independent Director. An Independent Director is clearly expected to bring an external unbiased perspective to the Board and it is expected that he/she will be appointed based on skill set, experience and strength of character. The INED’s “lack of interest” in the affairs of the Company and objectivity should not translate to a lackadaisical attitude to the affairs of the Company. The INED should inspire and sustain investor, regulator and public trust and confidence by presenting a formidable and dispassionate stance on the board. Independence goes beyond ticking the checklist recommended by the Code. It is indeed possible for an individual to meet the set criteria and still fail the true test of independwww.businessday.ng

ence. If the CEO or Board Chairman handpicks a “crony” who to all intent and purposes meets the aforementioned criteria, and labels such a person “Independent”, compliance would be with the letter rather than the spirit of the requirement. Independence does not however connote consistently being on the “other side”, suspicion of and an uncooperative attitude towards other Board members. The INED must at all times be reminded that his/her role is to stir the Board towards balanced decision making that as much as possible takes consideration of the interests of all stakeholders. The responsibility placed on the INED makes it imperative for him/her to devote time and attention to the Company. Whilst this is a requirement for every director, it is more significant for the INED whose appointment is often predicated on personal reputation. The INED is also required to Chair most Board Committees – in particular the Board Audit and Governance (Nominations) Committees. To provide clarity and ensure the INED is aware of the expectations of the role, a letter of appointment and an induction programme are useful. The conversation on whether or not tenure impacts independence has been settled by the Code which provides that the INED should not serve on the Board for longer than nine years from the date of his/her first election and the Board is required to annually ascertain and confirm the continued independence of each INED. The Board has a significant role to play in safeguarding the independence of the INED. In-

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Bisi Adeyemi dependence can be threatened by the appointment process, familiarity over time, economic considerations and the culture on the Board. The Board must oversee the appointment of an INED to ensure it is free, fair and transparent. The Board must also ensure that remuneration of the INED and other Non-Executive Directors is adequate without compromising the NED’s objectivity. Ultimately, the value of the INED to the Board largely depends on his/her strength of character. Dedicating time and intellectual resources where one has no pecuniary interest is a matter of choice and oftentimes altruistic. Sustaining the independence of the Independent Director largely depends on the personal integrity of the Director. Where the INED can no longer act in that capacity, he/she should be bold enough to leave. Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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Monday 17 June 2019

BUSINESS DAY

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Buhari’s wasteful inaugurations and empty Democracy Day speech global Perspectives

OLU FASAN

he formal inauguration of President Buhari for his second term took place on May 29, but the inauguration celebration followed two weeks later on June 12, the new “Democracy Day”. Both May 29 and June 12 were public holidays. Bizarrely, President Buhari didn’t give a speech at his formal inauguration; he only spoke at the inauguration celebration on Democracy Day! But let’s leave that aside, two issues are of more interest to me here. The first is the idea of two inauguration events. Does Nigeria need a public holiday on May 29 for the swearing-in of the president when the inauguration would be celebrated two weeks later on Democracy Day? The second issue is the president’s Democracy Day speech? Did he use it to set out a credible programme of government, of reforms, and to inspire national renewal? Let’s start with the first issue: the wastefulness of two inauguration events. We were told that the inauguration of the president on May 29 would be minimalist and low-key, while the real celebration would come two weeks later on the Democracy Day. Yet, although the only thing that took place at the inauguration was the swearing-in of the president and vice president, it was still a very elaborate event, with huge state resources committed to it. Surely, the president’s swearingin could have taken place in Aso Rock, without having two public holidays and ostentatious ceremonies. That idea is not without precedents. For instance, on January 20, 2009, President Obama was inaugurated at an elaborate public ceremony attended by world leaders, but he made several mistakes in reciting the oath of office. The following day, on January 21, the US Chief Justice, John Roberts, swore

Obama in again but this time in the White House, where Obama retook the oath of office. Four years later, during President Obama’s second inauguration on January 20, 2013, the swearing-in ceremony was done privately in the White House, while the public inauguration ceremony took place the following day, January 21, at the Capitol ground. These examples show that the swearing-in of a president could take place privately in the State House, while a public ceremony can follow later, with all the razzmatazz that goes with it. Since 1999, successive Nigerian presidents had been inaugurated on May 29, which was also the Democracy Day. Now, Democracy Day is June 12, but the president must, constitutionally, still be sworn in on May 29 while inauguration celebration takes place on Democracy Day. In this context, there is certainly no need to have two public holidays and two elaborate ceremonies. The president’s swearing-in ceremony, on May 29, should be like getting married at a registry and done privately in Aso Rock without a public holiday, while the celebration of his inauguration, on June 12, should be like the wedding ceremony and done publicly during the Democracy Day national holiday. The economics of public holidays has highlighted their negative impacts on productivity. Of course, public holidays are important, but they should not be frivolous. Nigeria’s economy suffers from low productivity, it shouldn’t be lumbered with more unproductive activities, such as wasteful and unnecessary public holidays. Now, let’s come to the president’s Democracy Day speech. Was it a speech that articulated a credible commitment to national renewal and reform? Well, the answer is no! The president missed the opportunity to recast himself as a reformist and transformation leader in his second term. The speech was full of platitudes, repeatedly saying things that people could not substantially disagree with, but which, underneath the façade, lack substance or credibility. Call it empty rhetoric! President Buhari needed to show two things in his speech. First, that he’s got an economic plan for his second term that would open Nigeria to business and foreign investors, and that would

Don’t forget the Principe

long time ago, a friend of mine who lived in Port-Harcourt called me and announced, “I am going abroad”. I was happy for him. It was, and still mostly is, a good thing to be able to travel out of the country. I asked him where he was going, and he said he was going to Sao Tome. I was like wow. In my youthful ignorance of African geography, I wrongly assumed that Sao Tome was one of those fancy Caribbean islands and was excited to hear all his tales. To my surprise he called again a few hours later and announced that he had arrived. Needless to say, I was shocked. “Did you use Concorde or something? Or Edo air? Or are you just messing with me? How did you get to the Caribbean so quickly?” He said he went by boat. As it turns out, Sao Tome and Principe is only a few hours boat ride from Port-Harcourt and my curiosity on the country was born. “Don’t forget the Principe” he said over and over again. As it turns out, Sao Tome and Principe are two islands off the coast of Gabon and people are fond of talking about Sao Tome but always seem to forget the Principe. That applied to me too. Even while learning about Sao Tome and Principe I kept on referring

to it as Sao Tome and forgetting the other half. A problem apparently not unique to me. So, why all these tales? A story in the news over the last week reminded of this Sao Tome and Principe experience, and how we have tendency to focus only on one side of a particular issue while forgetting other aspects of it. The issue in question in this story was access to finance. In response to one of the questions a panelists argued that Nigeria could not grow if citizens don’t have access to consumer credit. Indeed, he is not alone in pointing out the problems with the poor access to finance by both consumers and businesses. Valid problems too. But it is interesting how everyone always forgets the other aspects of access to finance besides just loans. These other aspects are mostly centered on savings and risk. It should be pretty obvious,but every loan given out must have been the result of savings by some other entity. If no one saves then there can be no loans. And the savings picture for Nigeria is not that great. With a gross savings as a percent of GDP at 15.5 percent in 2017 we are some way off the global average and miles behind the big savers like China, Singapore, and Korea. People often take shots at www.businessday.ng

unleash the animal spirits of enterprise in this country. Second, that he could unite Nigerians through leading Nigeria towards an enduring political settlement and true federalism, based on political restructuring. Unfortunately, his speech did not credibly address these issues. Although the president promised to “correct the lapses” in his first term, “tackle the new challenges the country is faced with” and “chart a bold plan for transforming Nigeria”, the agenda he set out in his speech is actually to “consolidate” the policies of his first term, it’s about more state intervention in the economy. The president referred to how China, India and Indonesia achieved economic growth and drastically reduced poverty. Based on these countries’ achievements, he concluded that “With leadership and a sense of purpose, we can lift 100 million Nigerians out of poverty in 10 years”. But did his speech writers really study the trajectory of China’s and India’s economic growth and poverty reductions? If they did, they would have known that the periods of economic transformation and prosperity in these countries coincided with the periods of their far-reaching economic reforms, private sector development and openness to the world economy. Evidence from the World Bank, the IMF and the WTO shows that Nigeria cannot achieve what China, India and Indonesia did unless it becomes an open, competitive market economy. Unfortunately, much of what the president said in his speech was about continuing with the current statist, interventionist and protectionist approach, with heavy reliance on government spending to address socio-economic problems. The few references in the speech to working with the private sector seemed perfunctory and hollow. If you were looking for commitments to market-based economic reforms, to privatisation, to tackling the supplyside constraints that businesses face, to the reform of critical state and marketsupporting institutions, you would be disappointed. For instance, the president said: “It still takes too long for goods to clear at our ports”. But how seriously has Nigeria taken its WTO trade facilitation commitments? The president talked about “improving productivity and accelerating economic growth”, but how

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The risk in lending and other macroeconomic risks are also one reason why we struggle to tap into global savings

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Nigeria’s economy suffers from low productivity, it shouldn’t be lumbered with more unproductive activities, such as wasteful and unnecessary public holidays

would that happen without embracing the economic openness and competitiveness that drive innovation, productivity and growth? Can Nigeria really be taken seriously as an open market economy if it doesn’t sign and ratify the African Continental Free Trade Area (AFCFTA) agreement? Strangely, Buhari said nothing about AfCFTA in his speech. Truth be told, it would take a seismic shift in mindset and worldview for President Buhari to truly understand market dynamics and economic fundamentals. As the president himself said, “Throughout my adult life, I have been a public servant. I have no other career but public service. I know no service but public service”. Surely, it would be hard for a leader with such a state-centred ethos to genuinely understand why the private sector, not the state, is the driver of economic growth and why private sector development is critical. Buhari’s speech proves this; his preference is for state planning! Now, what about uniting Nigeria? Again, it’s all empty rhetoric. President Buhari said: “We have been successful in forging a nation from different ethnicities and language groups”. Really, is Nigeria a “nation”, properly defined? Recently, President Buhari was hailed for saying that “True federalism is necessary at this juncture of our political and democratic evolution”. But what does he mean by “true federalism”? Is asking the Inspector General of Police to establish state and local government police forces, as Buhari reportedly ordered, the way to create a true federalism? Is naming the Abuja national stadium after MKO Abiola a substitute for restructuring Nigeria and creating an enduring political settlement? Surely, the answer is no. Yet, Buhari’s Democracy Day speech said nothing about political restructuring. Sadly, the new Senate rejected a motion to debate Buhari’s Democracy Day speech. That’s a bad start. The inauguration events and the President’s Democracy Day speech should ideally be debated by the legislature. Why wouldn’t they?

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

banks for not giving out loans, but we must not forget that banks are simply intermediaries taking funds from savers and giving out loans. The loans really come from the savers not the banks. Then there is the risk factor. The most important factor for loans is that it is eventually paid back. And Nigeria has significant risks in doing business and in recovering default loans which we are all aware about. From the high net worth individuals who systematically default on large loans to the small scale borrowers who just up and disappear, we know that defaults on loans are a problem. There is also the inherent risk in doing business in Nigeria which again we are all aware off. If we know there is significant risk in lending then perhaps we should be just as focused on risk as we are on any other aspect of access to finance. In 2017 Nigeria had a non-performing loans ratio of 14.8 percent as against a global average of just under 3.5 percent. Defaults are obviously still a problem. The risk in lending and other macroeconomic risks are also one reason why we struggle to tap into global savings. In 2017 the top five savers in absolute terms, China, the United States, Japan, Germany, and India had new savings of roughly $12.6tn. Yes, trillion. If we @Businessdayng

ECONOMIST

NONSO OBIKILI were able to incentivize them to put just one percent of those savings in Nigeria that would amount to $126bn worth of investment. More investment that we would have ever had in any single year of Nigeria’s history and almost one and a half times all the credit extended by the entire financial sector. The morale of this story is very simple. Access to finance is a problem but when we think about that problem we should not focus only on banks not giving loans. We should put as much effort in incentivizing savings, mitigating risks, and tapping into global savings. Or in the words of my travelling friend; don’t’ forget the Principe.

Dr. Nonso Obikili is Chief Economist at Business Day.

Monday 17 June 2019

BUSINESS DAY

COMPANIES & MARKETS

Kian Smith Gold Refinery becomes member of RJC

Company news analysis insight

Pg. 22

AGRICULTURE

Ellah Lakes acquires 100% equity stake in Telluria on market expansion push …appoints Chuka Mordi as Managing Director OLUWASEGUN OLAKOYENIKAN

llah Lakes plc, one of Nigeria’s foremost agriculture businesses, has acquired Telluria Limited in its renewed efforts to return the company to the path of profitability, strengthen its balance sheet and restore customer confidence. The agriculture firm, which is based in Port-Harcourt in Rivers State and specialises in fish farming, took over the 100 percent equity stake in Telluria after the Nigerian Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) approved the deal. The acquisition followed the fulfilment of all the necessary regulatory requirements

and became effective on May 7, 2019, the company said in a statement filed at the Lagos bourse on Friday. A check at the company’s financial results shows Ellah Lakes recorded a loss of N504 million at the end of the ninemonth period to April 2019 as against a loss of N8 million recorded in the corresponding period in the previous year. The company’s shareholders’ funds plunged to the negative territory of N6.88 million, indicating a need for recapitalisation. Consequently, the Board of Directors and Management of Ellah Lakes said it considers this business combination to be in the best interest of the firm as it expects the transaction to revitalize management

and create access to diversified expertise and financial strength. The agriculture firm further assured that its latest acquisition would improve administrative and operational and efficiencies of the company and strengthen the company’s market position by aiding access to new products and markets. The acquisition of Telluria Limited would “provide access to new markets while enhancing operations that will ultimately drive profitability and deliver value to shareholders,” the firm stated. Consequently, the management of the company at its recently held board meeting appointed Chuka Mordi as its Managing Director to take over from Frank Ellah who moves

on to new pursuits, according to the company. Prior to this appointment by Ellah Lakes, Mordi was a Director in Telluria and the Managing Partner of CBO Investment Management. Mordi has an impressive track record across all segments of finance both in Nigeria and the United Kingdom. He has over two and a half decades of experience in private equity investing, investment banking, and investment research. “The combination of Ellah Lakes and Telluria establishes a platform with a significant existing land portfolio, access to finance and investments in the domestic production of oil palm, and a variety of cash crops. I look forward to

an exciting future as we put Ellah Lakes back on a path to growth,” said Mordi. The Ellah Lakes’ new MD was responsible for oversight of the CBO’s management and investment activities and currently sits on the boards of CBO portfolio companies. In addition, Mordi led the firm’s efforts in publishing and distributing proprietary Africa macro and sector research, producing investment conferences, and developing active CSR programs. Shares of Ellah Lakes have remained unchanged at N4.26 for more than five years. The company was incorporated on August 22, 1980, as a private limited liability company and listed on the NSE on January 14, 1993.

CSR

Enyo’s Mechtech ups skill for Nigeria’s auto-repair industry FRANK UZUEGBUNAM

s auto manufacturers adopt the latest technology across design, connected mobile technology, vehicle tracking, 360 degrees cameras amongst other features, cars have become complex to maintain from a driver to mechanic point of view. Drivers have had to learn new ways to manage their cars and mechanics have become even more reliant on new knowledge to address new issues. It has now become important, now more than ever for mechanics to continuously update their skillset. Mechanics need to keep up with the high number of vehicles in need of service; they need to handle the growing influx of advanced vehicles, address the lack of knowledge and expertise for new technology To address the knowledge deficit in the automotive industry; and to foster sustainable solutions to professionals and up and coming mechanics in the country, Enyo retail and supply an innovative leader in the downstream sector of Nigeria’s oil and gas industry created a Mechanical Technician

academy program called MechTech. According to a report released by the Federal Road Safety Commission of Nigeria, there are over 14 million vehicles plying major roads in Nigeria. Despite a working population of over 1 million mechanics, it is estimated that about 15 percent of all road accidents are attributed to mechanical failure. Also, the newly imported vehicles have advanced technical, mechanical and digital features, most of which can be above the expertise level of traditional auto-mechanics. The first MechTech academy, which started in 2018, produced 50 graduates, educating participants with technical knowledge, tools and working capital. Going into the second year, the program continues to foster innovation and technical solutions for Nigerian mechanics by providing participants with the necessary information on automobile repairs and diagnostics. Through the training of mechanics, Enyo aims to reduce the number of auto crashes and casualties on Nigerian roads. This year, Mechtech will train another class of 50

mechanics. The curriculum for the 10 weeks intensive program covers the history of automobiles, workshop management and wealth creation. During this period, participants will benefit from exposure to modern day cars, excursions to auto centers, car diagnostic events, and practical sessions at Vehicons. The program is poised to

offer other benefits including access to the academy wide Alumni directory, Life time access to the MechTech online community and automatic MechTech Alumni membership upon graduation. Bringing jobs and fostering growth in the economy, Enyo Retail and Supply’s MechTech 2.0 is expected to empower a new batch of graduates - em-

powered with the knowledge and skills needed to solve Nigeria’s most prevalent auto problems. Lagos, one of the major hubs for business and mobility in the country has one of the highest influx of accident situations – from cars having technical failures, to unexpected bus scratches, shortage of fuel/oils and downright negligence from drivers. The

lack of patience, expertise and adherence to road laws by citizens – accounts for 45% of citizens frequenting auto repair shops for quick fixes, maintenance, electrical rewiring and general servicing on a weekly basis. The demand for auto repair and servicing has therefore created an active industry for mechanics to deliver expertise across a wide range of vehicle options.

Abayomi Awobukun - CEO, ENYO (centre) & participants of the Mechanical Technician academy program (MechTech) in Lagos

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

Monday 17 June 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

MINING

Kian Smith Gold Refinery becomes member of RJC JOSEPH MAURICE OGU

esponsible Jewellery Council (RJC), a standard setting and certification organisation, recently granted membership to Kian Smith Gold Refinery, the first-ever gold refinery company in Nigeria. RJC, which covers all parts of the jewellery supply chain from mine to store, developed standards and provides certification that confirms the compliance of companies with social, environmental and ethical standards. The membership of Kian Smith shows that the company is committed to complying with the world standard in gold chain, including procurement and processing. Nicole Smith, Event Manager, Gold West Africa, said the Gold West Africa conference will be highlighting aspects of compliance in adhering to the global ethical standard in gold supply

chain. “It is increasingly important in the global markets to show transparency and conflict-free in sourcing for minerals,” she said. According to Smith, a big component of responsible sourcing is not just about the legality of the source, but also ascertaining that chemicals harmful to lives and the environment are not involved in the gold value chain. In this regard, the company has been working and educating suppliers around the country to make sure that they meet all requirements necessary to comply with Organisation for Economic Co-operation and Development (OECD)’s responsible supply chain guidelines. Presently, there is no gold standard recognised in Nigeria or the West African region. Later this month, the company will be involved in the Gold West Africa Conference that is centred on the gold value chain, where it plans to discuss and tackle

the possibility of having ECOWAS region to adopt uniform international standards for gold. At the conference, the Standards Organization of Nigeria (SON) will be shedding some light on its recent efforts in gold standard while United Nations Industrial Development Organization (UNIDO) will be speaking about its efforts to address sustainability and other developmental issues in gold value chain of Nigeria and the West African region. The conference will hold on June 25th and 26th at Eko hotel, Lagos. Fagbemi Aremu, a local miner resident in Ilaro, Ogun State, said, though he has not come in contact with the company, the news he had heard about an incoming gold refinery company would give value to their work, instead of being exploited by foreign buyers. “With this company, we will have more money and our economy will be improved,” Aremu said.

L-R: Christopher Calvert, business development team leader, Randox Laboratories; Sandra Achebe-Obidike, head business development and client services, ISN Products Nigeria Limited; Don Anyanwu, non-executive director, ISN Products Nigeria Limited; Daniel Adewuni, applications support team lead, ISN Products Nigeria Limited, and Olaseni Fawehinmi, head marketing, ISN Products Nigeria Limited, at the Inaugural ISN Quality Assurance Summit (ISN QAS) in Abuja

Solomon Ogufere (2nd l), commercial director, Vodacom Business Nigeria, presenting the winning prize for best website design, at the Girls in ICT competition to Grace high School Gbagada, at Vodacom Office.

FINANCIAL SERVICES

World Remit unveils new product for business payments to Nigeria Jonathan Aderoju

eading digital money transfer company, Wo r l d R e m i t , h a s launched World Remit for Business; this is a new service that enables small and medium-sized business owners to quickly pay employees and contractors in 140 countries worldwide, including fast-growing markets such as Nigeria, Ghana, Kenya, and South Africa. WorldRemit’s low fees and exchange rates are shown upfront and customers can send money easily via the company’s website and app. By extending its money transfer service to SMEs, WorldRemit will save businesses time and money when they make international payments. Every year, the UK imports $2 billion (N720 billion) in goods and services from Nigeria, where SMEs account for 96 percent of businesses and 84 percent of employment. WorldRemit for Business will make it easier individuals to receive payment by UK-based partners via bank transfer to GT Bank accounts.

While some banks can take up to one week to process payments, WorldRemit transfers to Nigeria are processed instantly. Customers sending funds abroad can easily track their transfers in real-time on the WorldRemit app and opt-in to receive daily exchange notifications to send money abroad at the optimal time. According to Ismail Ahmed, Founder and Executive Chairman at WorldRemit, “When I first started WorldRemit, I was frustrated with the high charges and long delays in sending money abroad both as a business owner and consumer. Over the past 9 years, we’ve made it easier for 4 million people around the globe to send and receive money. Today, we’re pleased to extend that service offering to businesses, and put an end to the steep fees that many businesses have to pay, especially when sending to Nigeria. We’re committed to making it quick, safe and easy for you to pay individuals across borders, leaving you to focus on growing your own business.”

Adding to the comment of the CEO WorldRemit, Shane L ennox , Senior Product Manager for Business further commented that “With more people moving and settling across borders, the nature of business is becoming increasingly global. This new product offering is catering for those in need of a digital service that solves a number of pain points faced by SMEs with international staff and contractors. This new product launch will enable millions of SMEs to benefit from our awardwinning convenientservice.” WorldRemit customers complete over 1.4 million transfers every month from over 50 countries to over 140 destinations using its app or website and remain committed to providing innovative solutions to meet money transfer needs across the world. In addition to partnering with Nigerian Banks including First Bank of Nigeria Plc, Access Bank Plc, Fidelity Bank Plc for instant digital money transfers. In April 2019 the company launched international transfers to Paga mobile money accounts.

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L-R: Godwin Akpong, head, Learning and Development; Olufunke Amobi, country head, Human Capital, and Yosola Afemikhe, employee engagement consultant, all of Stanbic IBTC, at the Human Resources Practitioners 2019 Awards organised by HR People Magazine in Lagos, recently

Bukola Smith (5th l), executive director, business development, First City Monument Bank (FCMB), with officials of the Bank, International Finance Corporation (IFC), and some of the participants at the climate finance awareness workshop and exhibition on Solar Energy Solutions organised by FCMB in partnership with IFC in Lagos.

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Monday 17 June 2019

BUSINESS DAY

cityfile Re-Residents petition EFCC over developer’s alleged fraud at Pearl Garden Estate

n Friday, June 14, we ran a story titled ‘Residents petition EFCC over developer’s alleged fraud at Pearl Garden Estate,’ which we sourced from the News Agency of Nigeria (NAN). In the story, the residents of Pearl Garden Estate and Pearl Nuga Park Estate located at Sangotedo in Lekki/Ajah area of Lagos, had alleged that CMB Building Maintenance and Investment Ltd, allegedly mortgaged some of their homes, to secure bank loans. This allegation was, Cross section of Nestle Staff and volunteers, at the beach cleanup organised by the company to celebrate 2019 World Oceans Day in Lagos.

NEMA, Enugu partner on flood control

Lagos water transportation T to receive boost …as firm unveils facility to aid boat builders, operators JOSHUA BASSEY & JOHN SALAU

ater transportation in Lagos is expected to receive a boost, as Multimodal Transport Technologies Ltd, an integrated marine logistics solutions provider, has launched a one-stop centre in support of builders and operators of boats on the state waterways. The multimodal transport technologies is one of the kind purpose built warehouse and showroom that serves as a one-stop shop, which will cater for both leisure and commercial boat owners across Lagos. The centre, which was unveiled, Thursday, is an initiative that will drive the state government’s vision of creating an alternative means of transportation to

ease traffic congestion on the roads. Babajide Sanwo-Olu, the Lagos State governor, is optimistic that the multimodal transport technologies would boost water transport in the state. “Presently we have five boats; two are 60- seater capacity while another two are 45- seater; and we have one that can ferry cars. But that is not enough because we plan to have more,” said Sanwo-Olu, who was represented at the launch by Taiwo Olufemi Salam, permanent secretary, Lagos State ministry of transportation. Oludamilola Emmanuel, the general manager of the Lagos State Waterways Authority (LASWA), who gave an insight into the passenger traffic on Lagos waterways, disclosed that about

1.5 million passengers are ferried per month. “For the very first time in Lagos, we are having an efficient and effective way to fix boat with parts readily available to ensure that movement can easily happen for the ferries,” Emmanuel said at the unveiling of the centre. Kayode Olowu, the MD/ CEO of Multimodal Transport Technologies Ltd, said the company was supporting the state government’s plans for water transport, being the first phase of the business, as the company looks forward to building more infrastructure across the state. “In this store we have everything you need if you want to build a boat from scratch to finish and even for other boat operators we have enough in the store

that even if they want to build boat, we can offer parts, services and others. So, apart from serving operators we also serve boat builders,” he said. According to Olowu, there is a need for government to create an enabling environment by encouraging firms playing in the marine logistics sector to do more and scale up their business. “We need waivers, we need to be able to bring this service to boat operators,” he stated. Olowu explained that the company was a marine logistics firm with a team of people that have worked in both private and public sectors with verse experience around maritime. “What we have done is to put up a one-stop marine centre,” he said.

A’Ibom awaits FG’s nod on Ibaka seaport

kwa Ibom government says it is awaiting the Federal G overnment’s approval to start construction work on the Ibaka deep seaport project in Mbo local government area of the state.

Akan Okon, the immediate past commissioner for special dut i e s a n d av iat i o n d e velopment, stated this in Uyo on Friday. Okon said construction work would commence at the site as soon as the state government secures apwww.businessday.ng

proval from the Federal Government. According to him, the technical committee set up by the state government in 2015 to oversee implementation of the project had submitted its report, saying that a preferred bidder had

emerged to invest in the seaport business. According to him, the technical committee which is headed by Mfon Usoro, has experienced maritime professionals as members. “Governor Udom Emmanuel on assumption

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however, not verified by us before running the story, which also had the GSM number and the email address of Kelechi Mbagwu, Managing Director (MD) of CMB Building Maintenance and Investment Ltd, the developers of the said estates, published. We have since realised that this unverified claim, as well as the telephone number and email address of the MD shouldn’t have gone on our medium. We hereby tender our unreserved apologies to Kelechi Mbagwu for the embarrassment this may have caused him.

he National Emergency Management Agency (NEMA) is partnering with Enugu government on flood control and mitigation of its impact in the state. Enugu, particularly the metropolis is seasonally confronted with flood related disasters, which sometimes leaves residents homeless. NEMA zonal coordinator, Fred Anusim said in Enugu on Friday, that the agency was also extending sensitisation to communities and council areas, mostly affected by flood. Anusim said that the agency was also engaging the chairmen of the councils to ensure de-silting of all drains ahead of the major months of the rainy season. ‘‘We have met with the heads of the ministry and State Emergency Management Agency (SEMA) on the issue.

“Apart from community sensitisation, we have also involved council chairmen to see that they mobilise resources and volunteer groups to de-silt major waterways and drains in the localities. He emphasised the need for the residents of the state to be environmentally-disciplined and shun habits of throw refuse into drains as well as dumping them indiscriminately. Anusim also said that the agency was tinkering with the idea of collaborating with the state ministry and SEMA to check indiscriminate dumping of refuse by using the mass media especially the radio. ‘‘It is lack of care of the environment by individuals and group through injurious environmental practices that had made flash flood a persistent challenge in the state,’’ he said.

of office in 2015, knowing what could happen if such project is left under the bureaucracy of government, put in place a technical committee for actualisation of Ibom deep seaport. “The technical committee has worked so hard and as at today, we have gotten a preferred bidder which is one of the leading com-

panies in the maritime and cargo industry by name, Bollore And Power Channel. “The committee’s full report had been made and submitted for actualisation of the seaport and we are only awaiting the approval of President. “Once that is done, I assure you, construction will begin,’’ Okon said.

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Tuesday 17 June 2019

BUSINESS DAY

Tuesday 17 June 2019

BUSINESS DAY

CEOINterview

SANJAY TEOTIA MD, NIPCO Plc.

Interview with Private Sector Leaders

‘Unless government comes up with drastic policy measures in downstream, things won’t improve’ The distortion in the downstream sector of the Nigerian petroleum industry has been a major concern to industry players mainly because the federal government has refused to deregulate the sector. SANJAY TEOTIA, Managing Director of NIPCO Plc, in this interview with OLUSOLA BELLO, Energy Editor, offers insights on how the sector can be repositioned and made to attract investors. Excerpts

an you give a general over view of the operational environment of the downstream sector of the oil and gas industry? The general operational environment is really tough. It is absolutely tough as we speak. The margins have shrunk due to increased competition and, bureaucratic cost that goes into the operations. Levies and taxations are also scaling up with profound effect on the cost of operations in the industry today. You would notice that quite a few depots have shut down. The reasons for this are in the public domain. I do not need to elaborate. This is even affecting the majors’ oil marketing companies. Scores of other operators are on the verge of shutting down. To my knowledge DAPPMA is facing series of challenges that are threatening their existence in the sector along with a few major operators ‘ Hence, unless and until certain changes are made in the PPPRA templates and more proactive measures on the path of some of the regulatory agencies, things may not look up as rapidly as expected in the industry. As a major operator what have you done to draw the attention of the agencies that supervise the industry to these challenges you are facing instead of suffering in silence? It is not actually a case of suffering in silence as our views are expressed at several forum presented either by government or the private sector on the myriad of issues plaguing the industry. We are upbeat that something more enduring will be put in place in the overall interest of stakeholders There is no point in complaining or making unnecessary noise when scores of avenues are provided like the Nigeria Gas Associations for gas related issues and many foray such as newly approved Nigeria International Petroleum Summit (NIPS) and the yearly Nigeria Oil and Gas Conference, all of which provides veritable avenue for operators in the industry to review operational challenges and provide workable solutions This is the primary reasons for keeping quiet at least as an operator expecting that the power higher up will listen and understand the situation at hand. The situation in the last two years has degenerated and it is further degenerating. So everybody needs to understand that there is need to facilitate a healthy market. It is in the best interest of the industry to see if not a full deregulation but a partial one is carried out so that at least all the stakeholders can import product and see to it that the stress NNPC is going through ,which is really herculean in view of the enormous challenge of meeting the entire PMS demand of the nation is reduced .One must give kudos to them. However,a lot of relief would have been on the National Oil Company, NNPC, if she does not have to import every molecule. I also wish to see policies on forex that would help importers to import seamlessly without any problem. Affordable forex can be made available for the industry

Having said this, I am 100 per cent against importation of fuel. If I were in a position of authority I would have harnessed the resources in Nigeria for the economic benefit of the country. God has blessed Nigeria so much with abundance resources of natural gas that I would have seen to it that partnership with investors takes place and the usage of gas is deepened. I would have ensured that the Liquefied Petroleum Gas (LPG) or cooking gas that is required is produced in the country. This country can provide electricity for the entire African continent. So it is high time that the resources of the country be harnessed for the common good of the country. LPG can potentially be utilized to power vehicles with the experiments that have been conducted. The bottom line message is that unless and until the federal government comes up with drastic policy change things would not improve, things would improve long-term, and the moment there is consistency in policy, importation would become a misnomer and indeed an aberration. Imagine the billions of dollars the Nigeria nation spends on importation of petroleum products. This could be potentially utilized for the good of the people by using it to create infrastructure in the areas of health facilities to take care of highly deprived lots. There are many activities that the money spends on importation can generate for the benefits of the people.

mature in such a way that it grows for everybody to benefits. This is the idea. If hear you well, the company in Oron, is it a new company set up by NIPCO? It is being set up as an independent company, it is a sister company in our group. Is it going to be producing pipeline or gas? Yes, it is gas production. Is it under government flare gas commercialization programme? No, flare gas is different thing. What we are going to do is not a flare gas but pure natural gas coming from the wells waiting to be utilized. This gas can ultimately be converted to LNG but there is huge amount of CAPEX that is involved, or it can be used as natural gas in a compressed form into pipelines and transported to a particular destination where it could be used. Our intention is to first see it, if it could be transported through a pipeline and then taking it to a centre and if not we would go for LNG plant. That is the current plan. LNG is very costly in terms of infrastructure. It is not only turning the molecules into liquefied natural gas, it’s requires higher amount of energy and needs large volume of gas whereby the investors must have deep pockets. This would only be feasible through a long time policy plan by the government current regulatory frameworks in place, hence people think twice before investing. The moment regulations is also coming place I am sure Nigeria will attract investments like a honeycomb attracts bees.

Your business is being threatened so to say, because you are supposed to be dealing with PMS? NO. PMS is just one of the products. But from the point of view of outsiders PMS is what most of downstream companies like NIPCO are known for and not LPG or Lubricant? We are still marketing the Mobil brand of Lubricants for a company we acquired in 2017 and we are having a fair share of the market. In fact Mobil lubricant is a premium brand well recognized in Nigeria. We took over all the constituted facilities and we would continue to blend in their name, with their technology and standards. We are in all the facets of the downstream industry as we speak. We have also added another facet; we have gone into aviation operations. We are in collaboration with British Petroleum which exited Nigeria several years ago; they are back and are collaborating with us. All the international carriers have started buying fuel from our company, 11plc, formerly Mobil Oil Nigeria. We created infrastructure within a span of two years. All these are targeted for the good of the nation. Ultimately money cannot be where money is not earned. If regulations are given a serious priority then things would be changing rapidly for good for the industry and for the nation because there are good players in the market, very capable players in the market that are not only operating in Nigeria but also operating in other parts of the world. They are capable of deliveries but they don’t see any business sense right now because of poor margins that are available. So I would say a change is required in the way the industry is governed. Tell us more about your foray into www.businessday.ng

Your activities seem to be shifting from fuels? Yes, because we are just trying to show case that Gas is the future if it is developed sufficiently in Nigeria she being a rich Nation where every citizen enjoys goodies of the natural endowment of hydrocarbon resources. We are progressing with our CNG programme. We are setting another station near Asaba. We intend to set up another in Port Harcourt, Rivers State and Calabar, Akwa Ibom State respectively. So the expansion plans are on. Why are you not looking towards the

Natural gas? We would be starting Natural Gas production very soon. As matter of fact we are setting up a company that is at various stage of government approval for setting up a production facility. The details and basic designs of the facility is almost completed, we are going to order equipment very soon hopefully by first quarter 2020 the facility would be installed to produce. pipelines specification, natural gas. The facility is located in a remote area in eastern part of the country, Oron, in Akwa Ibom State to be precise. It requires that the

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gas would be moved by pipeline. We are exploring all options to see how we can move it. It will also require NNPC to also help in making available its pipeline facilities so that the gas can move from the East to the West because big consumption centres are in the west including our own facilities where we supply compressed natural gas and other kits. We supply compressed natural gas in Ibafo and Benin. So we are starting this venture in anticipation that things would happen in tandem with regards to pipeline infrastructure. But if things don’t happen, we have other plans also. We will set up small LNG facilities to see that the gas is ultimately liquefied and moved across to consumption centres.

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northern part of the country? The north does not have the infrastructure and resources that we can rely on at the moment, may be in future. Government bold moves in this direction are commendable especially in gas pipeline infrastructure from Ajaokuta to the Northern part of the country. The resources are available in the eastern part of the country. So the goodies can only be enjoyed by everyone if only the infrastructure are in place, but if there is nothing place the goodies are either wasted or locally utilized. If a very robust network is on ground I can see the import bill for Nigeria dropping down from billions of dollars to a few millions of dollars, because you don’t need to import PMS as it can be substitute by natural gas for use in vehicles, industrial usage and power generation. PMS consumptions are huge in this country. All those vehicles on our streets can potentially run on natural gas. So importation will automatically go down if the convergence happens. Similarly LPG is imported to the country. The production facility right now has not been sufficiently developed, the deepening of the market is taking place, and consumption level has gone up. If production facilities come up we don’t even need to import LPG. Refineries even though are not functional they still can produce the amount gas the country needs. This means the pressure would not be there on the refineries and the objective of saving the foreign exchange would be achieved. The resource utilization would start but the

I must tell you that we as a company are very bullish on Nigeria. Though it has got its own challenges but my investors have been operating in this country for 35 years in different businesses. They have great respect for Nigeria and confidence in the resilience of the economy. We have supported so manyinitiatives in Nigeria. As you may be aware, even at NIPCO, we have been in this business for last 15 years and have been complying with all the statutory requirements. NIPCO has been contributing its own share to the economic growth of the country and we are evolving in line with current realities . Evolving to see that we keep our eggs in various baskets and each www.businessday.ng

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infrastructure must be there. Let us know about your LPG business? Two years back we were doing 25 per cent of what we are doing now. But we have increased about four times in the last two year and half years. This is the only indicator that the usage is deepening. We have added infrastructure. Last two years we set up addition sphere which is the largest in Africa. It is having the capacity of 5,000 tons we did not rest on that as we expanded our gantries and we are putting in two more LPG sphere with our newly acquired company 11 PLC to see that the company starts operations. We are expanding into the retailing sector of LPG. We have installed skids at petrol stations almost two years back. When I came to this country we hardly retailed 200 tons of LPG but today we are retailing 2000 tons of LPG. You mentioned in the course of the interview that Nipco had supported other areas aside that of the bottom line, what are these areas? Thanks for bringing me back. We did not see ourselves as being interested in growing our balance sheet alone but as a responsible corporate organization with interest of its host communities at heart. This explains our broad social investment policies covering our host communities and the country at large. In Lagos for instance, we adopted two public primary schools, Apapa Nursery & Primary and Ijora Oloye Nursery & Primary School. In the two schools we have embarked on facility upgrade worth several millions of naira. In the next few days we shall be inaugurating a computer laboratory for Apapa pupils and teachers in the area and environs .The centre equipped with scores of computers in a congenial environment in one of the renovated classroom of Apapa Nursery & Primary School will aid practical computer education in the state. Nationally, we have also intervene in health and some humanitarian areas like free eye surgery for thousands of visually impaired patients as well as donation of goods worth several millions of naira to Internally Displaced People (IDPs,) in the Northern part of the country.

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Monday 17 June 2019

BUSINESS DAY

real sector watch

Expectations of Nigerian consumers from local manufacturers Maurice Joseph Ogu & Gbemi Faminu

igerian manufacturers face a number of challenges. The environment is tough, policies are sometimes unstable and infrastructure does not support manufacturing activities. Despite all these, Nigerian consumers have high expectations from local manufacturers and their products. Real Sector Watch asked a few Nigerians to vent their feelings on made-inNigeria products and what they expect manufacturers to focus upon. From their viewpoints, quality tops the list. It is a mixed bag as many want improvement in quality while others want price cuts. A section of consumers, however, think made-inNigeria products are better than imported ones. For Oyedeji Dolapo, a Lagos-based entrepreneur, local producers should improve the quality and durability of their goods. “Most of the made-inNigeria goods I have come across are of inferior quality and lack attractive packaging,” Dolapo said. Temiloluwa Fakunle, a fashion designer, said manufacturers should let their prices match the quality of their products. “The idea behind an expensive but inferior product is rampant among local producers, and this discourages the consumption of local goods. Let quality match pricing. If it is expensive, I expect good value for money spent,” Fakunle said. Like Dolapo and Fakunle, Frank Umeh, an Enugubased entrepreneur, said local manufacturers must improve the quality of their products. “The idea of producing low-quality products to compete with Chinese goods is not an innovative way of growing a business. Get something good out there, let people know you for quality and they will buy no matter the difference in price,” Umeh said. Solape Aina, a teacher, said local manufacturers are trying their best and some of

Temiloluwa Fakunle

them give value for money. But she advised them to be more innovative and gain a strong stance in the global market with their products. Okonjo Chidinma, a customer care representative in a Lagos-based firm, said Nigerian manufacturers must make high-quality products that can compete favourably in the local market. “They suffer high cost of production and difficulty in accessing raw materials,

Ayooluwa Obasuyi

among others. Therefore, I do not really blame them. I would rather request that the government help them in improving the quality of locally-made products by providing the right environment and the infrastructure to work with,” Chidinma said. Ayooluwa Obasuyi, an architect, explained that Nigerian manufacturers should take a cue from foreign counterparts in terms of designs, innovations, dura-

Irene Abidemi

bility, and quality that attract products to the consumers. “Most Nigerian products have mediocre designs and are of low quality, making them unattractive,” Obasuyi said. Dami Soyode, a risk analyst, said, “We have abundant resources. Therefore, indigenous goods should be unique and well branded in terms of design, quality, and usage, among others. Furthermore, indigenous goods should be affordable. Affordability should be one of the major motives of home-made products,” he added. Output of members of the Manufacturers Association of Nigeria (MAN) totalled N9.98 trillion in 2018 as against N9.7 trillion recorded in the 2017. Nigerian manufacturers are competing with Asian products, especially China with cheap but sub-standard products. Robinson Echefu, a com-

Robinson Echefu

Adunni Folarin

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mercial motorcyclist, said he likes made-in-Nigeria products and understands local producers face challenges. He said he is in love with clothes and shoes that are made in Aba, Abia State commercial capital. “But the only problem is that they fade quickly,” he admitted. “If Aba people make quality clothes and shoes, I will be willing to buy them at any amount. What I want is quality, not necessarily reduced price. For example, I bought one made-in-Aba shoes. The leather is good; the quality is good. It looked like foreign, so I did not mind paying more for it. Today, I am still enjoying it. I look good and feel good about it such that my friends want to buy such,” Echefu. For Moumoudu Didier, a Togolese who works at the Lagos ports, Nigerian products are the best.

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“I buy made-in-Nigeria things. Everything I have been using is okay for me. I am cool with Nigerian products. They are really trying their best,” Didier said. Esther Akinkunmi, a fashion designer, said: “I like made-in-Nigeria products. This weaveon I am putting on is made in Nigeria. I like it. I do not have any complain, which is why I am putting it on. I make clothes. I buy Nigerian clothes and design for people. My customers like them. They do not complain, rather, they keep on coming to buy more. They even introduce me to other people to buy from me.” Ruth Ndidi, a fabric merchant, explained that she sells ‘wrappers’ made in Kano faster than foreign ones. “They have quality and their prices are okay. That is why many people can afford it. I usually buy them N1,200 or N1,300 and resell at N1,800 or N2,000. I sell them fast and make returns. I make good money.” Adunni Folarin, a shoe and bag seller, said she buys made-in-Nigeria shoes and bags but they do not give her any problem. “The source of your products matters. I buy from trustworthy, good people. I buy from good sources to resell because I can afford to disappoint my customers,” she said. Irene Abidemi, petroleum marketer, said she buys Nigerian shoes, sandals and bags and even markets them for the producers because they are good. “I feel our government should encourage manufacturers. The person who sells to me is a University of Lagos (Unilag) graduate. He makes good products.” For a consumer who identified himself simply as Abdul, Nigeria products are good enough. “I do not usually have complaints. Nigerian products have been good. For example, I use wire a lot. I usually buy made in Nigerian wire. They are very good and okay, no complain. Toothpastes, beverages, soft drinks, everything is okay. I only want the manufacturers to reduce the prices of things. The quality is okay, but the price is not okay,” he said.

Monday 17 June 2019

BUSINESS DAY

real sector watch

Communities threaten to sack investors at Ogun-Guangdong FTZ …situation calls for quick FG, Ogun govt intervention RAZAQ AYINLA

t is no news that President Muhammadu Buhari-led federal government has resolved to diversify the Nigerian economy with the non-oil sector and exports. The government targets an improved non-oil sector performance and gross domestic product in the 2019 fiscal year and beyond. But Ejila/Igbesa communities in Ado-Odo/Ota local council of the state, home to the only operational free trade zone in Ogun State, are threatening to send away Ogun-Guangdong Free Trade Zone, accusing them of encroaching on their land, thereby endangering the country’s non-oil sector vision. The Ogun-Guangdong Free Trade Zone is located in Igbesa/ Agbara industrial hub of Ogun state and is dominated by Chinese investors operating as a business cluster within the zone. The free zone was licensed by the Nigeria Export Processing Zones Authority (NEPZA), which allocated 2,000 hectares of land in Igbesa/Ejila communities in Ado-Odo/ Ota Local Government Area of Ogun State with a 99-year tenor of operations. The 2,000 hectare-land allocation was done in 2008 by

Ogun State Government with Certificate of Occupancy No. 026765. A tripartite approval was secured from the Federal Ministry of Industry, Trade and Investment; Nigerian Export Processing Zones Authority (NEPZA), and Ogun State government to operate as a manufacturing cluster. The Ogun Guangdong Free Trade Zone, Igbesa, operated by China-Africa Investment FZC, is one of the 14 active free zones with 57 registered companies and over $500 million cumulative investments, offering em-

ployment opportunities for over 10,000 Nigerians in the form of direct and indirect jobs. The recent threats coming from ‘Omo Onile’, also known as land grabbers, backed by disgruntled members of Igbesa/Ejila communities, have, however, left so much to be desired. The ‘Omo Onile’ are alleged to be backed by the chairman of Land Owners Committee of Igbesaland, Solomon Ajose, as operators allege disturbances of manufacturing operations at Ogun Guangdong

We created 18,203 jobs in 2018—MAN ODINAKA ANUDU

he Manufacturers Association of Nigeria (MAN) created 18,203 in 2018, according to the association’s economic review for the second half of 2018. In the last six months of 2018, the body’s new manufacturing jobs stood at 8,883. Man has over 2,000 members who are in different industries, ranging from food to packaging and steel. Non-metallic group, which includes cement, glass and ceramics, created 1,369 jobs while the Chemical & Pharmaceutical group posted 1,342 jobs. Food, Beverage and Tobacco sectoral group had 1,335 jobs as Domestic/ Industrial Plastic & Rubber

group produced 1,125 jobs. These sectors accounted for most of the jobs created in the manufacturing sector in the second half of 2018, MAN says. Total job loss in the second half of 2018 stood at 2,587 jobs, which was less than 5,212 and 6,050 job losses recorded in the corresponding half of 2017 and first half of 2018 respectively, MAN said. Nigeria’s unemployment rate stood at 23.1 percent in the third quarter of 2018, up from 18.1 percent a year earlier, according to the National Bureau of Statistics. As of Q3 2018, the underemployment rate was 20.1 percent, and the combined unemployment and underemployment rate was 43.3 percent, NBS said. www.businessday.ng

Free Trade Zone. The communities claim that some 484.019 hectares of land within the 2,000 hectares allocated to Ogun Guangdong Free Trade Zone in 2008 belong to them. They say that the 484.019 hectares of land belonging to Imapa, Iludofin, Irinsa, Ikosi, Isunba, Ilemo, Iliwo, Imuse, Idafero and Ipodo families and the Acquisition Gazette do not cover the parcel of land referred to in the land acquisition arrangement which Ogun State government undertook to allocate

to Ogun Guangdong Free Trade Zone and, therefore, the management of the zone - China-Africa Investment FZC-should vacate their land. But in a swift reaction to the threat issued on ChinaAfrica Investment FZC, Daniel Che, deputy general manager and Sebastine Ijomah, public affairs manager of the free zone, said that the 2,000 hectares of land on which Ogun-Guangdong Free Trade Zone was built, was dully acquired from relevant government agencies for the establishment of the zone and the communities involved. They said the ‘Omo Onile’ are only looking for an issue which there is none. They noted that the land was dully acquired and the genuine land owners were being compensated through Ogun State Ministry of Agriculture and Bureau of Lands and Survey, saying the first batch of 1,439 and second batch of 2,285 have received N149.5 million and N126.6 million respectively, for economic trees and crops affected during the land acquisition, and more would still be paid in addition to several corporate social responsibility being carried out in the form of education, road construction, and medical outreach, among others. The land title documents and ‘composite plan’ prepared by Femi Olunubi of

Ogun State Bureau of Lands and Survey and signed by Onososen O. Ken-Salem, acting surveyor-general, Ogun State, the copies of which shown to BusinessDay, confirmed Ogun Guangdong Free Trade Zone as the rightful owners of the land. Based on the economic contributions of the zone to the entire economy of the country, China-Africa Investment FZC requested the relevant authorities to wade into the issue, saying, “Nigeria and China are forging a common front in terms of economy, technology and currency swap which we believe will bring the needed mutual benefits to the two nations and investments like Ogun Guangdong Free Trade Zone. We, therefore, appeal to the Federal Government of Nigeria to wade into this and find a lasting solution to the issue. “An issue like this also requires involvement of host communities, local government authority and state government if frantic and tangible achievement will be made. We, therefore, request Ogun State, through the Ministry of Commerce and Industry, to fashion local solutions to the issue at hand and we pledge to abide by the prompt, reasonable and business-oriented solutions given by the relevant authorities.”

Why ISN hosted Quality Assurance Summit in Lagos, Abuja Unemployment rate is 7.4 percent in Kenya; 11.8 percent in Egypt; 5.2 percent in Ethiopia; and 2.4 percent in Ghana. Only South Africa is worse, with 26.6 percent. With 87 million Nigerians living below the $1.90 baseline, almost one out every two Nigerians (44 percent) lives in extreme poverty. India is second in the poverty pedestal and has 57 million people that are extremely poor, representing just 4.4 percent of its 1.3 billion population. Small and medium businesses are big job creators but ccess to capital by young and enterprising entrepreneurs averages 23 percent, according to MAN, with the benchmark monetary policy rate sitting at 13.5 percent for almost two years.

IFEOMA OKEKE

SN Products Nigeria Limited has hosted its inaugural Quality Assurance Summit (ISN QAS) in Lagos and Abuja. Speaking at the summit, Felix Ofungwu, executive director, ISN Products Nigeria Limited, who was represented by Sandra Achebe, head, business development and client services, stated that the summit, the first in its series, was designed to evoke pragmatic, sustainable and most effective initiatives for institutionalising quality assurance in laboratory practices and diagnosis. She noted that ISN Products Nigeria Limited is committed to providing clients and end-users with consis-

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tent professional support to overcome daily challenges in laboratory practice and enable them produce laboratory results that can be trusted locally and internationally. Achebe noted that, “The Summit is geared towards equipping stakeholders with knowledge to improve technical proficiency and develop the ability to produce precise and accurate test results & calibration data which will in turn engender best-in-class patient care” She explained that ISN QAS has also been conceptualised to domesticate the fundamental principles of the ISO15189 framework in laboratory practice in Nigeria. Achebe further stated that “the overall aim of ISN @Businessdayng

QAS is to equip Laboratory Scientists and Quality Assurance Officers on prudent healthcare principles, processes and troubleshooting procedures.” According to her, “effective laboratory diagnosis remains a key driver and a critical enabler of sustainable healthcare delivery in Nigeria and the current economic landscape in the Country provides a unique opportunity for the public and private sectors to collectively address healthcare infrastructure gaps” Achebe noted that with the support and active collaboration of all stakeholders, ISN QAS will take place annually. CPD points and certificates were awarded to all participants at the end of this summit.

Monday 17 June 2019

BUSINESS DAY

Start-Up Digest

In association with

Adeshina Adewumi: Using AI to disrupt Nigeria’s ecommerce space Josephine Okojie

n the last decade, the ecommerce industry has been the main thing in the Nigerian entrepreneurship ecosystem, with entrepreneurs launching online stores and pumping millions of naira into the industry. The ecommerce industry has raked in over $1 billion in the last decade, but entrepreneurs’ attention is gradually shifting away from it as big players such as Konga and Jumia struggle to survive, with many exiting the sector. To address the high cost of logistics— one of the major challenges limiting the growth of the ecommerce industry in the country— Adeshina Adewumi established One Kiosk Africa to provide solutions using GPS and Artificial Intelligence. Adeshina is a serial entrepreneur with over seven years’ experience in the Nigerian entrepreneurship ecosystem where he is actively engaged in operations, youth development, business processes and advisory. He says the untapped potential in the ecommerce space inspired him to establish One Kiosk Africa in 2019 to change the status quo. He notes that the industry has the potential to create about a million jobs within five years and has been projected to account for 10 percent of Africa’s GDP by 2025. “One Kiosk Africa was launched out of the need to address three main issues. First are the challenges facing e-commerce business models ranging from high cost of logistics and poor turnaround time for delivery that have led to sudden deaths of many e-commerce businesses,” he says. “Second is the non-existence of sound

Victoria Chinwe

distribution network for micro, small and medium enterprises (MSMEs) in Africa, which is one of the major reasons why most small businesses close up. Last is the need to solve unemployment challenges in Africa,” the young entrepreneur adds. The accountant- turned- entrepreneur built a model that connects customers with merchants using GPS and AI to provide a secure, credible and cost- effective platforms for MSMEs to distribute their offerings to a wider pool of customers within their neighbourhood or area of operations.

The model is also used to create employment opportunities within the value chains. Adeshina’s initial capital was quite small. He bootstrapped the business with personal savings until Sterling Bank committed $3, 000 to the business through the Pitch Nigeria Programme. Since then, the business has attracted local and international investors. The young entrepreneur is committed to growing the business further by developing its solutions before utilising external investors’ funds that have been obtained, he says. The business, which was birthed 2018 and commenced operations in 2019, already has over 15,000 subscribers, users and merchants as well as six fulltime employees. Speaking on why ecommerce businesses are closing shop in the country, Adeshina says that the model in operation in the industry has been ‘copy and paste’. Jumia and Konga set the pace but their model were rather too expensive to sustain over time, he says. To change the narrative, he explains, “Our model addresses most of the concerns that have killed ecommerce stores in time past, among which include poor turnaround time for delivery,” he explains. He says his company delivers in 59 minutes and connect clients to the nearest merchant closest to them within a 1 to 2km radius, avoiding high associated logistics cost. “The recent survey conducted by Ventures Africa shows that out of every 500 adults involved in the survey, 53 percent of those who have shopped online indicated that faster delivery of goods would encourage them to shop more often online. Forty percent indicated that safer ways to pay was a key driver while 31 percent indicated

lower product costs as a driver to do more shopping online. “These are the solutions we provide,” he adds. He says that the business will continue to provide solutions that ecommerce businesses need in an innovative way while building capacity to scale quickly and grow to remain in business. He notes that the ecommerce industry gave birth to most innovations the country currently has in the fintech industry. He identifies infrastructural gaps as the main challenge facing his business as it continues to shoot up production cost. He says that Andela and Proville are already addressing the technical skills gap in the industry while calling on the government to encourage them to do more. He also urges the government to start bridging the country’s huge infrastructure gaps. He says the company plans to increase its subscriber base to a million within the next 12 months. “For our merchants, we intend to have introduced workable offerings to increase their capacity to efficiently take charge of the delivery systems either by absorbing our One Pro-delivery members or building their own system. “In five years, that’s by 2024, we expect to have grown to over 3.5 million users in Nigeria, Kenya, Ghana, South Africa and Egypt and created over 1 million direct and indirect jobs through our platform value chain.” On advice to other young entrepreneurs, he says, “Consistency and patience. We live in a world where everyone wants to shine without paying the price required to shine. Consistency always pays off at the end of the day and patience is a rare virtue.”

high shortage, with several multinationals complaining of not finding the right talents months after job placements. BusinessDay observed during a recent visit to Polsky Center that membership is free for all current UChicago students, faculty and staff. This instils the spirit of entrepreneurship in students and turns even the most indolent staff member into an entrepreneur. The University of Chicago technology transfer office is part of the Polsky Center with an estimated value of $300 million. More than 200 active licenses from this portfolio drive annual revenue back to the university and its innovators. Developed and refined over the past 20 years by the University of Chicago Booth

School of Business professors, entrepreneurship is now taught across campus to university students, faculty, researchers, alumni and local community entrepreneurs. “You can see that the United States understands that universities and enterprises are interlinked,” said Ike Ibeabuchi, managing director, MD Services Limited. “We are yet to understand this fact: The only way to bridge the town-gown gap is to bring the industry and the higher institutions together,” he said. “This speaks to the type of education and learning we have. Our education is not meeting the needs of the industry because we do not want to copy the American model,” he added. Nigeria’s unemployment rate is estimated at 23.1 percent, the National Bureau of Statistics said,while one out of every two Nigerians lives in extreme poverty, according to the World Bank John Smith, a Nigerian entrepreneur in food business, said federal and state governments must establish entrepreneurship departments in universities and polytechnics, while strengthening the country’s business schools with research funds. “Entrepreneurship should start from the school,” Smith said. “It creates jobs, thereby cutting the high unemployment rate in Nigeria,” he said. “It will also build a new generation of creative people who will boost the economy, lifting many out of poverty,” he added.

Can Nigeria replicate the Polsky Center model? ODINAKA ANUDU

he Polsky Center for Entrepreneurship and Innovation drives the creation of new businesses and partnerships at the University of Chicago and on Chicago’s South Side, the United States of America. The center brings the power of ideas in the laboratory, classroom and community to the world. It commercialises discoveries, partners with companies, and attracts venture capital for start-ups. It runs a top-ranked business accelerator, the Edward L. Kaplan, ’71, New Venture Challenge; and operates a 34,000 square-foot, multi-disciplinary co-working space called the Polsky Exchange. The Exchange is the entrepreneurship hub of the entire University of Chicago, said Michael Alter, clinical professor of entrepreneurship. It has raised $500 million in venture capital and grown 100 companies, including GrubHub, Alter said. Firms worth $10 billion were made in the entrepreneurship hub. The Polsky Center has the George Shultz Innovation Fund, which invests in earlystage ventures, and a state-of-the-art Fabrication Lab for prototyping new products. It manages the University of Chicago’s technology transfer function that houses all University-based intellectual property originating from faculty research and discoveries, which can be licensed to industry partners and investors.

In fact, it is the innovation centre of the University of Chicago, supporting start-ups and entrepreneurs to raise funds and scale up. Without doubt, universities in the United States of America are platforms through which entrepreneurs are hatched. They bridge the town-gown gap by making vital skills available for industries. A lot of research comes from them, thereby making innovation easier while reducing costs that should have been borne by entrepreneurs. This is completely different in many countries, especially Nigeria, where universities are centres of theory. Research is limited owing to poor state funding. The immediate consequence of this is that skills are in

L-R: Michael D. Alter, clinical professor of entrepreneurship, Univeristy of Chicago Booth School of Business; Eric Belcher, entrepreneur and former CEO of InnerWorkings; Rich Gallun, co-founder of B-Swift, and Rob Chesney, venture partner at Chicago Ventures, at an interactive session during Foreign Press Centers International Reporting Tour in Chicago on Friday.

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Monday 03 June 2019

BUSINESS DAY

Start-Up Digest SMEs groan as NAFDAC increases registration, pack design fees …business owners want urgent gov’t intervention Josephine Okojie

perators of small and medium scale enterprises (SMEs) in the country are groaning about the recent hike in the new fees for registration, laboratory analysis, change of company’s name and ‘package size extension’, among others, imposed by the National Agency for Food and Drugs Administration and Control (NAFDAC) recently. “NAFDAC increased their fees without consulting any business stakeholders. Some of the new fees went as high as 600 percent and more,” Femi Egbesola, national president, Association of Small Business Owners of Nigeria (ASBON), said. “For us as operators, this is untimely and unsupportive for small businesses. If the hike is allowed to stay, it will impact SMEs negatively as many will be forced to close shop and lots of jobs will be lost,” Egbesola said. He stated that the move would lead to price hike in the regulated products by NAFDAC and support an increased entry of fake and substandard products into the Nigerian market. He called on the Federal Government to intervene in the issue by asking the regulator to reverse

L-R: Temitope Ode, project manager, Axiom Learning Solutions Limited; Yinka Ogunde, CEO, Edumark Consult and organizer of the Total School Support Seminar/ Exhibition (TOSSE) and Jolaolu Laolu Ogunniyi, head - learning strategy and business development, Axiom Learning Solutions Ltd at a recent TOSSE event in Lagos.

the fees. BusinessDay investigation found that registration fee for bakery has risen from N31, 750 to N89, 750, indicating a 90 percent increase. Similarly, cost of registration form has gone up from N250 is now N2, 500. Also, product registration fee, which was N73,500, is now

N147,000, indicating a 100percent increase, while change in pack design is now N84,000 as against N10,500 few weeks ago. Moreover, cost of change of product name has risen from N21,000 to N84,000 . Oluwakemi Ajiboye, founder of Crystal Shine Skin Clinic, in a statement made available to BusinessDay, said that the move by

NAFDAC is a corrosive approach in building the economy. “With this new rate, a handful of legally registered small-scale manufacturers will resort to noncompliance in order to remain in business,” Ajiboye said. “Mr President, Mr Vice President and DG of NAFDAC, allow us in the SME manufacturing sector to

salvage what is left of this economy. Do not throttle us,” she pleaded. Nura Musa, public relations officer of the Association of Master Bakers of Nigeria (AMBN), Abuja chapter, appealed to the Federal Government and NAFDAC to review the fees in order to help small businesses remain in business. In a response to BusinessDay questions on why the fees were suddenly increased without due consultations with stakeholders, Mojisola Adeyeye, director general of NAFDAC, said that the decision was made by the regulator’s governing council and that there will be a meeting this week to further revisit the issue. In an exclusive interview with BusinessDay on October 2018, Adeyeye had said NAFDAC was reviewing its traffic, which was the lowest in the West African region to generate more revenue. “The government does not support us as such. They give us support for salaries but they do not support us as you would think in terms of infrastructure— whether it is equipment, building, vehicle or anything else,” she had said. “We have to generate our own Internally Generated Revenue (IGR), which is why we need money from tariffs and the other administrative things that we do,” she had added.

Business owners must be ready to take big risks—Olubayo

Why Unicorn TechMoney and innovation Summit matters

Stano Emmanuel Olubayo is the chief executive officer of Dcrocstyle Nigeria Limited, a foreign exchange trading firm. He started this business 15 years ago and has trained over 50 students. In this interview with SIKIRAT SHEHU, he talks about prospects and risks in FX trading, and the need for efficient regulation of brokers by Nigerian authoritities, among other issues.

Gbemi Faminu

Tell us about your company. crocstyle Nigeria Limited is a company established for money management. I started the business 15 years ago. We are playing in the foreign exchange market where we have over $5.3 trillion exchanging hands in a day. It is the largest market in the world, where we have big players like banks and other financial institutions as participants. This is relatively the most volatile market.

Tell us how your business works. We trade directly. The margin is what turns out as our profit. If you want to know the exact rate of exchange, ask us, not bureau de change traders. The fluctuation per time is what gives us profit. In the foreign exchange market, you can make as high as 90 percent of your investment in one single month while some months you can make as low as 10, 20 or 30 percent. You don’t run with the market. When you pick your trade, you will set some risk levels because for every single trade you pick in this foreign exchange market there must be a particular risk involved. If, for example, I have a million naira in this business and I want to pick a trade, I will set a ‘Stop Loss’ which is the risk limit that I can bear as a trader. I set a Stop Loss of N 5,000, whether I’m online or not, even if the market is going the other way. The

highest that could affect me is N 5, 000 and I have N995,000 to fall back on. This is a way to protect my funds because if I don’t set stop loss, all my funds are exposed to the market. Tell us management strategy? Every business has its own particular risk, and telling people about the risk involved is part of being sincere. Setting a risk limit is the main secret. If you don’t set a risk limit, you are most likely to be doomed. There is what we call ‘resistance’ and ‘support’. So, if you pick a trade from your support, I set my Stop Loss below my support because the support is a strong point that I don’t expect price to go below so that if any volatility or adversity happens in the future, it will just take me out with that little loss. If any news is released in America or elsewhere and there is market vola-

Stano Emmanuel Olubayo www.businessday.ng

tility, it would empty my account. This is what those unprofessional traders don’t utilise because they don’t want to let go of a little amount, but they end up losing all that they have in their account. About 97 to 98 percent of the time, it will go to your projected direction and make money for you. I have trading statement to prove that. What is average profit you make in a month? There are some months we make high profit and some months we make low profit. When the profit is high, we use that to compensate for the month when profit is low. Do you trade in other commodities? Yes, we trade gold, silver, platinum, diamond, oil and other instruments. What else do you do in your company? What we do here is not Forex alone; we train people on how to analyse the charts and all other instruments when they are given any stock chart to enable them analyse and make forecast of where the stock would be in the next two to three years, all other things being equal. What we are trying to let the world know is this: Scammers can do better things with their time on the internet and it pays them more to earn legitimate incomes.

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nicorn, a Pan African company, in association with University of Lagos, held its maiden TechMoney and innovation Summit recently at Unilag Multi-purpose Hall. The summit centered on solving Africa’s challenge in the tech space. Speaking in Lagos, Kola Abiola, chairman of Unicorn Group, said, “This event convenes the leading minds in technology, innovation and finance across Africa to do, amongst other things, inspire, educate, and connect leaders from government, private sector, academia, and entrepreneurs on the latest innovative and disruptive technologies. “More to that, we are also set to showcase the best and brightest African tech start-ups and entrepreneurs as well as to support tech and start- ups to secure investment and become more bankable.” According to him, with a Nigerian youth population of 72 percent, median age of 18.4 and an urban population estimated at 51.9 percent, with similar percentages worldwide, the initiative would provide the much needed hope by creating world-class solutions to African problems, which in turn unlocks the entrepreneurial potential of African youths. Summarily, it will create the jobs of the future, while ushering the continent into the 4th Industrial Revolution. “In order to achieve this, Unicorn Group is committed to holding TechMoney and Innovation Summit every year,” Abiola said. @Businessdayng

Also speaking at the event, Oluwatoyin Ogundipe, vice chancellor, Lagos State University said University of Lagos happens to be an outstanding institution that provides quality education, produced students who are outstanding citizens of the country and can be reckoned with both home and abroad. “For this summit to be held here means a whole lot,” he said. “This summit has gathered lots of youths from other institutions here, to gain innovative ideas, enhance and broaden their knowledge on tech and the opportunities in it.” According to Obafemi Hamzat, deputy governor of Lagos State, Lagos State is supporting entrepreneurs and attracting top talents into the technology industry to position Nigeria as the leading country for innovation on the continent. “These tasks before us are not easy, but the governor and I came to the job with a track record of experience, knowledge and ability to get the job done.” “We plan on making Lagos a 21st century state through transportation, education, technology, and health. Innovation plays an important role in catch-up growth in a global economy. We truly believe the state can leapfrog through technology and innovation.” “We believe there is an opportunity for better life. We are both excited and anxious to harness the true potential of Lagos,a Lagos that is truly the innovation hub of Africa, a Lagos with a thousand Andelas, and tens of Paga, a Lagos with CCHub in all the senatorial districts, a logistics hub for Amazon.

Monday 17 June 2019

BUSINESS DAY

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Monday 17 June 2019

BUSINESS DAY

Live @ The Exchanges Stock investors at NSE lost N170bn in one week …as NASD OTC market value rises Stories by Iheanyi Nwachukwu

tock investors at the Nigerian Bourse booked approximately N170billion loss in the four-day trading week ended Friday June 14, 2019. In the review week, some market analysts had expected bargain hunting on some down-beaten stocks following the preceding week’s negative performance and weak investor sentiment. Rather, the stock market benchmark indicator decreased by 1.27percent in one week. Currently, the market’s return yearto-date (ytd) is in the negative region of -4.40percent.

The Nigerian Stock Exchange (NSE) All Share Index (ASI) and market capitalisation decreased from a high of 30,432.13 points and N13.402 trillion in the trading week ended June 7 to 30,046.70 points and N13.232trillion respectively as at June 14. “In the absence of a positive catalyst, we guide investors to trade cautiously in the short term. However, stable macroeconomic fundamentals as well as compelling valuation remains supportive of recovery in the midto-long term,” research analysts at Cordros Capital had said in their June 10 note. Despite the positive close (+0.06) on Friday to end the week, analysts see the stock market drifting back to negative territory

at week open due to absence of market catalysts or significant news that could boost investor appetite. In their June 14 equity note, analysts at Lagosbased Vetiva highlighted that prices of stocks on the NSE remain attractive and pose a good entry point for long term investors. At the NASD OTC market for unlisted securities, the market capitalisation increased to N542.14 billion from preceding week’s low of N541.24 billion, which shows a 0.17percent increase in Capitalisation. Also the Unlisted Securities Index (USI) for the week ended June 14, 2019 recorded an increase from 753.35 points to 754.61 points.

Ellah Lakes acquires 100% equity stake in Telluria … appoints Chuka Mordi as Managing Director

llah Lakes Plc has acquired 100percent equity stake in Telluria Limited. The acquisition became effective on May 7, 2019. Having complied with all the necessary regulatory requirements, the acquisition was approved by the Nigerian Stock Exchange (NSE) and by the Securities and Exchange Commission (NSE). The company said in a statement at the NSE that the primary objective of the acquisition is to strengthen Company’s balance sheet, restore customer confidence, provide access to new markets, improve operations and create organizational efficiencies that will drive profitability and increase shareholders’ value. Ellah Lakes Plc is one of Nigeria’s foremost agriculture businesses, specialising in Fish Farming. It was incorporated on July 2, 1980 and listed on the Nigerian Stock Exchange on January 14,

1993. Ellah Lakes acquired Telluria in order to diversify its product offerings in the AgriBusiness sector. The Board of Directors and Management of Ellah Lakes consider this business combination to be in the best interest of the Company and expect the transaction to; revitalize management; create access to diversified expertise and financial strength; (c) improve administrative and operational and efficiencies of the Company; and strengthen the Company’s market position by aiding access to new products and markets. In a related development, Ellah Lakes Plc has appointed Chuka Mordi as Managing Director. His appointment became effective from June 12, 2019. Mordi takes over from Frank Ellah, who moves on to new pursuits. The appointment was made at a board meeting of the company on June 12th 2019 and follows the

L-R: Hamda Ambah, managing director, FSDH Merchant Bank Limited; Bola Onadele. Koko, managing director/chief executive officer, FMDQ Securities Exchange Plc; Patience Oniha, directorgeneral, Debt Management Office, Nigeria; Kobby Bentsi-Enchill, executive director & head, Debt Capital Markets, Stanbic IBTC Capital during the signing of the FMDQ bonds listings register at the Listing Ceremony for the $2.50bn Dual-Tranche and $2.87bn Triple-Tranche Federal Republic of Nigeria Eurobonds at Exchange Place, Lagos.

158 Dealing Member firms expelled from NSE since August 2014

o fewer than 158 Dealing Member firms of the Nigerian Stock Exchange (NSE) have been expelled between August 1, 2014 and January 31, 2019. This is contained in the ‘Broker TraX’ of the NSE. The expulsions of affected firms took effect at varied dates. In its bid to improve investors’ confidence in the market, the Exchange commenced a strong campaign against market infraction by its Dealing Members by introducing the Dealing Members compliance report, called BrokerTraX. A check on the report shows the regulatory hammer fell on the firms on different dates. The effec-

tive dates varied from August 1, 2014; December 11, 2015; March 30, 2017; June 25, 2018; December 13, 2018; May 25, 2017; January 26, 2017; to January 31, 2019. The report did not specify the particular infractions for which these members were expelled. Aside the expelled Dealing Member Firms, a look at the ‘Status of Dealing Member Firms as at June 10, 2019’ shows that the NSE has 186 Active Dealing Member Firms; 37 inactive Dealing Member Firms; while 24 were reclassified to Sub-Brokers. Also, five Dealing Member Firms were deregistered by the Securities and Exchange Commission (SEC) www.businessday.ng

while two discontinued Business Operations. With the BrokerTraX, investors can make more informed decisions about where to invest by viewing names of Dealing Member Firms that have been found liable for contravening market rules. The goal is to reduce contravention of market rules to its barest minimum in line with the deliberate and sustained effort to restore confidence. A Dealing Member Firm is considered an inactive firm where the firm has been suspended for a period of 3 or more months by the Exchange or SEC; or has not recorded any activity for a period of 3 or more months without being suspended. https://www.facebook.com/businessdayng

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board’s agreement to a business combination with Telluria Limited which would strengthen Ellah Lakes’ balance sheet, restore customer confidence, provide access to new markets while enhancing operations that will ultimately drive profitability and deliver value to shareholders. Prior to this appointment by Ellah Lakes Plc, Mordi was a Director in Telluria and the Managing Partner of CBO Investment Management. Commenting on his appointment, Mordi said: “I am very excited to be taking up the position of Ellah Lakes Managing Director. The combination of Ellah Lakes and Telluria establishes a platform with a significant existing land portfolio, access to finance and investments in the domestic production of oil palm, & a variety of cash crops. I look forward to an exciting future as we put Ellah Lakes back on a path to growth.”

Monday 17 June 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Money matters for fathers MONEY MATTERS

Nimi Akinkugbe

ather’s Day is globally celebrated in June; it is a day dedicated to the celebration of fathers. A father has a huge role to play in the family; a lifelong responsibility that comes with significant financial implications, as there are so many demands on their resources. Here are some tried and tested tips for all our fathers out there: Establish an Emergency Fund Having an emergency fund is one of the most important steps in a financial plan. If you don’t already have one, do start to build one. Ideally, at any moment of time, you should have six to twelve months of living expenses saved in your emergency fund. If it’s a challenge to set that aside all at once, start small and build up gradually. Automating your savings with a direct debit each month is a convenient way of achieving this. Consider your Risk Tolerance Too many men have lost huge sums through some “too good to be true” business deals introduced by friends. Men tend to bet big on riskier investments, hoping for that phenomenal lucky break; sometimes it doesn’t materialise, the deal goes sour and can turn the family finances upside down. Particularly where there are dependents, be a little more cautious about diving into those speculative opportunities that promise huge returns. Often what sounds too good to be true, is too good to be true. Talk about Money with your Partner Money woes are a leading cause of fractured relationships and divorce. Keeping financial problems to yourself makes things worse and can damage the fabric and stability of your relationship. Ideally, marriage ought to be a trusting relationship and discussing financial worries with your spouse and sharing the burden should ease it. Because men and women tend to have different money personalities, there are benefits in discussing financial plans and working together towards achieving joint goals. If you have loads of money and you hide it away from your spouse, leaving them completely in the dark, this breeds mistrust and will put a strain on your relationship

when they find out. Protect your Family against the Unknown Far too many people ignore the need for insurance until a major mishap or setback occurs; it is then that the impact of inadequate insurance coverage becomes glaring. No matter how meticulous you are with your finances, failure to purchase adequate insurance can impair your financial future and put you and your loved ones in a desperate situation in an instant. Motor vehicle, household, health and life insurance, are just a few of the various policies that are available to protect you and your family. Life insurance is particularly important if you are the primary or sole breadwinner. Insurance plans serve not only the financial obligations in the case of a disaster but often have an interesting investment component that paves the way to support important milestones for your child including higher education, investment in a business venture or other goals. Save for your Children’s Education Funding your children’s education is likely to be one of the largest expenses you will ever face and it must thus be carefully planned for. With the rising costs of education, if sound investments are not made early, covering the huge expenses for the secondary and post-secondary years can be a huge challenge. When your children are still young, you have the benefit of time to select investments that offer the prospect of higher returns over the long term. There are educational insurance plans that encourage you to plan for several years ahead when you need the money. With careful planning, discipline, consistency, sacrifice and professional advice, you can make

adequate provision for your children’s education and give them the best chances in life. Do you have an Estate Plan? Naturally we don’t like to dwell on death, but you do have loved ones and you do want to ensure that they are taken care of should anything happen to you. The only way to achieve this is through an estate plan; it will ensure that your investments and property and other assets do not go into the wrong hands. Review and update your will, trust and other estate planning documents periodically, to ensure that they are in accordance with your current status and intentions; you might have had more children or wished to include or remove some beneficiaries, may have acquired additional assets or disposed of some. Review your Beneficiary Designations At some time or the other, you have probably had to fill out a form or some other documentation where you had to clearly state your next-of-kin. When last was it updated? Many people don’t take this designation that seriously and sometimes even forget whom they designated as time goes by. It is important to check beneficiary designations periodically, say once a year, to make sure that they are up-todate on all documents including your insurance policies, your next-of-kin form and your estate planning documents. Who is your Next-of-Kin? In Western cultures, the choice of the spouse as next-of-kin is the most obvious one, for example, the mother of his children is generally the person in whom a man places the most trust. In Nigeria, however, it is very common for a man to choose his brother as next-of-kin. In the event of the husband’s death, making the wife your next-of-kin will save her and

‘ As financial literacy is not taught in schools, fathers have the responsibility to teach their kids the value of money and how to manage it

the children a lot of hardship given the traditional extended family system where other family members can often forcefully claim their brother’s property. There are numerous examples of widows having to cope with not only the loss of their spouse but also of all their personal possessions and property. Many people assume that if they pass on, their spouse will automatically become beneficiary to their estate. If you were to die intestate, that is, without leaving a will, your property will not simply pass to your spouse as you might think; strict rules rank your next of kin, and your property will be distributed according to laws of intestacy. In Nigeria, an estate may be subject to native law and custom, which varies from state to state; this may not be what you would have desired for your family. Teach your Children about Money As financial literacy is not taught in schools, fathers have the responsibility to teach their kids the value of money and how to manage it. This is a life skill that will serve them throughout their lives. A financially responsible child that is taught to value money and who understands that money is earned through hardwork and learns to manage it prudently, will also make it possible for the family to achieve its longterm goals. Invest Time in the Family In the final analysis, all the money in the world cannot replace that precious time for bonding, building and nurturing deep and loving relationships with your family. This is the greatest investment of all. Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.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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Monday 17 June 2019

BUSINESS DAY

Access Bank Rateswatch

Market Analysis and Outlook: June 14– June 21, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

Q1 2019 — lower by 0.38% compared to 2.39% in Q4 2018

Broad Money Supply (N’ trillion)

35.17

Increased by 3.95% in Apr’ 2019 from N33.83 trillion in Mar’ 2019

Credit to Private Sector (N’ trillion) Currency in Circulation (N’ trillion)

24.90 21.59

Increased by 3.76% in Apr’ 2019 from N23.99 trillion in Mar’ 2019 Increased by 0.25% in Apr’ 2019 from N21.53 trillion in Mar’ 2019

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

11.37

Increased to 11.37% in April 2019 from 11.25% in March 2019

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

13.5 Adjusted to 13.5% in March 2019 from 14% 13.5 (+2/-5) Lending rate changed to 15.5% & Deposit rate 8.5%

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

45.16 62.74 1.82

NSE ASI Market Cap(N’tr)

Friday

14/06/19

7/06/19

30,046.70 13.23

30,432.13 13.40

Volume (bn)

0.15

0.31

Value (N’bn) `

2.83

3.90

MONEY MARKET NIBOR Tenor

June 13, 2019 figure — an increase of 0.04% from June start June 13, 2019 figure— an increase of 0.61% from the previous wk April 2019 figure — a increase of 5.27% from March 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday Rate (%) 14/06/19

Friday Rate (%)

Change(%)

Indicators

14/06/19

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) (52.46) Agriculture Cocoa ($/MT) (27.48) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) (1.27) (1.27)

1-week Change

YTD Change

(%)

62.74 2.34

0.61 0.43

(2.67) (23.43)

2513.00 99.75 66.38 12.92 536.50

3.50 (0.70) (0.18) 3.86 6.50

29.80 (23.39) (14.35) (15.72) 23.76

1352.13 14.98 263.55

1.19 0.27 0.44

2.62 (12.86) (19.60)

6/06/19

5.29

10.86

(557)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

5.71 5.54 12.22

11.43 9.38 12.05

(572) (384) 17

Tenor

90 Days

12.88

13.52

(64)

1 Mnth 3 Mnths

11.12 11.63

11.21 12.68

(8) (104)

6 Mnths 9 Mnths 12 Mnths

12.18 13.44 13.78

12.98 13.47 14.05

(80) (3) (26)

OBB

FOREIGN EXCHANGE MARKET Market

Friday

1 Month

(N/$)

Rate (N/$)

7/06/19

14/05/19

14/06/19 Official (N) Inter-Bank (N)

307.00 360.46

306.95 360.44

306.95 360.53

BDC (N) Parallel (N)

0.00 361.00

Friday

Change

(%)

(Basis Point)

(%) 13/06/19

6/06/19

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

(%)

BOND MARKET AVERAGE YIELDS Tenor

Friday (%) 14/06/19

Friday (%)

Change (Basis Point)

7/06/19

3-Year 5-Year

0.00 14.47

0.00 14.59

0 (12)

7-Year 10-Year 20-Year

14.73 14.66 14.66

14.53 14.54 14.57

20 11 8

30-Year

14.69

(0)

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

(%)

Change (Basis Point)

14/06/19

7/06/19

Index

2,880.94

2884.31

(0.12)

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

8.82 5.44

8.83 5.47

(0.11) (0.55)

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

17.28 -38.56

17.42 -38.39

(0.14) (0.17)

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

Date

91 Day 182 Day

15,000.00 30,000.00

10 11.9499

13-June-2019 13-June-2019

364 Day

84,640.72

12.34

13-June-2019

Global Economy In the US, consumer prices moderated in May as an uptick in food prices was offset by cheaper gasoline prices. Data from the Labour Department showed that the consumer price index (CPI) ticked up 0.1% m-o-m in May. This follows a 0.3% gain in April. On an annual basis, CPI increased 1.8%, down from 1.9% in April. Core CPI, which controls for volatile food and energy components, edged up 0.1% m-o-m for the fourth consecutive month. The annual core inflation rate came in at 2%, after increasing 2.1% in April. In addition, US import prices fell 0.3% m-o-m in May amid a broadbased decline in the cost of goods. Muted inflation combined with a slowing economy strengthens the case for the Federal Reserve (Fed) to cut rates in 2019. In a separate development, in China, the inflation rate rose to a 15-month high of 2.7% year-on-year in the month of May 2019 from 2.5% in the preceding month. According to Statistics China, this marked the highest inflation rate since February 2019 as the cost of food items increased by 7.7% (6.1% in April). Non-food inflation came in at 1.6% in the reference month (1.7% in April). Elsewhere, the European Central Bank (ECB) kept key policy interest rates unchanged and extended its earlier pledge to hold rates at current levels until at least the end of this year. The bank now expects rates to remain unchanged 'at least through the first half of 2020'. There were slight upward revisions to the growth and inflation forecast for 2019, while the forecasts for the next two years were revised down marginally. ECB President Mario Draghi reiterated that the bank would react to any deterioration in the economy, placing the resumption of the quantitative easing programme or interest rate cuts back on the table as policy options. The ECB also announced the pricing of the new series of Targeted Long-Term Refinancing Operations (TLTRO III), which was initially announced at the March policy meeting. The long-term loans to banks will start in September and initially be priced at the main refinancing rate, which currently stands at 0%, plus 10 basis points (bps). Domestic Economy Nigeria, Africa's top oil producer, earned a total of $236.15bn from petroleum exports over the last five years, as revealed in a new report by the Organization of Petroleum Exporting Countries (OPEC). OPEC, in its 2019 Annual Statistical Bulletin, put the value of Nigeria's petroleum exports at $75.196bn in 2014; $41.168bn in 2015; $27.295bn in 2016; $37.983bn in 2017, and $54.513bn in 2018. In 2018, the value of the country's petroleum exports was the sixth largest in the 14-member group, behind Saudi Arabia's $194.358bn, UAE's $74.94bn, Iraq's $68.192bn, Iran's $60.198bn and Kuwait's $58.393bn. In other news, Fitch Ratings affirmed Nigeria's LongTerm Foreign-Currency Issuer Default Rating (IDR) at 'B+' with a Stable Outlook. According to rating agency, the credit profile was underpinned by relatively low general government (GG) debt-to-GDP and smooth general elections, high inflation, low fiscal revenues resulting from oil price fluctuations and low non-oil revenues, The Rating agency forecasts a widening of the GG deficit to 3.8% in 2019, and an increase in risks to debt sustainability due to rise in interest costs. Fitch expects a sluggish recovery of the Nigerian economy averaging 2.2%, driven by large infrastructure deficit, weak business climate restricting investment as well as high unemployment and inflation. Stock Market The All Share Index (ASI) moderated in the week ended June 14th, 2019 as investors took profit from the rally of the previous weeks. The

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

index dropped by 1.27% to settle at 30,046.70 index points from 30,432.13 index points the previous week. Similarly, market capitalization lost 1.27% to close at N13.23 trillion from N13.40 trillion last week. The consumer goods, industrial goods and financial services sectors were the main contributors to the decline in the ASI. This week, we expect the bearish posture to persist in the absence of any major catalyst to spur activity in the market. Money Market Rates at the money market inched lower last week as liquidity was bolstered by the Open Market Operation (OMO) maturity credit of N216 billion. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates trended lower at 5.29% and 5.71% from 10.86% and 11.43% respectively the previous week. Likewise, the 90-day NIBOR closed at 12.88% from 13.52% the previous week. This week, rates may trend higher due to expected retail Secondary Market Intervention Sales (SMIS) auction. Foreign Exchange Market The local currency recorded relative stability against the dollar across all market segments in th the week ended June 14 , 2019. At the NAFEX window the local currency witnessed a marginal depreciation of 2 kobo to close at N360.46/$. Similarly, the official rate weakened slightly to N307/$, from N306.95/$ the previous week. Meanwhile, at the parallel market, the local unit closed flat at N361/$. This week, we expect foreign exchange rates stability to continue. Bond Market Average bond yields further ticked upwards across most segments in the week ended June 14th, 2019 as bargain hunting was observed on some select instruments. Yields on the seven-, ten- and twenty-year debt instruments closed higher at 14.73%, 14.66% and 14.66% from 14.53%, 14.54% and 14.57% respectively. The Access Bank Bond index dipped by 3.37 points to close at 2,880.94 points from 2,884.31 points the previous week. We expect a cautious trading session and mixed sentiment to prevail this week barring any impactful news. Commodities The price of crude oil rose following an attack on two oil tankers in the Gulf of Oman. This is the second attack on tankers in the supply zone in a month and stoked concerns about rising tensions between the US and Iran. Bonny Light crude settled at $62.74 per barrel last week, 0.61% higher than the previous week. In a similar vein, precious metals prices trended higher last week supported by expectations for an interest rate cut by the U.S. Federal Reserve following weak inflation data. Consequently, gold price closed at $1,352.13 per ounce, up 1.19% from the previous week's close. Silver also nudged higher, settling at $14.98 per ounce compared to $14.94 per ounce the preceding week. This week, oil prices will receive support from the confirmation by OPEC that its supply cuts would be sustained throughout 2019, citing softer global oil demand due to trade tensions. For precious metals, prices will likely remain elevated against a backdrop of expectations that the Fed could cut rates in the near-term.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Jun’19

Exchange Rate (Interbank) (N/$)

Jul’19

361

362

Inflation Rate (%)

11.30

11.23

11.21

Crude Oil Price (US$/Barrel)

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

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Aug’19

Monday 17 June 2019

BUSINESS DAY

insurance today

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E-mail: insurancetoday@businessdayonline.com

NAICOM positive recapitalisation will increase local retention of risks Stories by Modestus Anaesoronye

nsurance regulator, the National Insurance Commission (NAICOM) is positive that the ongoing recapitalization exercise in the industry will help boost retention capacity. According to the commission, a lot of the risks emanating from the country were being insured abroad through reinsurance. Mohammed Kari, commissioner for Insurance who spoke during an interview with Journalists said the recapitalization exercise will strengthen the operating companies and enhance their capacity to absorb more risks. “The ongoing recapitalisation exercise will allow local insurers to retain huge risks in the country, thereby, avoiding premium flight, and in the long run increase the profitability of the sector and its impact on the nation’s economic growth and development, he noted. While stating that the recapitalisation is long overdue as foreign exchange rate, asset replacement values as well as claims volume have increased in the last 12 years, he added that, operating with the current capital base is putting insurance firms at risk. He said, insurance operators are fond of resisting recapitalisation exercise, whenever the idea is mooted, saying, some insurers prefer to continue to write huge risks in aviation and marine sectors, with small capital, a development, he said, was responsible for why some underwriting firms are struggling to pay claims. On whether there is the need for recapitalisation exercise at a

Mohammed Kari, commissioner for Insurance

time the country is transiting to Risk Based Supervision (RBS), he said, there is no insurance industry anywhere in the world that do not have minimum capital requirement, which is usually, the entry point. “All over the world, there is usually an entry point , which is the minimum capital requirement for an insurer to underwrite risk in a country. Other decisions, whether to increase the minimum capital or maintain it is taken thereafter. So, even under risk based, the minimum capital still exist, Kari stated. Analysts have lamented the low retention of risks by local insurers in the oil and gas, aviation and energy sector that has been

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described as volatile and vulnerable. For instance, local insurers was said to retain only about 30 percent of the risks in oil and gas industry despite the implementation of local content law. Speaking on the sideline of the recently concluded 46th African Insurers Organisation (AIO) held in Johannesburg, South Africa, Kari lamented the fragmentation of the financial sector in Nigeria He said unlike most countries where the financial sector only has one regulator, overseeing the activities of the banks, insurance companies, pension fund operators and Health Management Operators (HMOs), Nigeria has series of regulators, each control-

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ling each sub-sector of the financial sector. He said, the Central Bank of Nigeria (CBN) controls the banks, the National Pension Commission (PenCom) controls the pension fund operators while the National Insurance Commission (NAICOM) controls the insurance industry, whereas in most other countries, these sectors were considered as one and are regulated by a single regulator, which gives the financial sector of these countries good ratings because the achievements are counted as one. Whereas pension and Health insurance are classified as the products of Insurance industry in most countries, Nigeria’s case is an exception, he noted. According to him, “Nigeria operates a fragmented financial sector which restricts insurance sector to only the conventional insurance products and services. Pension is seen as a separate industry as well as health insurance when other countries classify pension and health insurance as being under the insurance industry. This is a miss-normal, a situation that is affecting the growth of the sector.” He said, such fragmentation is one of the reasons insurance penetration is said to be below one per cent, thereby, limiting the contribution of the sector to the nation’s Gross Domestic Product (GDP). If health insurance and pension products were added as part of insurance industry, the sector’s contribution to GDP would be higher as well as the penetration rate, which will make Nigerian insurance industry compete favourably with its peers across the world.

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Technology adoption major challenge for insurers

poll of more than 900 insurance industry experts reveals that the very urgent need for business and technology modernisation is the greatest threat to the global insurance sector. A survey and accompanying report from The Centre for the Study of Financial Innovation and PwC finds that ultimately, survey respondents expressed concern that they are weighed down by legacy business models and IT infrastructure that is poorly equipped to handle the changing demands of the industry. The rise of technology and its increased focus on the insurance industry has come at a time when market participants are looking to leverage new tech not only to access new lines of business and geographies, but also to improve the efficiency of their business models in an effort to lower costs and better meet client demand. However, the cost of overhauling old systems and integrating new technology is as high as the necessity of adapting and transforming to meet the demands of clients in today’s increasingly interconnected and digital world. What’s more, it’s no simple task and as the report highlights, is a growing concern for re/insurance industry experts. Following technology, PwC’s 2019 Insurance Banana Skins report finds that threats posed by cybercrime are the second biggest threat to global insurers and reinsurers. The report suggests that the insurance industry is highly susceptible to cyber attacks due to the volume of data it holds, with many of these attacks being highly sophisticated. “Operational risk continues to be the key category of risk occupying insurers’ boardroom conversations.

Monday 17 June 2019

BUSINESS DAY

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E-mail: insurancetoday@businessdayonline.com

Insurers’ profit continues to slump despite uptick in investment income BALA AUGIE

nsurers and reinsurance companies in Africa’s largest economy are not generating enough investment income, raising concerns about their ability to take on more risk to underpin deteriorating profit and deliver higher returns to shareholders. Insurers invest the premium received, less the expenses to the business, in financial assets. The income generated from such investment is called investment income and is a profit driver for insurance companies. Investment securities are bonds and treasury bills that react to interest rates. In the United States, Europe, and Asia, insurers invest the money given to them by policy holders, and profits on those investments have traditionally been of income to the industry in those investments This is because underwriting profit is usually weak after claims are deducted especially in climes where the environment is exposed to catastrophic events such as Hurricane, Wild wind, Typhoon, and flood. Sixteen largest insurers that have released 2018 audited financial statement realized N58.73 billion in December 2018; this represents a 21.84 percent increase from N48.20 billion recorded the previous year. The uptick in investment income wasn’t strong enough to underpin the bottom line as combined net income fell by 26.54 percent to N26.52 billon in December 2018 from N32.74 billion the previous year. Yields on short term government securities were at all-time high of between 22 percent to 18 percent in 2017, but at the mo-

ment, they are hovering around 15 percent and 13 percent. The prognoses are that yields could move upwards as the central bank could jerk up rates to control inflation and stabilize the economy. “We have a lot of maturity in the second half of the year as the apex bank is holding onto to $15 billion in OMO, and the large chunk of this money belongs to foreigners, said Wale Okunrinboye, Investment Analyst at Sigma Pensions Ltd. In order to protect the currency against external shocks, the Apex bank may have to increase rates,” said Okunrinboye. But only few insurers have the capital or liquidity to invest in either bonds and treasury bills as many of them do not have enough capital to take on more risk. National Insurance Commission (NAICOM)- the body that regulates insurance business in the country- has jerk up the capital bases of companies with a view to ensuring that the industry continues more to the economy. The revised paid-up capital requires life Insurance business operators to raise its capital from N2 billion to N8 billion; General business from N3 billion to N10 billion, while that of Composite business has been jerked up from N5 billion to N18 billion. For Reinsurance business, the revised minimum paid-up share capital has also been reviewed upward from N10 billion to N20 billion. A breakdown of the figures shows LeadWay Assurance Limited realized N22.90 billion in investment income in December 2018 from N16.81 billon as at December 2017. A further breakdown of the figures shows income from debt securities were up 44.06 percent

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to N19.65 billion as at December 2018 from N13.64 billion as at December 2017. First Bank Insurance’s Limited’s investment income surged by 168.86 percent to N7.34 billion in the period under review from N2.73 billion as at December 2017. Zenith Insurance’s Limited’s investment income was down 2.38 percent to N3.55 billion in the period under review from N3.63 billion the previous year. A breakdown of the figure shows income from treasury bills dipped by 4 percent to N2.88 billion in the period under review from N3 billion the previous year. AIICO Insurance Plc’s investment income was up 4.86 percent to N9.051 billion in the period under review from N8.63 billion as at December 2017. A breakdown of the figure shows income

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from treasury bills increased by 10.75 percent to N8.34 billion the previous year from N7.53 billion the previous year. AXA Mansard’s insurance Plc’s investment income were flat N5.08 billion the period under review while income from treasury bills increased by 8.41 percent to N2.18 billion from N2.01 billion the previous year. Wapic Insurance Plc’s investment income fell by 7.46 percent to N1.16 billion in the period under review as against N1.25 billion as at December 2017. Linkage Assurance Plc’s investment income was up 39.19 percent to N1.97 billion in the period under review as against N1.26 billion as at December 2017. Despite a tough and unpredictable macroeconomic environment, insurers recorded an improvement in revenue. For instance 16 insurance companies that have released 2018 audited financial statement saw combined premium written increase by 15.79 percent to N345.16 billion, from N298.0 billion as at December 2017. A breakdown of the figure shows life insurance spiked by 32.07 percent to N139.48 billion December 2018 from N105.60 billion a year ago while non-life insurance was up 48.41 percent to N161.24 billion from N139.48 @Businessdayng

billion a year ago. The boost from life segment is propelled by regulator intervention in the sector, according to Owolabi Salami, Executive Director of Allianze Insurance Plc. “NAICOM had in January 2018 mandated life insurers to comply with the Group life rate at six percent per mile, which was 300 percent higher than market rate. This means for every N1000 of the sum insured the person will be charged N6,” “Also, infrastructure spends by the federal government created a lot of business opportunities for operators in the industry. For instance, the second Niger Bridge and rail way projects pave the way for premium income. We experienced an uptick in income from retail business with regards motor vehicle,” said Owolabi. Most companies where struggling to survive before the new guide line because the rates they charged are not commensurate with the liabilities there in. A breakdown of non-life insurance figures shows these firms raked in N114.40 billion from Fire Business, representing 66.06 percent increase from N8.67billion recorded the previous year. Motor segment surged by 154.96 percent to N15.40 billion from N6.04 billion recorded the previous year.

Monday 17 June 2019

BUSINESS DAY Harvard Business Review

MondayMorning

In association with

Tackling the underrepresentation of women in media Aneeta Rattan, Siri Chilazi, Oriane Georgeac and Iris Bohnet

round the world, women are far less likely than men to be seen in the media. It is clear that the media must change how it reflects the world — but who can change media itself? For over two years, journalists and producers throughout the BBC have been tackling the gender representation issue by rethinking whom they put in front of the camera, with the goal of achieving 50:50 gender representation every month. “Outside Source” — Ros Atkins’ nightly prime-time news program that started the effort in 2017 — increased its representation of on-air contributors from 39% women to 50% within

four months. Today, 500 BBC shows and teams have joined the 50:50 Project . We interviewed more than 25 journalists, producers, presenters and top leaders at the BBC. We’ve found three

key lessons that are relevant for any manager or leader aiming to shake up the status quo and improve diversity, equality and inclusion in their organization. — START WITH YOURSELF: News shows typically have

little control over the newsmakers featured in the day’s major stories, but they do control the array of contributors, experts and reporters they turn to every day. By zeroing in on this aspect, Atkins was able to focus his

team’s efforts on specific, changeable behaviors. All the team had to do was record the gender representation of contributors each day (initially on a Post-it note, which eventually got entered into in a spreadsheet) and track their progress toward the goal of hitting 50:50 monthly. — FOLLOW THE DATA: Across shows, the one insight echoed by everyone we interviewed was the value of collecting their own data and following it over time. We heard this from people who initially argued that they were already doing a good job of representing women on-screen, only to find themselves at around 30% women after actually counting; from those who hit 50% women quickly, and then followed their data and found themselves backsliding; and from those who had yet to hit the mark.

— BELIEVE IN OTHERS’ ABILITY TO CHANGE THEIR BEHAVIOR: Teams decided what the “right” data to collect was for their show, and then reported their own data through a monthly BBCwide dashboard. Progress was celebrated, and teams that struggled were offered support. Teams that resisted were reminded that they could opt out of the project anytime — so far only one team has done so.

(Aneeta Rattan is an associate professor at London Business School, where Oriane Georgeac is a doctoral candidate. Siri Chilazi is a research fellow at the Harvard Kennedy School, where Iris Bohnet is a professor and a co-director of the Women and Public Policy Program.)

Why we need to rethink “Employer Brand” Ken Banta and Michael Watras

oday, a strong employer brand is seen as a critical way to attract, engage and retain the best people. At a time when top talent is highly mobile, those are certainly laudable goals. But is building a special, separate employer brand the way to achieve them? Based on our experience with hundreds of organizations, we believe what has been called “the employer brand” should in fact grow out of the established company brand. We recommend a threestep process, led by the CEO and the executive team.

First, create a talent framework that lays out the key qualities, behaviors and motivations Csuite managers want to see in their workforce, so the company can deliver on its total brand

promise. Next, validate the talent framework. Customer-facing workers have the best understanding of their needs and how work really gets done. Key questions in focus

our values come across clearly?” It’s also important to ask employees for candid feedback about what needs to change in the organization for it to retain, motivate and attract the best people over the long term. A major challenge is learning how well the talent framework resonates with potential hires. One effective approach is to reach out to new employees, asking them to assess imgroups and on ques- portant areas such as tionnaires for these em- the company strategy, ployees should include: sense of purpose and “Does this capture ca- quality of customer serpabilities critical to our vice, as if they were still success?,” “How do you looking at the organizathink prospective hires tion as a potential place will react?” and “Do to work. The final step is to

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fully embed the talent framework into the business. This means encouraging the right behaviors so that potentially abstract qualities, such as “teamwork,” are assessed and rewarded. As any good leader knows, their most important job is attracting, retaining and advancing the best people. Integrating talent into the center of the corporate brand, rather than spinning out a separate employer brand, is the best way to do that.

(Ken Banta is the founder of the Vanguard Network. Michael Watras is the chairman and CEO of Straightline.)

Monday 17 June 2019

Harvard Business Review

BUSINESS DAY

MondayMorning

In association with

The human behind the product increased satisfaction occurs in part because people value products based on the perceived effort exerted toward producing them, and human interaction makes the effort transparent. — AUTHENTICITY: Why do people pay more for auction items that have had physical contact with their owners, and why does increased physical contact predict increased willingness to purchase such items? According to research, these tendencies result from people’s magical belief in “positive contagion” — the notion that through touch the owner can instill an object with an authentic essence.

Adam Waytz

human touch imbues experiences and products with special significance and so increases people’s perception of the value of those experiences and products. Smart organizations, rather than continuing to automate their services at all costs, would be wise to understand the ways that human presence creates value in the mind of consumers. There are three primary ways human contact matters: — INTENTION: Sensing human intention at the root of the interaction is critical because people tend to equate intentionality with purpose and meaning. One consequence of the digital age and the push toward mass production is

that demand for handmade products has increased. Can customers really taste the difference between handmade and store-bought ice cream? It

is unclear, but the handmade touch seems to create the perception of something special. — EFFORT: Research shows that customers enjoy a sand-

wich order more when they observe the sandwich maker preparing the food (rather than simply ordering the food and receiving it). This

(Adam Waytz, a psychologist, is an associate professor at the Kellogg School of Management at Northwestern University.)

How B2B companies can win back customers they’ve lost count and underscores a repeated finding in management research and practice: People do business with people. — ACCOMMODATE SPECIFIC REQUIREMENTS: You must offer a better deal than the current supplier to motivate change. The resulting agreement justifies the effort. Brex Tech’s sales and net profit from the reestablished relationship with RILF were soon higher than in 2009.

Frank Cespedes and León Poblete

n our study of 26 broken customer-supplier relationships, we found that companies that had successfully won back a customer followed a similar pattern. They identified the reasons for the initial dissolution, applied the right cost-benefit analysis, conducted an honest conversation with the customer and accommodated their specific requirements. To illustrate the process, we’ll use two companies, which we’ve disguised: Brex Tech and RILF. In 2009, Brex Tech, which supplied RILF with electronic components for its optical devices, lost RILF as a customer, but managed to win it back in 2012. Here’s how Brex Tech did it. — REASONS FOR DISSOLUTION: Your analysis needs to focus on what happened, not what should have happened. In Brex Tech’s case, it had restructured, increased its prices and laid off key staff members. What started as a pric-

ing issue led to disputes and loss of trust between executives from both firms, which in turn generated more problems, and RILF lost interest in working with Brex Tech. — COST-BENEFIT ANALYSIS: After gleaning information from its previous transactions with RILF, including revenues, margins and investments, Brex Tech’s CEO said that “RILF had accounted for more

than 15% of turnover and we now had idle equipment in our plant that had been customized to manufacture products for RILF.” Next, Brex Tech looked at both the economic and organizational requirements for re-establishing mutual trust and reliability. Brex Tech knew it could offer RILF price reductions, better technical assistance than its current supplier in the relevant product cate-

gories, order-size flexibility and other areas where the customer could quantify the benefits of a reactivated relationship. — INTERACTIVE DIALOGUE: While top management at both companies had been unable to reach an agreement, production personnel shared positive relations and unique knowhow about products that RILF required. This was a key to reacquiring the ac-

Brought to you courtesy of First Bank Nigeria

(Frank Cespedes is a senior lecturer at Harvard Business School. León Poblete teaches at Chalmers University and Uppsala University, in Sweden.)

Monday 17 June 2019

BUSINESS DAY

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Monday 17 June 2019

BUSINESS DAY

MARKETS INTELLIGENCE

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Directors’ pay hits N19.14 bn in 2018

SHORT TAKES 2.6%

BALA AUGIE

s stewards of comp a n i e s, d i re c t o r s are expected to give proper accounts to shareholders that appointed at the Annual General Meeting (AGM). Good corporate governance, however, ensures that only talented people are engaged to steer the ship or manage the affairs of a corporate entity. We have decided to tabulate directors’ emoluments for 2018 as gleaned from their audited financial statement. Directors of the largest companies in Africa’s largest economy pocketed a combined N19.01 billion in 2018 in salaries and bonuses; this represents a 7.15 percent increase from N17.79 billion they received in 2017. Bench marking such pay with company performances shows Dangote Cement paid its directors N1.16 billion in 2018, which is less than 1 percent of total net income of N390.08 billion in the period under review. Zenith Bank’s executives received N1.41 billion in compensation in the period under review; this represent a 111.27 percent surge from N671.63 million it stewards got previous year. The lender’s net income was up 11.13 percent to N193.42 billion in December 2018 amid a low yield environment and sluggish economy. Directors of Access Bank received N1.17 billion in emoluments in the period under review, this represent a 74.96 percent increase from N671.63 million they pocketed the previous year.

The lender’s net income was up 58.13 percent to N1.17 billion the previous year. While First Bank Holdings’ directors pay reduced by 19.75 percent to N4.07 billion in the period under review, the pay package is the highest among the companies under our coverage. Consumer goods firms, beset by decrepit infrastructure, double taxation, and low consumer purchasing power, were generous to stewards of the company. Unilever Nigeria Plc directors were paid N1.63 billion in salaries, emoluments, and bonuses, s figure that was 16.30 percent of N10.55 net income for the year ended December 2017. The oil and gas industry is a tail of ironies, as the company that is wobbling is paying jumbo pay to directors, while the one thriving is prudent with package. Oando Nigeria Plc, the beleaguered oil and gas giant, increased directors pay by 41.70 percent to N2.08 billion in December 2018 even as the company is grappling with huge debt and poor deteriorating margins and cash flow.

On the other hand, peer rival, Seplat Development Corporation, reduced its director pay by 10.20 percent to N1.84 billion in the period under review as against N2.04 billion. The oil and gas have been growing earnings consistently in the last five years. Directors’ take home pay is a sensitive issue globally, because the money is paid out of sales or profit. For instance, in the United States, United Kingdom, and Asia, Chief Executives take home pay compared with employee’s to ascertain the level of inequality in remuneration. In Nigeria, the Companies and Allied Matters Act (“CAMA”) describes a Director as a person duly appointed by the Shareholders of a company, to assist in directing and managing the affairs of the company. The law further states that remuneration for the services that a Director renders, which are usually in the form of sitting allowances for attending Shareholders, Board and Committee Meetings, is determined by the

P.E

Shareholders of the company at a Shareholders’ General Meeting (“GM”).The remuneration of the Managing Director of any company is required by CAMA to be determined by the Board of Directors of the company. The Central Bank of Nigeria (CBN) code of Corporate Governance for Finance Companies (FC) in Nigeria reads: 1. FC shall align executive and Board remuneration with the long term interests of their institutions and their shareholders. Levels of remuneration should not be excessive but sufficient to attract, retain and motivate executive officers, management and members of staff of the FC. 2. Where remuneration is linked to performance, it shall be designed in such a way as to prevent excessive risk taking. Every FC shall have a remuneration policy put in place by the Board of Directors, which shall be disclosed to the shareholders in the annual report. 3. The MD/CEO and other Executive Directors shall not receive sitting allowances and Directors’ fees. Non-Executive Directors’ (NEDs) remuneration shall be limited to Directors’ fees, sitting allowances for Board and Board Committee meetings and reimbursable travel and hotel expenses. NEDs shall not receive salaries and benefits whether in cash or in kind, other than those mentioned above. 5. Where share options are adopted as part of executive remuneration or compensation, the Board shall ensure that the stock options are not priced at a discount except with the prior authorization of the relevant regulatory agencies.

The World Bank revised global growth downwards to 2.6 percent from 2.9 percent, reflecting weaker-thanexpected trade and investment at the start of the year. Growth is projected to gradually rise to 2.8 percent by 2021, predicated on continued benign global financing conditions and a modest recovery in emerging market and developing economies (EMDEs).

N289.04 billion Sectoral distribution of Value Added Tax (VAT) showed that N289.04 billion was generated in the first quarter of 2019 compared with N298.01 billion generated in the fourth quarter of 2018 and N269.79 billion generated in the first quarter of 2018, indicating 3.01 percent decrease quarteron-quarter and 7.1% percent increase yearon-year.

$50 billion Ecobank Transnational Incorporated (ETI) raised an additional $50 million in Eurobonds. The bond due April 2024 will be consolidated to form a single series with 5-year $450 million 9.5% issued in April 2019. The offer was more than four times oversubscribed.

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

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

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Monday 17 June 2019

BUSINESS DAY

MARKETS INTELLIGENCE Market bears push GTBank out of the trillion-naira market cap club Ifeanyi John

he space at the top just isn’t wide enough for everyone at the trillion-naira club. Just as MTN Nigeria’s listing brought Nigeria’s biggest telco provider into the elite club, the stock market selloff brought about one major casualty as Guaranty Trust Bank shares price significantly declined this year, evicting Nigeria’s largest bank by market capitalization out of the elite trillion-naira market cap group. The bearish trend of the market which muted for the first two weeks of MTN Nigeria’s listing hit GTBank negatively in the last month, pushing the share price tumbling below the N34 threshold the bank needs to be in the big boys’ club considering its total outstanding shares of 29.4 billion

units. This time last year, the trillionnaira club had about 4 companies namely; Dangote Cement, Nestle, GTBank, and Nigerian Breweries proudly elevating the status of shareholder’s portfolio. However,

as the general elections drew closer, market uncertainty rose, and Nigerian Breweries was the first to get kicked out of the elite club as the company’s stock price tanked. Zenith Bank which was briefly a member of the N1 trillion group

Access Bank’s shares are undervalued compared to peers in Emerging, Frontier Markets BALA AUGIE

a P/B of 1.1x and have a one-year forward P/B of 0.9x “On a P/B basis, Access is trading at a material discount relative

to its Nigerian peers with over 30 percent ROAE in in the first quarter of 2019,” said analysts at Chapel Hill Denham Limited.

ccess Bank shares are more attractive to when compared to some of its in Emerging and Frontier markets peers as the lender recorded the largest profit expansion among Tier 1 banks in Nigeria. According to a recent note by investment house Chapel Hill Denham Ltd, Access Bank has a price to book ratio (P/B) of 0.40 times, this compares to similar sized banks with total assets of $17-20bn (Access: $17.85bn post-merger) across some emerging markets and frontier markets that are trading on

Nigeria’s most profitable banks set to grow loan book in 2019 ... The tier 1 lenders had negative loan growth last year Ifeanyi John

ith the apex bank frowning at the ballooning treasury portfolios of local banks, Nigeria’s two most profitable banks will need to push harder to improve the total size of loans to customers as stated in their 2019 guidance. The race to be the most profitable bank in 2019 will depend on which of the two banks can achieve their guidance by the end of the year. Zenith Bank and Guaranty Trust Bank set ambitious loan growth targets coming from a 2018 where loan assets contracted by 10.5 percent and 13 percent respectively. Zenith project to grow loans by 7.5

percent in 2019 after their loan assets declined last year due to early repayments, with the bank reporting that borrowers were replacing overdrafts with term loans. It had earlier guided for loans to grow 2.5 percent in 2018. They failed to meet the loan growth target in 2018 but with CBN moving to cap treasury bills investments, achieving this objective may keep the regulators happy for the time being. Zenith bank had expressed opportunities in growing their loan books on the back of a stronger economy. “Our expectation is that the economy will continue to strengthen,” the bank said on an analyst’s call. “It will throw up opportunities to grow the loan book.” The bank said it saw opportunities in the agricultural sector, which receives good support

from the government, and that as the economic recovery continues it could also open up opportunities to lend to manufacturers. GTBank aims to improve its lending activities in other sectors of the economy to further diversify its loan book. MD of the Bank, Segun Agbaje stated in the conference call that the bank would grow its loan book along the oil and gas as well as FMCG lines. GTBank set 2019 guidance at 10 percent loan book growth and this will be possible if the economy continues to improve if crude oil prices stay above the natural $50/ barrel hedge price. Nigeria’s economy expanded in 2018 at its fastest pace since a recession two years earlier, while inflation fell in January from a seven-month high.

in early 2018 but was pushed out of the exclusive club by market bears after its share price fell below N32 back in March 2018. On Friday, 13 July, 2018, Nigerian Breweries saw its market capitalization fall to N879.65 billion

which still kept the firm among the largest publicly listed companies in Nigeria but N130 billion short of the N1 trillion mark. With the introduction of MTN shares on the stock market, the trillion-naira club was back to its 4-man team. Bearish market sentiments saw GTBank’s share price tumble below N34 at the start of May, 2019. It has now been one month since GTBank has been evicted from the group with no sight of a near return as investors’ confidence continues to remain bearishly low. The elite club is currently made up of one telecommunications firm, one consumer goods Company and one industrial firm which shows that the successes of the companies are not concentrated within one industry. GTBank is down 19.29 percent in the last one year and barely 70 kobo above its one-year low of N30.30.

Wall Street retreats as chipmakers, energy stocks weigh Mamta Badkar, Michael Hunter, Sarah Provan and Alice Woodhouse FT

all Street ended marginally lower on Friday as chipmakers and energy stocks declined, with investors weighing up a string of US economic data while deepening geopolitical tension in the Middle East added to global growth and trade fears. The S&P 500 slid 0.2 per cent but eked out its second consecutive weekly gain, up 0.5 per cent over the past five days. Friday’s decline was led by a 0.7 per cent slide in energy and a 0.8 per cent drop in technology stocks. Within tech, chipmakers were the hardest hit falling 2.4 per cent. That decline was led by a 5.6 per cent slide in Broadcom, which late on Thursday cut its full-year outlook and blamed the trade war for hurting demand. The Nasdaq Composite fell 0.5 per cent in New York, which kept a check

on its gains over the past five days and left it with a 0.7 per cent increase. In Europe, the Stoxx technology index dropped 1.8 per cent, while the region-wide Stoxx 600 shed 0.4 per cent. The euro fell 0.6 per cent against the dollar, with €1 buying $1.1205, after a set of US economic releases, starting with retail sales rising in May for the second month in a row, set the tone for the day’s trading. Industrial output climbed a better than expected 0.4 per cent last month, with figures showing a more robust manufacturing sector. Treasuries were mixed with the yield on the benchmark 10-year note little changed at 2.0856 per cent, having touched as low as 2.058 per cent in earlier trading on Friday. The twoyear Treasury yield was up 1.3 basis points at 1.8426 per cent. The yield on benchmark German Bunds fell to a record low, taking it deeper into negative territory and leaving investors holding the debt to maturity facing a guaranteed loss.

Volkswagen’s truck IPO signals bigger change at carmaker German car company says truck division will be valued at up to €16.5bn in listing Patrick McGee

olkswagen’s truck division will be valued at as much as €16.5bn in its initial public offering at the end of the month, a step that signalled to investors wider changes are afoot at the world’s largest carmaker. The German group said late on Thursday it planned to sell shares in Traton, the trucking business that includes VW’s Man and Scania brands, at €27 to €33 each, giving it a valuation of between €13.5bn and

€16.5bn. VW is only selling a small stake of between 10 per cent and 11.5 per cent — lower than some hopes it would offer a 25 per cent stake — but after VW shelved the deal in March, analysts were cheered that the plan for the IPO remains on track. “The transaction itself is small and you could dismiss it in some ways, but it shows VW has heard the message investors have been giving for years: break up, slim down, do something that is manageable,” said Philippe Houchois, analyst at Jefferies.

Monday 17 June 2019

BUSINESS DAY

news Super Falcons must be proactive, NAMA solicits IATA collaboration tactical against France - Falode on critical manpower training Anthony Nlebem

frican champions, Nigeria’s Super Falcons, must be proactive in their approach in order to earn a result against host nation and group leaders France at the 8th FIFA Women’s World Cup on Monday, according to Aisha Falode, member of the NFF Executive Committee. “I must commend the Super Falcons for their approach and game plan against the Koreans in Grenoble on Wednesday. They showed the stuff of a champion team with their determination and doggedness. “However, against France on Monday in Rennes, we will need to be much more proactive and try to dictate the pace of the game. We must study them for the first five minutes or thereabout and then set out our tactics on how to contain them and also launch our own onslaughts in search of goals. It will be an interesting match but a good result is possible for Nigeria,” Falode, who has been with the Falcons in France since the commencement of the World Cup, told thenff.com from Rennes on Saturday. Three-pointer Nigeria have a big chance of reaching the knockout rounds of the FIFA Women’s World Cup for the first time in 20 years if they hold their ground against the Les Bleues at the

28,000-capacity Roazhon Park. The Falcons put up a credible effort at the sixth edition of the Women’s World Cup in Germany in 2011, but after one-goal defeats by host nation Germany and France, their one-goal defeat of Canada proved inadequate to steer them to the second round. A win or draw against the Les Bleues on Monday evening (match starts at 8pm Nigeria time) will automatically send the Super Falcons to the Round of 16, though a narrow loss might also see them sneak in depending on results in other groups, as well as the result between Group A mates Norway and Korea Republic – which is starting at the same time in Reims. Norway has three points from their defeat of Nigeria but lost to France. Korea Republic could also go to three points if they defeat Norway on Monday, but their goals deficit of minus six (lost 0-4 to France and 0-2 to Nigeria) is heavy. Nigeria has only a minus one-goal deficit. Wednesday’s 2-0 victory over Korea Republic was the first time in 20 years (also since USA 1999) that the Super Falcons won a World Cup match by more than one goal, and was also the first win by an African team at France 2019. Africa’s other flag bearers South Africa and Cameroon have each lost their first two matches of the campaign.

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IFEOMA OKEKE

igerian Airspace Management Agency (NAMA) has canvassed for partnership and support from the International Air Transport Association (IATA) in the training of critical manpower of Air Navigation Service Providers (ANSPs) in the AFI Region. Fola Akinkuotu, managing director of NAMA, who made the demand while receiving Yassine El Charkaoui, the IATA manager, Safety and Flight Operations- ATM Infrastructure Focus, West and Central Africa, at the agency’s headquarters in Lagos at the weekend, said, “Such a gesture would be a win-win for everyone as beneficiaries of the training will be better equipped, better informed and will be able to offer better services to the airlines in the discharge of their duties.” Akinkuotu called for more understanding of the situation of ANSPs in the sub-region by the international body on the issue of navigational charges, adding that there was the need to consider the cost factors in some areas, particularly Nigeria, in arriving at a conclusion as to whether charges were high or not.

“A lot of our equipment are in remote areas which we have to support 24/7 on alternative means of electricity, even some are off the national grid, and powering these stations comes at a cost,” he said. The NAMA boss said continuous dialogue and synergy between IATA and the agency was an indication that both organisations were desirous of a safer airspace, adding that a safer airspace would impact positively on the industry. “The safer the airspace, the more passengers we can attract as more people would feel that air travel is truly the safest means of transportation,” he said. Earlier in his address, El Charkaoui said his meeting with the agency was pursuant to the Collaborative Decision Making initiative, seeking to improve operational efficiency of operators, increase capacity and also optimise the utilisation of resources. He said the meeting with NAMA would afford the agency the opportunity to share its current and future plans for air traffic management infrastructure with IATA and to ensure that the opinion of airlines was taken into consideration in the deployment of new technologies.

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Maritime possesses vast opportunity for economic growth – NIMASA DG …says agency has created 7,000 new jobs in 6 months SEGUN ADAMS

he Nigerian Maritime Administration and Safety Agency (NIMASA) says it has created over 7,000 jobs in the last six months through the New Cabotage Compliance Strategy. The agency, which is saddled with the responsibility for regulations related to Nigerian shipping, maritime labour and coastal waters, says it is set to do more as the maritime sector possesses vast opportunities for economic growth. Dakuku Peterside, directorgeneral, NIMASA, who stated this in Lagos while speaking with journalists on the activities of NIMASA, said the agency had come up with strategies that had ensured a steady rise in the number of jobs created through manning, crewing, stevedoring, and dockworkers engagement. This, he said, has positioned the maritime industry as one of the key sectors that will support the realisation of President Buhari’s Democracy Day promise of lifting 100 million Nigerians out of poverty in 10 years. The NIMASA DG, the implementation of a five-year plan for the cessation of waiver has encouraged the employment of more Nigerians by vessel

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owners. He said the effect of the new Cabotage regime was still yielding positive results, as more Nigerians are set to be engaged in various sub-sectors of the maritime industry due to the discouragement of the dominance of the sector by foreigners. “We have always known that the political will to deal with the issue of waivers in the Cabotage regime had been the challenge in the past. Our pronouncement and implementation of the New Cabotage Compliance Strategy has led to the engagement of over 7,000 Nigerians in various sub-sectors within the industry. This has also resulted in 32 percent increase in vessels operating under the Cabotage regime in the first two quarters of 2019,” Peterside said. Detailing the achievements of NIMASA, the DG said the agency had inspected and surveyed over 600 vessels calling at Nigerian ports, an unprecedented feat which, he said, showed that Nigeria was alive to its port state and flag state responsibilities. He said the increased inspection and survey had ensured that sub-standard vessels no longer call at Nigerian ports, which has also improved safety on Nigerian waters.

Monday 17 June 2019

BUSINESS DAY

NEWS

CBN tasked on conversion of power sector loans to equity OLUFIKAYO OWOEYE

he need for the Central Bank of Nigeria (CBN) and commercial banks to collaborate with the Nigerian Electricity Regulatory Commission (NERC) to reposition the power sector for a quantum leap in performance has been emphasised. According to Kola Ayeye, managing director, Growth and Development Asset Management Limited (GDL), it is time to admit the failure of the last power privatisation exercise, and recommended a new programme where NERC, CBN and banks should, on a competitive basis, invite a global player in the calibre of General Electric (GE) or such similar player to commit to generate, transmit and distribute a minimum of 20,000mw daily within five years, increasing same to 30,000mw daily by the tenth year. Ayeye speaking at an interactive forum in Lagos said, “We will be contracting to pay for power successfully delivered to the consumer rather than contracting for the execution of power projects. Execution of power projects has produced very poor results after huge investments in excess of $16 billion. “The nation has invested massively in power projects with poor results so we should change the model. Rather than contracting to execute power projects, let’s contract best-inclass players to deliver power. It is not our business how they generate, transmit or distribute the power. They are to deliver the power. They will only get

paid for the power they deliver to the consumers. Such big players exist and the size of the Nigerian power market is sufficient to attract them.” The contract with the new concessionaire will be backed with a 10-year payment guarantee for power delivered to the consumer, which will be provided either by AfDB, World Bank or first-class international banks, he advocated. “Let us find a partner who will take over available power assets across the entire value chain. But our commitment will be to pay for power delivered to the consumer. This contract will be between $8-12 billion, and is definitely of a sufficient scale to attract a global best-in-class operator,” he said. Ayeye, a former executive director of Asset Management Corporation of Nigeria (AMCON), decried the level of default of both electricity generation companies (Gencos) and distribution companies (Discos) to the banks, saying such entities should be put up for reconcessioning/reprivatisation either through voluntary collaboration with CBN/NERC/ banks or through receivership where the operator refuses to cooperate. All such Gencos and Discos, together with TCN, he said, will be concessioned to this new operator. The new programme will require collaboration between CBN, the banks and NERC. He said this radical reform in the power sector is necessary to address the abysmal performance of the present players who have failed to deliver constant power to users in Nigeria.

Presidency welcomes EU recommendations on electoral reforms

… as PDP demands prosecution of INEC chairman Tony Ailemen & OWEDE AGBAJILEKE, Abuja

s reactions continue to trail the European Union Election Observation Mission (EU EOM) in Nigeria’s report on the 2019 generalelections,Presidencysays itwelcomedthereport,promising to analyse it fully and act on the recommendations. A statement by Garba Shehu, senior special assistant to the PresidentonMediaandPublicity, said, “Presidency notes that the EU observers had been invited to the country by the Independent National Electoral Commission (INEC), and welcomed by the government of President Muhammadu Buhari. “This was a clear indication of the administration’s good intentions, commitment to a pure democratic process, and desire to improve for the next elections. “EU noted in their report that there were marked improvements from previous elections,

although stating that more work needed to be done.” The Presidency assured that the administration of President Buhari would work with all Nigerian citizens, state institutions, parties, civil society, the media and other experts to make sure that the improvements recommended by the EU were implemented, and that these areas of concern were addressed. “It is noteworthy that INEC is in receipt of a number of recommendations that form a part of the EU report,” according to the statement. Presidency also assured that the Commission was in safe hands and happy that they were currently engaged in root and branch reviews of the 2019 general elections and would input lessons learned into its recommendations for electoral and constitutional reforms. “We believe that the commission conducted a good election and will continue to improve on its processes and procedures.” While it is regretted that the

elections in a few parts of the country witnessed some violence,amongothershortcomings highlighted by the EU, we note howeverthatnoneofthesehitches affectedtheoveralloutcomeofthe elections. While noting, “EU did not question the results of the presidential election,” the Presidency said, “This is further proof that the polls reflected the overall will of Nigerians, and that the world is solidly behind the election of President Buhari for a second term.” In a similar note, the People’s DemocraticParty(PDP)hascalled for the prosecution of Mahmood Yakubu, chairman, Independent National Electoral Commission (INEC), following revelations by the EU that the 2019 general elections were marred by severe operational challenges and violence. The main opposition party argued that it had been vindicated with the fresh revelation by the damning EU report. Specifically, the party maintained that the February 23, 2019,

Presidential election was rigged to favour President Buhari and the All Progressives Congress (APC) party. AstatementonSundaybyKola Ologbondiyan,PDPnationalpublicity secretary, commended the EU for the courage in ‘exposing the evils committed by the APC and INECinthe2019generalelections.’ “The party notes that the revelations of manipulations as detailed in the EU report further validatesqueriesbymajorityofNigerians that President Buhari was not validly returned for a second term in office. “The world can now see that the PDP has not been crying wolf in insisting that the election was out rightly rigged with the cancellation of millions of PDP votes, alteration of results and allocation of fictitious votes to the APC. “Nigerians are still in shock over the revelations by EU of how about 2.8 million votes were deliberately “cancelled without sufficient accountability” and how several returning officers gave no reason for the cancellations.

CBi/BIF plans investment promotion to showcase opportunities in agric value chain

he Convention on Business Integrity (CBi) under the Business Innovation Facility (BIF) platform is scheduled to hold investment promotion events to highlight opportunities in the agriculture value chain industry. The programme will have two sessions focusing on major agricultural markets. The session for the Dairy and Maize is billed to hold on June 18, 2019, in the Ladi Kwali Hall of Sheraton Hotels, Abuja, while the session whose focus would be on Cassava and Aquaculture is scheduled to hold on June 20, 2019, at The Golfview Hotels & Suites, Ikeja, Lagos. The CBi was founded in 1997 to bring about a society that prefers integrity over corruption, promoting and supporting anti-corruption business coalitions with the use of collective action to curb corruption and promote ethical business practices, transparency and fair competition in the private sector. The BIF is one of the strategic initiatives of the organisation. It is a DFID funded programme that works to improve the income of smallholder farmers and drive investments in agriculture. BIF has achieved this by developing business innovations

that enable farmers increase their productivity, facilitate their inclusion in formal agricultural value chain and create opportunities for more investment flow into the agricultural sector. These innovations are scalable and represent a lucrative opportunity for potential investors keen to increase expand their market. Based on the output/track record from the projects, UKAID has mandated the organisation to disseminate its approach and learning to industry players in order to encourage investments, reduce risks associated with entry/ operations, facilitate potential partnerships to reduce operation costs and harness growing opportunities in the cassava and aquaculture value chain. The event is expected to have in attendance over 100 industry stakeholders/players that would cut across the government, private sector, the academia and other related stakeholders. The event would provide opportunities for investors and companies with complementary interests in the aquaculture, cassava, diary, maize and information services value chain to collaborate and explore partnership possibilities. www.businessday.ng

Deepankar Rustagi, founder/CEO, Mplify Limited(l), and Frank Aigbogun, publisher/ CEO, BusinessDay, at a courtesy visit of Deepankar Rustagi to BusinessDay head office in Lagos.

Apapa-Oshodi road rehabilitation raises safety concerns, journey delays to commuters MIKE OCHONMA

ngoing rehabilitation work along the ApapaOshodi Expressway embarked on by the Federal Government to ease vehicular traffic along the corridor leading to the Apapa and Tin Can ports is now of major concern to commuters following the gridlock being experience on a daily basis. This is coming at a time the Federal and Lagos State government are under pressure to find permanent solutions to the hydra-headed traffic situation in and out of the Apapa and Tin Can ports complexes for many years. On a drive past the axis last weekend, it was observed that the middle of the road had been cordoned off at different

intervals by the different gangs of the construction companies handling the project, thereby diverting traffic and leaving motorists to scramble for passage on already decrepit two lanes. Some of the flashpoints bus stops with tensed vehicular traffic logjams where commuters are facing daily frustration for hours include Berlet, Sadiku, Ilasamaja and Cele bus stops Speaking at a recent stakeholders’ meeting in Lagos, Adedamola Kuti, the Federal Controller of Works in Lagos, assured that government would complete the reconstruction of the roads on schedule, slated to last two years, but advised road users to obey traffic rules. The controller said the reconstruction would be divided

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into four sections and that the work was going to be done on all the sections simultaneously by different construction firms. The controller assured that traffic regulatory agencies would manage traffic better, adding that adequate diversion signs would always be provided during the reconstruction. He said alternative routes were being rehabilitated to ease congestion, calling for the cooperation of motorists. Stakeholders including truck owners associations, truck drivers associations, traffic management agencies, law enforcement agencies and officials from the Lagos Ministry of Transportation. Ivan Bekker, managing director, Hitech Construction Company Limited, the contractor handling the project @Businessdayng

on behalf of Dangote Group, said some materials would be recycled for speedy completion of the work, saying the recycled materials would be used to stabilise cement during the reconstruction period. It would be recalled that the past meetings, stakeholders’ had always addressed issues of traffic management and regulations. Meanwhile, Hyginus Omeje, sector commander, Federal Roads Safety Corps, has appealed to Lagos residents to use the waterways and mass transit buses to reduce congestion during the reconstruction, while consultations with truck owners and drivers’ unions on how to evolve strategies to utilise some trucks parks under-utilised currently, to ease gridlock is being intensified.

Monday 17 June 2019

BUSINESS DAY

news Ogun records zero poliomyelitis case in 10 years, moves to intensify efforts RAZAQ AYINLA, Abeokuta

aving achieved zero record of poliomyelitis in the last 10 years, the Ogun State government has rolled out second round of Outbreak Respond (OBR) Campaign centred on the means to intensify efforts against poliomyelitis that either cripples or kills children between ages 0 and 59 months. Speaking at flag off of second Round Outbreak Respond (OBR) Campaign held at IjebuOde on Saturday, Governor Dapo Abiodun said the clinical intensifier efforts were being promoted to ensure that no child suffered disability or die as a result of any vaccine preventable diseases that might break out in the state. The governor, represented his wife, Bamidele, said, “We know the role that child healthcare plays in the economic growth of a nation, hence our administration is committed to ensuring that no child suffers any disabilities as result of any vaccine preventable diseases. “In almost 10 years, Ogun did not record any wild polio virus or the vaccine derived circulating virus. As a result of this our dear state has successfully maintained this until

2019. Our government is committed to efficient and qualitative healthcare of the children by supporting the campaign for effective exercise and ensure that Oral Polio Vaccine (OPV) is administered to prevent children from contracting the disease and interrupt the

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transmission.” Permanent secretary, Ministry of Health, Ayinde Adesanya, appealed to parents to immunise their children, saying the vaccine was of top quality and would strengthen children’s immunity against the child crippling disease.

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Monday 17 June 2019

BUSINESS DAY

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BUSINESS DAY

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Monday 17 June 2019

BUSINESS DAY

news CBN’s life support to FG rises 780% to... Continued from page 1

don, said in an emailed response to BusinessDay. Central bank credit to government which has been a major source of financing in the ECOWAS states is curbed at 5 percent. Analysts say while central bank’s financing may be inevitable in an environment with fewer tax revenues due to recession and undeveloped financial systems, borrowing from the apex bank should be on a transitory basis. Ideally, where such borrowing is undertaken, the loans should be repaid within the same fiscal year, and gradually, the government should wean itself off central bank financing of deficits.

Since 2015, when President Muhammadu Buhari first assumed office, the total amount of money borrowed from the CBN (Ways and Means) to meet fiscal obligation has surged by more than 14 times, no thanks to the unrealistic revenue target in which Africa’s biggest oil producer sets in its budget. In 2014, borrowing by the Federal Government stood at N922 billion. This later surged to N2.5 trillion in 2015, N5.21 trillion in 2016, N5.87 trillion in 2017, and a whopping N8.12 trillion in 2018. Reacting to the development, Taiwo Oyedele, head, tax and regulatory services, PwC, said CBN’s claim on the Federal Government is in principle monies printed to buy

FGN securities or, put differently, a form of quantitative easing. The impact, he said, would already have been felt on the economy by way of depreciation of the naira against major foreign currencies and inflationary pressures. In substance, both the claim and the obligation belong to the Federal Government hence it’s a zero sum item. However, should the Federal Government decide to settle or pay down the claim, it will mean a restrictive monetary policy and potentially higher taxes from the fiscal side. “The Federal Government has been running a huge fiscal deficit and as such, the central bank is lending to the Federal Government through Ways and Means and this has a serious multiplier

effect in the economy,” said Johnson Chukwu, managing director/CEO at Lagos-based financial and investment house, Cowry Asset Management Limited. “What this does is that it would increase inflation, crowd out the private sector and make the CBN to have a weaker balance sheet,” Chukwu said on the phone. BusinessDay’s effort to reach the CBN to comment on this was not successful as its spokesman, Isaac Okorafor, could not respond to his calls and text message. For donkey years, Africa’s most populous nation has never met the revenue target stipulated in the budget and the variance keeps getting wider ever since the global collapse in oil prices that sent the

oil-dependent nation to its first recession in a quarter of a century. However, this hasn’t stopped the government from increasing the benchmark oil price at which it pegs the budget. In 2018, for example, Nigeria approved a fiscal expenditure of N9.12 trillion and hoped to rake in about N7.2 trillion from both non-oil and oil sources. An anticipated revenue of about N7.2 trillion means the government would have to borrow about N1.9 trillion which in the budget is stipulated as fiscal deficit. However, data from the Budget Office of the Federation showed that the Federal Government could only retain a meagre N3.9 trillion. A revenue figure of N3.9 trillion would increase the country’s fiscal deficit to as high as N5.22

trillion. Going by an initial approved figure of N1.9 trillion fiscal deficit, Nigeria would need an additional funding of N3.32 trillion to meet its fiscal obligation, a move Chukwu said was raised by the apex bank minting more currency. In 2018, the Federal Government borrowed as much N668 billion from the domestic debt market, an amount analysts say could have created funds for private sector that has over time been starved of cash by banks. It is not just the Federal Government that the CBN has been giving bailouts, but also states and local governments. Lending to states and local governments in the form of conditional budget support doubled to N656 billion in 2018, from N300 billion in 2016.

Neconde Energy Limited Refinances... Continued from page 1

an agreement to refinance

the company’s existing Senior Secured Medium-Term Loan Facility Agreement worth $640 million (about N2.3 trillion) with Neconde Energy Limited, an indigenous oil and gas exploration and production company, following the 20year renewal of the company’s Oil Mining Licence effective June 2019. The consortium of seven lenders is made up of four Nigerian banks and three international lenders. The banks include Access Bank, Fidelity Bank, Zenith Bank and First Bank (UK) Limited, while the international lenders include the Africa Import Export Bank (Afrexim), Africa Finance Corporation(AFC)andGlencore Energy(UK)Limited.Apartfrom being a member of the lending consortium, Glencore is also the off-taker of Neconde’s equity crude oil production. With the refinancing, Neconde is now positioned to achieve its field development plans for the asset. Ernest Azudialu-Obiejesi, chairman of Neconde Energy Limited, said in a statement that the loan refinancing affirms the strong financial fundamentals

Ernest Azudialu-Obiejesi, chairman, Neconde

of Neconde Energy Limited as a leading player in the upstream sector oftheoilandgasindustry. He also disclosed that “this restructuring frees up capital for Neconde to invest in more development activities that will result in production increase”. Neconde is in a Joint Venture (JV) with the Nigerian Petroleum Development Company (NPDC) in OML 42. The JV’s production currently stands at an average of 50,000bpd and upon completion of the development activities planned in the 2019 work programme, the JV expects to hit a production output of about 100,000bpd. In Q3 2018, Neconde alongside its JV partner, NPDC, secured a robust and indepen-

Nigerians to pay more for commodities... Continued from page 2

surpass its N887 billion annual target for this year, but we also see many Nigerian importers leaving Nigerian ports because many of them will require a lot of money to bring in goods into the country. Many other government policies have scared importers away to other West African countries and ports in those countries are becoming hub for Nigerian cargo,” Anakebe said. According to the Nigerian Ports Authority (NPA) 2018 third quarter operational performance report, the nation’s seaport recorded a significant drop as the number of ves-

sels that called at the ports dropped by 7.3 percent to 969 when compared to 1,045 recorded in the corresponding period of 2017. The report further stated that the gross registered tonnage of vessels completed stood at 31,747,589, representing a drop of 7 percent over the corresponding period of 2017. Jonathan Nicol, president, Shippers Association of Lagos State, described the development as a sign of inflation created by government’s determination to raise funds to enable the payment of newly signed N30,000 minimum wage. He said the inflation would definitely affect the exwww.businessday.ng

L-R: Paul Gbededo, group managing director, Flour Mills Nigeria plc; Hamdah Ambah, managing director, FSDH Merchant Bank; Biola Alabi, managing partner, Biola Alabi Media; Olubunmi Aboderin Talabi, executive council chairperson, WIMBIZ; Comfort Lamptey, UN Women Country Representative, Nigeria and ECOWAS, and Hakeem Muri-Okunola, head of service, Lagos State, at the WIMBIZ Annual CEO/Policy Maker Interactive Forum in Lagos.

dent alternative crude evacuation system. This initiative was borne out of the need to find a more reliable alternative to the Trans-Forcados Pipeline which is prone to repeated outages. The new evacuation system (“Barging”) has become the primary evacuation system for the JV and has since proven to be

a more reliable and consistent channel of evacuating its crude oil for export. The JV intends to consolidate on this major achievement and improve its cash flows from the Asset. In January 2011, Neconde participated in and emerged successful in the competitive bid for the acquisition of 45

percent stake in OML 42 previously held by a consortium of International Oil Companies (Shell, Total Exploration and Production Nigeria Limited and Nigerian Agip Oil Company Limited). Only recently, it secured the renewal of its lease for OML 42 for a further tenor of 20 years.

Neconde’s status as an indigenous company with an excellent management team offers a viable option through which the rich reserves of the Niger Delta could be brought into production with attendant economic benefits for the local communities and the country.

change rate of naira to dollar. “The adjustment in rate means that importers would not be able to make projection for their businesses while those who projected based on the old exchange rate will have their fingers burnt because the approved exchange rate on the Form M would be different from the one used for import duty valuation,” Nicol said. “Already, there has been increase in prices here and there as National Agency for Food and Drug Administration and Control (NAFDAC) recently increased their own charges. Government is always pressuring its agencies to make money. The big question is what government is

doing with taxpayers’ money because we have no good roads, no water and no electricity?” he said. Another angle to the story is that it could also be the CBN’s quiet way of adjusting the country’s exchange rate to the market rate of N360. Experts, however, are divided on this. On June 11, 2019, the CBN stopped publishing the fixed naira exchange rate on its website, saying that “the rate will be market-determined”, BusinessDay checks showed. The bank, however, said the following day that there had not been any change in Nigeria’s exchange rate structure. “There has been NO

change in Nigeria’s exchange rate structure,” CBN announced on its Twitter handle at 12:15 AM, June 12, 2019. The CBN’s previous official rate was N305/$. That rate was used to ensure that traders, including fuel importers, got cheap dollars. But it is almost becoming clear that the rate is not tenable as most of economic agents get dollars at N360/$. Ayodeji Ebo, managing director, Afrinvest Securities Limited, commenting on whether or not the CBN is trying to use the exchange rate used by Nigerian Customs to allow market to determine the exchange rate, said the rate is not theoretical. “You know the CBN is

trying to ensure that the naira converges. For those that have been enjoying subsidised FX, they would now have to be paying the full value of the exchange rate. But it is not going to trigger any pressure,” Ebo explained. Andrew S. Nevin, advisory partner and chief economist, PwC, said if the change in the exchange rate used by Nigeria Customs is a further step in harmonising the exchange rate, the CBN will explain its strategy and direction in due course. “I don’t think the move is particularly differential to importers’ FX costs, which are already largely within that band up to N360 to the dollar,” Rafiq Raji, chief economist at Macroafricaintel, said.

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news Teachers’ registration: No going back on deadline, NUT, TRCN insist Cynthia Egboboh, Abuja

n the heels of ensuring a regulated and formidable association of teachers in Nigeria, the Nigeria Union of Teachers (NUT) and the Teacher Registration Council of Nigeria (TRCN) have insisted on December 2019 as the deadline for teachers across the country to register with the Council or be dropped. Speaking with BusinessDay, Audu Titus Amba, national public secretary, NUT, states that the Union is in support of the position of the government,

as registration is essential to deepen regulation and ensure control among teachers in Nigeria. “We support the position of the government and the TRCN, and we are in line with it, by December every teacher that is found without the certificate will be asked out,” Amba says. On the quality of teachers allowed in the classrooms, Amba laments that over the years there have been numbers of unqualified teachers and people without jobs taken up teaching, which had lowered the quality of teaching outputs in the country.

“There are thousands of qualified teachers that seek opportunities to practice, hence they will be given the chance to practice. We want qualified teachers, in the recent past, we have seen people that lack job take up teaching as a means of survival till their desired jobs come, and they are allowed to practice in our schools, but we are saying, not anymore. “The classrooms should be a place for people with required teaching training, people with professional training, and practicing licence not for the unqualified job seekers,” he notes. He, however, could not give

the actual number of teachers that have registered since the process began, but states, “We have several teachers registering, and hence we have not been able to keep track of the numbers. But I know they are well over 2 million registered teachers in Nigeria.” Adamu Bello, director of operation, TRCN, told BusinessDay that the importance of the registration cannot be overemphasised, as it seeks to promote the standard and quality of the education sector as a whole, hence December 2019 remains the deadline for teacher’s registration. “In Nigeria today, to achieve

any desire from a constituted authority, there is need for coordination among qualified teachers,” he explains, also noting the need to bring all teachers together to create a better standard for the profession and the education sector as a whole. “We encourage people to show interest and start the process of registering. Those that could not complete the registration as at the deadline will be granted extension, otherwise anyone found in the classrooms without teaching licence will be penalised. “We have seen all sort of people because of lack of jobs

Power Africa moves towards bringing more energy to the continent MIKE OCHONMA

ower Africa, launched by former US President Barack Obama six years ago, is working towards its target of providing energy access to an additional 60-million new homes and businesses and adding 30,000mw of cleaner, more efficient electricity generation capacity to the African continent. So far, the programme, which brings together technical and legal experts, private sector and governments around the world to increase the numbers of people with access to energy, has helped 121 power generation projects that provide a combined capacity of more than 10,000mw, reach financial close. Power Africa involves 160 partners, including US government agencies; developments banks, such as the World Bank and the African Development Bank, and the governments of the US, the UK, France, Israel, Japan, Korea and Sweden, besides others. “We see our role as, side by side with the private sector, to figure out obstacles,” Power Africa coordinator, Andrew Herscowitz, told the African Utility Week and PowerGEN Africa three-day energy conference and expo in Cape Town last week. One of its recent successes

has been to bring electricity to 500,000 people in Nigeria for the first time, and help generate $160 million in new revenues. “We work with utilities in Nigeria, which has enormous opportunities.” Nigeria is endowed with large oil, gas, hydro and solar resources and has the potential to generate over 12,500mw of electric power from existing plants; however, it generally generates only about 4,000mw. “Power Africa needs to see how to tap into latent demand. We need to get projects to the people. We need to do more to strengthen utilities, train people on collections and stop the theft,” said Herscowitz. He said utilities needed to improve their internal audit systems. New business models and upgrading equipment would also be essential. He said there was also much to learn from solar home system companies, which were making money and bringing much-needed light and powering up appliances in poverty-stricken areas. About 600-million people or two out of every three people living in Africa do not have access to electricity. But Herscowitz cautioned that there need to be a careful balance of supply and demand in its support of projects.

FMDQ holds Series II Bootcamp training for corporate issuers

wing to the need for increased stakeholder engagement and continuous market sensitisation on the opportunities that exists in the Nigerian debt capital markets (DCM) for corporates seeking to raise capital for their businesses and beyond, FMDQ Securities Exchange plc (FMDQ), through the Debt Capital Markets Development (DCMD) project, is deploying a series of bootcamp training sessions across various stakeholder groups in the Nigerian DCM. These training sessions, an initiative of the Investors, Issuers and Intermediaries Engagement/Education (IIIEE) sub-committee of the DCMD project, which aims to build capacity and know-how of the DCM stakeholders with respect to debt issuances, was flagged off by the Series I Bootcamp training programme in October 2018. The inaugural session

brought together potential issuers with the aim of promoting an increase in capital formation through the Nigerian DCM. In the same vein, the Series II Bootcamp training, held June 14, 2019, at FMDQ’s business complex, Exchange Place, brought together corporates and other potential issuers in the Nigerian financial markets. With its theme – The Nigerian Debt Capital Markets: A More Viable Means of Financing for Corporates – the session focused on the importance of good corporate governance practices for potential issuers that seek to expand their businesses and grow profitability in the long term, modalities for accessing various finance options in the Nigerian DCM and steps to simplifying the documentation process required, amongst others. www.businessday.ng

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go into the teaching job, we want to get those untrained teachers away from our schools. Whoever wants to teach should get the required skill to teach, we are out to ensure that quality assurance is maintained in our schools,” he says. Emmanuel Hwande, national PRO, NUT, states, “The issues around the teachers registration has been on for long, we have given the teachers enough time to do what is right, there is no going back this time. Anyone found faulty will be dropped from practicing, there is no need for further extension.”

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FEATURE How government picks social investment programme beneficiaries HARRISON EDEH, Abuja

Mariam Uwais

formed that they were currently paying in 26 states because of the procurement delays. “We have clean data of over 1 million poor and vulnerable households, (almost 4 million individuals) on the National Social Register in 34 states while the others are at various stages of compliance,” she said. The social investment scheme working with the community uses local knowledge of the community in identification and selection of poor and vulnerable individuals and families, she said. She also explained that broad and thorough community participations helped avoid errors of exclusion and inclusion. In the absence of comprehensive and high quality data on household/ individual welfare, a communitybased approach is used to identify households or individuals that are relatively poor or vulnerable in a community. She explains further that selected poor households were assessed and ranked using welfare index, with a community development officer of the local government of the local government, taking charge of that, while reverting to the national office for vetting of www.businessday.ng

the register according to the World Bank standard that categorises the poor. Giving further insight on identifying vulnerable Nigerians, she states, “The poorest communities within the LGAs must be identified; ranked and selected using agreed criteria for community ranking process. We started with 30% of each state. The Poorest local government in each senatorial district was picked to create a balance across the country and before the community facilitators worked with us, we signed a MoU with them on community based services.”

She had earlier explained that the school feeding had spiked by 20 percent on the back of the National Home-grown Feeding Enterprise and empowerment programme. The programme is currently in 31 states across the country, while the remaining states and the Federal capital are gearing up to join other states, for an initiative the government said has created an economic structure for structural demands for small holder farmer. She also indicates that an executive bill was underway to ensure sustainability of its social safety programmes, focused in

“

We have clean data of over 1 million poor and vulnerable households, (almost 4 million individuals) on the National Social Register in 34 states while the others are at various stages of compliance

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“

oordinator of the Federal Government’s Social Investment Programme (SIP), Mariam Uwais, has told BusinessDay that a ‘template’ streamlined by the World Bank as well as inputs from select communities with whom they work closely were used in choosing poorer Nigerians who benefited from government’s social safety programme. Her explanations followed recent concerns, particularly from the wife of the president, Aisha Buhari, who has been insisting that the SIP, a major campaign project of her husband, had been poorly handled and had failed to yield desired results. Uwais, in an exclusive interaction with BusinessDay, notes that the government had partnered the World Bank under a National Social Safety Nets Project (NASSP) to support the development of safety nets that would reduce the impact of poverty and socio-economic vulnerabilities in Nigeria. BusinessDay has interrogated the methodology and even criteria used by the government in identifying ‘who is a poor Nigerian,’ and who should benefit from such programme if well run. The programmes under the SIP include: N-Power, Conditional Cash Transfers, National Home-Grown School Feeding and Government Enterprise and Empowerment Programmes (GEEP). Uwais explains that the Conditional Cash Transfer Programme uses a Community targeting approach in reaching out to the poor and the vulnerable in the society. According to Uwais, these four steps are followed in the identification process including: Pre-sensitisation visit to the community, community sensitisation and mobilisation, community engagement and enumeration. “Communities must select the poorest of the households on their own perception/definition of poverty and vulnerability on Focus Group Discussions. The Community based target team at Local government level is only to facilitate and should not take lead in the identification of the poor. Members in the Federal Government’s team must be representative of the community and must come to a consensus on the identified poor and vulnerable households,” she explains, adding that at the community level, broad participation was key to ensure ownership. On beneficiary states, she in-

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four key areas of N-Power, Conditional Cash Transfers, National Home-grown School Feeding and Government Enterprise and Empowerment Programmes. She states that the social safety programmes were structured to be impact-oriented, specifically catering to the needs of the poor, vulnerable, unemployed and those at the bottom of the pyramid without access to finance. A non-governmental organisation, which participated in the monitoring exercise of the Conditional Cash Transfer through its Monitoring Recovered Assets through Transparency and Accountability, MANTRA Project with funding support from UKAID told BusinessDay that they were able to track Federal Government intervention in various local governments across the country. “We focus on verifying that the data generated by key stakeholders to note whether they are fit for decision making and cannot be manipulated for personal interest, “David Ugolor, the executive director of African Network for Economic and Social Justice, and coordinator of MANTRA, says. According to Ugolor, in the monitoring exercise, MANTRA conducted spot checks on the Funds disbursed in the August to September payment cycle to 30,778 beneficiaries in 11 states across 5 Geo political zones of Nigeria. “The exercise spanned for 2 weeks and was conducted across reporting levels of the National Cash Transfer Office and the National Social Safety Net Coordinating offices at the National, L.G.A and Ward level,” Ugolor says. He says the data they used were reviewed from the CBN, World Bank, Cash Transfer programme, and the National Beneficiary register. Nigeria’s first lady Aisha Buhari has last week questioned the success of the N500bn social investment programme, particularly raising concern that the scheme failed to cater for the poor in the Northern part of the country. Also, Industry analysts said if the President’s wife had to raise concern on the success of the programme in the North, which is the stronghold of the President, what happens to the Southern part of the country, some of them queried. “I was expecting that N500 billion to be utilised in different methods in the North for the aim to be achieved. I don’t know the method they used but most of the Northern states did not get it,” Aisha Buhari said, while querying the methodology of the scheme.

Monday 17 June 2019

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

FG boosts Benue adult literacy centre with learning materials James Kwen, Abuja

he Federal Ministry of Education has boosted its Adult Literacy Centre at the Federal Government College (FGC) Otobi, Benue State with additional instructional materials for learners. This was in fulfilment of the earlier pledge by Sonny Echono, Permanent Secretary of the Ministry to make

additional supplies to the Centre following the upsurge of learners that nearly overwhelmed the materials provided initially. Echono while presenting the materials said the Federal Government was determined to reduce illiteracy in the country through the establishment of the literacy centres across the country. Represented by an Assistant Director, Office of the Permanent Secretary, Abosede

Olayiwola, the Permanent Secretary regretted the high illiteracy rate in the country. He said over 60 million Nigerians were within the illiteracy bracket and commended the learners for their enthusiasm in acquiring basic education. “Please don’t stop until you get there, trouble your facilitators until you are able to communicate in writing and reading. With this basic education, you can do your

businesses effectively, make demands from your leaders and even conduct bank transactions”, Echono added. Earlier, the Principal, Federal Government College, Otobi, Gabriel Amudipe, commended the Permanent Secretary for fulfilling his promise to the learners adding that he would host the first batch of the learners with the 134 new enrollees at the end of the year to a diner party.

BIPC seeks NIPC’s partnership to revive Benue industries

Cynthia Egboboh, Abuja

ational Pension Commission (PenCom) has concluded plans to hold the 2019 pre-retirement workshops for staff of Ministries, Departments and Agencies(MDAs) who are due to retire between January and December 2020. Peter Aghahowa, PECOM Head of Corporate Communications in a statement said the workshop is designed to educate the prospective

retirees on the modalities for accessing retirement benefits under the contributory pension scheme. According to the statement, the workshop will hold between 17 and 25 June, 2019 at 15 centres across the six geo-political zones of the Federation and FCT. “The centers scheduled for the exercise include; Abuja, Lagos, Kano, PortHarcourt, Ilorin, Gombe, Bauchi. Others are Owerri, Sokoto, Enugu, Lokoja, Ibadan, Lafia and Benin”, Aghahowa stated.

Peace returns to Jalingo, Ardo Kola after weeks of bloodbath

Benjamin Agesan, Makurdi

ro u p Ma n a g i n g Director, Benue Investment & Property Company Limited, Alfred Adem has called on Nigerian Investment Promotion Council (NIPC) to collaborate with the company to revive semi-moribund industries in the state. Adem made the call during a courtesy visit on him by the new Zonal Coordinator for North Central Region of the Council, Emmanuel Longza and the State Coordinator Beatrice Peter. Adem who appealed to the Council to use its network by recommending some of the semi-moribund industries to prospective foreign and local investors for the economic growth of Benue State, requested the council to create more opportunities in the state and pledged BIPC’s commitment to meeting all registration requirement with the council. Earlier, Zonal coordinator of the council, Longza requested the company to register with the council in order for the company to achieve visibility on the council’s website and as well as the Book of the State which will enable the company be recognized among the five star category. Longza stated that if registered the investment opportunities in the state would be recorded for easy assessment and possible investment by investors both in the country and other parts of the world. He assured BIPC that the council was already working out modalities to train Benue entrepreneurs and provide opportunities for them to expand their businesses.

PENCOM to train prospective retirees on contributory pension scheme

Nathaniel Gbaoron, Jalingo

P L-R: Adamu Salihu, DG, Niger State Chamber of Commerce and Industry; Abdulkadir Hassan, president, Niger State, and Adetokunbo Kayode, president Abuja Chamber of Commerce and Industry (ACCI), at the signing of Memorandum of Understanding (MOU) to embark on joint activities and projects of Commerce and Industry held in Abuja. Pic by Tunde Adeniyi

AGF urges new GIFMIS officers not to compromise Cynthia Egboboh, Abuja

ccountant-General of the Federation, Ahmed Idris has enjoined the newly posted Government Integrated Financial and Management Information System (GIFMIS) State Support Officers not to get compromised as they resume at their new posts. The Accountant-General who was represented by the Director Funds, Mohammed Usman stated this at the meeting with the Federal Pay Officers and newly posted

GIFMIS State Support Officers on in Abuja. Usman said the support and master data administration has been decentralized to bring support closer to all Ministries, Departments and Agencies (MDAs) as part of the Federal Government’s measures to strengthen GIFMIS Support for better effectiveness and efficiency in service delivery to MDA end-users. A statement by Henshaw Ogubike, Deputy Director Press and Public Relations ,Office of the Accountant General of the Federation said GIFMIS

is one of the economic reforms of the Federal Government to provide a foundation upon which different Public Financial Management reforms will be anchored. “As part of the Federal Government’s measures to strengthen GIFMIS Support for better effectiveness and efficiency in service delivery to MDA end-users, GIFMIS Support Teams have been deployed to resume at the Federal Pay Offices of the 36 States of the Federation with immediate effect to provide the required Technical Support to the MDAs.

Traditional ruler asks Buhari to give attention to science/tech James Kwen, Abuja

che Egenti, a traditional ruler in the South-East has urged President Muhammadu Buhari to give adequate attention to science and technology for the development of entrepreneurship in the country. Egenti who made the call in an interview with journalists in Abuja said, science and technology sector would bring about job creation, address

youth restiveness and foster development at the grass root. “The future belongs to science and technology and it belongs to harnessing our raw materials and potentials. I plead with the Federal Government to vote more money into science and technology so that our people can be able to do things done in developed countries. “They should stop voting money into politics but should pass legislation that will give strong vote to research on raw development council. If done,

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they will be able to harness, process and commercialize our raw materials so that we can put food on the table,” he said. While calling on youths in the country to help sharpen their potential and achieve goals of self reliance and career development, the royal father decried the rate at which some youths lived without concrete goals and charged them to embrace goal-centered networking in view of the present economic situation in the country.

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eace has returned to some communities in Jalingo and Ardo Kola local government areas of Taraba State after weeks of bloodbath and destruction of valuable property, following the crisis between Fulani and Kona people. Abdunasir Bobboji, Caretaker Chairman of Jalingo local government Council, told BusinessDay that peace has returned to the affected communities sequel to intervention by the government and security agencies. Bobboji regretted the crisis which has forced thousands of people to take refuge in IDPs Camps and called on Fulani and Kona people to forgive one an-

other and live in peace for the development of the area. He noted that as farmers whose economy was mainly farming, the Fulani and the Kona need not to fight one another and urged the people not to allow themselves to be used by the enemies of the state. “We have talked to our people and the tension that was building in the local government has now died down. What we want is peace and only peace can guarantee development and economic prosperity of our people. “The situation in Ardokola and Jalingo Local governments which led to the killing of dozens of people and displacement of thousands of others have now been brought under control”, he said.

NCDC partners Germany Institute on health security Cynthia Egboboh, Abuja

he Nigeria Centre for Disease Control has signed a joint declaration of intent with Germany’s National Public Health Institute, the Robert Koch Institute to mark the start of a new project to strengthen health security in Nigeria. Over the past two years, Nigeria has been confronted with several outbreaks of epidemic-prone diseases, including measles, yellow fever, cerebrospinal meningitis, cholera, Lassa fever and monkey-pox. In response to some of these disease outbreaks, public health workers have conducted vaccination campaigns and also provided infection prevention and control training to health @Businessdayng

workers, established new laboratory testing capacity and conducted communication and engagement activities to communities. However, studies have shown that the number of zoonotic and epidemicprone disease outbreaks are unlikely to subside in Nigeria as a recent modeling study of risk for viral hemorrhagic fevers identified LGAs in Nigeria have a high risk for having an index case for Ebola virus disease, CrimeanCongo hemorrhagic fever, and Lassa fever. According to the statement signed by Jeremiah Agenyi, Communication Assistant to the Director General, NCDC, the project, aims to promote Capacity Development for Preparedness and Response for Infectious Diseases.

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FINANCIAL TIMES

World Business Newspaper

AHMED AL OMRAN, SIMEON KERR AND MONAVAR KHALAJ

rown Prince Mohammed bin Salman said Saudi Arabia would “not hesitate” to defend its interests as Riyadh joined the US in blaming Iran for last week’s attacks on two oil tankers in the Gulf. Prince Mohammed, the kingdom’s de facto leader, said Saudi Arabia did not want a conflict in the region, but his comments were indicative of rising tensions in the oil-rich Gulf. They came days after two tankers — one loaded with methanol from Saudi Arabia — were damaged, forcing their crews to evacuate. Last month, four tankers, including two Saudi vessels, were also struck by “sabotage attacks” in the same coastal waters of the United Arab Emirates. The incidents have raised concerns about the vulnerability of energy supplies around the vital shipping route through the Strait of Hormuz. “The kingdom doesn’t want a war in the region, but we will not hesitate to deal with any threat to our people, sovereignty and vital interests,” Prince Mohammed said in an interview with the Saudi-owned Asharq al-Awsat newspaper. “The choice before Iran is clear. Does it want to be a normal country that has a constructive role in the international community, or remain a rogue state?,” he continued. “We hope that the Iranian regime would choose to become a normal

Saudi Arabia ups ante in war of words with Iran Crown prince says Riyadh will ‘not hesitate’ to defend its interests after tanker attacks country and cease its aggressive approach.” Khalid al-Falih, Saudi energy minister, said on Saturday that there “must be a rapid and decisive response to the threat of energy supplies”. His comments were echoed by Sheikh Abdullah bin Zayed, the UAE’s foreign minister, who on Saturday called on friendly nations to confront “fascist regimes that seek to destroy the region”. In addition to the tanker incidents, Yemen’s Houthi rebels, who are aligned to Iran, last month claimed responsibility for drone attacks on oil pumping stations in Saudi Arabia and fired a missile at a Saudi airport last week, injuring more than 20 people. Riyadh and Abu Dhabi lead an Arab coalition fighting the Houthis in Yemen and are the staunchest backers of US president Donald Trump’s administration in its efforts to push back against Iran’s influence. Mr Trump said on Friday that last week’s attacks had Iran “written all over it”. Washington released a grainy video purporting to show Iranian forces alongside one of the damaged tankers hours after the attacks removing a mine from the vessel. It has provided no other evidence that Iran was behind the attacks. Tehran has rejected the allegations and said the timing of the incident, which coincided with

Boeing chief says progress being made on fixing 737 Max flaws

oeing’s chief executive has vowed there will not be another accident related to the flight control software that has been implicated in two deadly crashes of its 737 Max aircraft, while admitting its communications were unsatisfactory during the crisis. Addressing the media on the eve of the Paris Air Show and for only the second time since the second crash of the 737 Max in March, Dennis Muilenburg said he was “very confident there will not be another [MCAS-related] accident”. He was referring to the faulty manoeuvring characteristics augmentation system that played a role in both crashes. Boeing has thrown its weight behind resolving the crisis, said Mr Muilenburg, stressing that the “accidents continue to weigh heavily on us”. They were “something we will never forget,” he said.

“the suspicious actions against the oil tankers” appeared to be a “complementary measure” to the crippling sanctions the US had imposed on the Islamic republic. Iran accuses Mr Trump of waging an “economic war” against the republic and says the US is pushing for regime change. In recent weeks, Tehran has been proposing regional dialogue to ease tensions, but has ruled out talks with Washington. The US and Iran have been at loggerheads since Mr Trump last

year unilaterally withdrew the US from the 2015 nuclear accord Tehran signed with world powers. He has imposed sweeping sanctions on Iran that have severely affected Iran’s ability to export oil and plunged the republic into a deep recession. Last month, Washington deployed an aircraft carrier strike group together with bombers and additional troops to the region as US officials cited unspecified “escalatory” activity by Iran.

Probe extends to every country in group’s network

Boeing, he added, had work to do “to re-earn the public’s trust”. The company continues to work on a software fix for MC AS but Mr Muilenburg did not give a timetable as to when the Max would return to the skies. “We are making g o o d steady progress,” he said. Global aviation safety regulators, he said, were “converging together to certify and get the Max back up in the air. We will take the time necessary to ensure that safety is paramount.” The company has initi ated training and education updates around the world. Pilots at more than 90 per cent of Max customers have now flown the Max in a simulator setting. Boeing is also working hard on improving its communications which Mr Muilenburg admitted was an area where “we could have and should have done better”.

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a meeting between Ayatollah Ali Khamenei, the Islamic republic’s supreme leader, and Shinzo Abe, Japan’s prime minister, in Tehran was highly suspicious. Mr Abe was seeking to de-escalate tensions and potentially mediate. Prince Mohammed said Iran did not respect Mr Abe and “practically responded to his efforts by attacking two oil tankers, one of them Japanese”. Ali Larijani, Iran’s parliamentary speaker, countered on Sunday that

Nissan expands internal investigation into Carlos Ghosn

Dennis Muilenburg admits communications were unsatisfactory during crisis over fatal crashes

SYLVIA PFEIFER

LEO LEWIS AND KANA INAGAKI

issan’s internal investigation into Carlos Ghosn now extends to every country in the group’s global network and has significantly increased its use of digital forensics experts in its hunt for evidence, say people close to the company. Although Mr Ghosn has already been formally charged on multiple counts of financial misconduct — all of which he denies — and is currently on bail in Tokyo awaiting trial, Nissan receives almost constant demands from prosecutors assembling information relating to the case. Much of that information, say people familiar with the investigation, requires extraction from laptops, mobile phones, over a decade of archived data and millions of potentially relevant emails from Mr Ghosn’s 19-year leadership of the company. Forensic IT experts are not only working to compile and recover digital evidence and render it fit for use in court, but are also helping to establish, at the request of both prosecutors and Nissan’s manage-

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ment, historic patterns of behaviour surrounding Mr Ghosn and a number of business associates in the Middle East and Latin America. “The investigation now covers pretty much everywhere and everything,” said one person briefed on the situation, who said that as well as satisfying the prosecutors the internal investigation was aimed at closing the “open-ended liability” that Nissan itself faces at certain of its operations around the world. As the investigation enters its eighth month since the arrest of Mr Ghosn and his close aide Greg Kelly in Tokyo last November, the geographic focus has sharpened on Brazil. Nissan continues to look into whether its former chairman and close members of his family were benefiting personally from payments made by the company and its subsidiaries. One of the biggest problems that investigators have encountered in Brazil has been the practical difficulty of talking to relevant people: since the end of the 2016 Olympics in Rio, a large number of employees of one of Nissan’s local Brazilian subsidiaries have left the company and been unavailable for @Businessdayng

questioning. People close to the Ghosn family have previously pointed out that a search by Nissan lawyers and judicial officers of the apartment in Brazil that was rented by Nissan and being used by Mr Ghosn did not lead to any major discoveries in the case. The expanded investigation has been combined with an operation described by people involved as a “clean-up” — an effort to purge the company of the alleged anomalies that arose during Mr Ghosn’s long tenure at the top. The issues associated with Mr Ghosn’s longevity as the head of Nissan features strongly in a report published last week by the proxy advisory firm Institutional Investors Services. The report, ahead of Nissan’s first annual general shareholders’ meeting since Mr Ghosn’s arrest, recommends that investors vote against the reappointment of the current CEO, Hiroto Saikawa. The report repeated the findings of a committee on improving Nissan’s corporate governance that the company had built a corporate culture “moulded by Ghosn’s effective dictatorship”.

Monday 17 June 2019

BUSINESS DAY

NATIONAL NEWS

Power outage blacks out Argentina and Uruguay Massive electricity failure exposes years of under-investment in infrastructure BENEDICT MANDER

rgentina and Uruguay were hit by a massive blackout on Sunday which affected more than 40m people in one of the region’s worst ever power outages. By midday local time, power was gradually returning after Argentina’s interconnection system “collapsed” at 7.07am, according to the country’s energy secretariat. Two high voltage power lines running south from the Yacyreta hydroelectric dam on Argentina’s border with Paraguay reportedly went down simultaneously and triggered the outage. The blackout coincided with several regional elections in Argentina on a day of heavy rains across much of the country. It paralysed public transport and brought many businesses to a standstill.

The incident exposed the vulnerabilities of Argentina’s electricity infrastructure, which suffered years of under-investment after utility tariffs were frozen in the wake of an economic crisis in 2001-2002. Smaller scale blackouts became a regular feature of life, although the situation began to improve gradually after the government of President Mauricio Macri started to raise electricity tariffs three years ago. Uruguayan energy company UTE tweeted that the system was being reinstated from scratch. “There are already coastal cities with service and work continues toward general restoration,” it said. The episode was compared to a major blackout in Brazil in 2009, when the Itaipu hydroelectric dam on its border with Paraguay left tens of millions of people without electricity.

Germany to back EU-wide net zero emissions target Support for carbon neutrality by 2050 strengthens Europe’s climate leadership credentials ROCHELLE TOPLENSKY AND LESLIE HOOK

ermany has thrown its weight behind an EU-wide target to cut net carbon dioxide emissions to zero by 2050, according to a leaked document seen by the Financial Times. Berlin’s backing increases the likelihood that national leaders will agree to an EU-wide 2050 goal at a gathering in Brussels next week. A lack of German support had been a sticking point for the adoption of tougher EU emissions target which eight member states — Belgium, Denmark, France, Luxembourg, the Netherlands, Portugal, Spain and Sweden — committed to in May. There were signs that Chancellor Angela Merkel was preparing to shift her position after she endorsed a German carbon neutral target last month. An EU-wide agreement would give the bloc a concrete commitment to take to the UN climate conference in September, strengthening its claim to be a climate leader and increasing pressure on China and other countries to do more. It also underlines how the need to reduce emissions to combat climate change has moved up the political agenda. The US decision to withdraw from the Paris climate accord — which aims to limit warming to well below 2C — has increased the pressure on the EU to lead global efforts. This month the UK became the first major economy to legislate for a net zero emissions 2050 target, with France expected to follow suit this year. The warnings of the last UN Intergovernmental Panel on Climate Change report and this year’s youth marches for climate action have also helped to shift public opinion, culminating in a strong showing for the Greens in the European elections last month. Miguel Arias Cañete, EU climate commissioner, welcomed Ms Merkel’s support for climate neutrality by 2050. “It is very much needed and hopefully it will now translate into an ambitious deal next week. Let’s get it done,” he told the Financial Times. The bloc-wide target will be on the agenda of EU leaders who will gather

in Brussels on Thursday for a two-day meeting whose conclusions could include a commitment to climate neutrality by 2050. Sixteen EU member states have signed up to the net zero ambition, although Germany had refused to commit. German diplomats declined to say why Berlin had decided to endorse the plan now. While bringing Germany on board is vital, Poland, Bulgaria and Hungary have opposed the 2050 target on economic and social grounds. However, they could be persuaded to support the plan if there was sufficient funding to ease the transition, according to EU officials. Poland, which draws close to 80 per cent of its electricity from coal, would be impacted hard by a net zero target. Funding from the EU to help ease the transition — for example by paying for retraining or unemployment benefits for workers in fossil fuel industries — is a key item of discussion. EU carbon emissions fell 22 per cent between 1990-2017 as its economy grew 57 per cent. However, while the bloc is on track to reach its 2030 goal to reduce emissions by 40 per cent compared with 1990 levels, that will not be enough to meet the targets of the Paris climate accord. Although almost all the countries in the world signed the Paris deal, their pledges have so far been insufficient, with global carbon dioxide emissions hitting a record high last year. The latest IPCC report highlighted that cutting carbon emissions to net zero by 2050 was crucial if global warming is to be restricted to 1.5C. The European Commission climate road map published in November included net zero by 2050 scenarios. It estimated the far-reaching changes required in the economy would necessitate €175bn-€290bn investment in energy infrastructure annually. Sebastian Mang, Greenpeace EU climate policy adviser, said the netzero by 2050 target was a “no-brainer”, adding that European leaders must also raise their 2030 ambitions. “If they do not, Europe could go empty-handed to a crucial UN climate summit in September. That would be hugely irresponsible behaviour from supposed climate leaders.” www.businessday.ng

Hong Kong protesters stage fresh rally against extradition bill Territory’s chief executive Carrie Lam apologises to public NICOLLE LIU AND SUE-LIN WONG

rotesters again took to the streets of Hong Kong on Sunday, a day after the government suspended its extradition bill but balked at withdrawing the controversial proposal. Large crowds spilled out of subway stations and packed streets along the march route, many wearing black and carrying placards. The demonstrations came after Hong Kong chief executive Carrie Lam said on Saturday that she would mothball the extradition bill proposal, following protests that saw hundreds of thousands of people take to the streets and which drew international condemnation from lawyers, businesses and the US government. Ms Lam had emphasised she had suspended rather than withdrawn the bill, arguing the amendment was well intended but had been poorly communicated to the people of Hong Kong. Her office issued an apology on Sunday to the public, and the government “reiterated that there is no timetable for restarting the [legislative] process”. “The chief executive acknowledged that the government’s insufficient work has caused great confrontations and disputes in the community of Hong Kong. People are disappointed and saddened,” said the government in a statement. “The chief executive apologises to the public and

promises to accept criticism with the utmost sincerity and humility, to improve, and to serve the general public.” Opposition to the proposed bill, which critics claim would allow anyone passing through the territory to be taken across the border to stand trial in mainland China on potentially trumped-up charges, resulted in violent clashes on the streets of Asia’s leading financial centre. “Ultimately we just don’t trust the legal system in China,” said Alice Wong, a computer science student. “The so-called safeguards against political charges [implemented by the Hong Kong government in the extradition bill] aren’t enough.” Protesters are also calling on the government to revise their description of Wednesday’s event as a “riot” and for Ms Lam to stand down. By mid afternoon crowds of people had amassed at the start of the planned route on Hong Kong island. “The main psychology [today] is that last week’s demonstration of people power worked.,” said Willy Lam, a China expert at the Chinese University of Hong Kong, speaking from the protest. “So everyone is back again to savour their victory, to show the government that they are ready and able to mobilise one million people again.” Protesters want a complete withdrawal of the legislation and for Ms Lam to step down. “We want them to withdraw all the charges against the demonstrators, said a retired civil servant who was on the march. “And most important we want the with-

drawal of the bill.” Flyers advertising the event were being sent to iPhones on Sunday morning, using the airdrop function at major thoroughfares and subway hubs including Central and Tsim Sha Tsui. Online posts gave packing recommendations — water, masks and energy bars — and encouraged marchers to bring flowers and paper cranes to mark the spot where a man fell to his death on Saturday while protesting the bill. Many of the protesters were carrying white flowers in tribute. Sunday’s march followed clashes between police and protesters last Wednesday, when at least 94 people were injured and central Hong Kong was brought to a standstill. Police used an estimated 150 rounds of tear gas, 20 bean bag rounds, several rubber bullets and batons against protesters Police commissioner Lo Waichung said the police acted in selfdefence after protesters, armed with metal poles and wooden boards, threw bricks at them. Eleven protesters were arrested for illegal assembly, assault and rioting. Ms Lam, who has declined to apologise for her handling of the extradition bill debacle, defended the police at the press conference on Saturday. She said her decision to suspend the bill was prompted by Wednesday’s violence, rather than because of the biggest protest in 30 years last Sunday when an estimated 1m people — roughly one in seven of the population — marched through the streets to oppose the extradition bill.

Head of Brazil development bank resigns after threats from Bolsonaro Joaquim Levy’s exit from BNDES raises fears of return to state interference in economy ANDRES SCHIPANI

he head of BNDES, Brazil’s powerful development bank, resigned on Sunday following threats from rightwing president Jair Bolsonaro, in a move that could unsettle investors who fear a return of state intervention in the economy. Joaquim Levy is the fourth senior official to leave since the nationalist government’s inauguration in January. On Saturday, Mr Bolsonaro threatened to fire Mr Levy after he appointed Marcos Pinto to head the capital markets unit of BNDES last week. Mr Pinto once worked for the leftist government of the PT party of jailed former president Luiz Inácio Lula

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da Silva, Mr Bolsonaro’s political nemesis. “I told him [Levy]: fire that guy on Monday or I will fire you,” Mr Bolsonaro told reporters. Mr Levy was recruited by Mr Bolsonaro’s economic tsar, Paulo Guedes, as part of his team of liberal “Chicago boys”, a group of economists who studied at the University of Chicago. But he was never trusted by the president, government insiders said, because he served as finance minister during the second term of former leftist president Dilma Rousseff in 2015. This was despite him leaving that administration after less than a year. Analysts say the resignation of Mr Levy is yet another sign that the government’s ideologues are @Businessdayng

gaining the upper hand on key decisions, following the sacking of a moderate government minister on Friday. Mr Bolsonaro’s administration encompasses three distinct tribes: economic technocrats, such as Mr Guedes and Mr Levy, radical ideologues, including the president and his sons, and pragmatic former generals. The move comes as the administration has been rattled by yet another scandal, following a string of leaks involving Sérgio Moro, a former anti-corruption judge turned star justice minister in Mr Bolsonaro’s cabinet. This spurred allegations he had colluded with prosecutors during the trial and subsequent incarceration last year of Mr Lula da Silva. He has denied any wrongdoing.

Monday 17 June 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Can the ECB’s Mario Draghi bolster expectations for action? Market questions is the FT’s guide to the week ahead

an Mario Draghi bolster expectations for action? This week brings the European Central Bank’s annual forum in Sintra, Portugal — for investors, a must-watch powwow among central bankers, academics and economists on “monetary policy issues”. This event is frequently a market-mover, notably marked in 2017 by ECB president Mario Draghi sending the euro soaring with his assertion that the “threat of deflation is gone”. This year, there will be no shortage of topics to discuss. Mr Draghi is in a tricky spot. After the central bank’s latest rate decision, he dropped some heavy hints that further monetary stimulus, in the form of rate cuts or even bond purchases, is a possibility, given the gloomy global economic outlook. But markets have so far largely failed to respond to his usual charms. Bunds have rallied, but mostly on geopolitical fears, while the euro has held firm. Policymakers are unnerved by traders’ reluctance to buy into Mr Draghi’s message, but investors are questioning whether the central bank really has the scope to unleash another round of firepower, and what will happen when Mr Draghi steps down in October. Adding to the pressure on Mr Draghi, market-based expectations for future inflation suggest that investors have little faith that the rate will come back up to the ECB’s target. Sintra provides a forum for the ECB president to try and turn that around. Katie Martin Will the Fed confirm a likely rate cut? The Federal Reserve’s policymakers’ meeting on Wednesday is the biggest event for financial markets this coming week — with the potential to reinforce the recent recovery or douse it with cold water. Although pretty much every economist polled by Bloomberg expects the central bank to hold interest rates steady at 2.25-2.5 per cent — and markets are pricing in only a 20 per cent chance of a cut — the expectation is that officials will strongly hint that easier policy is in the mail. The Fed funds futures market indicates that there is an overwhelming likelihood of a rate cut in July, and some investors, such as Pimco, are arguing that a half percentage point cut is a possibility. The Fed likes to be predictable, and if it expects to ease monetary policy in July, it will probably want to signal that

strongly at this week’s meeting. However, that could set markets up for a fall, should the Fed fail to hint at a coming rate cut. Some officials have clearly sent a signal that they are inclined to trim interest rates, but others have not. Fed chair Jay Powell has been non-committal, even though he has insisted that the central bank will be “nimble” and monitor the economic data for signs of worrying weakness. Jan Hatzius, Goldman Sachs’ chief economist, has broken with his Wall Street peers and predicted the Fed won’t even cut rates later this year. “The committee faces a tricky balancing act,” he said in a note. “On the one hand, chair Powell and his colleagues need to keep signalling that they would respond to large adverse shocks by easing policy. On the other hand, they will not want to feed the expectation that cuts are imminent . . . In such an environment, the right course of action is to retain optionality.” Robin Wigglesworth Could the Bank of Japan surprise at its monetary policy meeting next week? Japan’s central bank will hold its next monetary policy meeting in Tokyo on Thursday and with expectations for a rate cut from the US Federal Reserve growing, some have begun to speculate that the Bank of Japan could move in tandem to offset the impact of a dollar weakened by US easing. For now, at least, that prospect remains a long shot, as analysts expect no action from the Fed at its own monetary policy meeting next week. Marcel Thieliant, senior Japan economist at Capital Economics, says that while the Japanese economy is expected to soften as the year wears on, the BoJ “remains concerned about the impact of low interest rates on financial stability and we think it will keep policy settings unchanged for the foreseeable future”. The pressure on Japan’s economy could mount if other central banks begin to cut rates and drive up the yen, and the currency’s haven status could get a further boost from panicked investors if the US and China fail to reach a deal at the G20 summit in Osaka at the end of this month. What might finally force the bank’s hand, Mr Thieliant says, is the sales tax rise slated to take effect on October 1 — but only if it puts a serious dent in consumer demand. Given that previous tax and interest rate rises in Japan were soon followed by recessions, that is a real possibility. www.businessday.ng

Should we really be worried about an inverted yield curve? The recession indicator is not perfect but neither can it be ignored GAVYN DAVIES

he shape of the yield curve in the bond market — usually proxied by the 10-year government bond yield, less a short-term policy rate — has been used as a lead indicator of recession risk in the US and other developed economies for several decades. In fact, this one simple indicator sometimes seems to exert a mesmeric influence over investor sentiment about future economic activity. While this degree of credence is far too simplistic, inversions in the curve have certainly preceded many previous recessions, and it is dangerous for investors to ignore them. Policymakers and academic economists also pay close attention to the information contained in the yield curve. The recent inversion in the US curve is the first since 2007, and it will be high on the agenda at the Federal Open Market Committee meeting next week. Opinion on the committee about the usefulness of the curve is somewhat split, but there is probably a majority of members in favour of taking the latest signal seriously. In the US, whenever the yield curve has inverted in the past 60 years — with only one exception in the late 1960s — a recession has followed.

That is some record! Even more remarkably, the yield curve seems to have offered guidance about future economic activity since the 1850s. It has also worked in more recent cycles in many other economies. Despite this remarkable history, it is not fully understood why the curve tends to invert before recessions. Most economists point to the fact that the curve systematically flattens and eventually inverts during periods of monetary policy tightening. When short-term policy rates rise, expected future short rates, and bond yields, are more stable, because they reflect the market’s view of the underlying equilibrium interest rate, which changes only very slowly. Accepting that the yield curve is generally a good indicator of the stance of monetary policy, then it is not too surprising to discover that it contains leading information about economic activity. This is just a reflection of the normal lag between policy and the output response that appears in most macro models of the economy. The Fed routinely uses the yield curve to calculate the probability of recession 12 months ahead. One of its most important models is that published by the New York Fed, shown in the box below. This uses “probit” estimation techniques that

relate the yield curve slope at any given time to the appearance (or not) of recessions 12 months later, as determined by the National Bureau of Economic Research recession dating committee. Although the statistical significance of these methods is inevitably limited by the fairly small number of recessionary episodes, the regularity of the inversion of the yield curve ahead of recessions is very striking. The latest calculation shows that the yield curve slope in early June implies a probability of 29 per cent that a recession will occur sometime within 12 months. There are, however, reasons for questioning whether today’s recession risk is exaggerated in this calculation. Long bond yields represent the expected forward path for short rates plus a risk premium, or term premium. Because of reduced inflation risk, this term premium has dropped by around 1.5 percentage points since the early 2000s, which implies that the yield curve is more inverted, for any given path for expected short rates, than it might have been in previous eras. Research has not clearly established whether this drop in the term premium reduces the reliability of the recession signal from the yield curve.

Why the wealthy are investing directly in private companies For individual investors, the routes into private equity have become more sophisticated and varied SHARLENE GOFF

hen SenSat, the UK drone data provider, embarked on a £3.3m fundraising, it made the unusual decision to turn down a Silicon Valley venture capital backer. Chief executive James Dean says the terms offered were not right for the business. Instead, the company, which provides detailed mapping information for infrastructure projects, turned to a group of private investors brought together by Coutts, the UK private bank. These investors provided a total of £1.8m (£300,000-£500,000 each) as well as business advice, network connections and help accessing South American markets. Dean says for a young tech company, private investors provide “fertile backing”

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and “great access” to expertise. “We have a very tight knit investor base who I’m in contact with regularly,” he says. SenSat is an example of the growing number of opportunities for wealthy individuals to invest directly in private companies, increasing their allocation to private equity through means other than standard funds. Private equity has long been a mainstay of institutional portfolios. But in recent years — particularly as the effects of the financial crisis have faded — there has been a surge in demand for the asset class from large endowment funds, sovereign wealth funds, charitable foundations and pension funds seeking to boost long-term returns. Increasingly, wealthy investors @Businessdayng

are looking to mimic that exposure in their own portfolios, as low interest rates hit returns available on cash and bonds and fears grow that equities are overvalued. High demand from investors has led private equity groups to raise large funds at a rapid pace, increasing their firepower for deals. But that has fuelled concerns that asset prices are becoming too high — multiples being paid on deals are near an all-time record — which could hit returns. Jake Elmhirst, head of private markets at UBS Global Wealth Management, says the appeal of private equity is “obvious”: “Over the long term its returns have compared very favourably with almost every other asset class. In addition, it provides some stability in portfolios in choppy markets as it is less volatile.”

Monday 17 June 2019

BUSINESS DAY

ANALYSIS FT Loss-making tech companies are floating like it’s 1999 Investors urged to avoid loss-makers and seek those groups that make the unicorns’ businesses possible MATTHEW VINCENT

emember the dotcom boom? Gregory Perdon of private bank Arbuthnot Latham does. As its co-chief investment officer, he worries that 2019 feels a bit like 1999: “In the late 1990s, taxi drivers in New York would tell me which call options they were buying on which tech stocks — it was euphoric back then. I don’t think we are at those levels just yet but, equally, I don’t think we are a million miles away.” In fact, some argue that the only real difference is that the taxi drivers are now the investment, rather than the investors. Last month’s initial public offering of shares in Uber, the ride-hailing app, saw a tech company that is set to lose $5.4bn this year seek a stock market valuation

Amazon. Facebook floated in 2012 at $38 a share when it made a $59m loss, and saw its price fall to $20; last year its shares peaked at $210. However, for every Facebook, there is a Snapchat. Shares in the messaging app initially rose from their $17 IPO price despite the company never having made a profit. They traded as low as $5 earlier this year, and, at $14 currently, the company still hasn’t gone into the black. They now trade as low as $14, and the company still hasn’t gone into the black. And Amazon’s rise from loss-making online bookstore to ecommerce giant did not require investors to buy into sky-high valuations: when it floated in 1997, its market capitalisation was only $300m. Facebook shares fall in 2012 © Bloomberg

of around $80bn. Nor is it the only heavily lossmaking company to launch an IPO on a multibillion-dollar valuation. Lyft, Uber’s main rival in the innovative business of booking cabs by phone, posted a net loss of nearly $1bn last year but in April pursued an IPO valuing its business at $24bn. Pinterest, the website that appears to do little more than let users collect pictures of soft furnishings, managed to lose $63m last year and launched an IPO seeking a $12bn valuation this spring. WeWork, provider of serviced offices full of little but hard furnishings — recently posted a $264m loss, as it considers an IPO with a $47bn valuation. Research by Jay Ritter, a specialist in corporate finance at the University of Florida, has found that the last time there were this many loss-makers trying to flog shares to investors was 2000 — the year the dotcom boom turned to bust. Back then, 81 per cent of US companies coming to the market had lost money in the year leading up to their IPO. In the first nine months of 2018 — even before those tech unicorns had tried to tap investors — the proportion was 83 per cent. As in 1999, there are plenty of people claiming “this time, it’s different”. Some point out that the high level of loss-maker IPOs reflects the number of biotech companies raising equity these days — which they must do to fund drug trials. Others note that in recent years, several loss-makers have turned into stock-market darlings. Uber boss Dara Khosrowshahi cites the journeys of Facebook and

Why, then, are so many lossmakers asking for so much of your money all at the same time? Two reasons suggest themselves, both to do with market conditions. First, cash flooded into the private equity market between 2011 and 2014, as asset managers sought higher returns in a low interest rate environment. Their investment created a spate of billion-dollar tech “unicorns” that stayed private longer than usual. This created pent-up demand from equity investors, which now gives those early backers the chance of a lucrative exit. Second, those investors and their advisers are now looking at the longest equity bull market in history, and worrying that their chance to cash in might be running out. Some 29 banks had something to gain from Uber’s IPO. So is now the wrong time for any investor or wealth manager to be giving it to them? In many cases, yes — though not necessarily. At London & Capital, private investment office partner Iain Tait sees the recent loss-maker IPOs as feeding a market appetite for “disruptive growth investments” — and reflecting their scarcity value. But he says it is imperative to employ critical analysis of each investment case to avoid excessive valuations. “An investor with a long-term time horizon with the appropriate risk tolerance may well be suited to a high growth investment opportunity that is currently loss-making. But it would be critical to assess the roadmap to profitability,” he says. www.businessday.ng

The future of meat in a plant-based world As campaigners argue for a greener diet, can carnivores combat climate change too? STEPHEN BURANYI

t can sometimes feel like a fait accompli that at a certain point in the future we will eat nothing but plants. It isn’t just that the number of young people claiming to be vegan or vegetarian is increasing — current polling suggests about a quarter of 18- to 24-year-olds in the US and UK are one or the other — but also that the meatfree movement has been able to trade on the idea that, culturally and morally, carnivores may be on the wrong side of history. “The plant-based-eating stuff has become huge,” says Matt Chatfield, a food supplier who connects producers in Cornwall with London restaurants. Chatfield and his van service are probably more responsible than anyone else for the presence of Cornish meat and fish in the capital’s best establishments. As a logistician, Chatfield is a great anticipator of problems, and these days, meat has problems. “The newspapers are all-in on meat-bashing lately,” he complains. The green-minded Guardian is one thing, he says, but even the “World in 2019” almanac from the Economist declared it “the year of the vegan”. “And then you’ve got that big Lancet report,” he adds, referring to a scientific review published in January by the prestigious journal that promised to define “healthy diets from sustainable food systems” to be implemented by 2050, which turned out to be almost entirely plant-based. His summation: “They basically say in the future we won’t be eating meat any more.” Chatfield is explaining this to me as we stand in what could best be described as a meat fortress: the hanging and drying rooms of Philip Warren Butchers in Launceston, Cornwall, one of the suppliers he represents. There are so many impeccably clean beef carcasses hanging in rows from the ceiling that they muffle sound, like heavy velvet curtains. The shelves are packed with cuts at various stages of ageing — from cherry-tomato red to a dense, ruddy brown, like rich wet clay — and tagged with metal tines announcing the restaurants that have claimed them: temples of modern British cooking such as Brat, Lyle’s and the Holborn

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Dining Room. But while business is good now, Chatfield worries that the rise of plant-based eating isn’t just a fad, destined to die down, but the result of deep structural shifts in the way we value meat. Veganism especially was once considered both woolly and preachy, relying on vague claims to health and “meat is murder” hectoring, but science has been very good to it in recent years. There are the studies linking high levels of red-meat consumption to cancer, for example. Even more significant is the realisation that livestock production — again, especially red meat — may account for up to 14.5 per cent of all greenhouse-gas emissions. Christiana Figueres, the former head of the UN Framework Convention on Climate Change, even mooted the idea (admitting it was “very, very provocative”) that in a decade or two, people who order meat in restaurants could be asked to eat outside, like smokers. As our understanding of sustainability shifts under the increasing pressure of climate change, a topsy-turvy logic has emerged. Many small producers once felt that, killing animals aside, they had a lot in common with the plant-based-eating community. “We’re generally thankful for vegans, they make people think about where food actually comes from,” says Ian Warren, who oversees the ageing and hanging facility in Launceston. “We all want smaller farms, fewer chemicals, better soil, more wildlife, basically something sustainable that could go on for ever,” Chatfield explains. “We’re against factory farms; we’re against destroying the earth.” But, he fears, the new, world-scale ambition of plant-based eating has left this idealistic localism behind. Suddenly, fast-food chains and discount superstores — the very market-makers that helped induce agriculture to become ever bigger, faster and more reliant on industrial chemicals and genetic modification — are stocking ultra-processed meat substitutes with names such as “Beyond Meat” and the “Impossible Burger”, produced by companies headquartered in Los Angeles and Silicon Valley that are staffed by former tech workers. The real sign that plant-based @Businessdayng

eating may rule the future is that venture capital firms and corporate giants such as Nestlé are ploughing millions into it. The Swiss food giant recently predicted its vegan business — including a forthcoming meatless “Incredible Burger” — would be worth a billion dollars in the next decade. If there is an opportunity here, small producers figure it lies in the gap they have always maintained between themselves and factory-farmed meat. A tradition of small farms and farmers striving to produce the most humane, sustainable meat possible already exists, and young farmers especially are keen to see that it continues. They also feel strongly that, if we have to consume less meat overall, the losses should fall squarely on the large producers that caused the problems in the first place. Not far from the Warrens’ shop in Launceston is Coombeshead Farm, a working farm and restaurant opened in 2016 by Tom Adams, the former proprietor of London barbecue stalwart Pitt Cue. In 2017, Adams was named Young Chef of the Year by the Observer, which described him as taking farm-to-table eating and “turning up the dial”, supplying nearly everything on his nightly menu from his own produce. But his approach might also be described as dialling down — way, way down — the startling, ahistorical abundance of modern eating. Adams was tempted out of London partly by the time he spent with suppliers such as the Warrens. Rather than offering him whatever he requested, they were focused on what worked best on their land, and on teaching him what was possible within those confines. “Working in London means working at the point of the dish [but] I wanted to go beyond that,” Adams says. Ian Warren’s father Philip has been raising cattle since the 1970s, and describes sustainability as “working with things as they should be”. His guiding principle has always been: take only what the land can support. The land is Bodmin Moor, whose lean, rocky hills make nearby Dartmoor look positively lush. He has a herd of Welsh Blacks, with lean builds and thick coats that are perfectly suited to the harsh climate.

BD Money

Monday 17 June 2019

BUSINESS DAY

PERSONAL FINANCE

EQUITIES

COVER

COMMODITIES

What you need to consider before taking mortgage

How NSE 30 companies rank by dividend yield

Check your financial fitness score with this calculator

As equities listed on the Nigerian Stock Exchange (NSE) extended their bearish performance to the second consecutive week in June amidst muted investor appetite for stocks with strong fundamentals, high dividend-yield stocks continued to create good investment options for risk-averse investors.

Nigeria to benefit from new Ivory Coast, Ghana cocoa floor price agreement, says CAN

There is the popular saying that “If one fails to plan, one plans to fail”. A lot of people know that already, but the culture of evaluating one’s current and future financial state to aid judicious financial decisionmaking remains lacking among many.

Despite being cornered in the list of minor cocoa producing states, stakeholders in Nigeria’s Cocoa production are optimistic that their produce would benefit from the floor pricing of $2,600 per ton being pushed by the Ivory Coast and Ghana, the world’s two biggest cocoa producers.

Are you hunting for your dream home, and you are short of cash? You might need a mortgage to make that dream of becoming a home owner a reality.

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Monday 17 June 2019

BUSINESS DAY

Personal Finance

What you need to consider before taking mortgage Israel Odubola

re you hunting for your dream home, and you are short of cash? You might need a mortgage to make that dream of becoming a home owner a reality. Cost of housing is expensive in Nigeria particularly in urban areas like Lagos, and many Nigerians lack the financial capacity to make outright payment to purchase a home. A mortgage, coined from a law French term, is a loan obtained from a bank or lender to help you finance the purchase of a home. The bank or mortgage lender loan you a sum, typically 80 percent of the price of home, which you must repay with interest over a specified time period. The home is used as collateral, and if you fail to pay back the loan, the lender can take over the home through a legal process. Key factors like knowing which type of loan works for you and how a down pay-

ment affects your monthly mortgage payment can help you narrow things down. In as much as mortgage makes home ownership pretty, prospective homeowners need to “count their cost first” before taking a mortgage loan. Before you decide to take a mortgage, you need to ask yourself these important questions: · Do I want to buy or build a house? · Do I really need a mortgage? · What kind of property do I have in mind? · Can I pay back? · Am I comfortable with the interest rate? Once you have answered those questions, you need to factor in the following before approaching the bank for a mortgage. · Am I mentally ready for a mortgage? Funding a project is as important as the project itself. It can be very challenging for some people, causing them sleepless nights as they think of how to fund the project at hand. Raising funds

to buy a property is no different. You can decide to raise the money personally, or better still, secure a mortgage. Loan must be repaid at a certain time period, and this scares people. But loan might just be what you need to lift you to the next level. · Do I have a steady income source? Lenders require a steady source of income to qualify for mortgage. However, self-employed applicants may have a harder time qualifying for mortgage as many lenders see irregular income as higher risk. · Can I payback? You need to sincerely evaluate your capacity to repay as you would be required to provide proof. Interest on mortgage is as high as 21 percent in Nigeria. You also need to put this into consideration. Problem will inevitably arise if you can’t repay your debt. It will suffice to project, if you run a business, how much you can make after the loan has been secured and put into use. This should be based on concrete evidence. For the employed persons, how much do I earn? Can I pay in instalments and still live

comfortably. · What about market swing? Assuming you acquired mortgage worth N30 million with 20 percent down payment. This implies that you owe the bank N24 million minus interest and other fees. If the market experiences a downturn and the value of the home dip 30 percent, a big problem arises as the home now worth N20 million but you still owe the lender N24 million. The sad news is that if you need quick cash and need to sell the home, you might lose a huge sum. However, this is the possibility, so get ready for it. · Am I prepared for extra charges? There will be some fees you might be required to pay before your mortgage is approved. Such charges include insurance fees, appraisal fees, development levy. You have to factor this in your plan. · What if the worst happens? This sounds somehow pessimistic but it is a possibility. If you cannot repay the debt, and you lose something else you had listed as collateral, can you recover? If you are sure you can’t, it is advisable to leave out the loan.

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

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Monday 17 June 2019

BUSINESS DAY

Equities How NSE 30 companies rank by dividend yield

is used to compensate investors for the higher risk taken. Data gathered from the NSE after the close of trading on Friday, June 14 show that tier-one bank, United Bank for Africa (UBA), leads the pack with 13.93 percent dividend yield. The lender paid a final dividend of 65 kobo for every unit of shares held by its shareholders, the stock closed unchanged last Friday at N6.15 on the NSE. Zenith Bank followed closely with a dividend yield of 13.90 percent. The bank paid its owners N2.50 per share, translating to N78.5 billion pay-outs from N193.4 billion it generated as profit-after-tax in the 2018 financial year. In the same vein, Total Nigeria, a major player in the downstream sector of the Nigerian oil and gas industry, stood at the third position with an annual dividend yield of 11.33 percent. The company

OLUWASEGUN OLAKOYENIKAN

s equities listed on the Nigerian Stock Exchange (NSE) extended their bearish performance to the second consecutive week in June amidst muted investor appetite for stocks with strong fundamentals, high dividend-yield stocks continued to create good investment options for riskaverse investors. Dividend yield, which is expressed as a percentage, is a financial ratio that measures the annual value of dividend payout to shareholders of a company relative to the market value per share of the company’s investment security. A dividend is a portion of a company’s profit paid to its owners. BusinessDay reviews dividend yields of NSE 30 companies’ stocks to show the yields investors can expect by buying such stocks at a time when the market has lost as much as 4.40 percent of its value since the start of the year, even as investors continued to wait for a market catalyst. NSE 30 is the price index that tracks the top 30 companies in terms of market capitalisation and liquidity. But of all the 30 firms, only 21 companies will be reviewed as others have no dividend yields as at the close of business on Friday, June 14 owing to various reasons. It is noteworthy that the share price of any stock varies as it trades daily at the bourse, it indicates that a company’s dividend yield rises when its share price falls and vice versa. Furthermore, the dividend yield ratio may not be used independently as a valuation metric, equity investors are therefore advised to consider other valuation checks as well as the dividend-paying track record of the company before they finally make their decisions. For instance, despite mid-tier lender, Ecobank Transnational Incorporated plc (ETI) recording a 46 percent profit growth to N102.17 billion from N69.99 billion in 2018 with a percentage increase in gross earnings and operating income, the bank said its directors could not recommend dividend payment for the year as it looks to build its liquidity buffer after a 3 percent depletion in its shareholders’ equity. As a result of the zero dividend payout, the company has no dividend yield and

‘

Despite mid-tier lender, Ecobank Transnational Incorporated plc (ETI) recording a 46 percent profit growth to N102.17 billion from N69.99 billion in 2018 with a percentage increase in gross earnings and operating income

therefore ranks least among the firms considered. Although high dividend yields may look attractive to investors willing to take posiwww.businessday.ng

tions in the stocks, it could have a highcost implication on the company’s growth prospect as the money which could have been ploughed back to stimulate growth

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declared a final dividend of N14 per share and is expected to pay the amount for every unit of shares held by its owners on June 28. Also on the ranking are Dangote Sugar, Guaranty Trust Bank, Dangote Cement, Access Bank, Flour Mills of Nigeria, National Salt Company of Nigeria, Fidelity Bank, Mobil, Unilever Nigeria, Okomu Oil and Nigerian Breweries. Others include Nestle Nigeria, Guinness, First Bank of Nigeria Holdings, Presco, Seplat, Stanbic IBTC, and Transnational Corporation of Nigeria.

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Monday 17 June 2019

BUSINESS DAY

Monday 17 June 2019

Cover Story Check your financial fitness score with this calculator SEGUN ADAMS

here is the popular saying that “If one fails to plan, one plans to fail”. A lot of people know that already, but the culture of evaluating one’s current and future financial state to aid judicious financial decision-making remains lacking among many. The problem is simple; people simply do not know what their current financial state is, and as a result, they do not see the need to imbibe the habit of planning their finance. However, there is a quick way to determine how financially fit you are. Afrinvest, a Lagos-based financial house, developed a calculator which has been adapted, to help gauge financial health and determine whether a person needs a financial plan. The calculator involves a list of important criteria against which one rates his or her performance on a scale ranking zero to a limit based on the weight assigned to such criterion. Zero implies the individual has not achieved such a goal while a higher score shows the extent to which such target has been met. Some questions are binary and involve only a maximum and minimum score. If you answer as honestly as possible, an overall score of less than 50 implies an urgent need for you to create a financial plan. Good luck with the test! • Spend less than you earn (0-10pts) The first question to ask yourself is how much are you able to save every month. Financial planning involves being able to prepare “the rainy days”; if you are able to put part of your income aside for future consumption then you are well on trackwell, another perspective is what proportion of your income is being saved. The more the merrier? Perhaps so, if your current consumption allows it. The action point here is to rate yourself from zero-ten on how well you are able to spend below your income on the average, every month. • Have a pension account (Binary: 0 or 10pts)

You are not going to work forever! This makes setting up a pension account very important. Your pension would enable you to maintain a reasonable standard of living when you retire. A high five wouldn’t do justice if you already have a pension account. Given the importance of owning one, it is ten points- and zero if you don’t have a pension account. • Saved up to 3 months of expenses (0-15pts) Think of your savings as a reserve, do you have up to three months of firepower should an unexpected event-like the loss of a job-occur? It is easier to say “God forbids it” but job losses and companies downsizing are inevitable events when there is an economic downturn or a global financial crisis. The chances of such events might be unlikely in the near-midterm but it shows how events beyond our control can make us vulnerable. Depending on how much your savings can account for three months’ worth of expenses, you can assign a score from zero to fifteen. www.businessday.ng

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• Have Investments in Naira (0-20pts) How much investment (in Naira) do you have? Whether in fixed income, equities, real estate or alternative investment and assets classes, investment is pertinent to your financial fitness. Since cash erodes value while financial assets earn a return and preserve wealth, this criterion has the most weight. BusinessDay believes the size of the investment matters and suggests 0-5 for having any investment under N1million, 5-10 for investments between N1million and N10million, and 15-20 for investments more than N10 million. • Have investments in Dollars (Binary: 0 or 5pts) Imagine having had investments dominated in US Dollars before the 2016 oil price crisis and naira’s devaluation. Having investments in Dollars act a safety net and is important to your overall financial soundness. • Have any insurance-Car, health, life, house (0-5pts) Insurance is a guarantee that in the events of a mishap one is restored to one’s prior state. This makes insurance an important consideration in assessing your financial health. There are four very important policies an individual should consider. If you have any insurance policy you can assign yourself two marks, then additional one mark for extra policies you hold. • Have a supporting source of income (020pts) Are you solely dependent on one source of income? That should be a downer! Getting extra sources of income is a great way of diversifying the risk of shock to income when there is an unexpected change to employment situation or business slows. If you have more than just one source of income, rank yourself from one to ten, depending on how much earnings compared to your mainstream job or business is realised from the side job. For more than one supplementary income source, the rating should start from 10. • Completely debt free (Binary: 0 or 5pts) Debt is not necessarily a bad thing. Even the world’s wealthiest 1 percent is not absolutely debt free. The ability to keep debt under reins and to live absolutely debt-free, therefore, is a rare art that might speak volume of one’s ability to manage expenses and live within means. If you are in the debt-free club, it is a high five. What is your score?

BUSINESS DAY

Beyond the lyrics: 5 Investment lessons we can learn from Jay-Z’s latest billionaire ranking OLUFIKAYO OWOEYE

part from Jay-Z’s thought provoking lyrics which has won him 22 Grammy awards and huge fan base who adore him across the globe, one can also learn some wealth-creation lessons from his entrepreneurship spirit and money making skills. Jay Z, whose real name is Shawn Carter in his album 13th studio album “4:44” released in 2017 provided some great insights on the value of saving and investing, supporting your community, and passing wealth on to the next generation. The Brooklyn-born rapper was recently named the world’s first billionaire rapper in a new Forbes cover story. According to Forbes magazine, the 49-year-old’s business empire “conservatively” totals $1bn after valuing his various ventures as well as real estate and his art collection, thus, making him one of just a handful of billionaire entertainers and the first hip-hop artist to claim such a fortune. Three years after releasing his debut album, Jay Z launched a clothing line called ‘Rocawear’, which was later sold for $204 million to apparel company Iconix in 2007. However, in 2000, the rapper launched Roc Nation which, according to Forbes, is now worth an estimated $75 million. Similarly, five years after the rapper launched Roc Nation, Jay Z submitted a bid to purchase the parent company of Scandinavian streaming service, Tidal for a little less than $60 million. The service, which he re-launched later that year, is now worth $100 million. In his album “4:44,” he detailed some of his investments, including artwork that he purchased years ago for $1 million. Today, Forbes estimates that his art collection is worth roughly $70 million. Outside arts and music; he has investments in real estate business, liquor business, and even equities in ride- hailing platform, Uber. According to Forbes, his stake in Uber is valued at an estimated $70 million. His real estate investments are worth an estimated $50 million just as his coognac, D’Usse, sells almost 200,000 cases annually and

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is worth $100 million. More so, the rapper’s investment in Armand de Brignac, a champagne company, is worth an estimated $310 million. 1. Diversify your income Jay-Z isn’t just a rapper; he’s a founder and owner of record companies. He has a clothing line and a sports bar. He’s a part owner of the NBA’s Brooklyn Nets. He has involvement in the casino and real estate industries. He owns the majority of the

people to stop worrying about “living large” and instead plan for the future. He advocates buying and holding onto things that will increase in value. 4. Control your image and products Jay-Z releases his albums exclusively on Tidal, meaning that he will no longer be at the mercy of other competitors who may take a bigger cut of revenue. Jay-Z has noted that Tidal offers higher quality streaming than other services, making it more

Jay-Z’s

music streaming service, Tidal. All of this has allowed him to amass a far more than he could make from music alone 2. You can’t go wrong with real estate Jay-Z has made good money on real estate deals, but also recognizes that he may have missed out on some bargains, too. In his song, “The Story of O.J.,” he laments spending his money on frivolous items when he could have bought property in a once-troubled neighbourhood. 3. Spend wisely and invest In the same album, Jay-Z advised young

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respectful of artists. 5. Support your community Jay-Z raps at length about looking out for those in the black community, noting that “Nobody wins when the family feuds.” He extends this advice to supporting blackowned businesses. Having a joint income can improve your buying and borrowing power, and boost the overall net worth of your family. In JayZ’s case, he’s married to Beyoncé, a hugely popular music artist with a net worth that rivals his own.

@Businessdayng

Monday 17 June 2019

BUSINESS DAY

Commodities Nigeria to benefit from new Ivory Coast, Ghana cocoa floor price agreement, says CAN Temitayo Ayetoto

espite being cornered in the list of minor cocoa producing states, stakeholders in Nigeria’s Cocoa production are optimistic that their produce would benefit from the floor pricing of $2,600 per ton being pushed by the Ivory Coast and Ghana, the world’s two biggest cocoa producers. Should the duo follow through with the plan, it will become handy as an international index for the commodities pricing, making it possible for less producing countries like Nigeria to even negotiate for higher prices. “The moment it is agreed internationally, we will also work with it as the prevailing price. It is a very common practice in the market economics of demand and supply. When there is low supply, Nigerians can easily determine price because there will be more demand for our Cocoa. That’s where the independence comes in,” Sayina Riman, president Cocoa Association of Nigeria (CAN) told BusinessDay. His confidence also derives from the fact that Nigeria has a highly sought-after variant of Cocoa, which will continue to boost demand. According to monitored reports, the two biggest producers have suspended sales for the harvest that will begin in October 2020, pending an agreement with buyers on a minimum price. Unlike Nigeria where freedom of market forces of demand and supply is allowed, Ivory Coast and Ghana have instituted boards which regulate pricing. If the market price ends up below the proposed $2,600 level, the two regulators plan to make up for the difference through a “living-income differential, Joe Forson, managing director of Ghana Cocoa Board’s marketing unit, told buyers Accra. A technical committee will be established to meet in Abidjan on July 3 to discuss the implementation of the plan. The regulators of both countries are meeting buyers about the proposal, which they said is necessary to address

income disparity in the cocoa value chain. The two countries last year outlined plans to coordinate cocoa production and marketing as part of efforts to

“

We will also be benefitting

from it. But why I have refused to talk about it is that we should come together and actualise the plan

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exert more control in the market after sharp price swings in recent years. Accounting for about three-fifths of global cocoa output, Ivory Coast and Ghana typically sell about 80 percent of the bigger of the two annual harvests before it starts. In its bid to widen its revenue, Ivory Coast is particularly tinkering plans to expanded its capacity for blending. Nigeria produced 255,000 metric tonnes within 2017/2018, according to the International Cocoa Organisation (ICCO). Ghana and Ivory Coast who account for 65 of global cocoa supplies believe that the current pricing structure that makes cocoa producers price takers does not reflect their contribution to the sustenance of the cocoa industry. Riman thinks Cote d’Ivoire and Ghana are using their power of production to undermine others and only points to the need for Nigeria should up its game and follow its Cocoa Action Plan to develop and also be reckoned with when it comes to trade negotiation. One of the drives of the Nigerian Co-

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coa Action Plan is that origin countries should consume not less than 30 percent of its production in the short term – a move projected to stabilise price. The Nigerian approach, he says, believes that the entire continent that produces about 75 percent of the world’s Cocoa needs to highlight about consumption and in that, Nigeria is a huge market compared to a combination of all other producing countries. “We will also be benefitting from it. But why I have refused to talk about it is that we should come together and actualise the plan. We also look at when we have a glut and we consume less. We believe in the objective but not being carried along means they have denied good collaboration with other producing countries,” explained Riman. A free market does not mean you cannot regulate price. Nigeria has one of the strongest flavours and we are working with consultants within the research world to be able to build and differentiate and build our cocoa into different brands.”

@Businessdayng

Monday 17 June 2019

BUSINESS DAY

Data

Federal government eurobond Yields on Eurobonds rose week on week by c.71bps from an average of 7.03 percent when the market closed last week to 7.09 percent as selling interest on sovereign Eurobonds persisted. On Wednesday oil price fell after the Energy Information Administration (IEA) reported another build in inventories at 2.2 million barrels for the week to June 7. The price dropped from $62.29 Tuesday to $61.13 per barrel. Precisely Brent crude, which is equivalent of Nigerian Bonny crude, was sold at $61.06. The authority expects Brent crude to average $67 a barrel, down from $69 a barrel forecast in the May edition of the Short Term Energy Outlook (STEO). Crude oil was up 0.75 percent to $62.09 per barrel as at 18:17 (GMT+1) on Friday.

Corporate eurobond Yields on corporate Eurobonds fell c.10bps across all tickers week-on-week with average yield falling from 7.45 percent last week to 7.44 percent.

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Monday 17 June 2019

BUSINESS DAY

Funds

Here are the 5 biggest mutual fund managers in Nigeria Israel Odubola & Segun Adams

mutual fund is a professionally managed investment vehicle that pools funds from numerous investors to purchase securities such as stocks, bonds, money market instruments and similar assets. In others words, mutual fund accumulates fund from investors that need professional management of their fund for maximum returns. Mutual fund offer opportunities for risk diversification as investors are exposed to more than one asset classes, thus balancing risks against returns across instruments. There are currently 24 managers registered with the Securities and Exchange Commission (SEC) managing 84 different funds. However just five control more than 80 percent of total mutual funds worth N746 billion as at the last week of May. Here are the giant funds: · Stanbic IBTC Asset Management Limited (N321 billion) Stanbic IBTC Asset Management Limited, a subsidiary of Stanbic IBTC Holdings, is the largest fund manager in Nigeria, with 43 percent market share amounting to N321 billion. The manager holds eleven (11) funds in seven different asset classes. As a matter of fact, their largest holding is in the money market.

Funds in their custody include: Stanbic IBTC Nigerian Money Market Fund (N262 billion) - the largest fund in the entire capital market, Stanbic IBTC Nigerian Equity Fund (N5 billion) among others. · FBN Capital Asset Management (N173 billion) FBN Capital Asset Management is owned by parent company, First Bank of Nigeria Holdings. The fund manager boasts of a 23 percent market share of total Fund under Management in Nigeria. Its holdings is worth N173 billion. FBN Capital oversees six (6) different funds across different asset classes and its money

Week Ahead Week Ahead(Monday, 17th June – Friday, 21st June, 2019)

market fund which worth N163 billion is the second single largest fund in Nigeria. Hence, the exposure of FBN to the money market is 94 percent. · Asset and Resource Management Limited (N65 billion) The Lagos-based Asset and Resource Management Limited was established in 1994 and provides wealth creation opportunities through a unique blend of traditional asset management and alternative investment services. The manager has 9 percent share of total fund in the market, and controls four (4) funds in seven (7) different asset classes that include

Equities, Money market, Real estate and Ethical funds among others. ARM Money Market Fund accounts for 88 percent of the manager’s holding and is the third single largest fund in the market. · FSDH Asset Management Ltd (N39 billion) Unlike other fund managers, First Securities Discount House Merchant Bank’s Asset management arm has its highest exposure in real estate funds. The managers total funded under management amounts to N39 billion, of which N33 billion or 85 percent is directed to real estate under the UPDC Real Estate Investment Fund vehicle. The UPDC Real Estate Investment Fund vehicle at 73 percent is the biggest real estate fund. FSDH Asset Management Ltd has five (5) percent market share in the entire mutual fund market. · AXA Mansard Investments Limited (N26 billion) AXA Mansard Investments Limited is an asset management company within the AXA Mansard Group. The manager has N26 billion as total und under management- that is, 3 percent of the entire market. N25 billion of its total fund is committed to the money market where it has the AXA Mansard Money Market Fund, which has a weight of 4.56 percent of entire money market.

Chart of the week Pension Fund Asset grows by N1 trillion year-on-year in Q1 2019

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

Corn: Corn prices surged to $436.25/bushel from $369.50/bushel in the second half of May owing to unfavourable weather condition in the United States. Going forward, it is expected that corn prices would continue to trend upward due to lower Russian exports. Fixed Income A 364-day Treasury Bills worth N41 billion offered by the Central Bank of Nigeria at a stop rate of 11.5% will mature Thursday, June 20. A 91-day OMO bill worth N30 billion offered by the Central Bank of Nigeria at a stop rate of 11.8% will mature Thursday, June 20. Data Release The National Bureau of Statistics to release May 2019 report on Selected Food Prices on Monday, June 17. A snapshot of the report for the previous month revealed that Selected food price watch data for April 2019 reflected that the average price of 1 dozen of Agric eggs medium size decreased year-on-year by -15.38% and increased month-on month by 1.60% to N467.18 in April 2019 from N459.81 in March 2019 while the average price of piece of Agric eggs medium size (price of one) decreased year-on-year by -0.71% and increased month-on-month by 0.06% to N41.95 in April 2019 from N41.92 in March 2019. Event The Annual General Meeting of Dangote Cement Plc will come up Monday, June 17. The Directors of Nigeria’s most capitalized firm approved for shareholders’ recommendation a dividend of N16 per share. The firm grew top and bottom-lines by 12% and 91 percent respectively to N901 billion and N390 billion. Currency The naira depreciated 0.09% to N360.51/$ on the Investors and Exporters window at Friday’s trading. Friday’s turnover stood at US$142 million. Going forward, we expect naira to remain stable across all windows given Nigerian Apex Bank’s regular injection of liquidity in the market. www.businessday.ng

Source: National Bureau of Statistics (NBS) The Pension Asset and RSA Membership Data Q1 2019 showed an increase in Asset Under Management (AUM) of 14 percent year-on-year to N9.03 trillion in Q1, data from the National Bureau of Statistics (NBS) show. Data from the state-funded data agency showed AUM as at Q1 2019 stood at N9.03trn as against N8.63trn in Q4 2018. The report also shows FGN Bonds has the highest weight percentage of 49.37% of the total pension fund assets and closely followed by treasury bills with 21.44% weight and local money market securities with 9.68% weight while foreign money market securities has the least with 0.25% weight. 8,569,037 workers are registered under the pension scheme compared to 8,410,184 registered workers in Q4 2018 while participants within the age distribution 30-39yrs have the highest percentage composition with 35.77%. Participants within the age bracket of 40-49yrs and 50-59yrs have 28.12% and 18.02% respectively while participants above 65 years have the least percentage composition with 2.78%.

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Monday 17 June 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 14 June 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 223,934.92 6.40 1.59 165 16,006,917 UNITED BANK FOR AFRICA PLC 208,616.47 6.15 -0.81 169 7,745,154 ZENITH BANK PLC 627,929.88 20.00 -0.50 233 6,461,329 567 30,213,400 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 249,472.28 6.95 -0.71 119 3,963,172 119 3,963,172 686 34,176,572 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,761,089.70 135.60 0.37 85 2,165,363 85 2,165,363 85 2,165,363 BUILDING MATERIALS DANGOTE CEMENT PLC 3,135,453.36 184.00 0.55 30 62,168 LAFARGE AFRICA PLC. 157,051.01 9.75 -2.50 31 303,832 61 366,000 61 366,000 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 302,107.44 513.40 - 6 53 6 53 6 53 838 36,707,988 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 14,408.66 5.40 - 0 0 0 0 0 0 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 0 0 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 70,589.34 74.00 - 8 1,227 PRESCO PLC 55,000.00 55.00 - 5 2,205 13 3,432 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 511.20 4.26 - 2 7,706 2 7,706 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,800.00 0.60 - 3 27,263 3 27,263 18 38,401 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 794.19 0.30 - 1 100 JOHN HOLT PLC. 182.90 0.47 - 2 31,230 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 45,932.23 1.13 -0.88 45 3,864,950 U A C N PLC. 17,864.04 6.20 - 30 413,383 78 4,309,663 78 4,309,663 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 28,578.00 21.65 - 13 10,535 ROADS NIG PLC. 165.00 6.60 - 0 0 13 10,535 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 3,923.58 1.51 - 2 150 2 150 15 10,685 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 9,395.40 1.20 - 4 72,736 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 104,043.18 47.50 - 35 184,417 INTERNATIONAL BREWERIES PLC. 159,453.24 18.55 -7.25 8 65,036 NIGERIAN BREW. PLC. 463,820.32 58.00 0.87 47 2,146,300 94 2,468,489 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 80,000.00 16.00 - 35 141,071 DANGOTE SUGAR REFINERY PLC 127,200.00 10.60 -0.93 61 1,084,454 56,995.28 13.90 -0.72 55 2,925,562 FLOUR MILLS NIG. PLC. HONEYWELL FLOUR MILL PLC 8,564.61 1.08 - 13 96,524 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,211.69 14.80 - 10 16,175 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 174 4,263,786 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 20,566.31 10.95 - 21 218,431 NESTLE NIGERIA PLC. 1,133,498.44 1,430.00 -1.38 36 122,245 57 340,676 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,678.16 3.74 - 10 39,639 10 39,639 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 29,183.01 7.35 - 22 90,611 UNILEVER NIGERIA PLC. 178,095.17 31.00 - 17 82,428 39 173,039 374 7,285,629 BANKING ECOBANK TRANSNATIONAL INCORPORATED 180,743.08 9.85 0.51 40 4,739,247 FIDELITY BANK PLC 50,995.64 1.68 -2.89 74 7,041,692 GUARANTY TRUST BANK PLC. 912,366.56 31.00 0.65 201 55,723,829 JAIZ BANK PLC 13,553.55 0.46 -4.17 3 628,432 SKYE BANK PLC 10,687.83 0.77 - 0 0 STERLING BANK PLC. 67,657.48 2.35 -0.42 79 2,892,698 UNION BANK NIG.PLC. 203,845.27 7.00 - 19 134,766 UNITY BANK PLC 8,182.54 0.70 9.38 9 715,392 WEMA BANK PLC. 23,916.17 0.62 3.33 27 1,321,302 452 73,197,358 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 4,781.84 0.69 1.47 41 3,756,812 AXAMANSARD INSURANCE PLC 20,055.00 1.91 - 0 0 CONSOLIDATED HALLMARK INSURANCE PLC 1,788.60 0.22 - 0 0 CONTINENTAL REINSURANCE PLC 19,811.94 1.91 - 0 0 CORNERSTONE INSURANCE PLC 2,945.90 0.20 - 1 1,625 GOLDLINK INSURANCE PLC 909.99 0.20 - 1 50 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 2,197.03 0.30 - 4 43,000 LAW UNION AND ROCK INS. PLC. 1,976.31 0.46 - 0 0 LINKAGE ASSURANCE PLC 3,840.00 0.48 - 2 80,000 MUTUAL BENEFITS ASSURANCE PLC. 2,346.27 0.21 - 0 0 NEM INSURANCE PLC 11,089.06 2.10 - 7 87,001 NIGER INSURANCE PLC 1,547.90 0.20 - 1 200 PRESTIGE ASSURANCE PLC 2,691.28 0.50 - 1 6,392 REGENCY ASSURANCE PLC 1,333.75 0.20 - 1 5,000 SOVEREIGN TRUST INSURANCE PLC 1,918.39 0.23 - 0 0 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 0 0 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 5,486.92 0.41 2.50 46 5,305,252 105 9,285,332

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MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 2,972.63 1.30 - 5 102,500 NPF MICROFINANCE BANK PLC 5 102,500 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 3,780.00 0.90 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 6,820.00 3.40 -2.58 75 807,925 CUSTODIAN INVESTMENT PLC 35,879.37 6.10 0.83 5 80,671 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 33,070.53 1.67 -2.99 52 4,215,475 ROYAL EXCHANGE PLC. 1,234.89 0.24 9.09 7 690,775 STANBIC IBTC HOLDINGS PLC 435,223.50 42.50 - 11 64,175 UNITED CAPITAL PLC 13,980.00 2.33 1.30 59 2,545,014 209 8,404,035 771 90,989,225 HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 - 3 214,000 3 214,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 593.50 0.60 - 4 951 4 951 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 7,575.00 5.05 - 1 10 GLAXO SMITHKLINE CONSUMER NIG. PLC. 10,164.95 8.50 1.80 27 507,751 MAY & BAKER NIGERIA PLC. 4,054.30 2.35 - 6 22,950 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,063.53 0.56 - 3 18,106 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 37 548,817 44 763,768 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 745.92 0.21 5.00 6 221,000 6 221,000 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 648.00 6.00 - 1 4,000 TRIPPLE GEE AND COMPANY PLC. 346.47 0.70 - 0 0 1 4,000 PROCESSING SYSTEMS CHAMS PLC 1,643.62 0.36 2.86 7 981,540 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 0 0 7 981,540 14 1,206,540 BUILDING MATERIALS BERGER PAINTS PLC 1,854.87 6.40 - 8 6,200 CAP PLC 21,770.00 31.10 - 11 20,663 CEMENT CO. OF NORTH.NIG. PLC 177,437.26 13.50 - 8 20,417 FIRST ALUMINIUM NIGERIA PLC 844.14 0.40 - 0 0 MEYER PLC. 313.43 0.59 - 1 500 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,959.74 2.47 - 1 10 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 29 47,790 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,501.08 1.42 - 8 234,800 8 234,800 PACKAGING/CONTAINERS BETA GLASS PLC. 37,497.90 75.00 - 2 60 GREIF NIGERIA PLC 388.02 9.10 - 0 0 2 60 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 1 1,000 1 1,000 40 283,650 CHEMICALS B.O.C. GASES PLC. 1,565.08 3.76 - 1 352 1 352 METALS ALUMINIUM EXTRUSION IND. PLC. 1,803.64 8.20 - 1 100 1 100 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 79.20 0.33 -8.33 1 200,000 1 200,000 3 200,452 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,503.05 0.24 - 12 405,665 12 405,665 INTEGRATED OIL AND GAS SERVICES OANDO PLC 48,482.51 3.90 2.63 75 2,022,855 75 2,022,855 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 58,957.33 163.50 - 11 2,996 CONOIL PLC 15,960.90 23.00 - 14 22,666 ETERNA PLC. 4,694.92 3.60 -1.37 12 115,638 FORTE OIL PLC. 38,292.94 29.40 9.91 31 491,242 MRS OIL NIGERIA PLC. 6,354.80 20.85 - 5 1,277 TOTAL NIGERIA PLC. 50,928.28 150.00 - 18 9,708 91 643,527 178 3,072,047 ADVERTISING AFROMEDIA PLC 1,820.01 0.41 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 17,551.17 1.80 - 1 100 1 100 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 341.14 0.29 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 3,242.23 5.50 - 1 16,000 TRANS-NATIONWIDE EXPRESS PLC. 342.26 0.73 - 0 0 1 16,000 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 1 100 1 100 HOTELS/LODGING CAPITAL HOTEL PLC 4,723.78 3.05 - 0 0 IKEJA HOTEL PLC 3,014.25 1.45 - 5 50,500 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 20 1,280 TRANSCORP HOTELS PLC 41,042.18 5.40 - 0 0 25 51,780 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 163.30 0.27 - 0 0 LEARN AFRICA PLC 1,033.74 1.34 - 7 28,683 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 776.54 1.80 - 4 13,700 11 42,383 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 497.31 0.30 - 3 32,327 3 32,327

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Company IN FOCUS

BUSINESS DAY Monday 17 June 2019 www.businessday.ng

Nestle Nigeria plc: Resilience amid economic headwinds, shrinking consumer wallet compared with N257 and N757 respectively. Analysis of its balance sheet revealed that Nestle’s high ROE on its back of high debt financing in its capital structure. 69 percent of its capital structure as at 2018 comes from debt, while the other 31 percent are sourced through equity. Nestle betters peers in cost efficiency, going by cost-of-sales ratio. Last year, production cost accounts for less than 60 percent of gross profit, compared to Cadbury and Unilever with more than 70 percent. Cost-of-sales ratio hits a 3-year low in 2018 at 57.22 percent. Gbolahan Ologunro, Research Analyst at Lagos-based CSL Stockbrokers, stated that Nestle’s cost efficient on the back of economies of scale, it enjoys from its brands and local input sourcing. “In terms of cost efficiency, they enjoy economies of scale from their wide range of products that get to the market, underpinned by their route to market strategy. The company also source most of its raw materials like sorghum, maize, soya beans, sugar, cocoa, and cassava locally”

OLUFIKAYO OWOEYE & ISRAEL ODUBOLA

he urban population in Nigeria grow is growing at 4.6% per annum and by implication, an increasing number of Nigerians participate in the cash economy and have become consumers. However, one would expect players in the nation’s FMCG to enjoy booming sales and profitability. Sadly, this is not the case. The last recession, the worst in 25years left consumers with shrinking wallet, while manufacturers are left to bear the growing cost of operation as they could not pass the cost to the already cash-strapped consumers. Also, the economic headwinds left several FMCGs struggling to find their footing, while few have been able to triumph and shine in the midst of economic adversity, thus conferring the tag of Primus inter pares (first among equals) on them. Nestle is the world’s largest food and beverage company with operations in over 190 countries with its Headquarters in Switzerland. The company commenced operations in Nigeria in 1961 and was listed on the nation’s bourse in 1979. From its first factory commissioned in 1982, Agbara, Ogun-State, it currently has 3 manufacturing sites with a recently commissioned water factory in Abaji, outskirt of the FCT.

Market performance Nestle’s performance at the domestic bourse in underpinned by weak investors’ sentiment. Investors are snubbing the attractive earnings figures churned out by corporates and looking up to the Buhari-led administration to formulate market-moving reforms that would revive the bourse. Its shares declined N20 or 1.38 percent to close at N1, 430 after Friday’s trading session, down 3.7 percent since the beginning of the year. The food product giant outperformed the broader market index and consumer goods sector that has returned 4.4 percent and 37.2 percent losses respectively. Nestle is trading at price multiple of 24, compared with Unilever (17.3x) and Nascon (9.6x), making the stock the most expensive among peers in the food product segment.

Nestle’s management team The Board of directors of Nestle Nigeria Plc is made up of individuals from diverse academic and professional backgrounds. They include David Ifezulike as the chairman, who joined the company in 1980 and served the company in various capacities spanning over 26 years. Maurico Alarcon, a Mexican who is the Managing Director/ Chief executive officer, other Nigerian on the board include Gbenga Oyebode, who is the chairman of several listed companies including a non-executive director of MTN Nigeria, Ndidi Nwuneli is an entrepreneur with over 25 years of experience and also serves on the board of several quoted companies. Others foreign directors include Jagdish SINGLA, Ricardo Chavez, Remy Ejel. Financial performance Nestle has consistently grown revenue and net income in the last three years. In 2015, revenue and net income of the food product maker rose 6 percent and 7 percent respectively to N151.3 billion and N23.8 billion in 2015. The food product maker felt the impact of the economic slowdown on its bottom-line. Despite revenue soared some 20 percent from N151.3 billion in 2015 to N181.9 billion in 2016, net income plunged 67 percent, on the heels of dampened disposable income. Finance cost which skyrocketed from N4.9 billion in 2016 to N20.8 billion in 2017. However, about 80 percent of its finance expense came from foreign exchange loss. This is however not surprising considering the fact that there was intense pressure on foreign exchange in that period, as the naira traded as high as N525 a dollar. The consumer goods giant picked up the pieces of a horrid year in 2016, to grow revenue by a whopping 34 percent to N244.1 billion in 2017, fuelled by 139 percent surge in domestic sales. Export sales, which contracted in 2016, grew more than double to settle at N3 billion in 2017. The tangible appreciation in operating profit and finance income, coupled with lowered finance cost helped trigger net income from N7.9 billion in 2016 to N33.7 billion 2017. Revenue further trended northwards to N266.2 billion in 2018, and a sharp drop in finance cost helped after-tax earnings soared some 26

Backward integration Some of the company’s products include MAGGI, milo, Golden morn, Nescafe, Nestle Pure Life water. According to the company, it has spent N52 billion in the last six years on productive investment across its manufacturing operations and substantial amount in creating value. Currently, 80 percent of the company’s input is sourced locally while 100 percent of the grains and legumes used in the production of Golden Morn is sourced locally. This has tremendously helped over 30,000 local farmers to improve on their farm inputs to meet Nestle’s high quality standard and also provides a steady source of income for the farmers. percent to N43 billion last year. Nestle maintained stellar performance in the first quarter of 2019. Sales revenue grew 5 percent year-on-year buoyed by 6 percent growth in domestic sales. The company recorded its first net finance income in the first quarter, which consequently helped trigger net income by 49 percent. The food product giant continued to wax stronger in profitability. Profit margin, which measures the profit percentage retained by a firm after settling production cost, operational expenses, interest, and tax, hits a 5-year in 2018 at 16.15 percent, more than industry average of about 10 percent. This implies that the food product maker retained N162 as profit last year from every thousand naira realized as revenue. This com-

pares with N156 in 2014, N157 in 2015, N43 in 2016 and N138 in 2018. The company showed resilience profitability as margin upped N181 in three months to March 2019. The company’s return on assets and equity are at their 5-year high in 2018, indicating that Nestle is more efficient in utilizing assets and shareholders’ funds to generate earnings. For every thousand naira the consumer goods giant invested assets, it realized N265 in 2018, higher than N210 in 2014, N199 in 2015, N47 in 2016 and N228 in 2017. Furthermore, Nestle has been exciting shareholders with a high return on their investment. Return on equity (ROE) has trended northwards after the 2016 economic recession. For every thousand naira invested in the company’s stock, the food product maker returned N856 in 2018,

Takeaway from Nestle’s AGM At the 50th Annual General Meeting (AGM) of the company held on 28th of May 2019 at The Shell Hall, Muson Center, Onikan, shareholders commended Nestle’s management team for an impressive performance in 2018, the company’s turnover growth of 9percent from 2017 to 2018, while profit after-tax increase 94percent over the last five years despite the harsh operating environment. However, a cross section of the shareholders also advised the management to establish a manufacturing plant in the southeastern part of the country to further aid the penetration of its products to the south-south and southeastern part of the country. They also advised the company to add more products (such as ice cream brand) to its known brands in the market and further boost its bottom line.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Advert Hotline: 08034743892. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Patrick Atuanya. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.