BusinessDay 18 May 2020 by BusinessDay

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news you can trust I ** monDAY 18 may 2020 I vol. 19, no 565

Despite FG’s assurance, petroleum downstream sector awaits full deregulation ISAAC ANYAOGU (Lagos) & HARRISON EDEH (Abuja)

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No respite for businesses 2 weeks after ease of lockdown See story on page 31

he Federal Government on Thursday said that it had deregulated the downstream petroleum industry. It, however, said it would continue to intervene in determining the pump price of the Premium Motor Spirit (PMS), also known as petrol, to protect the consumer – in violation of the basic concept of deregulation. In a deregulated environment, experts say market forces determine prices and governContinues on page 31

Inside

What NCDC’s partnership with private labs means for Nigeria’s COVID-19 effort P. 30

A logjam caused by the enforcement of interstate travel ban by security men on the Abuja-Kaduna highway at Madalla, a boundary town between the FCT and Niger State, on Friday. NAN

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COVID-19 is transforming the world of work: Can Africa adjust to the change? global Perspectives

OLU FASAN

ince Britain imposed a coronavirus lockdown on 23 March, I have been confined to my home in London. Under the government’s “Stay at Home” rules, unless you were a “critical worker”, you must not leave your home except for very limited reasons, namely, to buy food or medicine; to have one form of exercise a day; or for any medical need. The stay-at-home rules were so strict that the chief medical officer of Scotland had to resign when she flouted the rules and visited her second home. Professor Neil Ferguson of Imperial College London, whose modelling prompted the introduction of the lockdown in the first place, also had to resign as the UK government’s scientific adviser when it was revealed that he had allowed his mistress to visit him at home in breach of the rules! So, over nearly two months, since 23 March, I have not, literally speaking, been to my workplace in central London. And, as I will explain later, I won’t be able to do so for the foreseeable future. But when I said my “workplace”, I meant my “physical workplace” because I have never stopped working. For a start, I have all the equipment I need to work from home, with remote access to my work systems. The only things that are missing are the in-person meetings and other face-to-face engagements. Instead of those physical contacts, I hold several meetings with colleagues and other people using Zoom or Microsoft Teams. For instance, while previously I would travel to Edinburgh, Cardiff, Manchester etc, and spend one or two nights in a hotel, just to have meetings with businesses and other corporate organisations, now

I hold Zoom or Teams conference calls with business leaders and senior corporate executives, sometimes with over ten people on one call. Of course, none of these virtual encounters is the same thing as real-life ones held in physical proximity, where you can interact with people personally and feel the human essence. But these are the inevitable consequences of the lockdown and social-distancing measures triggered by COVID-19, and home-working and virtual engagements are the ways most Western-based businesses have been operating since the coronavirus lockdowns started about two months ago. Recently, the Editor of the Financial Times, Roula Khalaf, said in an interview that the FT was being produced mostly remotely. The Deputy Editor of the London Times, Tony Gallagher, also said the same thing. All but a few core staff work from home, he said, adding that “a very small number of staff come in for the evening shift to make sure that the paper is published on all three platforms: paper, tablet and online.” Everything else is done remotely. He explained: “We do the main meetings, news conferences and leader meetings with the Editor, John Witherow, and others via Google Hangouts.” So, each time I receive my FT and my Times, the two papers I subscribe to, I know the efforts that have gone into producing them, especially knowing the challenges of working from home. But that brings me to where I am really going, namely, that this remote way of doing business is likely to become the “new normal”. Put simply, home-working and virtual encounters will continue for the foreseeable future, if not permanently, at least in the West. This is because until there is a permanent solution to the coronavirus, either through an effective vaccine or drug treatments, social distancing and, thus, home-working would remain the default response to managing the risk of COVID-19. As Professor Niall Ferguson, the economic historian and senior fellow at Stanford University, wrote recently, “The coronavirus is to social life what HIV was to sexual life,” in other words, just as HIVAids changed attitudes to promiscuous

sex, coronavirus will change attitudes to social interactions – such as shaking hands, hugging people or being in a crowd and getting close to unfamiliar people – and, of course, to business life. For instance, Bill Gates recently said that, following COVID-19, things like business trips would reduce and that virtual shareholder meetings could replace inperson ones. Of course, all the social distancing and remote encounters would not continue if an effective vaccine could be developed to tackle COVID-19. But, as most experts have said, that’s by no means a 100 percent certainty. For instance, despite best efforts, there are, so far, no effective vaccines for malaria, tuberculosis, HIV-Aids and many other infectious diseases. Of course, this is not to rule out a breakthrough, especially given the ongoing global race to develop a coronavirus vaccine. But the cautious position is that it may take time to develop, trial, manufacture and distribute reliable treatments or vaccines for COVID-19. As a result, Western countries are rebuilding their societies for a world with, not after, COVID-19. On the one hand, they are concerned about the huge economic and social costs of lockdowns and want to reopen their economies to restore people’s jobs and livelihoods and improve their living standards. But, on the other hand, they know that the coronavirus has not been defeated; it remains an invisible threat, a devastating enemy! So, their precautionary response is to establish completely new ways of working, of doing business, that balance protecting businesses and jobs with managing the risk of COVID-19. Last week, the UK laid out the framework for new ways of working in a COVID-19 world. While the prime minister, Boris Johnson, announced some modest relaxation of the lockdown measures, he also set out the conditions that workplaces and public spaces must satisfy to be “COVID-19 Secure” and thus safe enough for people to work or meet in them. Specifically, the UK government published “COVID-19 Secure” guidelines for different types of work, such as construction, factories, offices, shops and restaurants. Essentially, under the guidelines, all

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Of course, some businesses are not suited to socialdistancing and some cannot afford the cost of redesigning their workplace. They will simply turn to remoteoperations, if possible. One large restaurant chain said it would change its business model to home delivery

workplaces and public spaces must be re-designed to be COVID-19 secure. But what does it mean for a workplace to be COVID-19 secure? Well, first thing is a presumption that “everyone should work from home, unless they cannot work from home.” In other words, if a company’s employees can work from home, it should let them work from home. Second, for those who have to go to their workplace, they must maintain social distancing, i.e. keep a distance of two metres apart at work. This means that every part of a workplace must be completely redesigned to ensure that staff don’t come close to each other or even sit or work face to face! In fact, staff canteens must be closed, and other common areas, such as toilets, where queues typically form, must have clear social-distance markings. Now, given the amount of work needed to re-design and change the layouts of my massive office building in central London to make it “COVID-19 Secure”, you can see why I will work from home for the foreseeable future. Even when the place becomes COVID-19 secure, only few people can be allowed in it at a time. So, my homeworking may continue for a distant future! Of course, some businesses are not suited to social-distancing and some cannot afford the cost of re-designing their workplace. They will simply turn to remote-operations, if possible. One large restaurant chain said it would change its business model to home delivery. I mean, how can you maintain social-distancing in restaurants, a place of conviviality? Yet, that’s the imperative of the COVID-19 world. For Africa, all this means not just having hygiene procedures in workplaces but also ensuring social distancing at work. Alternatively, it means actively encouraging and facilitating remote working. But can Africa, particularly Nigeria, adjust to the COVID-19 world of work? Well, if not, we must hope and pray that COVID-19 doesn’t hit Africa hard or that an effective vaccine is developed! 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

Independent state of mind - myth or reality?

irectors owe their fiduciary duties to the Company as a whole and are expected to act in the best interest of the Company and not in the narrow interest of the stakeholders (typically shareholders) they represent. An independent mindset will enable the Director take a stand, when he/ she is of the view that the company’s long-term future is not being prioritized, no matter the consequences. However, many Directors are unable to take a step back when faced with decisions that are not in the best interest of the stakeholder block, they represent, but which would benefit the company – often in the long run. This brings to the fore the struggle to align the interests of the Company (all stakeholders) and the interests of those charged with running the Company (Board and Management). The concept of Independent Directors is an attempt to ensure that there is sufficient “independent judgement” on the Board that enables the Board act in the best interest of the Company at all times. It has been argued that the Independent NonExecutive Director (INED) is no different from any other Non-Executive Director (NED). However, the process of appointing Directors (INED or NED) unto the Board is critical in determining and assuring the individual’s independent state of mind and judgement. A well-defined and transparent appointment process, that clearly sets out the criteria for the role as well

as the required skills set; outlines a procedure championed by the Nominations (Governance) Committee which is clear to all Directors, is one way of achieving true independence. The converse is where the Chairman or CEO unilaterally circulates CVs of individuals known to them to the Board “for consideration”. Sometimes these individuals go through the motion of “appearing” before the Nominations Committee before being “recommended” to the Board and the shareholders for appointment. More often than not, such Directors find it difficult to take a stand that will “hurt” their “benefactor”, even where such a position is in the best interest of the Company. Ownership is also a significant factor in a Director’s ability to think and act independently. Separating the role of ownership and governance engenders Board independence which is a sine qua non to delivering value to a wider spectrum of stakeholders and acting in the company’s overall interest. Decisions would not always be influenced by investment objectives of the individual and institutional shareholders, but will be better focused on considerations beyond the bottom-line. Another key determinant of the independence of the Non-Executive Director is the character of the individual. Integrity connotes sound ethical values, transparency, accountability, commitment and courage. If the selection process throws up an individual with integrity and www.businessday.ng

sufficient moral fibre, he or she will bring on board the appropriate independent judgment required for Board effectiveness and sound decision making. It would be of little or no consequence to such a Director that he or she represents a shareholder, as such a Director will have the sufficient presence of mind required to make optimal decisions. Conversational intelligence, candour, leadership skills, confidence are some of the desirable character traits in a Non-Executive Director. The culture on the Board to a large extent also determines the level to which Directors are able to maintain independent judgment. Openness to new ideas – as opposed to an attitude of “this is how we do it”, the ability of Directors to accept constructive criticism and feedback are attributes of the Board that will engender greater independence of thought. Also, if one or more Directors exercise overbearing influence whether by reason of shareholding or a propensity to dominate discussions, the tendency will be to always defer to such individuals. The Chairman (if he/she is not the culprit) will need to firmly deal with this by ensuring that no Director dominates discussions and drawing out the less vocal Directors. The process of determining (and sometimes the quantum of ) Non-Executive Director remuneration also has an impact on Director independence. Leaving the determination of Director remuneration to the CEO’s discretion

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Bisi Adeyemi is not best practice. This responsibility should be that of the Governance (Remuneration/ Nomination) Committee which will make recommendations to the Board on the components, quantum and frequency of review. The Committee will periodically undertake a peer review to ensure that remuneration package compares favourably with industry peers. Excessive and arbitrary pecuniary benefits to Non-Executive Directors has the potential of beclouding their judgement. Finally, Directors who are busy with other endeavours and who do not solely depend on their Board membership for relevance or economic gain are more likely to bring a greater degree of independent judgement to the Board. Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. DCSL provides Governance Advisory, Corporate Restructuring & Board Evaluation, Board & Senior Management Training, Retreats & Strategy Sessions, Executive Talent Recruitment, HR Outsourcing, Company Secretarial services

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An empty seat for Koleade Adeniji Abayomi, SAN; OON – embodiment of intellect, charm and good humour

Bashorun J.K Randle

bayomi is fondly remembered by his students for his undoubted intellect, erudition and his easy charm as well as his infectious good humour. He was a huge hit with his risqué jokes with daring sexual undertones which provided a repertoire that he unleashed on successive intakes. Here is a witness statement (Prosecution Witness 1) by one of his students: “Dr. Abayomi!! Our darling teacher. Debonair, dapper, genial, cerebral are some adjectives I would use for him. He taught us well and Legal Drafting remains one of my strongest points to date. My sister and I were in his tutorial class and he would be openly flirtatious in class. He would say if any one of the girls pleaded being married as the reason for not wanting his attention, he would respond in his seductive baritone voice “so am I”. The swag with his signature walking stick added to his appeal and I only realised now that he is dead that he was just in his 40s when I was in Law School. He has played his part, teacher of teachers, lawyers, judges and everything in between all through the gamut of the legal profession and judiciary.” Dr. Abayomi was always jovial, down to earth and very popular with his students. They looked forward to his lectures with eagerness and unbridled excitement. He had no qualms about announcing in the classroom / lecture theatre: “From the waist upwards, I am a Christian but from the waist downwards, I am a Moslem.” Now that he is gone, discretion would not permit me to divulge his salty story about “PUSH HARDER” except that it had something to do with a Nigerian lawyer (an old boy of St. Gregory’s College!!) who was on a visit to India and enjoyed the company of an Indian escort lady whose

command of English was somewhat limited. It was not until the Gregorian was on the golf course the following day that the directional / communication difficulties of the previous evening were clarified!! Outside the Law School, Kole’s brilliance earned him a seat among the fifty (actually forty-nine) wise men/women who drafted Nigeria’s 1979 Constitution under the Chairmanship of the legal icon, Chief F.R.A., Williams S.A.N. which substituted Parliamentary (Westminster model) Democracy with the American presidential system that was bequeathed to our nation by General Olusegun Obasanjo. Ah well, there goes another empty seat!! I have been searching frantically for any evidence that serious consideration was given to the cost of running a vastly expensive presidential system (with twelve states, now thirty-six states in addition to the Federal Capital Territory, Abuja) in a poor country like Nigeria. Kole was a man of impeccable character and unassailable integrity (which is a sine qua non for thoroughbred Lagosians). He had nothing but contempt for dubious characters, scoundrels and the masters of treachery/mendacity. For him integrity, loyalty and uprightness were the ground norm for friendship. He never wavered. Our paths crossed at King’s College, Lagos sixty years ago when he joined the highly competitive Sixth Form from C.M.S. Grammar School. He was two years ahead of his brother, Bola who was my classmate. At that time, Kole was as slim as a rake but showed no interest whatever in games or athletic pursuits. By his own testimony he had discovered a more agreeable sport---girls!! At a time when most of his classmates were still contemplating how to woo their first girlfriends, Kole was well ahead of the pack. He was precocious. He already had a formidable list of conquests under his belt-supported at that tender age with sworn affidavits. It was the first hint that he was destined for the legal profession rather than medicine for which his Dad (who was a doctor and politician) had been grooming him. He was a gifted raconteur and would regale us with stories of his encounters with the opposite sex who apparently considered him an irresistible magnet for their affections. At King’s College, Kole quickly served notice that as an Aristocrat

he was exempt from corporal punishment by any of the tutors (not even the Headmaster/Principal, Mr. P. H. Davies). He was promptly nicknamed: “Aristo”!! Here is a vignette of Kole’s recollection of his brief (non-legal!!) spell at King’s College in an interview published in “The Punch” newspaper on 1st July 2017 with a bold headline: “At 21, my dad gave me his will, access to his accounts.” How was it like growing up in Lagos Island, a place known to be rough? “It was not as rough as it is today but even as of then, you had to know the son of whom you are. I had friends who were on drugs but I have never taken drugs in my life. I had friends who were always going to night clubs but I preferred regular parties. I had friends who broke bounds in school and I also did a bit of that. Did you ever get caught? Yes, I got caught. There was a time I took about nine people to the Ambassador Hotel. We left school at about 8pm and got back to school about 2am but we were caught, two were expelled, six were suspended but the principal thought that since I just got in from another school and I did not know the routine, I should be on probation. My friends thought that it was favouritism but I was not bothered.” After obtaining his law degree from Durham University in Britain, Kole proceeded to Clare College, Cambridge for his LL.M followed by his Ph.D. from Oxford University. His Ph.D. thesis was on “Control of Administration by Parliament”. He thereby joined the long list of King’s College boys (and girls) who attended either Cambridge University or Oxford University (and sometimes both!!). The motto of the University of Cambridge is: Hinc lucem et pocula sacra (From this place, we gain enlightenment and precious knowledge). The motto of the University of Oxford is: Dominus illuminatio mea (The Lord is my light) • Adetokunbo Ademola (Selwyn College) – Oxford University • Louis Mbanefo - Cambridge University • Justice Charles Dadi Onyeama – (Brasenose College) Oxford University • Harry Afolabi Lardner S.A.N. (St. John’s College) Cambridge University • Dr. Alex Boyo - Cambridge Uni-

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Kole was a man of impeccable character and unassailable integrity … he had nothing but contempt for dubious characters, scoundrels and the masters of treachery/ mendacity. For him integrity, loyalty and uprightness were the ground norm for friendship. He never wavered

J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services. Email: jkrandleintuk@gmail.com

From the blogs

Francis Egbokhare

Disobedience and lawlessness are Nigeria’s undoing

have been following the events in Rivers. The governor’s action is beyond belief! He has become power drunk, but I see why he was angry. However, in his anger, he has also disobeyed the law, yet being a lawyer, and having a judge as a wife. I read the frustration of the governor of Lagos over the movement across the state boundaries. The desperation of people to continue to break interstate travel restrictions appears now not to be motivated by survival but more by habit. The habit is disobedience to laws and authority. The cry for palliatives (the distribution of which was fraught with disobedience of basic human equity) has now subsided, which means that to some extent, the government is working? So, why are people still so much involved in movement across boundaries? It cannot be that they are in search of livelihood. Let us take the case of the police who have become transporters, are aiding and abetting lawlessness by collecting huge tolls at night to let people cross boundaries. Take the case of some of them who arrest people indiscriminately in order to collect hundreds of thousands for bail. If the keepers of law are lawless, where will order spring from? As I try to understand the meaning of law, I

have concluded that the law essentially trains human beings to avoid having societies in which order is maintained by brute force. In the animal kingdom, one creature has the prerogative of determining what’s law and keeping order. In human societies, by voluntarily obeying the law, societies ensure the enculturation of order. Without order, there cannot be peace. Without peace, development is an illusion. People are placed in authority to give examples of orderly conduct, and by so doing, earn the legitimacy to enforce order in community. In Nigeria, the authority are the supreme law breakers. By giving examples of lawlessness, they socialise the rest of society in disobedience. Lawlessness is everywhere. From politicians who rig elections to judges who pervert justice; from clerics who exploit the congregation to those who promote violence; from University leaders who cheat to teachers who sleep with their students, the message is the same. The law is meaningless. I have come to understand why obedience is one of the highest active character trait in our relationship with God. Obeying the law is akin to obeying God, because just like God, the law is impersonal but it must be personalised www.businessday.ng

for it to have a controlling power over humans. Nigerians, both leadership and followership are lawless. The strength of a person’s character is what he/she does when no one can see. When you feel you can get away with it! In public space or private places, at home in the family, we are averse to rules. Whether we are watched, in supervision or in secret, we cut corners and break laws. A people like this are strong in demanding rights but terrible in taking responsibility. They are good at criticising but poor in providing solutions. They know everything that is wrong with everyone but have no capacity to introspect and self-correct. Everything is about advantage and every relationship is transactional. Where the capacity for obedience is lacking the majority are screamers, never stopping to listen, very arrogant in foolishness, blamers and haters who thrive in self-righteous indignation. The COVID-19 pandemic is revealing our depth of lawlessness and the stench of disobedience. From the okada rider who does not respect traffic flow, or the taxi driver who overload to the car owner who beats the red light and drives against traffic, disobedience is right here

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versity • Izoma Phillip Chiedu Asiodu (Queen’s College) - Oxford University • Chief Allison Akene Ayida (Queen’s College) - Oxford University • Otunba G. Adeoye Tugbobo - Oxford University • Chief Remi Fani-Kayode S.A.N. Cambridge University • Akins Fani-Kayode - Cambridge University • Chief Rex Akpofure - Oxford University • Professor J.T.K. Duncan - Cambridge University and Oxford University • Major-General (Dr.) A.O. Austen Peters - Cambridge University • Dr. Dayo Akinrele - Cambridge University • Engr. Marshal Akinrele - Cambridge University • Ambassador Albert I. Osakwe - Oxford University • General Chukwuemeka Odumegwu Ojukwu - Oxford University • Gbolahan Abisogun-Alo - Oxford University • Adekunle Oyenuga - Cambridge University • Peter Alexander Ashikwe Adione Egom - Cambridge University • Geoffrey Adekunle Williams - Oxford University • Oladipo Jadesimi - Oxford University • Babatunde Edu - (Brasenose College) Oxford University • Babatunde Mobolaji Williams (Christ’s College) Cambridge University • Oyewole Brown - Cambridge University • Professor Adele Jinadu - Oxford University • Professor Osato Giwa-Osagie - Cambridge University • Hakeem Bello-Osagie - Oxford University and Cambridge University • Senator Udoma Udo Udoma - Oxford University • Chief Fubara Anga - Cambridge University • Aare (Dr.) Bolu Akin-Olugbade – Cambridge University

before us. I see disobedience in everyone and everywhere. I see big men and women break the law with impunity. I am alarmed that we are breeding a generation who don’t even know that there are laws much less develop a capacity for obedience. We are socialising our children in lawlessness. Very early, we teach them manipulation when we leg admission for them. Then they are taught stealing when we hire people to write examinations for them or buy questions for them. We denigrate hard work when we bribe to get them jobs or bypass those who are better qualified to employ them. They see us when we steal from the state to give them a life, when we tell lies and call them to witness. They are the generation of vipers that we have created. These ones even think that God is a maiguard at their service. God is to obey their every whim, answer their calls and wait on their service. No amount of “religiosity” will save this country! Does the Bible not tell us that disobedience is a sin?? What drove our ancestors from Eden’s perfect garden? We are riding the back of a tiger while holding its tail. Double trouble!! We will surely fall off very soon and be devoured.

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Ideas for a new Nigeria: Is it time for a federal personal income tax? (first in a series of five volumes) ECONOMIST

NONSO OBIKILI

he jig looks well and truly up for government. The era of crude oil as the major sustainer looks to be over, and that was clear even before the COVID-19 pandemic hit. The federal government was already running record deficits financed through “creative” methods and many states were struggling to just pay salaries. Despite the revenue challenges the governments cannot just pack up and leave. Public services need to be provided. Security services, courts, public schools, hospitals, and so on are needed. As we are finding out, public health crises do not care if the government has money or not. If crude oil can no longer generate enough to provide essential public goods, then what will? One area where Nigeria is systematically lacking is in the collection of personal income taxes (PIT). Our PIT rates are not that low but

compliance is poor. In the United States for instance, the equivalent of personal income taxes accounted for 27 percent of all tax revenue and 9 percent of GDP in 2017. This is not a US specific statistic. In a wide range of countries from Canada to Denmark and from Japan to Turkey and South Africa, PIT makes up a significant share of all tax revenue. In the average OECD country, PIT accounted for 24 percent of all taxes and was eight percent of GDP. This does not include things like social security contributions by the way. In Nigeria though, personal income taxes only made up about seven percent of all taxes collected and only about one percent of GDP in 2018. I know the next question will be something about how “we have oil” or how Nigerians are poor or something about corruption. We can ignore the “we have oil” question because we already know the answer to that, but what of the poverty question? According to the latest NBS data Nigeria has a poverty rate of around 40 percent. Very high of course. But that also means that 60 percent of Nigerians are not poor and can contribute something to the tax net. Also remember that N146 trillion worth of economic activity was generated in this same Nigeria in 2019. The corruption question is valid but the status quo of not paying taxes and not demanding accountability is not tenable. Remember the “stop corruption before removing sub-

sidy” slogan? That did not turn out so well. The reason compliance for PIT is so poor is largely because it is too easy for people to evade. If you happen to work for a big and visible company then PAYE is deducted automatically, although not for the side hustle. For most others who have to file through direct assessment, the incentives to comply are very poor. Part of the reason is that the responsibility is left to state governments who do not have enough information to enforce compliance. There is no national residency register or any other framework that identifies where people live and who they should be paying taxes to. Most states do not have the technical capacity to go after tax evaders, especially the high net worth individuals. There was a joke I heard a while ago of tax advice given to a certain governor. “Just go and beg the rich people in your state to drop something because we all know you cannot properly tax them”. If the question is compliance then the federal government is the party most likely to be able to make improvements on that front. First, in terms of simple organisational capacity, ensuring that everybody is on the same standards and that every identifiable individual is counted somewhere. Secondly, in terms of enforcing compliance for high net worth individuals. In many countries, that group is responsible for a big chunk of all PIT. No other entity is as capable as the FIRS with

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According to the latest NBS data Nigeria has a poverty rate of around 40 percent. Very high of course. But that also means that 60 percent of Nigerians are not poor and can contribute something to the tax net

regards to its capacity to pull in information from companies, capital markets, international data sharing partners, and so on, to enforce compliance in that segment. The reason there is currently no federal PIT is largely due to our historic dance with crude oil. That history is coming to an end and we need something new. A federal PIT also does not necessarily mean a higher overall tax rate. If the federal government’s tax rate replaces some of the current state governments’ tax rates then the overall tax rate can remain the same. Of course, if you want state governments to cut their rates then it needs to be replaced somehow. I still think it is preposterous that Nigeria has a “derivation” for crude oil production but not for corporate income taxes. This could be part of a renegotiation of the tax structure which probably needs to happen soon. We may have become attached to the current tax structure that says states keep this and the federal government keeps that. But that structure was not handed down on a tablet to Moses. It was agreed on by ordinary Nigerians. Which means we can agree on something else. If we are truly hoping to transform the Nigerian governments from oil dependent ones to tax dependent ones then more fundamental tax reform is necessary. And a federal PIT should be on the agenda. Dr. Obikili is the chief economist at BusinessDay

Right to reply: BusinessDay, where is the scam and wither the corruption?

ith reference to your editorial of Thursday May 14, 2020 which ran under the banner – “Stop the scam of ‘school feeding’ for at-home pupils,” the Ministry of Humanitarian Affairs, Disaster Management and Social Development hereby refutes your claims. As a matter of fact, your scathing editorial, was to say the least, written without full comprehension of the raison d’etre of the modified home-grown school feeding programme. For context, hunger is the most critical by-product of crisis such as we are currently experiencing in Nigeria. This is especially so for the more vulnerable members of our society – people living with disability, the elderly and children. In April, following the presidential broadcast of March 29th 2020 announcing a 14 day national lock down, the overwhelming sentiment across the land was that Nigerians, especially those who are subsistent and who depend on daily income to survive, would die of hunger if constrained to remain at home for a considerable length of time. But President Muhammadu Buhari seemed to have anticipated that outcry because in his address he issued a presidential directive which was clear and unequivo-

cal - “although schools are closed, I have instructed the Ministry of Humanitarian Affairs, Disaster Management and Social Development to work with state governments in developing a strategy on how to sustain the school feeding programme during this period without compromising our social distancing policies.” In compliance, the ministry of Humanitarian Affairs, Disaster Management and Social Development entered into consultation with states and after considering many options, they resolved that the distribution Take-Home Rations was the best option for achieving the presidential mandate and so was born the modified National HomeGrown School Feeding Programme. Under the new dispensation, parents/ guardians/caregivers of children in primary 1-3 in public schools will receive Take-Home Rations made up of 5 kg Bag of Rice, 5 kg Bag of Beans, 500 ml Vegetable Oil, 750 ml Palm Oil, 500 mg Salt, 15 pcs of eggs, 140gm Tomato Paste. These rations have been reviewed by nutrition experts to ascertain the nutritional value and benefit to the children. It is thus a full-fledged collaboration between the Federal Government which is funding the programme and the states who are implementing. The programme, which has the World www.businessday.ng

Food Programme providing Technical Support commenced on Thursday May 4, 202o in Abuja. It was a resounding success and will now extend to Lagos and Ogun before other states of the federation. A total of 3,131,971 households will be targeted for this intervention. Why is the FG feeding children at home? Well, let us take a quick look at the Sustainable Development Goals (SDG). SDG-2 commits to end hunger in all its forms by 2030 and to achieve food security. It is in recognition of this imperative that the World Food Programme is working with the programme. Now, where is the scam and wither the corruption? Tarring the Home Grown School Feeding Programme with the brush of corruption is a very unkind cut because having gained access to our official press release announcing the programme (which your editorial quoted liberally from) you would have noticed that, as part of the measures put in place to ensure that the programme is not compromised, the ministry invited other agencies of government including the DSS, EFCC, ICPC, Code of Conduct Bureau and a host of NGOs and CSOs to help monitor. How does a man who plans to commit a felony invite the police to witness his crime?

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The truth is that this programme is a proactive intervention with the sole objective of impacting positively on vulnerable Nigerians. As at 2016 and according to a UN report, nine countries in Sub-Saharan Africa were implementing school feeding programmes and the countries included Nigeria, Botswana, Cabo Verde, Cote d’Ivoire, Ghana, Kenya, Mali, Namibia, and South Africa. But Nigeria is the only country which seems to have taken this innovative and proactive step under COVID-19 and in so doing displayed an almost clairvoyant streak. One, it anticipated the outcry from Nigerians but more importantly helped primary school children avoid hunger while isolating during this lockdown. A May 7, 2020 news story from Reuters reported that 9 million South African school children are facing hunger following their inability to access daily free meals usually served them at school during this lockdown. That, in a nutshell, is what this modified Home-Grown School Feeding Programme set out to achieve – keep Nigerian children from dying of hunger. This article is a rejoinder from the Ministry of Humanitarian Affairs, Disaster Management and Social Development

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BUSINESS DAY

Monday 18 May 2020

EDITORIAL Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

COVID-19 not a cover for rule of man in states Governors must follow the rule of law no matter their good intentions

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

anagement of the COVID-19 pandemic has handed extra powers to governors and various authority figures at all levels. While citizens appreciate the necessity for these war powers to engage in the fierce battle with an unseen enemy, they still hold citizenship rights. We caution against the descent to the rule of man in various states in the name of containment of COVID-19. States, mainly in the Northern half of Nigeria, have wilfully trampled on the rights of Almajirai children. Governors of the Northern States resolved, peremptorily, to undo years of sociological conditioning and history by decreeing a return to their home states for the Almajirai. The consequence has been the mass movement of these victims of society and politics to various locations. Those places rejected them and forced attempts to invade the southern states with vehicles breaking the lockdown restriction of movements across state boundaries. The handling of the Almajirai has been mean and wicked. They

have been treated as subhuman cargo and loaded in trucks alongside animals or sundry artefacts of trade. Their traducers then ship them to states that in turn reject them. The Almajirai problem became an existential threat when many of the ones in Kano became positive for COVID-19. The Northern Governors Forum then saw an opportunity. Governor Nasir El-Rufai of Kaduna State said. “We’ve been looking for the ways and means to end this system because it has not worked for the children, it has not worked for Northern Nigeria, and it has not worked for Nigeria. So, it has to end, and this is the time,” said El-Rufai. The governor said that the Kaduna State government located the parents of the children returned from Kano State to Kaduna State. The Government would train those parents on their responsibilities as parents. Across the country, many governors have seen their state boundaries with other states as international borders. They erected control posts and determine who goes in or out. Their actions have been patently illegal and against the spirit of our federal structure and constitution. A most egregious case of gubernatorial excess happened in Eleme,

Rivers State where Governor Nyesom Wike supervised the bulldozing of two hotels for flouting the state’s executive order. Executive Order 6 stipulated that hotels should not open for business. The two hotels not only opened for business but officials of one shot and injured Rivers State government officials who came to enforce the regulation. Governor Wike in reaction went to the hotels on Sunday, 9 May 2020 and brought them down. The action earned him a fusillade of angry condemnation by citizens. It also raised many troubling issues for the more discerning. Wike failed to follow due process of trial and adjudication by a court or independent panel, preferring to be prosecutor, jury and judge of the matter, even as there was an Executive Order. He overstepped his bounds. Citizens are right to pillory him. On the other side, however, is the tendency of Nigerians to ignore and disobey laws. The culture of disobedience has played out in the difficulty of enforcement of rules outlined by the federal government in line with World Health Organisation guidelines for the control of COVID-19. We have a sociological chal-

lenge. Part of the challenge is that because we have never enforced our laws, we now tend to take them for granted. We do not even bother to read those laws and understand their full implications. Or the Executive does not specify the sanctions that follow some regulations. For instance, though the Executive Order specified pulling down of the structures housing recalcitrant enterprises, critics suggest that Governor Wike should have varied the penalty, to ensure it is not “too harsh”. Yet the punishment was in the books ab initio, and the Rivers State Government repeatedly announced it on communication channels in the state. Since it was specified, what gave a citizen the nerve to ignore the law? Because the Nigerian Factor would come into play and we will rewrite its provisions as citizens are now doing after the fact? Because the Nigerian Factor means that laws are for the books and not for application? The onus is on the Governors to follow the rule of law no matter their good intentions. The rule of law involves the due process, fair hearing and citizens’ rights. We must operate as a democracy regardless of the COVID-19 challenge.

HEAD, HUMAN RESOURCES Adeola Obisesan

EDITORIAL ADVISORY BOARD Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo Wiebe Boer Paul Arinze Boye Olusanya Ayo Gbeleyi Haruna Jalo-Waziri Clement Isong

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BusinessDay avidly thrives on the mainstay of our core values of being The Fourth Estate, Credible, Independent, Entrepreneurial and Purpose-Driven. • The Fourth Estate: We take pride in being guarantors of liberal economic thought • Credible: We believe in the principle of being objective, fair and fact-based • Independent: Our quest for liberal economic thought means that we are independent of private and public interests. • Entrepreneurial: We constantly search for new opportunities, maintaining the highest ethical standards in all we do • Purpose-Driven: We are committed to assembling a team of highly talented and motivated people that share our vision, while treating them with respect and fairness. www.businessday.ng

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Monday 18 May 2020

BUSINESS DAY

news T-Bill rates increase first time in 3 months as FG seeks budget deficit fund … allotment exceeds offer by N108bn ENDURANCE OKAFOR

ixed-income investors seeking high-yielding securities in the light of the prevailing developments in the markets were successful for the first time in three months, as attempts by the Federal Government to raise revenue to fund budget deficit led to an increase in stop rates. More than N142.76 billion worth of successful transactions was recorded at the Nigerian Treasury Bills (T-Bills) auction conducted on May 13, 2020, by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN) as investors bid at rates as high as 6.64 percent, 7.48 percent and 12.8 percent on the 91-day, 182-day and 364-day bills, respectively. Subsequently, the CBN left the rates across the three tenors at 2.5 percent, 2.85 percent, and 3.84 percent, respectively. While this is the first improvement since January 29, 2020, the rates compare with 1.85 percent, 2.49 percent and 3.84 percent the apex bank cleared on the 91-day, 182-day and 364-day bills at the previous T-Bills auction. According to Dayo Akinola, a Lagos-based financial and risk management consultant, the stop rates are a pointer to the fact that the Federal Government is desperately looking for money to

fund its budget deficit. “They desperately need the money and can’t live in denial any longer. Don’t be surprised if they bite more than offered in the coming auctions. I suspect that this is necessary to meet budgetary exigencies and avoid debt servicing default since revenue has shrunk,” Akinola said in a tweet. Analysis of the auction result reveals that investors jostled for the N33.84 billion the CBN sought to raise at the auction with N165.55 billion, oversubscribed by N131.71 billion. The apex bank allotted N142.76 billion, meaning the lender raised more money than it offered by N108.92 billion. Even though interest for the debt instruments waned when compared with the previous primary market auction, the week’s auction was oversubscribed by more than four times with most demand on the 182-day paper. The CBN sold N19.78 billion worth of bills for the 91-day paper, N40.09 billion worth of bills were allotted on the N182-day paper, while bills valued at N82.89 billion were sold on the 364-day paper. A breakdown of the result reveals that the central bank offered N4.38 billion for the 91-day maturity but investors were willing to place a subscription of N22.33 billion. The apex bank eventually allotted N19.78 billion. The 182-day medium-term paper was oversubscribed by more than three times. While the

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central bank offered N12.92 billion for auction, investors were willing to subscribe with N41.19 billion but the apex bank settled at N40.09 billion, N27.17 billion more than the amount offered. Further analysis of the auction result reveals that the central bank sold N82.89 billion worth of bills for the 364-day paper. Investors jostled for the N16.54 billion offered by the central bank with N102.03 billion subscription. The amount allotted for the long-term instrument was more than five times the amount initially offered for auction. The Nigerian government plans to cut its cost of borrowing and ramp-up its revenue collection have consistently failed to meet its targets in the past half a decade. To achieve this, the country’s central bank crashed interest rates on T-Bills to single-digit after restricting local corporate and individual investors from patronising its OMO bills. Meanwhile, Nigeria’s revenue capacity has in recent time come under pressure amid lower crude price. This has widened the nation’s budget deficit. The projected deficit embedded in the 2020 budget of Africa’s largest economy jumped to N5.2 trillion or 3.67 percent of its GDP, this was after Federal Government slashed its already passed budget and revenue projections in line with new economic realities.

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Monday 18 May 2020

BUSINESS DAY

news

ICAN enhances professional capacity, confers fellowship on 1,325 members KELECHI EWUZIE

Geoffrey Onyeama (r), minister of foreign affairs, receiving the British High Commissioner to Nigeria, Catriona Laing, in his office in Abuja. NAN

Post-COVID-19: Nigeria’s fragile economy will face major challenges after pandemic - Governor Sule … 2,500 youths to benefit from CBN/NIRSAL rice cultivation programme Solomon Attah, Lafia

asarawa State governor, Abdullahi Sule, said with the impact of COVID-19 on the economy, the state would leverage agriculture during the post-COVID-19 period in order to provide employment opportunities for youths in the state. He observed that, the postCOVID-19 would be the most challenging period on the already fragile economy for Nigerians by the time the pandemic was over. Also, the state government says it has reached agreement with the Lower Benue River Development Authority (LBRDA) to engage about 2,500 youths who will cultivate rice farm of the CBN/NIRSAL Agricultural Youth Empowerment programmes in the state. He disclosed this when he toured Doma Dam and inspected the 500 hectares of land al-

located for youth empowerment in agriculture in Doma Local Government Area of the state. The governor, who visited the facility in company of the managing director, LBRDA, Mohammed Addra, said the efforts was part of his commitment to mitigate the impact of COVID-19 on the economy of the state. He disclosed that Nasarawa, being an agrarian state will seriously leverage on agriculture during the post-COVID-19 period, in order to provide employment opportunities for youth in the state. According to Sule, this has become necessary to undertake a feasibility tour of the area in order to expedite action on his administration’s youth agricultural programme. The Governor however entertained fear that, “once COVID-19 is over, the country’s fragile economy, is going to face some major challenges, particularly economic challenge, and that Nasarawa State is going to be at the receiving

end when that happens.” Sule therefore explained the need for the state to hasten action on its commercial agriculture programme, as well as small scale holders for youths in the state “Just recently, the state entered into an agreement with the LBRDA, to access 500 hectares of land around the Doma Dam, which he said, will be partitioned into one hectare each for the CBN/NIRSAL youth empowerment programme. “I am happy with what I have seen. It’s a lot of work that needs to be done to convey water from the dam all the way to the 500 hectares given to us, so that we can irrigate, and will be able to carry out two season of rice farming,” he stated. The governor however said a lot of work need to be done in that direction to enable the youths cultivate rice in two seasons. “I felt it was necessary for me to come and see the location of the dam in connection to the land given to us. To see what we need

to do, are we going to irrigate? Are we going to cultivate rice so that we have two seasons of rice? Instead of one season if it is rain fed. “With the dam, we can have irrigation. So I want to see opportunities for the irrigation. Is the dam supposed to be feeding the field by gravity or we need to be pumping? Do we have all the structures for pumping into the field for irrigation? These are all the opportunities that I came to see. And so far so good, I am happy with what I have seen,” he said. The Governor was emphatic that he desired the youths to have two seasons of rice farming, so that they can be able to earn throughout the year, with the Doma project expected to accommodate 1000 youths. He disclosed further that Akwanga Local Government was another location for the youth empowerment programme in agriculture, around the Mada River, where another 1500 youths would be engaged.

UNICEF decries weakened health system in Nigeria

… says 950 deaths could occur in children under age five in next 6 months Cynthia Egboboh, Abuja

nited Nations Children’s Fund (UNICEF) has decried the weakened health system and disruption of routine services such as vaccinations, occasioned by the COVID-19 outbreak, saying about 950 Nigerian children under the age of five could die daily in the next six months. In a statement from UNICEF, countries such as Nigeria, the Covid-19 crisis has caused further disruption in medical supply chains and straining financial and human resources as visits to health care centres are being declining due to lockdowns, curfews and transport disruptions even as communities remain fearful of contracting the virus. UNICEF, while revealing that about 6,800 more Nigerian maternal deaths could also occur in just six months, noted

that globally 6,000 additional children under the age of five could die every day. The estimate which were based on an analysis by Johns Hopkins Bloomberg School of Public Health and published in the Lancet Global Health Journal, noted that the 950 potential deaths are additional figures to the 475,200 children under the age of five who already died from preventable causes in the country. Lamenting the devastating impact of COVID- 19, which poses a great threat to reversing a decade progress of ending maternal mortality and under-five child mortality in Nigeria, UNICEF noted that an additional 173,000 under-five deaths may be recorded in Nigeria within the next six months as a result of poor access to quality health care delivery and services. According to the UN body, “The under-five mortality rate in Nigeria had declined gradually over the last two decades www.businessday.ng

from 213 deaths per thousand in the year 1990 to 120 today, probably due to improved access and coverage of key lifesaving interventions at primary health care and community levels and improved immunisation rates.” However, the three scenarios of the potential impact of COVID-19 in 118 low and middle-income countries, including Nigeria due to reductions in routine health service coverage levels, including routine vaccinations and an increase in child wasting has shown a potential increase in both maternal and child deaths. “The 10 countries that are most likely to witness the highest excess child mortality rates under the worst-case scenario were listed as Djibouti, Eswatini, Lesotho, Liberia, Mali, Malawi, Nigeria, Pakistan, Sierra Leone and Somalia”. “Also, according to the modelling and assuming reductions

in coverage in the worst-case scenario, the 10 countries that could potentially have the largest number of additional child deaths are Bangladesh, Brazil, Democratic Republic of the Congo, Ethiopia, India, Indonesia, Nigeria, Pakistan, Uganda and United Republic of Tanzania”. Henrietta Fore, executive director, UNICEF, said in a worst case scenario, the global number of children dying before their fifth birthdays could increase for the first time in decades. “We must not let mothers and children become collateral damage in the fight against the virus.” UNICEF Nigeria’s country representative, Peter Hawkins, said “We have made steady progress in reducing preventable child and maternal deaths in Nigeria over the last 20 years and it would be devastating if that progress is lost or reversed in Nigerian families, communities and for the country as a whole.

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etermined to keep churning out globally competitive accounting professionals despite the disruption occasioned by coronavirus pandemic, the Institute of Chartered Accountant of Nigeria (ICAN) has conferred Fellowship Status on 1,325 deserving members. The status of Fellow is the highest professional designation that can be attained by any member of the Accountancy Profession worldwide. It is conferred on select members annually who have rendered exceptional service to the profession or whose achievements in their careers, the community, or in the profession have earned them distinction and brought honour to the profession. According to Nnamdi Okwuadigbo, the 55th president of ICAN, in an address delivered virtually at the 18th Conferment of Fellowship Status Ceremony, last Thursday, the Fellowship status comes with higher responsibilities, and urged the new fellows to guard jealously their professional conduct and competence. The ICAN president noted that in a rapidly changing world, professionals should consciously keep up with emerging developments. “The most pressing one is the coronavirus (COVID-19) pandemic. In response to these developments, accounting standards setters are releasing update on a regular basis. It is your duty as professionals to keep abreast of these updates in order to provide top-notch services to your clients,” Okwuadigbo said. These are challenging times,

he said, noting that the accounting profession is not immune to the realities of this period. The ICAN boss however assured that institute would continue to evolve novel approaches in order to meet the needs of members. “The Governing Council of your Institute is aware of the watershed occasioned by COVID-19. We have deployed technology to ensure our members are not disadvantaged in their pursuit for continuous professional development. Since the outbreak, we have issued various materials to aid members’ professional practices,” he said On his part, George Okufi, former registrar of ICAN and guest speaker in his address delivered virtually also, charged the new fellows to ensure they continue to add values and be role models as they continue their performance and valuable contributions. The Fellowship rank conferred on them denotes excellence in the Accountancy Profession and confers leadership on all of them who have been elevated, Okufi observed. “You will have to abide by the values of professional conduct including comportment relationship with the Institute, clients, colleagues and members of the public,” he said. He pointed out that the Institute was not a monument but a movement that must continue to move forward, improve on its performance and image so as to continue in its giant strides that leave others grasping for breadth. “ICAN is an Institute that gives continuity in a world where nothing is constant,” he said.

Emirates could cut 30,000 jobs, retire its A380 planes faster

mirates Group is considering plans to cut about 30,000 jobs as the operator of the world’s largest long-haul carrier seeks to reduce costs after the coronavirus pandemic grounded air travel. The Dubai-based group could slash the number of employees by about 30% from more than 105,000 at the end of March, according to people familiar with the matter. Emirates is also considering accelerating the retirement of its fleet of Airbus SE A380s -- of

which it is the biggest operator, some of the people said, declining to be identified because the information hasn’t been made public. Emirates said it is reviewing “costs and resourcing” levels against projections as it prepares for a resumption in service. “No announcement has been made regarding mass redundancies at the airline,” it said in an emailed statement. “Conserving cash, safeguarding our business, and preserving as much of our skilled workforce as possible remain our top priorities.”

AIS automation fully on course - NAMA IFEOMA OKEKE

he Nigerian Airspace Management Agency (NAMA) has disclosed that the automation of its Aeronautical Information Service (AIS) is fully on course. This assurance is sequel to a release making the rounds in the media to the effect that the agency had abandoned the implementation of Aeronautical Information Service (AIS) automation. The said release by the Aeronautical Information Management Association of Nigeria (AIMAN) was quoted as saying, “NAMA management has neglected the implementation of the AIS Automation, thereby exposing personnel to Covid-19 pandemic.” However, NAMA, while denying this, stated, “The AIS Automation contract was signed since 2009 and without prejudice to @Businessdayng

previous efforts, we would like to state that the current administration of President Muhammadu Buhari through the dedicated leadership of Hadi Sirika, the minister of aviation has made remarkable interventions targeted at actualising the AIS Automation project. “These interventions came by way of granting and approval of funding for the project which never happened in the past. The agency on its part has never relented in its bid to actualise this dream. For instance, the installation of VSAT nodes necessary for the transmission of data to remote locations is currently ongoing with 8 important nodes already running,” In a statement signed by Khalid Emele, the corporate communications manager of NAMA disclosed that the joint pilot briefing offices where the AIS Automation will operate from are simultaneously being installed with 8 offices fully

Monday 18 May 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

BANKING

FSDH declares N5.183bn profit, leverages modern digital platforms SEYI JOHN SALAU

fter reviewing the global economic environment of 2019 and identifying opportunities for 2020, Femi Agbaje, Chairman of FSDH Merchant bank has assured shareholders that the Bank will continue with its conservative and robust risk management framework, leveraging modern digital platforms as it engages the various identified opportunities. Figures from the financial year ended 31 December 2019, show that the bank printed a Profit before Tax (PBT) of N5.183billion. This figure was virtually identical to the PBT of N5.186billion recorded for the year ended 31 December 2018. This achievement was commendable in the light of significant headwinds in the operating environment in the year under review. However, the Profit after Tax (PAT) for the Bank declined by 18.14percent, from N4.41billion for the year ended 31 December 2018, to N3.61billion for the period ended 31 December 2019. This decline was due to a significant increase in the income tax figure by 103percent, from N775.05million in 2018, to

N1.57billion in 2019. This increase was as a result of a combination of factors, namely the fact that dividend tax was incurred twice in one financial year following the declaration of an interim dividend as well as the fact that a portion of the Bank’s deferred tax assets was wound down.

In spite of this, Earnings per Share (EPS) for the Bank stood at 197kobo, which is 39kobo higher than the 158kobo that was recorded in the ﬁnancial year ended 31 December 2018. On the 7th of May 2020, the Bank had a virtual 8th Annual General Meeting in line with government’s regulation on

PwC distributes N100m intervention fund in fight against COVID-19

op professional services firm, PricewaterhouseCoopers (PwC) Nigeria has commenced the distribution of its N100 million COVID-19 intervention fund to support individuals, businesses and government in response to the impact of the pandemic in Nigeria. According to a statement by the firm, the COVID-19 intervention fund tagged PwC Cares is in line with the firm’s purpose of building trust in society and solving important problems and consists of a number of initiatives targeted at various sections of society including vulnerable households, health workers and small businesses. The firm is also leveraging its knowledge and resources especially around business and the economy to support governments both at the federal and states level in their economic response to the

ner with relevant stakeholders to develop innovative ﬁnancing and investment solutions to enable us exploit these opportunities and create shared prosperity for all stakeholders in 2020.’’ The CEO, FSDH Merchant Bank, Hamda Ambah also pointed out that despite a tough

R-L Chantelle Abdul , group managing director, MOJEC International Group; presenting a palliative food to Sunday Chukwuma. during the MOJEC Food Bank Drive for people affected by the economic slowdown due to COVID-19 pandemic in Lagos.

FINANCIAL SERVICES

GBEMI FAMINU

social distancing. In his address, the Chairman stated that ‘’despite the short-term risks in the economy, we still see a lot of opportunity for the medium to longterm, especially with regard to the potential in the expanded market that the AfCFTA will bring. We will continue to part-

challenges resulting from the outbreak of the pandemic. Uyi Akpata, Country and Regional Senior Partner, PwC West Africa said that at a time such as this it is necessary for firms and individual to render help in every possible way considering how the pandemic has affected lives and businesses. “As well as having serious implications for people, health and the healthcare services, COVID- 19 is having a significant impact on businesses and the economy particularly for Nigeria at this time given our dwindling resources and high level of poverty. As a firm, we are supporting a number of initiatives aimed at addressing the health and economic challenges in Nigeria. We are also providing food items to at least 5,500 vulnerable households, as well as personal protective equipment (PPEs) for frontline healthcare workers in the following states; Lagos,

Ogun, Imo, Edo, Kaduna, Akwa Ibom, Kano and the FCT.” Akpata said. He also said that in addition to the intervention fund, the firm offered complementary business continuity support services to small businesses employing between 5 to 50 employees who undertake to retain all their staff during this period and has also hosted series of free webinars on the economic implications and policy responses to COVID-19 during which it shares key insights on the situation, providing various response scenarios and generally engaging the business community on how to remain resilient through the crisis. “It is clear that we still have a long way to go and we continue to learn to deal with the challenges. Therefore, now more than ever before, we see that partnerships between stakeholders especially between public and private sector, is key to success.”

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operating environment, the Bank embraced the winds of change by carrying out a recent restructuring exercise to enhance the viability of its business model and sharpen its focus on meeting the needs of stakeholders. In describing the Organization’s decision to restructure for growth, she stated that ‘’since the discount house became a Merchant Bank in 2012, it operated at the helm of a group structure, providing oversight to subsidiaries of the FSDH Group including FSDH Asset Management, FSDH Securities and PAL Pensions. In June 2019 however, the FSDH Group concluded a restructuring that transferred the oversight of the four companies in the Group to a nonoperating financial holding company. This has enabled the Bank to focus even more closely on its core operations, ensuring faster decision-making and business growth in a time of rapidly evolving regulation in the banking industry.’’ Ambah noted that the resilience of the Bank’s business model lays the foundation for the long-term prosperity of the Bank and would drive growth in the near-term in spite of shifting economic conditions.

CreditRegistry’s dud cheque API Service provides infrastructure to boost transparency, accountability in banking sector SEGUN ADAMS

ig e r i a’s la rg e st credit bureau, CreditRegistry, has launched an API (application programming interface) service to validate the financial credibility of cheque issuers to improve confidence in lending. The product launch is in line with the Central Bank of Nigeria’s directive that all financial institutions perform a status check on potential customers to ensure they are not serial dud cheque issuers before opening an account, approving them as guarantors to credit facilities or granting of credit to them. The Dud Cheque API service protects lenders, SMEs, retailers and other organisations from accepting cheques from serial dishonoured (Dud) cheque issuers, especially as the economic challenges occasioned by the COVID-19 pandemic becomes more pervasive. Accepting cheques as a means of payment increases sales and improves the cash

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flow for businesses by assuring timely collection of all credit granted on post-dated cheques. A first of its kind for the credit reporting industry in Nigeria, CreditRegistry Dud Cheque API is a self-service solution that enables duly enrolled agents carry out necessary dud cheque verifications conveniently and in an automated fashion. Dud Cheque enquires are performed in real-time through the API in addition to the existing web application that has been available since 2016. Speaking on the importance of the service, Andrew Nevin, chief economist, PwC, said, “We need to commend CreditRegistry with this important step, showing how FinTech at its best will improve the financial system. This is simple but solves a major problem verifying the accountability of cheque issuers. In 2009, PwC recommended the need for robust credit registries in the financial ecosystem in Nigeria; of course, CreditRegistry was already the pioneer, having been established in 2003, so it @Businessdayng

is no surprise to see CreditRegistry on the cutting edge of technology.” Banks and other institutions that intend to verify the dud cheque risk of their customers in real-time can programme to directly integrate their bank account opening and/or loan origination systems with the new Dud Cheque API service to improve turn-around-time and perform batch services. Ja m e e l a h S h a r r i e f f Ayedun, CreditRegistry’s CEO, commenting on the overall impact of the service, said, “Everyone needs credit at some time. This service simply helps to improve transparency to reduce the barrier so more people can access credit using post-dated cheques as a means for payment. This service not only offers comfort to economic agents advancing credit but also lubricates the economy by ensuring that accountable individuals and businesses who need credit get it in a fast, easy and inexpensive way. Ultimately, the overall economy benefits.”

Monday 18 May 2020

BUSINESS DAY

COMPANIES&MARKETS

Business Event

POWER

Ikeja Electric unveils new horizons for growth in 2018 sustainability report SOLA BELLO

keja Electric Plc has published its 2018 Sustainability Report titled, “Committed to Excellence - Half a Decade of Bringing Energy to Life”, which reflects IE’s performance, accomplishments, challenges, passion for its business and its growth opportunities in 2018. Being the first and only Electricity Distribution company in Nigeria to produce a sustainability report, the Report covers IE’s sustainability journey post-takeover with the inherent accomplishments including rebranding, infrastructure investments, smart technology investment, business process investment and performance improvement among other successes attained from the takeover period up to December 2018. The 2018 Sustainability Report is the fourth report published by IE in successive order, and commemorates five years of the takeover of the company’s operation by its core investors following privatization on November 1, 2013. Introducing the Report, the Chairman of Ikeja Electric, Kola Adesina, explained that “the scope of IE’s sustainability reports has moved beyond merely communicating financial risks to performance reporting aimed at fostering stakeholder confidence, long-term risk management, building the Company’s reputation and refining its corporate vision and strategy. Through the yearly publication of sustainability reports, IE has demonstrated its commitment

to accountability, responsibility and transparency, which have unarguably, distinguished the Company in the Nigerian Electricity Supply Industry (NESI).” The Company aims to publish its Sustainability Reports on an annual basis and the intended audience for this Report are key stakeholders, which include customers, employees, shareholders, suppliers, government and regulatory bodies. These stakeholders directly impact and are also directly impacted by the activities of the Company. “Since we took over in November 2013, we have put in place, strategies that will steer the electricity distribution arm of the electricity sector value chain to greater heights,” Adesina added “We have assembled a strong leadership team with extensive experience, robust industry and consumer knowledge, focused on innovation and growth. In addition, we have reinvigorated our legacy of sustainability with the introduction of customercentric initiatives, which are geared towards assuring all stakeholders of a business built on accountability, responsibility, transparency and fairness. We have demonstrated that with the right leadership, the Company can continue to grow and improve its performance as expected by all stakeholders.” Looking beyond the five years, Adesina noted that “sustainability will remain a central focus for the Company and its Board. Our customers and other stakeholders are crucial to the achievement of our goals; and we believe that a business can

only be deemed strong and successful when its stakeholders are satisfied with the services provided. Consequently, the Board will continue to support initiatives that promote its sustainability agenda while creating value in the coming years.” The Report which is developed by the Company’s Governance & Compliance Office, highlights that in 2018, the Sustainable Development Goals (SDGs) aided the Company in securing its social license to operate and build the trust of its stakeholder groups. Businesses cannot succeed in societies that fail, and as such, the Company invested in the achievement of SDGs such as; ensuring healthy lives and promoting wellbeing for all at all ages; ensuring inclusive and equitable quality education; promoting lifelong learning opportunities for all; achieving gender equality and empowering women and girls. The Company also contributed to the achievement of the SDGs by providing access to affordable, reliable, sustainable and modern energy for all; building resilient infrastructure, promoting inclusive and sustainable industrialization; fostering innovation and promoting peaceful and inclusive societies for sustainable development. Other contributions include provision of access to justice for all; building effective, accountable and inclusive institutions at all levels; strengthening the means of implementation and revitalizing the global partnership for sustainable development.

L-R: Chief Executive Officer, MTN Nigeria, Ferdi Moolman; Chairman, Board of Directors, MTN Nigeria, Dr. Ernest Ndukwe (OFR) and Company Secretary, MTN Nigeria, Uto Ukpanah at the First Public Annual General Meeting of MTN Nigeria Communications Plc held on Friday, May 15, 2020, at the MTN Plaza, Ikoyi, Lagos.

Joe Omatshenu, Key Account Manager, Ibadan, Chi Limited and Hon. Muyiwa Ojekunle, Oyo State Commissioner for Agriculture during the donation of products by Chi Limited to the Oyo State Government to support its COVID 19 response effort

Mojec supports Covid-19 response with relief materials, face masks KELECHI EWUZIE

ojec Meter Assets Management Company, a subsidiary of Mojec International Limited, has donated relief materials including food items, cash and face masks to vulnerable citizens across the Country. The company which is bothered by the increasing trend and spread of Coronavirus pandemic and hunger among less privileged Nigerians says the donation is part of its Corporate Social Responsibility (CSR) efforts to cushioned the effect. The Initiative according to the company has been dubbed: MOJEC COVID-19 ‘Food Bank Drive’ and is targeted at impacting 20,000 households/ individuals in Nigeria. The Programme will span the catchement areas & states MOJEC serves within the following DISCOs: Abuja Disco, Enugu, Ikeja, Ibadan, EKO, Kano, Kaduna, and Jos DISCO. Chantelle Abdul, group managing director, MOJEC Holdings Limited says Mojec Meter Asset Management Company created the Food

Bank Drive as its response to the socio-economic impact of the Lockdown on 65 percent of the Nigerian populace who depends on their daily/ weekly wages to feed and care for their families. According to her, “Due to M3AC’s foot prints and the number of customers it serves across the Country, we have begun distributing the Relief Packages starting in Lagos. The COVID19 Food Drive Initiative’s sole objective was intended to help bring much needed succor to many of it’s customers Nationwide as well as ameliorate the economic impact of the month long lockdown on them through the relief packages”. Abdul further stated that Mojec partnered with reputable companies and individuals to achieve the goal of the initiative, some of which includes: Price Waterhouse Coopers Nigeria (PWC) and Diageo. She commended the two Corporate partners for sharing in the vision of the initiative by donating in cash and kind to the project and encouraged others to contribute to program to help vulnerable Nigerians. The Relief packages items www.businessday.ng

include: bags of Rice, Beans, Vegetable Oil, Garri, Indomie, Maltina and Salt. PWC who donated millions towards the Campaign provided Food Relief packages for the northern region of Kano and Kaduna, feeding up to 700 families with the N5, 000 worth Relief food pack per family. She also mentioned that Diageo donated over 2,000 cartons of its non-alcoholic drinks (Malta Guinness & Orijin Zero). The drinks were a huge compliment to the food being given to the recipients who were both prayerful and thankful “We have been closely following the news of the spread of the virus across various regions in the Country and we realise that food items have become more expensive due to this global pandemic. Nigeria, being an import dependent Nation is expected to experience a decline in food importation substantially (as much as 25 percent) due to a combination of higher transaction costs and reduced domestic demand. As responsible cooperate citizens, we have developed a relief program to cater for these unintended consequences”, she noted.

L-R: Abolore Oladiti, Accountant, Mojec Meter Asset Management Company (M3AC); Michael Onuorah, Head of Mojec, MAP Programme for M3AC; Monday Ubogu, Head of installation, Mojec Meters Asset Management Company and Chantelle Abdul, group managing director, Mojec Holdings International during the presentation of relief package items to vulnerable citizens in Lagos recently

R-L: General Manager, Mikano Motors, Ali Salaa presents a key of ZNA Rich 6 Pick-up 4x2 model to the representative of Head of Service and Permanent Secretary, Public Service Office, Mr. Olusegun Ajibade onbehalf of Lagos State Government in support of COVID-19 Pandemic at the Secretariat Alausa Ikeja, on Sunday, May 17, 2020. With them are Sales Manager, Mikano Motors, Mr. Ezeh Evaristus and Advertising Manager, Mikano International Limited, Wura Orimolade. Pix by: Peter Alausa ikeja.

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Monday 18 May 2020

BUSINESS DAY

INTERVIEW

We have sung gas to power, now it is gas to people - Auwalu Sarki Auwalu is the director of the Department of Petroleum Resources (DPR) with the responsibility of regulating Nigeria’s oil and gas sector, from up to mid and down streams. In this exclusive interview with BusinessDay, he addresses a multitude of concerns: gas flaring, petrol subsidy, crude oil production costs and the biggest of them all, how gas will transform Nigeria. He spoke to Stephen Onyekwelu and Dipo Oladehinde. Excerpts: Twenty-twenty was scheduled as the year for zero gas flare. Gas flaring has reduced significantly but it is not at zero. Where are we on this? Please comment also on the Gas Transport Network Code. et me first address gas flaring. Technically Nigeria is a gas province. It is not an oil province. We have over 200 trillion standard cubic feet of gas and there are many unexplored basins with gas. When you do deep drilling in Nigeria, you encounter gas. We are yet to properly harness our gas resources and when we do, we will forget about oil. The global gas flare reduction initiative is to extinguish all forms of flaring by 2030. What we did was to take it upon ourselves as a country to see how we can do it before that time. At present, based on our production the gas flare volume is 11 percent of the total gas production. This 11 percent has been identified and we are commercialising it. The gas flare commercialisation programme is the first of its kind I think on the planet. We have put a value on the 800 billion standard cubic feet of gas that is being flared to create value for Nigerians. On one hand, you create investment opportunities; on the other hand, you create value for Nigerians. This year indeed is a year of gas. Previously, we sang the song of gas to power, but this year it is gas to people. We realised every household requires clean energy, for survival and cooking. You have to cook and gas is the most efficient energy source required to cook. It cooks easier, quicker and it is cheaper in the long run when you compare it with the traditional fuel source, whether it is biomass or wood. To harness this gas for Nigerians from flared gas we put together the commercialisation programme and have requested proposal. Good enough we have many interested parties. We qualified over 200 companies. They have shown seriousness and commitment to take up those flare points. Among the 97 flare points identified, we pulled out 45 that are unencumbered and unquestionable. These will be priced and we will send commercial agreements to those successfully qualified companies to look at it, review it with the view to bring the investments in. We plan to evaluate the bid that they will submit based on that commercial agreement that we send and we will announce the successful bidders for the 45. The remaining will come and they will use the process to learn so that we will not only eliminate the flare but create value and opportunity for investors and Nigerians. For the gas transportation network code, it is simply called Network Code. You simplify and create open access to both gases being flared and to gas that is explored. This enables evacuation of both associated and non-associated gas. Remember, I told you the value and volume of gas that we do have, so we have to create open access so that people will have access to the transport system and the transmission system of the resource we do have. The gas to people programme will be actualised

Sarki Auwalu

this way. We have critical projects which will change the country; three critical pipelines that would change the country. One will connect the Eastern part of Nigeria and the Western. Another will provide the west with the required gas for development. The third will provide the entire north with gas for development and there is one that will connect between the west and the north. The east-west line is Obiafu-Obricom-Oben (OB3) that will carry over 2 billion standard cubic feet of gas daily. The second one, the Escravos-Lagos Pipeline System (ELPS) is already in existence and carries 1.1 billion standard cubic feet of gas daily. There will be an additional line with the same volume which will make it 2.2 billion. The third pipeline is the AjaokutaKaduna-Kano (AKK) system. There is a trans-Nigerian line that will link Calabar, Lagos and Ajaokuta so that the gas will be available for the north. The AKK will give about 2 billion standard cubic feet of gas daily. The two, that is east-west-ELPS, will be commissioned this year. For AKK we have issued the permit to survey for the line, we have issued the preliminary engineering design approval. So we hope in the next 18 months it will be commissioned like the others. What does that mean for Nigeria? It means opening up opportunities. There are many Gas Based Industries (GBIs) springing up, many factories will come up. By way of case study, all the textile companies that are on gas in the eastern part of Nigeria are still on. They do not rely on transmitted and distributed power to operate, they have their gas, they generate their power, so they are on and employment is assured. While those on transmitted power are all down. Pushing this volume of gas across the nation will guarantee employment. The aspiration of taking 100 million Nigerians out of poverty is a reality since these pipelines are there. The only one that we are about to construct is the AKK, which as you know the design is at an advanced stage. So the GBIs will provide many opportunities then again our aspiration for gas to people, can easily be reached www.businessday.ng

because there is a deliberate attempt to create penetration of liquefied petroleum gas is LPG and compressed natural gas (CNG). This will give Nigerians alternative energy which creates wealth and reduces poverty. The launching of Nigerian Gas Transport Network Code is deliberate to create open access for gas bulk sellers, bulk producers and bulk purchasers to have structured and seamless relationships just like the network of communication. There are conflicting figures regarding modular refineries. How many are they, have some been commissioned, how many are in operation? First the government of Nigeria through the Department of Petroleum Resources licenses refineries generally. Every refinery in Nigeria is licensed by the DPR. There are government-owned refineries that are being operated by government-owned companies and that company is the Nigerian National Petroleum Corporation (NNPC). So the Warri refining, the Port Harcourt refining and Kaduna refining and petrochemical companies are companies under NNPC owned by the government. The shareholders there are 200 million people, Nigerians. There are private refineries, we license private refineries too. We ensure that any prospective refiner has land that he wants to put his refinery on. Secondly, he must have a proven technology because we do not allow refiners to refine at a loss. Thirdly, he must have a crude oil source, you must have money to source crude oil. Fourth, you must have means of receiving feedstock and evacuating the product; this is what we look at basically. Other considerations are that the company has to be registered in Nigeria, must pay taxes and must have the capacity in terms of the human capacity to execute the job. When you say modular you mean it is a refinery that is not very complicated. It produces two or three products and the bottom products and you can recycle and get more. It is not a complex refinery. Currently, we have over 28 licences that are active and we issue

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only for two years for you to renew the licence or we withdraw it. That will ginger you to go and get investment because the more you renew the licence, the more we keep you on your toes to bring more money for Nigerians to get jobs. We have five private licensed refineries. One is not modular, four are modular. Among the modular, one is the Opac refinery in Delta State. This Opac refinery is 7000 barrels per day refinery; it is at over 95 percent mechanical completion. Walter Smith is 5000 barrels per day capacity refinery. It is at 85 percent completion as we speak. We have the Niger Delta Petroleum Refining Company. This is the first pioneer refinery in Nigeria. It started with 1000 barrels, they were producing only Diesel. Then they added 5000 barrels to make it 6000. They expanded it to produce diesel and other basic products naphtha, diesel, kerosene with small petrol. They have added 5000 and it now has a total capacity of 11000 barrels per day. The Edo refinery is 6000 barrels and at 60 percent completion. So these refineries the Niger Delta Petroleum Resources Limited 11000 barrels, will take over 4 percent of our national requirements and national inputs. It will reduce the burden on the foreign reserves, foreign exchange and then when Opac and Walter Smith starts with a combined capacity of 12000 barrels plus Niger Delta 11000 that is about 23000 barrels per day. When we add Edo’s 6000 that is about 29000 which is a significant percentage compared to our daily consumption of petrol, kerosene and diesel. So that is how the refinery equation is for the private refineries. How in your view can Nigeria’s crude oil production costs be made competitive, it is $4 per barrel in Saudi Arabia but more than $20 per barrel in Nigeria? First terrain matters. In Saudi Arabia and Russia oil production is mainly onshore. On-shore production is cheap. You do not need floating production storage and offloading (FPSO) vessel, you do not need subsea, and you do not need so many things. You just punch a hole, bring it up, put it in a pipeline and sell. But in Nigeria for example, leave our onshore go to the swamp, even for the rig you have to bring a swamp rig or jack up which is different from a land rig that a truck will just bring and you couple it. The prices are different if land rig will charge for example $10000 per day swamp rig will charge like $30000. When you get to offshore it will be higher and when you get to deeper offshore it will be even higher. So you see the terrain matters. Most of our crude oil production now comes from deep offshore where onshore would cost you like $16 million, in deep offshore, it will cost you like $150 million so that is a big difference. To reduce costs, we encourage anyone that is going to drill in deep and water to do a well that has many tributaries. It is one slot but you have so many sands, many reaches, rather than drilling five wells. Handling of crude itself involves costs. Onshore, when you produce your crude, you just treat it to remove the water and de@Businessdayng

bris. But in offshore when you remove water and debris, disposing of it is not easy. It is another cost so what do we do. We encourage technology in such a way that we do it at a minimal cost. We encourage maximum enhanced cost recovery. Again the use of new technology is important for turnaround time. If using a certain pump and compressor will give me maybe 20000 barrels processing capacity, I can use the same that will process 40000 at the same time. This will lower the cost. Those are the things we are looking at and advise in working with companies to achieve lower costs. We encourage the use of electric submersible pumps. What is your view on subsidy removal? We are not talking about subsidy removal. We are talking about alternative fuel. As a government, we promised Nigerians alternative fuel. We want Nigerians to get affordable fuel and energy freedom. Nigerians buy at any price because they do not have alternatives. Compressed natural gas (CNG) is an alternative fuel. Some countries have gone far with alternative fuels. Italy, Mexico, China, Brazil and Iran are some examples. Our goal is to use the global system for mobile communications (GSM) strategy. Before the advent of GSM telephone and communication were privileges. When the government decided to sell the Nigerian Telecommunications Limited (NITEL) people were crying it is a national asset, and then the government introduced the GSM. It was very expensive at the beginning – subscriber identity module (SIM) sold for thousands of Naira and handsets were out of reach for everyday Nigerians. But right now SIM cards are free. Handsets go for as low as N3, 000 or even N1, 000 and you are connected. You can get one minute for as low as N2 or N3, it costs N50 before, technically everybody is connected. Nigerians now have alternatives. This is the same thing we want to do with energy, petrol. We want to introduce CNG. Cars will be converted, especially commercial ones, to become CNG and enabled. One litre equivalent of CNG will give you at least 180 percent more when compared to one litre of petrol and it is cheap. The current landing price for CNG is less than N90, no subsidy. If you know a litre of CNG costs say N100 and gives you 1.8 kilometres more than petrol that costs say N125, you will not go for that. Once Nigerians have this alternative the issue of subsidy does not even arise anymore. It becomes a question of choice. It is working, we have a success story in Benin City. We want to rewrite our history. We can replicate this story across Nigeria. We have the gas, we have everything. This is why a special committee was set up for LPG and CNG penetration which DPR is hosting. The aim is to take gas to people by converting commercial vehicles such as tricycles, taxis, buses and some of the conglomerates have started converting their trucks that carry products across the nation to CNG. They have this big pot behind for CNG.

Monday 18 May 2020

BUSINESS DAY

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Monday 18 May 2020

BUSINESS DAY

real sector watch

Repositioning Nigeria’s pharmaceutical industry for global competitiveness ODINAKA ANUDU

he Nigerian pharmaceutical industry is faced with a number of challenges ranging from high energy cost to lack of a strong petrochemical industry. But it has managed to stay afloat in the face of these challenges. Four firms in the industry have so far obtained the World Health Organisation(WHO)’s pre-qualification needed for international competition and competitiveness. Even though the WHO certification may appear as cheery news for the industry, three out of four firms that have obtained it are in a bad shape. Evans Medical Plc is one of the three which got the pre-qualification. But it was taken over by the defunct Skye Bank and the tier-one First Bank in 2017. Its dream of conquering the global market died as soon as the takeover happened. Swiss Pharma sold its assets to Biogaran-Servier in March 2017. Those familiar

with the company before its exit said the sale to the French company was based on financial crisis. Chi Pharma was acquired two years ago by Coca-Cola. Since the beverage maker took over Chi Limited, it appears that the possibility of the firm returning to the market is remote. Insiders say the drug makers failed to do due diligence before investing heavily to acquire the WHO prequali-

fication. The pharmaceutical industry has been hard hit by a number of factors. One is lack of funding, which has exposed the likes of Evans Medicals to humongous debts it could not repay. Apart from funding, the industry is also hard hit by high production cost, which makes its drugs more expensive than imported ones. Cost of production occupies 30 to 40 percent of their ex-

Challenges for local manufacturers as productivity, sales decline significantly Gbemi Faminu

ocal manufacturers are in for a bad year as the impact of the coronavirus continues to hinder the possibilities of having a successful business year. This is highlighted in the Manufacturers CEOs Confidence Index (MCCI) conducted by the Manufacturers Association of Nigeria (MAN) in the first quarter of 2020, where 86 percent of the respondents who are chief executive officers (CEOs) of manufacturing companies complained that the coronavirus was digging a hole in their margins, causing a significant decline in their level of production. Seventyfive percent of the CEOs also said that investments in the sector had reduced drastically Furthermore, 79 percent of the CEOs reported decline in sales, while 43 percent of the CEOs said the level of unsold manufactured products had not reduced in the last three months, leaving the companies to incur debts especially those producing goods with short shelf lives. On the average, local manufacturers recorded a 21.5 in-

crease in their cost of production, 19.8 percent decrease in productivity and 14.2 percent decline in sales. The root of these challenges is majorly due to the scarcity of raw materials and production equipment, especially as China, which is the major hub where these things are sourced, closed down its economy to arrest the pandemic, In addition, the lockdown and restrictive movement, which was enforced by the government, hindered the availability of workers and forced some companies to execute a temporary shutdown. This simply aggravates the problems of these manufacturers who are functioning in an unfriendly business environment laced with infrastructure deficit, epileptic power supply, overregulation, among other business challenges. According to MAN, “Covid-19 pandemic has affected a number of operations in the global and the national economic space, a development that the manufacturing sector is not immune to.” Consequentially, experts say that the imbalance between the increase in cost of www.businessday.ng

production and the decline in sales may lead to shut-down of some of these companies as many of them are already neck deep in debt. As a recovery recommendation, MAN posits that there is a need for the government to provide palliative measures to protect the manufacturing sector from sinking beyond recovery, by prioritizing the needs of the sector and addressing its challenges in order of necessity and resource availability. “There is a need for an effective collaborative framework for government and private sector operators to rub minds on suitable stimulus packages that would enable the manufacturing sector ramp-up production to effectively meet domestic consumption requirements and in readiness for export.” MAN says. MAN adds that provision of basic infrastructure should be paramount; power supply to the sector should improve while maintaining the prevailing electricity tariff. It adds that foreign exchange allocation to the sector should be prioritised to ease the importation of machines and raw materials that are not locally available.

penditure as the firms spend a lot on energy, water, research and development as well as raw materials. Most of the raw materials used by these drug makers are imported because Africa’s most biggest economy does not have a strong petrochemical industry that should produce resins and excipients. Okey Akpa, chief executive officer of SKG Pharma and former chairman of the Pharmaceutical Manufactur-

ers Group of the Manufacturers Association of Nigeria (PMG-MAN), said that increased import of medicines jeopardises Nigeria’s drug and national security. Akpa said the industry needs an urgent support to save Nigeria during emergencies. The world is currently facing an unprecedented crisis precipitated by covid-19, which has hit over 3.9 million people across the world amid tens of thousands of deaths. Nigeria already has over 3,000 confirmed cases and there are fears of the virus spreading further in the coming weeks. Unfortunately, the pharmaceutical industry is not ready to produce healthrelated products to support fight against the pandemic. Fidelis Ayabae, chairman of Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), said as long as the country makes case for importation of drugs more than local manufacturing, the pharma industry will continue to fall below expectations. “The only remedy for drug

security is encouraging local manufacturing,” he said. “It has come to a situation where there is every man to himself. So, what do we do? As long as we think that drug importers have an argument, we will continue to struggle,” he said. He advocated that hospital-based drugs, which drug makers could produce in the country, should no longer be allowed into Nigeria. Analysts stress the need to cut multiple taxation and build infrastructure to support manufacturers. They stress the need to reduce gridlocks at Apapa and Tin Can ports to cut rising logistics costs at the ports. Sam Ohuabunwa, president of the Pharmaceutical Society of Nigeria (PSN), said recently that the pharmaceutical industry should seek to increase its relevance and be less dependent on importation. “We should be less dependent on imported inputs,” he said. “Let the industry spend more time to develop local inputs for production. We must begin to think how we can be more self-sufficient,” he advised.

Covid-19 presents opportunity for Nigeria to promote import substitution — LCCI ODINAKA ANUDU

he Lagos Chamber of Commerce and Industry (LCCI) has said that the current coronavirus situation ravaging the world presents an opportunity for Nigeria to embrace import substitution and develop the manufacturing sector. Speaking in Lagos last week, Toki Mabogunje, president of the LCCI, said countries across the world might place technical embargo on exports of essential goods in a bid to meet local demand and as way of managing disruption to global supply chain. This, Mabogunje said, would hurt local manufacturers’ ability to access raw materials. “We strongly believe a scenario as this will not bode well for import dependent countries like Nigeria, as limited supply of raw materials will further damage already constrained manufacturing capacity utilisation,” she said.

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“We are, however, convinced that the current situation presents an opportunity for the country to stimulate and promote import substitution. This implies changing the narrative from the base, mobilising resources and galvanising critical stakeholders and actors to reach consensus to commit to creating an economy that will not only produce significant proportion of its major commodities (intermediate and finished goods), but equally competitive on a global scale,” she explained. Import-substitution is a strategy in which local industries are established with a view to producing goods that replace imported ones. Mabogunje further explained that the current situation in the global oil market also presented an opportunity for redirecting Nigeria’s export initiatives and over dependence on oil, focusing on the non-oil sector. She said achieving that required policies from the government that would intensify local production in @Businessdayng

the real and service sectors. “We believe that there is a need for collaboration and partnership between the private sector and the government (ministries and agencies) to achieve any meaningful success in this drive as it will help bridge the gap between government prescriptions and the real needs of the private sector,” she noted. She further said that to drive non-oil export and stimulate participation of SMEs, Customs’ procedures and documentation processes must be less cumbersome and technology driven. “The new approach to import substitution must be a holistic concept of policies and deliberate strategies with the buy-in from both the public and private sectors,” she explained. “Government must lead from the front through assurances of continuity of policy and programmes thereby give impetus to the private sector and venture capitalists to make investment decision in priority intermediate and finished goods.”

Monday 18 May 2020

BUSINESS DAY

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Monday 18 May 2020

BUSINESS DAY

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Monday 18 May 2020

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Monday 18 May 2020

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Monday 18 May 2020

BUSINESS DAY

Start-Up Digest

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Otufodunrin: Joining the race to curb coronavirus spread BUNMI BAILEY

he continuous spread of the Covid-19 pandemic has pushed fashion designers into the fight against the virus through the production of face masks, hospital gowns and other protective equipment. Damilola Otufodunrin, the creative director for Damsco, a men’s wear brand targeting changing the narrative of how African fashion is accepted on a global scale, is one of the few designers producing face masks to curtail the novel Covid-19, giving them out for free. “We wanted to give back to our customers who have patronised us over time,” Otufodunrin says. “We decided to produce and give them out for free,” he says. “This happened until others began to see how beauti-

ful they were and asked us to produce for them. Also, at some point, some people began to request that we make it at a fee for personal use or distribution,” he adds. Otufodunrin, who is also the fashion consultant to other brands, has produced and distributed over 100 face masks. “Sincerely, we didn’t focus on keeping records since our motive was not to do business with the masks. We have been producing and distributing as well as selling a few to those who are making requests for them,” the young entrepreneur explains. “We are primarily investing our time and creativity in the production of the masks. On the financial front, we have invested just as needed,” he says. Due to the lockdown that disrupted the supply chain for raw materials, he had to personally come up with face mask designs that allowed him to use available materi-

Damilola Otufodunrin

als the business had in stock. The business, established in 2013, has a team of tailors comprising permanent employed staff who work as the head tailors and other

contract tailors. According to Otufodunrin, the business works more with people on the basis of contract following laid-down work patterns under the su-

How Fatanmi conceived, grew City Scope Africa John Fatanmi is the founder of City Scope Africa, a pan-African media platform focusing on showcasing excellence in Africans and shining the spotlights on beautiful places of interest on the continent. In this interview, he speaks about City Scope Africa and its vision for Africa. When you founded City Scope Africa back then, what was it about and what is it now? t City Scope Africa our sole aim is to inspire Africans to strive for excellence in major facets of human endeavours and become what they want to be, by reading about the winning stories and strategies of Africans doing small things (sometimes big things) in profoundly transformative ways. Another core of the mandate is to uncover and harness the untapped potential of Africa’s rich and diverse cultures by showcasing beautiful destinations in Africa for adventure travel and corporate tourism through Afrotourism. Afrotourism is a vital component of our local economies. It will contribute to African tourism development and change the existing narrative held about the continent, over the years.

What informed your setting up of City Scope Africa? When I visited Dubai and the oil-rich Emirate of the UAE, Abu Dhabi, in 2014, I was asked to pay about 4,000 Dirhams (over N350,000) for horse riding. This got me mad, especially when I saw Nigerians paying. Yet, back at home, we could barely pay N1,000 to see the statue of Eyo Masquerade in Lagos or Moremi at Ile Ife, Osun State, or at the Obudu Cattle Ranch in Cala-

bar and beautiful mountain at Uganda. Also, when you meet Emiratis (the name for UAE nationals) on the streets of UAE, you are accosted and asked, are you from Africa? When you respond in the affirmative, they say, ’Oh Africa, corruption and football.’ They mention names like Jay Jay Okocha and Rashidi Yekini. I tried to answer, annoyingly, that Nigeria is not just about football and some African leaders may be corrupt but we have beautiful things in Africa that the western media world does not showcase. I also remind them that Africa is not a country, but a continent with a lot of opportunities for all of us. I later realised that Rasheed Yekini sometime played for an Abu Dhabi club. All these informed taking City Scope Africa up a notch, even though I had started lowkey in 2011 before visiting the Emirates. Frankly speaking, the western world knows little or nothing about Africa. More often than not, Africa is always in the bad news of the western media. What is known is that there are jungles, big animals, corruption, poverty and malaria. This sums up the world’s narrative of this great continent over the years. At City Scope Africa, we are using our indigenous media to change such age-long narrative. www.businessday.ng

John Fatanmi

What have been your major setbacks to achieving your goals with City Scope Africa? A whole lot, but I will dwell on a few. Solely setting out in 2011, I had setbacks ranging from brand acceptance to finance. I started just with magazine publication, known back then and registered as City Scope Magazine. At that time, I was a final year student of the Federal University of Technology Akure, South West Nigeria. It was very rough setting out alone. The vision was not very clear, I must confess. So, it was difficult to sell the vision to some of my colleagues back then. I struggled with making it an entertainment and lifestyle magazine. I had to beg a lot of small and medium scale firms in Akure to place adverts on the magazine. It was printed hard copy back then. In fact, I had to print 1,000 copies each time and I didn’t have the financial purchasing power as a student. I skipped lectures to travel down to Lagos to print and pay the graphics designer.

That wasn’t sustainable again. I got stuck financially and had to persuade some friends to work with me pro bono. I remember inviting my biological younger brother to work on the graphics of the magazine pro bono too. In return, I encouraged him to take his designs up a notch and he is today a co-founder at Fourthcanvas, a design agency that worked on the campaign of three African presidents. I remember giving up on magazine publication for some three years, after having about three magazine hardcopy publications to my credit. Technically, it is very tough to be an entrepreneur in this clime. I picked my vision up again in 2016 from where I left it in 2014 while in Nigeria, before moving to the UAE. I initially visited but got distracted with a job offer from an Abu Dhabi Emirati. I encountered some setbacks again and made some pathetic mistakes through to 2017. I later realised that vision is progressive and it grows with a collaborative strategy. God reveals visions in phases, and they are usually fulfilled in phases. I also suddenly realised that I would always need to raise a company of people to accompany me in my vision. Since I have been struggling with it, I will need to communicate my vision within my little circle of influence.

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pervision of the head tailor. He believes that the Nigerian fashion industry is now taking a centre stage as fashion consumers in the country now prefer to wear quality clothes made locally in Nigeria than ready-made imported clothes. And with the rising number of fashion brands in Nigeria, Otufodunrin believes that the only way to stand out is to carve a niche for the brand you represent. “As the creative director of Damsco, my team and I always want to understand the mind of our customers. With this, we are able to blend our personal love for art with the imagination of the client to birth an exclusive masterpiece that makes our consumers keep patronising us and also advertise our brands to others,” Otufodunrin says. The few textile production companies operating in Nigeria is a major issue in the fashion industry. Even when designers claim to be pro-

moting African fashion, they are still highly dependent on imported fabrics from countries such as China and India, among others, he says. He advises the government to come up with more protectionist policies to help the few existing textiles mills in the country to survive. Similarly, he urges the government to improve power supply in the country to help reduce cost and boost productivity. Otufodunrin plans to have the presence of his business in other African nations and the rest of the world by understanding their perception of fashion and creating wears to suit their taste. He advises young and upcoming entrepreneurs to not just limit their business to making money alone but to understand their industry and set out to make a difference. “By doing that, your business will thrive and we can all make Nigeria great,” he says.

SMEs must reinvent to remain competitive says Sekibo Hope Moses-Ashike

fie Sekibo, managing director/chief executive, Heritage Bank Limited, has advised small and medium enterprises (SMEs) to reinvent themselves in order to remain competitive and overcome the challenges of the COVID-19 pandemic. Speaking on ‘Converting ideas into reality with focus on SMEs,’ Sekibo stressed the need for SMEs to continually embrace partnership and function as an integral part of a value chain. “For SMEs to succeed, they must continually reinvent themselves. One big plus for SMEs is that they are quite small, and they can easily change. Cooperation is key at this very time. As I advocate always, competition is good but complementing each other is better. It comes with value chain principle,” Sekibo said. “When you plan yourself in a value chain, you gain more because the big dinosaurs need the small SMEs to survive. The economy of Nigeria needs the SME to survive. I recommend that partnerships are developed in the space of SMEs. A one-man business finds it difficult to survive in an economy that is changing on daily basis or even hourly. If @Businessdayng

you want to remain viable, your dreams being viable, partnerships are good way to go.” Sekibo also counselled SMEs on the need to adapt to the realities of a new world occasioned by the COVID-19 pandemic, especially the increased adoption of electronic channels (e-channels) for productivity and product marketing. “The truth is that even after this pandemic, we can never return to the normal way because this is the new normal and in our desperation to find solution, mistakes abound, failures will set in and most of us will hide from our failures other than face it,” he said. “We will blame everybody for it and some of us will throw in the towel. My advice for SMEs at this critical time is that since this is a failure not caused by you or anybody, you should accept the failure. Let us begin to make amends. We are having a conference today and it is on e-channel. Can we begin to sell our products by e-channel? Can we begin to sell our ideas on e-channel? Can we begin to work at home and still be as productive and disciplined as we should? Those are the new normal. So, if we know the new normal, then we should courageously face it and go on.”

Monday 18 May 2020

BUSINESS DAY

MARKETS INTELLIGENCE Supported by Asset Management Corporation of Nigeria (AMCON)

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Despite Covid-19 crisis, GTBank remains most efficient lender in Nigeria BALA AUGIE

mid the global economic turbulence caused by the coronavirus pandemic, Guaranty Trust Bank (GTBank) has sweated its asset to generate more returns more than any other lender in Nigeria. What this means is that the largest lender by market value has used or deployed the resources of its owners in generating higher profit, and it has consistently been turning top line impressive performance into bottom linr growth. For instance, GTBank has a return on average equity (ROAE) of 29.70 percent as at March 2020, and what this means is that every Naira of common shareholder’s equity earned about N29.70 so far. In other words, shareholders saw 29.70 percent return on their investment. Its peer rivals are only playing the catch up game. Zenith Bank has a ROAE of 21.64 percent, AccessBank, (26.28 percent); FirstBank Holdings,

After a disappointing 2018, Fidson healthcare seems to have regained its mojo as it records an after-tax profit of N312 million in full-year 2019 for the period ended 31 December. Revenue dipped 13.5 percent to N14.06bn from N16.22bn in the same period in 2018. Efficient cost management saw its cost of sales decline 17.35percent to N8.19bn from N9.91bn

measures imposed by governments to curb the spread of the virus, oil demand dwindled by more than 60 percent as Brent crude, the international marker, plunged to an 18-year low below $20 a barrel last month. On Friday, Brent rose more than 3 percent to above $30. The International Monetary Fund says Nigeria’s economy is expected to shrink by 3.4 percent this year and Africa’s largest economy could face a recession lasting until 2021.

Lagos could Lose almost N133bn everyday if it implements a total lockdown

agos State is unarguably the most populous and prosperity city in Nigeria and accounts for up to one third of the country’s gross domestic product (GDP) according to Financial Times. Based on that assumption, Lagos is estimated to have an economic size of N48.5 trillion ($134.8billion) making it the 4th largest city economy in Africa behind Johannesburg, Cape Town and Cairo. As the most populous city and the transportation hub in Nigeria, it is not surprising that Lagos is the

worst hit city by coronavirus in the country, yet the government who had initially put Lagos on a partial lockdown to control the coronavirus outbreak is now gradually reopening the economy despite a rise in the number of new cases reported every day. The reason is not far fetched as the local economy may have been hit even harder than the coronavirus outbreak in the State due to the lockdown. Daily economic output in Lagos is estimated to be around N133 billion, therefore a total lockdown to lead to a complete loss of all economic output. To put this into perspective, N133 billion lost every day in Lagos is the equivalent of snatching N5,600 out of the pocket of all 23.9million

SHORT TAKES N312m

(13.80 percent), Stanbic IBTC Holdings, (26.45 percent), and United Band for Africa, 19.89 percent. The small and midsized banks, hobbled by deteriorating assets quality, have not been generating much return to shareholders. Fidelity Bank has a ROAE of 10.54 percent, Sterling Bank, (7.03 percent); Union Bank, (9.55 percent), and First City Monument Bank, (9.30 percent). GTBank’s market cap has grown steadily higher than equity value, which indicates increased confidence on the part of investors. The lender has a price to earnings ratio of 3.21 times earnings, which makes it shares attractive amid an economic downturn brought on by the coronavirus induced lockdown. A dividend yield of 12.44 percent means shareholders will be generously compensated for investing in the shares of GTBank. Analysts say it is easier for a camel to go through the eye of a needle than for banks to deliver higher returns in the future as the coronavirus induced lockdown has paralyzed

economic activities. Banks also face pressure from accumulated loan loss provision and weak loan book on the back of lower oil price, and lackluster consumer demand is expected to weigh on demand for credit. Interest income and similar charges for the 1o largest banks increased by a mere 4.97 percent as at March 2020, from N700.94 billion last year, according to data gathered by BusinessDay. As a result of the lockdown

IFEANYI JOHN

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Lagosians. The sheer size of this loss on a daily basis due to a prolonged lockdown could cripple Lagos economy and force companies to consider moving primary business locations out of Lagos due to fear of bankruptcy if they cannot operate in the State due to a lockdown. The partial lockdown is estimated to cost Lagos between N33-66 billion everyday in lost economic productivity as the skeletal operations of companies during the partial lockdown could cost business operations to drop to anywhere between 25-50% of normal operations. This may explain the choice by Lagos to adopt a partial lockdown rather than a total lockdown which

will have far reaching impact on economic productivity and internally generated revenue (IGR). Lagos is among an elite group of States who can sustain state government activities using only IGR and a total or partial lockdown could hurt IGR collections for 2020, throwing the State’s financial position into distress. As at Friday last week, there were about 2,099 reported coronavirus cases in Lagos with 33 deaths. Though the State government is worried about maintaining the health and wellness of its populace, it will be doing so knowing that considering a total lockdown could also snuff live out of the economy that 23.9 million people rely on to survive.

The stock market declined for the fifth-straight trading session on Friday to end its worst week after CBN’s CRR policy weighed on banking stocks and set off 2020’s longest bear-run. Nigerian equities fell for all five trading sessions last week to close 2.65 percent lower weekon-week, and end January on a very different tempo than it began the month. Bank stocks shed 5.17 percent to push Year-to-date return to 7.46 percent, down from around 10 percent at the beginning of the week, while analysts say the bearish sentiment will likely extend to trading this week. “Next week, we expect bearish pressures on the equities market to remain, as investors continue to selldown on banking counters,” said analysts at Lagos-based Chapel Hill Denham in a note to clients.

N23bn Interswitch Limited has listed its N23bn callable senior unsecured bond with a tenor of seven years at a fixed rate of 15percent, embedding a call option that can only be exercised from the second year, are payable in full at maturity A callable bond is a bond that the issuer may redeem before it reaches the stated maturity date. In essence, a callable bond allows the issuing company to pay off their debt early. According to the company, this is part of its N30bn debt issuance programme through a special purpose vehicle, Interswitch Africa One Plc.

BusinessDay MARKETS INTELLIGENCE Team Lead: BALA AUGIE, IFEANYI JOHN; Graphics: FIFEN FAMOUS

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team balaaugie@yahoo.co.uk; augiebala@gmail. www.businessday.ng

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Monday 18 May 2020

BUSINESS DAY

In Association With

Globalisation unwound

Has covid-19 killed globalisation? The flow of people, trade and capital will be slowed Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub

VEN BEFORE the pandemic, globalisation was in trouble. The open system of trade that had dominated the world economy for decades had been damaged by the financial crash and the Sino-American trade war. Now it is reeling from its third body-blow in a dozen years as lockdowns have sealed borders and disrupted commerce (see Briefing). The number of passengers at Heathrow has dropped by 97% year-on-year; Mexican car exports fell by 90% in April; 21% of transpacific container-sailings in May have been cancelled. As economies reopen, activity will recover, but don’t expect a quick return to a carefree world of unfettered movement and free trade. The pandemic will politicise travel and migration and entrench a bias towards self-reliance. This inward-looking lurch will enfeeble the recovery, leave the economy vulnerable and spread geopolitical instability. The world has had several epochs of integration, but the trading system that emerged in the 1990s went further than ever before. China became the world’s factory and borders opened to people, goods, capital and information (see Chaguan). After Lehman Brothers collapsed in 2008 most banks and some multinational firms pulled back. Trade and foreign investment stagnated relative to GDP, a process this newspaper later called slowbalisation. Then came President Donald Trump’s trade wars, which mixed worries about blue-collar jobs and China’s autocratic capitalism with a broader agenda of chauvinism and contempt for alliances. At the moment when the virus first started to spread in Wuhan last year, America’s tariff rate on im-

ports was back to its highest level since 1993 and both America and China had begun to decouple their technology industries. Since January a new wave of disruption has spread westward from Asia. Factory, shop and office closures have caused demand to tumble and prevented suppliers from reaching customers. The damage is not universal. Food is still getting through, Apple insists it can still make iPhones and China’s exports have held up so far, buoyed by sales of medical gear. But the overall effect is savage. World goods trade may shrink by 10-30% this year. In the first ten days of May exports from South Korea, a trade powerhouse, fell by 46% year-on-year, probably the worst decline since records began in 1967. The underlying anarchy of global governance is being exposed. France and Britain have squabbled over quarantine rules, China is threatening Australia with punitive tariffs for demanding an investigation into the virus’s origins and the White House remains on the warpath about trade. Despite some instances of cooperation during the pandemic, such as the Federal Reserve’s loans to other central banks, America has been reluctant to act as the world’s leader. Chaos and division at home have damaged its prestige. China’s secrecy and bullying have confirmed that it is unwilling—and unfit—to pick up the mantle. Around the world, public opinion is shifting away

from globalisation. People have been disturbed to find that their health depends on a brawl to import protective equipment and on the migrant workers who work in care homes and harvest crops. This is just the start. Although the flow of information is largely free outside China, the movement of people, goods and capital is not. Consider people first. The Trump administration is proposing to curtail immigration further, arguing that jobs should go to Americans instead. Other countries are likely to follow. Travel is restricted, limiting the scope to find work, inspect plants and drum up orders. Some 90% of people live in countries with largely closed borders. Many governments will open up only to countries with similar health protocols: one such “travel bubble” is mooted to include Australia and New Zealand and, perhaps, Taiwan and Singapore (see article). The industry is signalling that the disruption to travel will be lasting. Airbus has cut production by a third and Emirates, a symbol of globalisation, expects no recovery until 2022. Trade will suffer as countries abandon the idea that firms and goods are treated equally regardless of where they come from. Governments and central banks are asking taxpayers to underwrite national firms through their stimulus packages, creating a huge and ongoing incentive to favour them. And the push to bring supply chains back home in the name of resilience is accelerating. On May

12th Narendra Modi, India’s prime minister, told the nation that a new era of economic self-reliance has begun. Japan’s covid-19 stimulus includes subsidies for firms that repatriate factories; European Union officials talk of “strategic autonomy” and are creating a fund to buy stakes in firms. America is urging Intel to build plants at home. Digital trade is thriving but its scale is still modest. The sales abroad of Amazon, Apple, Facebook and Microsoft are equivalent to just 1.3% of world exports. The flow of capital is also suffering, as long-term investment sinks. Chinese venture-capital investment in America dropped to $400m in the first quarter of this year, 60% below its level two years ago. Multinational firms may cut their cross-border investment by a third this year. America has just instructed its main federal pension fund to stop buying Chinese shares, and so far this year countries representing 59% of world GDP have tightened their rules on foreign investment. As governments try to pay down their new debts by taxing firms and investors, some countries may be tempted to further restrict the flow of capital across borders. It’s lonely out there Don’t be fooled that a trading system with an unstable web of national controls will be more humane or safer. Poorer countries will find it harder to catch up and, in the rich world, life will be more expensive and less free. The way to make supply chains more resilient is not to domesticate them, which concentrates risk and forfeits economies of scale, but to diversify them. Moreover, a fractured world will make solving global problems harder, including finding a vaccine and securing an economic recovery. Tragically, this logic is no longer fashionable. Those three bodyblows have so wounded the open system of trade that the powerful arguments in its favour are being neglected. Wave goodbye to the greatest era of globalisation—and worry about what is going to take its place.

A Balkan Escaping thebetrayal lockdown

Don’t rely on contact-tracing apps Governments are pinning their hopes on a technology that could prove ineffective—and dangerous

VERY THING HAPPENS faster in a crisis. Faced with covid-19, vaccine-makers are cutting as many corners as they safely can. Anti-viral drugs are being rushed into clinical trials. Even so, it will be months until anything is available. With 297,000 people recorded dead, the wait is agonising. But caution is crucial. Medicine’s history is full of promising treatments that, when tested, turned out not to work or even to cause harm. Many governments hope salvation can come sooner, with contact-tracing apps on smartphones—even as a row brews

over Apple’s and Google’s grip on the technology. These apps can be used to automate the difficult process of tracking down people who have been in contact with those diagnosed with covid-19, which is vital for keeping tabs on the virus. Countries from Bahrain and Bulgaria to Indonesia and Iceland have developed such apps. They are an attractive idea. Yet contact-tracing apps are also an untested medical invention that will be introduced without the sort of safeguards that new drugs are subjected to. Inaccurate information can mislead health officials and citizens in ways that can be as harmful as any failed drug. Governments should proceed with care. Coverage is one complication. Epidemiologists reckon that apps might be useful if around 60% of people use them. Yet even in Europe, where adoption is highest, only 76% of people have mobileinternet subscriptions. That number is lower among the elderly, Continues on page 28

Monday 18 May 2020

BUSINESS DAY

In Association With

Re-open and shut

When lockdowns end, governments will have to free labour markets

Continued from page 27

Managing the transition will bring many risks

EVER BEFORE have governments erected safety-nets as generous as those they have created during the pandemic. In Britain 7.5m furloughed workers’ wages are being paid in large part by the state, which is spending more on them than it is on health care. In France the government is topping up the majority of private-sector workers’ incomes after their hours were cut. America has increased unemployment benefits by $600 per person per week, almost trebling the average payout. Since March a staggering 34m or so claims for this kind of support have been made (see article). Germany and Japan have boosted their existing subsidy schemes for furloughed or partially furloughed workers. These policies have been indispensable. Replacing lost incomes has averted suffering, prevented economies from falling apart and ensured public support for social-distancing measures. Yet governments need to prepare an exit strategy not just from lockdowns, but also from their emergency policies (see article). They cannot replace private incomes indefinitely. If today’s transfers are maintained for too long, they will be ruinously expensive and prevent labour markets from adapting to the new way of life that emerges from the pandemic.

Many of today’s schemes reflect the idea that economies need to be placed in deep freeze in order to be revived intact once the crisis subsides. Yet it seems increasingly likely that economies will instead be permanently changed. Consumers may emerge from lockdown with new habits and fears about mixing, spending less on restaurants, cinemas and travel, and spending more on deliveries, home-improvement and video-streaming. Employees may, reasonably, demand higher wages to perform some jobs, such as construction or butchering, which involve working elbow-to-elbow with others all day. And industries starved of immigrant labour because of border controls may have to entice in more locals. Four in ten American jobs

lost in the pandemic will not return, according to one estimate based on surveys, historical patterns and stockmarket signals. Three in ten gross job losses have already been offset by new hiring. The necessary adjustments will not take place while the state pays workers to wait for their old jobs to return—often on better money than they got before. In America roughly three-quarters of recipients of unemployment insurance are receiving more than they did in work. That blunts the incentive to seek new jobs. And yet cutting support abruptly would leave legions of unemployed workers fending for themselves in brutal conditions, especially in America with its thin welfare system. Governments thus face a difficult

balancing act: withdraw support too readily, and many people will suffer; withdraw it too late, and the economy will ossify. To find the right path, the most lavish support should be maintained only in industries which the government is forcibly keeping closed. Once shops, restaurants and cinemas are allowed to open, the market must decide if they have a future. These signals should not be ignored for long. Schemes should also encourage flexibility. Idled workers should be allowed to return to their companies part-time, as Britain this week pledged. America should make more use of work-sharing schemes, already in place in about half of the states, which, as in Europe, provide benefits on the basis of lost hours of work, not just lost jobs. This should be paired with unemployment insurance, though neither scheme should pay so much that it discourages seeking full-time work. Finally, governments should help people find new jobs. That means boosting support for training, tearing down barriers to opportunity such as unnecessary licensing rules, and cutting payroll taxes to encourage hiring. As in normal times, governments must not stand in the way of economic change. They should instead grease its wheels—while offering a helping hand to those who are left behind.

The smouldering pandemic

Why covid-19 seems to spread more slowly in Africa Transport links are worse

T WAS NOT what fishermen usually mean by a good catch. Last month a worker at a fish factory in Tema, a port city in Ghana, infected 533 people with the virus behind covid-19. President Nana Akufo-Addo linked the “super-spreader” to about 10% of the country’s 5,408 cases. That Ghana could identify the person is a tribute to its response. It has tested more than 155,000 people, the fourth-highest per-person rate in Africa, according to data from CDC Africa, a public-health body. Elsewhere a lack of testing makes it harder to assess the true course of the disease. But what data there are, and new analysis by the World Health Organisation (WHO), suggest the virus is spreading more slowly in Africa than elsewhere—and that its path will vary across the continent. Africa, which contains about 17% of the world’s population, has less than 2% of its confirmed cases of covid-19. By May 13th CDC Africa had counted 69,947 cases and 2,410 deaths. Over the past month reported cases have doubled roughly every two weeks. Until recently American cases were doubling about every three days. This may partly reflect insufficient testing. Africa has checked just over 1m people—a day’s work for officials in Wuhan. South Africa and Ghana account for nearly half. The Partnership for Evidence-Based Response

to Covid-19, a public-health consortium, notes that “the true number of infections is likely to be much greater than currently known.” Its rough estimate suggests a tally eight times higher. Another sign of undercounting is the share of covid-19 tests coming back positive. The “test-positivityrate” is an imperfect guide. But assuming those being tested have covid-like symptoms, a rate above 5-10% suggests there are many uncounted cases, says Jason Andrews of Stanford University. At least 22 African countries have rates above 10%, including Algeria (91%), Sudan (87%) and Tanzania (78%). John Magufuli, Tanzania’s president, does not believe his country’s www.businessday.ng

Don’t rely on contacttracing apps

results. “We only see them releasing positive, positive, positive results,” he said. He claims that the national laboratory was sent papaya, goat and sheep samples that tested positive. (The lab denies this.) No new official data have been released since April 29th. Opposition activists and NGOs say that there have been dozens of burials of covid-19 victims in Dar es Salaam, Tanzania’s largest city. On May 12th the American embassy said that hospitals there were “overwhelmed”. “It is a cover-up,” says Zitto Kabwe, an opposition leader. There are similar reports of undocumented surges in other countries. In Kano, in northern Nigeria, hundreds of unexplained deaths

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have been alleged by gravediggers. In Mogadishu, the capital of Somalia, medics claim that the deaths they are seeing do not chime with official totals. Nevertheless there are few signs that these “ghost hotspots” are ubiquitous. Some countries, including Mauritius, Namibia and the Seychelles, have not reported a new case for two weeks. Ethiopia, Rwanda and Uganda have fewer than 700 cases between them and positive-test rates below 1%. Nor are there reports of surges. “In a society like ours there’s simply no way this could be kept secret,” says Berhanu Nega, an Ethiopian opposition leader. Crucial in slowing the early spread of covid-19 was the swift introduction of containment measures. Most African countries implemented lockdowns far earlier than rich countries did. By the end of April at least 42 African countries had done so; 38 of these were in place for at least 21 days. So despite undercounting, official data are still a rough reflection of reality in many countries, say those leading the response. “While covid-19 likely won’t spread as exponentially in Africa as it has elsewhere in the world, it likely will smoulder in transmission hotspots,” says Matshidiso Moeti, the director for the WHO in Africa. @Businessdayng

the most vulnerable to covid-19. A recent survey suggested less than half of Americans would use a contact-tracing app. Accuracy is an issue, too. Such apps are designed to listen out for nearby mobile phones, registering a contact if another device comes close enough. Yet the strength of the radio signals used to do this is affected by all sorts of things besides distance. Human bodies impede transmission, for instance, meaning a phone in a pocket will behave differently from one in a hand. That could make it hard to calibrate the system—and a mistake would have consequences. Too sensitive, and you risk a deluge of “false positives”: contacts deemed close and significant that were actually distant and irrelevant. Too forgiving, and genuine cases of viral transmission will go undetected. Moreover, the apps themselves might change behaviour. An over-reassuring app could spur people to go out before it is safe. Privacy must be weighed against transparency, for medical reasons as well as for civil liberty. South Korea publishes detailed summaries of cases uncovered by its contact-tracers. A recent jump in cases was linked to a man who visited gay nightclubs. The resulting stream of homophobic invective could deter others from co-operating with the authorities, electronically or otherwise. The efforts of some governments, including those of Britain, France and Germany, have been complicated by Apple and Google, which between them hold sway over almost every smartphone on the planet. The firms have made privacy a priority, deeming that users will be anonymous and information stored mostly on devices rather than uploaded to central repositories. That has infuriated many officials. Centralisation offers advantages, they say. And in any case, why should coders in Silicon Valley overrule decisions made by medical experts and elected officials?

Monday 18 May 2020

BUSINESS DAY

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Monday 18 May 2020

BUSINESS DAY

news Explainer

Why NLNG Train 7 is going ahead despite gas glut DIPO OLADEHINDE

espite a world awash in liquefied natural gas and lower prices, shareholders of Nigeria LNG Ltd proceeded with the signing of the Engineering, Procurement and Construction (EPC) contract for Train 7, the company’s major gas expansion plan. This announcement comes at a difficult time just as LNG prices in Asia and gas prices in Europe have hit record lows as the coronavirus pandemic worsened already weak demand. The decision is also coming after commodity tracking firm, Kpler, disclosed that

about half of the world’s LNG vessels currently deemed floating storage are heavily loaded with Nigeria’s gas. Why contracts for Train 7 proceed Notwithstanding the concerns about the coronavirus pandemic, the Federal Government hopes to conclude the $4.2 billion project by 2025, noting that the project will survive the pandemic. One major reason why all contractors involved are progressing with the deal is the positive outlook for LNG demand which, according to Global-LNG, is expected to double to 700 million tonnes by 2040 as gas will continue to play an important role in a lower-carbon energy system. “Their focus is on the fu-

ture cash flows derivable from the project. As production activities commence in different countries post-COVID, there will be a surge in natural gas demand, thereby leading to the rise in natural gas prices,” Emmanuel Afimia, petroleum economist at Afimia Consulting, told BusinessDay. Another reason is the contract obligation by the participating oil majors who had signed a letter of intent in September last year after the deal for the grand project was brokered after 12 years of negotiation and delay. NLNG announced in September 2019 it had issued a Letter of Intent to a consortium made up of Saipem of Italy, Daewoo Engineering

& Construction of Korea and Chiyoda of Japan. “Not proceeding with the execution of the project will portray NLNG as an institution that does not keep to agreement,” Afimia said. With the signing of the letter of intent, Nigeria LNG Limited and the members of SCD JV committed to finalising the EPC Contract based upon the proposals submitted by SCD JV on an exclusive basis. NLNG is run in a unique way that is different from other public assets as it is owned partly by the government and the private sector. It is, however, run exclusively by the latter, earning it plaudits along the way for its operational success.

VFD holds virtual AGM, announces key appointments … as shareholders approve N3.30k dividend Segun Adams

hareholders of financial services company, VFD Group, have approved the payment of N3.30 kobo dividend for the 2019 business year at the Group’s 4th Annual General Meeting (AGM) and its first Open Virtual AGM (OVA), where key appointments to strengthen Group performance were also made. The meeting was held via Zoom and live-streamed on YouTube in testament to the company’s transparency and following the social distancing rules of the Securities and Exchange Commission (SEC) and Corporate Affairs Commission (CAC) due to the COVID-19 pandemic. The General Meeting approved, amongst other resolutions, the individual company, and consolidated financial statements for the fiscal year 2019. The distribution of a dividend of N3.30 kobo per 50 kobo share with book closure date of May 1, 2020 and payment date of May 15, 2020 was also approved. Nonso Okpala, GMD/CEO of VFD Group, said the 2019 performance has provided the

foundation for VFD Group’s emergence as the leading investment company in Nigeria with interest in key sectors of the Nigerian economy. “In 2020 and beyond, we will seek to integrate these companies in order to establish a value ecosystem for enhanced efficiency and compelling offering to over a hundred million Nigerians,” Okpala said. He noted that the base of that ecosystem is its investment in VFD Tech and its recent launch of Nigerian’s #1 virtual bank, called V by VFD, which is available on the Apple App Store or Google PlayStore. At the AGM, members approved the appointment of Chuks Ozigbo as a director of the company. Olatunde Busari, Suleiman Lawal, Azubike Emodi, Samuel Maduka Onyishi and Jewel Okwechime were also reelected as directors. The meeting further appointed Deloitte & Touche as external auditors of the company and approved the election of members of the Statutory Audit Committee. The Board of Directors still comprises 13 members including five executive directors and two independent directors.

CBN rejects investors’ demand as N70bn OMO records no sale Hope Moses-Ashike

Godwin Obaseki (r), governor, Edo State; J.U. Oyomire, chairman, commission of inquiry into the construction of the Edo Specialist Hospital and supply of equipment for the hospital, during the submission of the commission’s report at the Government House in Benin City, Edo State.

What NCDC’s partnership with private labs means for Nigeria’s COVID-19 effort Godsgift Onyedinefu

he Nigeria Centre for Disease Control (NCDC) is partnering private sector laboratoriestoaggressivelyscaleupthe number of COVID-19 tests conducted in the country and meet its target to test 2 million citizens over the next three months. NCDC’s readiness to partner private sector laboratories is coming on the heels of concerns that Nigeria, Africa’s most populous country, is not testing nearly enough compared to other countries in the continent. Experts have underscored the centrality of testing to the fight against

COVID-19. “You can’t fight a virus if you don’t know where it is,” Tedros Adhanom Ghebreyesus, director-general of the World Health Organisation (WHO), said in his opening remarks at the Mission briefing on COVID-19 on March 12. Nigeria plans to conduct 50,000 tests in each state and the Federal Capital Territory over the next three months. Chikwe Ihekweazu, directorgeneral of NCDC, had informed that 2 million test kits were being expected from the Global Fund. But with the country’s current testing capacity per day, this goal may not be achievwww.businessday.ng

able. Nigeria conducts only about 900 to 1,400 tests per day across 24 laboratories in the NCDC laboratory network. This is still short of its target to carry out 1,500 to 3,000 tests daily. As at May 13, a total of 30,657 tests had been conducted in the country and of these, nearly 5,000 came back positive. But Nigeria needs to conduct at least 22,000 tests daily for the next 90 days to meet its target, and NCDC says a key response strategy to reducing the impact of the COVID-19 pandemic is to expand diagnostic testing to ensure a large number of people can access testing which is key

in containing the virus. The integration of private sector labs is expected to significantly bridge the testing gap among other variables, Emeka Oguanuo, spokesperson of NCDC, said. He, however, quickly noted that the centre does not have any projection of the number of tests expected from private laboratories. “It is not clearly cut out how many tests we expect from private sector laboratories, because the partnership is voluntary and for now, we don’t know how many from the private sector will come

he Open Market Operation (OMO) market recorded no sales to the N70 billion bill offered to investors by the Central Bank of Nigeria (CBN) on Thursday due to demand for higher rates. The short, medium and long-term instruments were oversubscribed by investors but the CBN could not meet their demand, leading to no sales. A breakdown of the OMO auction shows that the CBN offeredN50billionforthelongerterm bill which was oversubscribed to the tune of N306.67 billion at a bid range of between 12.34percentand12.60percent. The 89-day and 194-day tenors were allocated N10

Continues on page 31

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@Businessdayng

billion each. While the shorter instrument (89-day) was oversubscribed to the tune of N20.50 billion, the mediumterm bill (194-day) was oversubscribed by N17.00 billion. Investors demanded a stop rate of between 11.23 percent and 11.49 percent. The average OMO yield across the curve declined by 46 bps to 8.45 percent on Friday. NT-bills market closed on a positive note on Friday, with average yield across the curve declining by 1 basis point to close at 2.28 percent, a report by FSDH Research stated. The overnight rate declined by 0.98 percent to close at 3.42 percent on Friday. The Open Buy Back (OBB) rate also declined by 0.85 percent to close at 2.75 percent.

Monday 18 May 2020

BUSINESS DAY

news Despite FG’s assurance, petroleum... Continued from page 1

ment’s role is limited to regulation. In a liberalised market, on the other hand, the government maintains a control price band and puts a cap on profits. Timipre Sylva, minister of state for petroleum resources, said deregulation came into effect March 19, 2020 but the government would continue to intervene in fixing fuel price due exploitative pricing practices of petroleum products marketers as is seen in the case of diesel. Unlike petrol, the diesel market in Nigeria is fully

deregulated. Operators are supposed to arrive at prices after removing operational costs but they are accused of operating a cartel, selling at a determined price. “Look at our battle with marketers. We brought down the price of PMS because the landing cost had come down, but the marketers had refused to bring down the prices of diesel and other deregulated commodities, even though their landing costs had come down also,” Sylva said. Diesel often escapes intense scrutiny because unlike petrol, which is consumed by the vast majority of Nigerians in their cars and generators, its biggest consumers are industries and power plants. “PMS and kerosene are strategic to the country, hence we cannot allow their prices to be determined wholly by marketers. Consumers had to be protected. This is what obtains globally,” Sylva said. But this comes at a cost, analysts say. Ronke Onadeko, an oil and gas expert, said a fully deregulated downstream sector would yield improved tax returns, remove inefficiencies and allow private companies who are more effective to run things. The true test of deregulation is in access to foreign exchange. In the past, the Nigerian National Petroleum Corporation (NNPC) got dollars at preferential rate of N306 while others got it at N360,

allowing the governmentowned oil firm to keep pump prices at N145 even when landing cost was over N160. Full deregulation will mean that the NNPC along with other marketers will scramble for dollars at the prevailing rate. Sylva bemoaned the fact that despite the slash in the pump price of PMS, prices of food items and other commodities were yet to come down but were instead going up, noting that if the prices were increased by a little margin, prices of food items would have skyrocketed. He said government was aware that the price of crude oil would rise again shortly, which would also affect the pump price of PMS, and government was already in the race to provide a cheaper alternative to PMS, in the form of Compressed Natural Gas (CNG). But Henry Adigun, analyst at the Facility for Oil Sector Transparency and Reform in Nigeria (FOSTER), said a slight recovery of oil prices would test the Federal Government’s resolve on petroleum downstream sector deregulation. Speaking further, Sylva said the Federal Government was kick-starting the Liquefied Petroleum Gas (LPG) penetration policy June ending, hopefully, after the COVID-19 pandemic forced it to postpone the commencement twice, in April and May 2020. The minister said the government was planning to set up 32,000 micro-distribution centres (MDC) for LPG, also known as cooking gas, across the country, and would see the engagement of 5,000 youths across the country while the existing illegal roadside LPG dealers would also be inculcated in the programme. He said the LPG penetration programme would create a lot of jobs in the country and would encourage more Nigerians to use LPG. Mele Kyari, group managing director of NNPC, said there was a gradual easing of the crude oil glut issue, as uncleared transactions were now being cleared.

What NCDC’s partnership with private... Continued from page 30

on board,” Oguanuo told BusinessDay. He said in addition to the privatesector,thegovernmentis workingtoactivatePCRlabsand repurpose TB testing machines, GeneXperts, for COVID-19 testing. There are about 400 GeneXperts across the country. While Nigeria has only managed to carry out just above 30,000 tests since the country recorded its index case in February, Ghana, South Africa, Mauritius and Djibouti have achieved commendable rates of testing. South Africa is

leading in Africa with nearly 200,000 tests conducted. Key to the high rates of testing achieved in South Africa is integration of private sector laboratories. Experts say integration of private sector labs can increase testing by 60-80 percent. Patrick Dakum, CEO of the Institute of Human Virology Nigeria, agreed that the integration of the private sector can help the country scale up rapidly the number of tests conducted. He, however, advised that sample collection be scaled up side by side. Dakum said there would www.businessday.ng

L-R: Zainab Ahmed, minister of finance, budget and national planning; Ibikunle Amosun, chairman, Senate Committee on Capital Market; Mary Uduk, acting director-general, Securities and Exchange Commission (SEC), and Mariam Katagum, minister of state for industry, trade and investment, at the International Conference on Nigerian Commodities Market in Abuja. Pic by Tunde Adeniyi

No respite for businesses 2 weeks after ease of lockdown ODINAKA ANUDU & JOSEPHINE OKOJIE

usinesses in Nigeria are having a hard time operating optimally two weeks after the government began a gradual easing of the lockdown imposed on Lagos, Abuja and Ogun State to help curb the spread of coronavirus. In Lagos, Nigeria’s economic nerve-centre, businesses are struggling to sell their products despite the easing of lockdown that started on May 4 – exactly two weeks ago. Even when they sell, moving their goods across Nigerian states poses a very big challenge due to inter-state restrictions and imposition of lockdowns by other states. Debo Thomas, founder of Lagos-based Hastom Nigeria Limited, deals in cattle and cashew in Lagos. Demand for his cattle has fallen by over 50 percent since he re-opened on May 4. To survive, he now slaughters the cows himself be a need to involve the private sector also in mobilising communities to accept community-based testing so they can willingly come out for their samples to be taken. In South Africa, a vast majority of cases there have been tested by private laboratories. By the end of April, a total 187,495 tests had been carried out in South Africa. Of this number, private sector laboratories conducted a total of 105,419 tests which represents 57 percent, while government-owned laboratories tested 80,006 representing 43 percent of the total tests, health authorities said.

and sells as meat to markets across the South-West region. But his cost of logistics has soared as security agents on checkpoints allegedly demand N5,000 to N30,000 to move the meat to neighbouring states. “We now dry our cashew nuts and store them appropriately to ensure they are well aerated to increase their shelf life so that we can sell after COVID-19,” he said. Thomas is not the only one facing the struggle. Ifeanyi Okeleke, CEO of Kenfrancis Farm, said he was closing down his poultry business as he could not cope with rising input costs. He is now moving to cassava production to process it into ‘garri’, starch and flour. Coronavirus has forced states to impose restrictions to curb spread of the deadly virus. But the struggling economy and rising cases of infections have boxed the federal and state governments into a hard choice between saving lives and avoiding an uprising from impoverished citizens. Official data show that Lagos has 8,395 million MSMEs, the highest in Africa’s largest economy with 41.5 million small businesses. Most of them are now battling with high cost of logistics. Olamide Ayeni-Babajide, chief executive of Pearl Recycling, a Lagos-based company that transforms solid wastes into chairs, has got orders for the supply 300 chairs across the Nigerian states since the Lagos lockdown. But she can’t supply due to restrictions on inter-state movements. “In Lagos, I now dispatch the products myself. But logistics companies no longer accept products that are nonessential for onward movement to other states. This is

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affecting us badly,” she said. A five-week lockdown to curb the spread of COVID-19 has impoverished many Lagosians who rely on daily incomes for upkeep. Lagos accounted for 12 percent of total national household expenditure (N5 trillion) in 2019, according to the National Bureau of Statistics (NBS). Lagos residents spent N534 million on transport and N827 million on eating outside their home in 2019, said NBS. But the situation seems to be changing. Samuel Ogundipe, a hawker in Oshodi, who used to sell ice cream and sausages before the lockdown, said he was not returning to the business because he did not have any capital to go back to it. His plan is to move down to Osun State and work in a construction company. Other small businesses are also facing challenges. Seyi Osinaike, CEO of Divine Hair Dressing Salon based in Owode-Weigh Bridge along Ikorodu Expressway, Lagos, said before the COVID-19 outbreak hairdressers in Lagos had been struggling as most ladies preferred to wear wigs than braid their hair. “Few that were patronising us before stopped because of the lockdown. Now that the lockdownhas beenlifted,things are yet to pick up,” she said. Most businesses in Lagos rely on other states to operate optimally, and restrictions on inter-state movements mean they can’t meet the needs of their customers or get supplies from outside the state. Ibrahim Maigari Ahmadu, co-founder of livestock247. com, sells cows online. But he depends largely on cattle farmers who are offline. He facilitates movement of cows @Businessdayng

from the northern part of Nigeria to the south, which is the hub of cattle business. But he can’t move cows from Charanchi in Katsina State or Nguruji in Mambilla Plateau in Taraba State to Lagos now because most states are on lockdown. He said despite getting government exemption to move, truck movement was being hindered by security checks. Ahmadu said billions of naira was being lost every day as one market alone (Charanchi) often moved 100 trucks worth N600 million to Lagos. “We are operating at a very difficult time,” he said. “What happens to those in the value chain such as those fattening the cows and the merchants? Lagos can say, since Oke-Oba market is shut down, anyone interested can buy through a trusted channel.” The Lagos Chamber of Commerce and Industry (LCCI) ran a survey and 81 percent of businesses indicated that they were severely impacted by the COVID-19 situation. Forty-six percent are cutting jobs. Chukwuma Soludo, a former central bank (CBN) governor, advised that while efforts should be made to fight the pandemic, locking down a largely impoverished people would have an adverse impact on the people. However, some businesses say they are coping well with the situation. Attah Anzaku, co-founder of Agroeknor, an exporter of hibiscus flower, said his business has not been interrupted as he still exports to the global market. Anzaku said raw materials prices have crashed as farmers are now desperate to sell at giveaway rates.

Monday 18 May 2020

BUSINESS DAY

news

COVID-19: FG commends manufacturers on sustainable production of essential commodities HARRISON EDEH, Abuja

he Federal Government has lauded manufacturers and captains of industries on the sustained production of essential commodities nationwide to cushion the effects of the COVID-19 lockdown put in place to curtail the spread of the pandemic. Richard Adeniyi Adebayo, minister of industry, trade and investment, who gave the commendation, said the impact had ensured bridging gaps on possible lacks of such vital supplies across Nigeria. The minister was represented by Battah Ndirpaya, manager, Emergency Operation Centre (EOC) of the Committee on Sustainable Production and Delivery of Essential Commodities During COVID-19 Pandemic at the weekly briefing of the EOC

in Abuja, last week. He said despite the initial challenges faced by manufacturers and industries, they were encouraged to operate by the Federal Government to ensure the production and distribution of essential products like food items, medical and pharmaceuticals products while observing all standard procedures as recommended by the National Centre for Disease Control (NCDC) and Presidential Task Force on COVID-19. He noted that inter-state restrictions and curfew as one of the major obstacles militating against the free-flow and movement of essential commodities, but the EOC however urged drivers to desist from the habit of smuggling passengers into states of destinations, and to abide by all extant rules and regulations put in place by the Federal Government.

Afreximbank bucks COVID-19 to raise over $1bn in syndicated loan Hope Moses-Ashike

frican Export-Import Bank (Afreximbank) vaulted market uncertainties caused by COVID-19 pandemic to successfully conclude a dual-currency syndicated loan, raising the equivalent of $907.5 million, comprised of two tranches of $485 million and €390.4 million. Proceeds will be used for general corporate activities, and will strengthen the bank’s liquidity position as it implements its $3 billion Pandemic Trade Impact Mitigation Facility (PATIMFA). Emirates NBD Capital Limited, MUFG Bank Limited and Standard Chartered Bank acted as joint Global Coordinators, Initial Mandated Lead Arrangers and Bookrunners for the Facility. MUFG Bank also acted as Documentation Agent and Standard Chartered Bank as Facility Agent.

Launched April 9, 2020, to a limited group of relationship banks at an amount of $600 million equivalent, the facility was more than 50 percent oversubscribed allowing its increase to $1.1 billion equivalent with an accordion feature. Afreximbank president, Benedict Oramah, said the market’s confidence in the bank, despite the COVID-19 pandemic-induced volatility and uncertainty, was a testament to the strength of Afreximbank’s investor relationships. “The final deal size and the relatively short period over which the funding was raised reflect the high regard and confidence the market has in Afreximbank’s financial strength and its importance to the continent,” he said. “Afreximbank intends, in due course, to issue additional syndicated loans. The bank looks forward to the continued support of the loan market at that time,” he said.

The National Orientation Agency’s Community Orientation and Mobilisation officer on an awareness campaign to stop the spread of COVID-19 pandemic, at Ojokoro Market, Ifako-Ijaye Lagos State. NAN

Nigeria, others to suffer consequences of refusing to diversify economies Olusola Bello

igeria and other Africa oil producers that failed to diversify their economies, depending solely on oil, will suffer the consequences of paying leap services to such an exercise after the COVID-19 pandemic crisis would have been curtailed. According to analysts, even when the crisis is over, the price of oil would still be so low to the extent that it would be difficult for them to have enough savings to face economic diversification. “Even if prices rise, the future income of producer countries could be hit by reduced or delayed investment. As it is believed that current projects are likely to be postponed to late 2021 or even 2022, rather than be carried out according to their present schedule,” they note. Nigeria has, for instance, hinged her diversification

strategy on developing the gas value chain but gas is also bedevilled by the same problem as oil, as the sector is also badly affected by low prices that it may be an uphill task for investors to consider putting their resources into it either now or later. For years, African oil exporting countries have pledged to wean themselves off crude - but for many, this uphill task may become mountainous after the coronavirus pandemic caused the energy market to collapse, say the analysts. Nigeria accounts for around 40 percent of the roughly 4 million barrels of crude pumped daily in sub-Saharan Africa, while Angola is second with around 30 percent. According to AFP, a global recession provoked by the coronavirus pandemic has gutted crude oil prices, which hovered at around $30 a barrel for Brent North Sea crude on

last week. That is an increase from landmark lows reached in April, but it is still far from the $55-57 used by many African countries when they drafted their 2020 budgets. Angola has been in recession since 2016. The country “has already been forced to use €1.3 billion ($1.4bn) from its sovereign wealth fund and speed up a privatisation programme,” economist Carlos Rosado noted. In Republic of Congo, the third-biggest producer, President Denis Sassou Nguesso has had to ask the International Monetary Fund (IMF) for $300$500 million in emergency aid. The plight among small producers “is not very different than that of regional heavyweights”, said Siva Prasad, an analyst at Rystad Energy. Gabon, Equatorial Guinea, and Chad produce up to 10 times less than Nigeria, but the

first two are also OPEC members that have agreed to cut output, and oil is almost as important to their smaller economies. But there are notable political differences among the three. In Equatorial Guinea, “most of the population has never really benefited from oil reserves, and crisis or not, they will not see” much difference, said Benjamin Auge of the French Institute of International Relations (IFRI). In Gabon, there are around 100,000 civil servants for a population of two million, and if the state tightens its belt, there will be “dire consequences”, he said. Whenoilpricesfellbelow$100 a barrel in 2014, producer countries promised to diversify their economies. Today’s fresh pledges do not impress observers. “It is a slogan that comes back with every oil crisis,” notes Jean Aime Brice Makosso of a Congolese NGO, the Justice and Peace Commission (CJP).

FG, states, LGAs share N606.196bn from FAAC for April How we effected deregulation of petroleum downstream sector - FG CYNTHIA EGBOBOH, Abuja

he three federating units on Friday shared a total of N606.196 billion as Federation Accounts Allocation for the month of April 2020. The shared sum was N174.73 billion lower than N780.926 billion disbursed in the previous month. Of the total amount shared, which is inclusive of VAT, exchange gain, solid mineral revenue, excess bank charges and excess oil revenue, the Federal Government received N169.831 billon, the states received N86.140 billion, local government councils got N66.411 billion, while the oil producing states received N32.895 billion as derivation (13% mineral revenue). However, cost of collection, FIRS refund, allocation to North East Development Commission and transfer to excess oil revenue was out at N15.134 billion.

According to a communiqué issued by the Federation Accounts Allocation Committee (FAAC), the gross revenue available from the Value Added Tax (VAT) for April 2020 was N94.495 billion representing a N25.772 billion decrease from N120.268 billion distributed in the preceding month of March 2020. Of the total VAT generated for the month, Federal Government got N13.182 billion, the states received N43.941 billion, and local government councils got N30.758 billion. The distributed statutory revenue of N370.411billion received for the month was lower than the N597.676 billion received for the previous month by N227.265 billion. The communiqué also revealed that Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Import and Export Duties, oil and Value Added Tax (VAT) all recorded decreases. www.businessday.ng

HARRISON EDEH, Abuja

espite widespread criticism on its ‘no subsidy regime,’ the Federal G overnment last Thursday clarified that it had deregulated the downstream petroleum industry. However, it will continue to intervene in determining the pump price of the Premium Motor Spirit (PMS) - petrol to safeguard consumers of the commodity from being exploited by oil marketers. Minister of state for petroleum resources, Timipre Sylva, stated that the deregulation came into effect March 19, 2020. Sylva disclosed that the decision of the government to continue to intervene in fixing petrol price was as a result of the ugly experiences the government was having with oil marketers, who had deliberately refused to bring down the cost of diesel and other petroleum products whose

… says intervention in pricing will continue due to marketers’ exploitative tendencies landing costs had reduced. He, however, bemoaned the fact that despite the slash in the pump price of petrol, the prices of food items and other commodity were yet to come down, but were instead going up, noting however that if the prices were increased by a little margin, prices of food items would have skyrocketed. According to Sylva, “Deregulation of the downstream petroleum sector was approved on the 19th of March. What was announced on that day was already deregulation, However, PMS and kerosene are strategic to the country, hence, we cannot allow their prices to be determined wholly by marketers. Consumers had to be protected. This is what obtains globally. “If we allow marketers to fix the prices of these commodities anyhow they like, it will not augur well for us. That is why we will continue to intervene

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in price-fixing. In the recent price-fixing, we allowed the marketers to get some profit, but we determine the price to protect consumers. “Look at our battle with marketers. We brought down the price of PMS because the landing cost had come down, but the marketers had refused to bring down the prices of diesel and other deregulated commodities, even though their landing costs had come down also.” If the PPPRA does not continue to interface with marketers in determining the prices of PMS, the oil marketers would fix the prices arbitrarily and exploit consumers, he said. According to Sylva, PPPRA would continue to work with marketers in determining the prices to ensure that the best pricing is arrived at for the consumers. He further noted that the government was aware that @Businessdayng

the price of crude oil would rise again shortly, which would also affect the pump price of PMS, stating, however, that government was already in the race to provide a cheaper alternative to PMS, in the form of Compressed Natural Gas (CNG). He bemoaned the fact that the reduction in the price of PMS had not impacted prices of food items and, transportation costs among others, while he called on Nigerians to hold market players accountable when the price of PMS began to rise again. He said: “We have reduced fuel price, but the prices of commodities in the market are not going down. But if we increase, you will increase the price of PMS, the cost of these same items would skyrocket. Now, the market players should be held responsible to ensure prices do not go up inordinately while prices of fuel go up.”

Monday 18 May 2020

BUSINESS DAY

news

Petrol marketers enjoy N15.5/litre profit margin as PPPRA delays price update for May ENDURANCE OKAFOR

he delay by the Petroleum Product Pricing Regulatory Agency (PPPRA) to review the price of Premium Motor Spirit (PMS), or petrol, for May has increased the profit margin of oil marketers to N15.5 per litre. This is as a result of the recent slash in the ex-depot price of petrol by the Nigerian National Petroleum Corporation (NNPC) from N113.28/litre to N108/litre. That is the price at which the national oil

company sells petrol to marketers. Analysis by BusinessDay shows that the oil marketers, who sell directly to the final consumers at the approved pump price by PPPRA, are yet to reflect the NNPC price slash in the petrol being sold in May due to PPPRA’s delay in updating the price for the month. Going by BusinessDay’s calculations, if the oil marketers are buying petrol from NNPC at N108/litre and are still selling at the approved retail price of N123.5/litre for April, it means they are enjoying a distri-

ABCHealth announces new CEO

he African Business Coalition for Health (ABCHealth) has announced the appointment of Mories Atoki as chief executive officer (CEO) following the unanimous agreement of its Board of Directors. Mories brings to the Coalition years of experience as senior manager with PricewaterhouseCoopers where she pioneered and led the firm’s Sustainability & Climate Change practice. With an extensive track record in the field of development and as a recognised sustainability expert, she is a member of the Advisory Board of Partners for Review (P4R), a United Nations supported initiative to standardise sustainable development reporting. Mories is also an alumnus of Harvard Business School as well as the London School of Business and Finance. Aigboje Aig-Imoukhuede, chairman of ABCHealth and cochairman of Global Business Coalition for Health (GBCHealth), said, “Mories’ appointment comes at a critical moment for ABCHealth. We have just finalised a rigorous strategic planningprocessaimedattransforming Africa’s Health landscape. Our theory of change now needs to be implemented and Mories has a mandate to successfully drive its implementation.” ZoueraYoussoufou,CEOofAliko Dangote Foundation (ADF) and BoardMemberofABCHealth,stated, “Mories has a strong track record for execution; she has good communications skills and great leadership capabilities. Her understanding of Africa’s health landscape provides a balanced perspective in our organ-

isation’smandateoftransformingthe continent’s health landscape.” “I am honoured and excited to lead ABCHealth,” Mories said, saying, “I believe that my appointment as the CEO of ABCHealth has come at a time when Africa clearly needs astrongconvenerofallstakeholders in Africa’s public and private sectors to facilitate deep partnerships and collaboration all with one end in sight – improving the continent’s health outcomes.” The ABCHealth is a not-forprofit advocacy drivenorganisation founded by the Aliko Dangote Foundation and the Global Business Coalition for Health as an African-led coalition of business leaders and companies to improve the health and wellbeing of the African population. ABC Health was launched in February 2019 on the margins of the 32nd African Union Summit in AddisAbaba,EthiopiaduringtheAfrica Business; Health Forum convened in partnership with UN Economic Commission for Africa (UNECA) to mobilise leaders from governments and businesses towards improving Africa’s health outcomes.

bution margin of N15.5/litre. This is an increase of N5.28/litre when compared to the N10.22/ litre distribution margin initially enjoyed by the petrol marketers before NNPC slashed the ex-depot price on May 6, 2020. “The lack of communication by PPPRA about the new pump price of petrol for May has created an opportunity for marketers to make some quick gain,” Yinka Ademuwagun, research analyst at United Capital, said. While PPPRA released the updated petrol price for last month on April 1, the regulatory agency said it was engaging the Central Bank of Nigeria (CBN) to determine the applicable foreign exchange rates for the importation of petroleum products, the likely reason it is yet to give an update for May almost two weeks into the new month. “The agency is engaging the CBN to determine the applicable foreign exchange rates for the importation of petroleum products and modalities for accessing the applicable foreign exchange window by the marketers,” Abdulkadir Saidu, executive secretary of the agency, said in a statement. According to Saidu, the rate would be reflected in the pricing template to determine the expected open market price of the product.

5 things to know about Nigeria’s revised medium-term expenditure plan

igeria’s Federal Executive Council (FEC) has finally approved the revised 2020-2022 Medium Term Expenditure Framework, MTEF and an amended 2020 budget can now be submitted to the National Assembly for approval. Accordingtothedocument,the total federal spending of N10.52trn or $27.2bn including government enterprises other than the NNPC and project tied loans is little changed from the original budget because of the sharp increase in concessional external financing. Nigeriahasalreadysecureda$3.4bn financing support from the IMF anditseeksmoreloansfromothers including World Bank. There has been some revisions to the core assumptions for 2020, notably: average crude price of $25/b (cut from $57/b in the original because of market developments); average crude production of 1.94mbpd (reduced from 2.18mbpd in compliance with OPEC quota; and average exchange rate of N360 per US dollar (from N301 following the CBN’s rate adjustment in mid-March). Firstly, while some analysts are comfortable with the new oil price assumption when we allow for the start of the reversal

of lockdowns in some important jurisdictions, the use of the preferential exchange rate of N360 wsends mixed signals. This is so especially since the authorities have been heard to say that they are working towards the unification of rates. It could be justified by its use for imports of petroleum products. In addition, the 1.9mbd oil production target might prove to be overly optimistic given the chaotic global market and how slowly we might see a recovery if any. For instance, BP’s new global CEO said days ago the world might have already seen peak oil demand. Secondly, the total expected revenue now stands at N5.16trn, compared with N8.42trn in the original budget. The Nigeria’s share of oil and non-oil revenue together came to N4.57trn in the original. The large residual balance was covered by some rather ambitious projected flows from the ten largest government enterprises (N990bn), signature bonuses/early renewals (N940bn) and the government’s share of balances in special accounts (N650bn). It is important also to note that the earlier projected N2.64trn for oil revenue (based upon US$57/b) is now unattainable.

It is sensible to query the earlier figure for non-oil inflows since the original document (dating from December) assumed GDP growth of 2.9% this year. Thirdly, the amended budget has a deficit of N5.37trn. The main financing components are the concessional funding already mentioned (N2.48trn at N360) and borrowing through the best efforts of the Debt Management Office, DMO (N1.59trn and now all will be raised domestically). Fourthly, note that after the FEC meeting, the federal finance minister mentioned the drawdown of some already committed project loans and of some special accounts as well as privatization proceeds as other financing items. The detail is thin at this stage although it can be recalled that the original budget forecast financing flows of N250bn from asset sales and N330bn from tied project loans. Finally, it is important to remember that analysts now project that Nigeria’s total external debt stock will likely rise to $36bn from $31bn while the country’s debt service burden is already in excess of 96% of independent revenues. They all point to a worsening fiscal environment for Nigeria.

Imo State Commissioner for Gender and Vulnerable Affairs, Nkechi Ugwu, handing over relief items to representatives of Special Citizens.

UK aims to have 30m doses of Oxford’s Coronavirus vaccine ready by September

K’s Business Secretary Alok Shama says the government has put aside £38m towards building a “rapid deployment facility” that will ensure a coronavirus vaccine is widely available in the UK and this could start with having thirty million doses of the Oxford University vaccine candidate by September. “This new money will help mass produce the Oxford vaccine so if trials are successful we have dosages to start vaccinating straight away,” he says. Speaking at the daily Number 10 briefing Sunday, he said the vaccine trial in Oxford University is progressing well describing the speed at which the trials have been organised as “genuinely unprecedented”. According to the minister, a licensing agreement with AstraZeneca has been reached allowing for the manufacture of 30 million doses to be available

by September. “The UK will be first to get access,” he says. However, echoing warnings made by other authorities and experts, he says “it’s possible will never find a successful coronavirus vaccine”. Sharma added that six drugs aimed at fighting the virus have now entered clinical trials, adding that “in order to definitively conquer this disease we need to find a safe workable vaccine”. Businessday learnt that the keenly-watched COVID-19 vaccine being developed at Oxford, will be priced to allow as wide as possible access to it, if it proves successful, and will be made at huge scale to keep costs down and supply up. The Oxford University professor co-leading its development, Adrian Hill, says ensuring wide distribution and low cost have been central to the project from the start.Microbiologist www.businessday.ng

Elisa Granato, being injected as part of the first human trials in the UKootential coronavirus “This not going to be an expensive vaccine,” Hill told Reuters in an interview. “It’s going to be a single dose vaccine. It’s going to be made for global supply and it’s going to be made in many different locations. That was always our plan.” The experimental vaccine, known as ChAdOx1 nCoV-19, is one of the front runners in the global race to provide protection against the new coronavirus causing the COVID-19 pandemic. Hill’s team began early-stage human trials of the vaccine last week administering doses to candidates in the UK, making it one of only a handful to have reached that milestone. As of this week, more than 1,000 people have been dosed in the trial - with around half getting the experimental vaccine and

the other half serving as a control group. Preliminary data from an earlier small trial of the experimental vaccine in six monkeys found that some of the animals given a single shot developed antibodies against the virus within 14 days, and all developed protective antibodies within 28 days. When the monkeys were exposed to the new coronavirus, the vaccine appeared to prevent damage to the lungs and kept the virus from making copies of itself there, although it was still actively replicating in the nose. Hill said the data from the animal tests were “encouraging of course” and reinforced his team’s high degree of confidence that ongoing human trials of the shot will also show positive results. The first signals on whether and how well it works could come as early as July or August. Asked about the progress

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of the human trials, Hill said he and his team “are not going to give a running commentary” but added, “You can conclude that if the trial is still running - as it certainly is - that would mean there have been no major upsets.” Almost 4.5 million people have been reported to be infected by the novel coronavirus globally and more than 301,000 have died, according to a Reuters tally. Health and disease experts say a vaccine that protects people from the new coronavirus could help end the pandemic, but finding one that works and manufacturing enough doses is a huge challenge. The ChAdOx vaccine, a type known as a recombinant viral vector vaccine, uses a weakened version of the common-cold virus spiked with proteins from the novel coronavirus to generate a response from the body’s immune system. @Businessdayng

Other vaccines in human trials include those by Moderna Inc, Pfizer Inc and BioNTech SE and China’s CanSino Biologics Inc. Hill told Reuters the ChAdOx1 project has at least seven manufacturing sites around the world. Those include India’s Serum Institute as well as sites in Europe and China which will ensure global manufacturing of the vaccine if the trials succeed. Hill has said that up to a million doses of the shot are already being manufactured and will be available by September, even before trials fully prove whether it works. “The ambition is shared to get a low-priced, very, very extensively available vaccine as soon as possible,” Hill said. “And one of the reasons that we chose Astrazeneca was because they shared that ambition and they were convincing that they could provide supply and large scale.”

Monday 18 May 2020

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Investors deprived of income as companies slash dividends

European payouts are predicted to drop 30 per cent this year CHRIS FLOOD

ension funds and other income-focused investors hoping for another year of generous dividends in 2020 have instead been pummelled by savage cuts to company payouts. A record $1.43tn was paid in dividends last year by companies worldwide, according to Janus Henderson, the asset manager. It had forecast that global dividend payments would rise by about 4 per cent this year. But then coronavirus struck. Strict lockdown measures ordered by governments to limit the spread of the virus have created severe cash flow problems for companies across multiple sectors, forcing them to make painful cuts in payments to shareholders. In some industries, such as banking, regulators have stepped in to limit payouts. The cuts have led to widespread losses for dividend-focused funds, which are used by retirement savers for pension payments. Analysis by the data provider Morningstar of 254 global, European and UK equity income strategies with more than $50m in assets each, shows that all of these funds have registered losses this year. Most, however, have rebounded strongly from their lows in late March on hopes that economies will recover rapidly as lockdown measures are eased. Investors and fund managers are scrambling to assess the outlook for equity dividends that have become critically important

to long-term investors because of the significant decline in bond yields over the past decade. Dividends paid by European companies could fall 30 per cent this year and 15 per cent in the US, according to Thomas Schuessler, manager of the €18bn DWS Top Dividend fund, the largest global equity income product sold in Europe. It has lost 10 per cent this year, recovering from its late March low when it was down by about a quarter. Mr Schuessler says it is “not surprising” that some companies find themselves unable to pay dividends when coronavirus has paralysed entire economies, but he is confident of a healthy recovery. “Dividends will come back

with earnings when the economy recovers,” he adds. UBS, however, is warning that less cash could be available for dividends in the future because companies may choose to emphasise building more resilience to disruptions into their businesses. Regulators may also put more pressure on banks to support economic activity in preference to paying shareholders, while governments may decide to raise corporate taxes to help pay for the huge bills resulting from coronavirus. “Reinstating shareholder distributions may not be straightforward,” says Victoria Kalb, a sustainability analyst at UBS. Dividends have been the main driver of total returns in stock markets outside the US

over the past five years. “Without dividends, investors w ould have made ver y little, if anything at all. To now see dividends under extreme pressure is a concern, if those dividends are not reinstated or take several years to rebound,” says Andrew Lapthorne, a quantitative strategist at Société Générale. Just five sectors — banks, energy, pharmaceuticals, insurers and capital goods — are responsible for more than half of the total dividends paid in Europe. Banks have largely halted payouts on the instruction of regulators while energy companies’ cash flows have shrunk due to low oil prices. Royal

Dutch Shell cut its dividend last month for the first time since the second world war and its rival BP has said that distributions to shareholders will be reviewed before the end of June. BP’s shares yield 10.5 per cent, which is seen as unsustainably high by many analysts. Dividend cuts and suspensions by banks, oil companies and insurers have had a particularly large impact in the UK where FTSE 100 companies have already reduced payouts to shareholders by nearly £24bn, according to AJ Bell, the broker. Mark Peden, lead manager of the $416m Kames Global Equity Income Strategy, warns that some service sector companies may be permanently impaired by the health crisis but other businesses will want to demonstrate that they remain attractive to shareholders. “Companies will be keen to reinstate dividend payments to prove that they too are becoming healthier,” says Mr Peden. Dividend cuts are also mounting in the US where at least 67 constituents of the Russell 1000 index have already suspended payouts, more than during the financial crisis, according to Morgan Stanley. A further 36 constituents of the Russell 1000 index have reduced dividend payments but more than 200 US companies have also announced that they will raise dividends this year. “Most of those increases were announced before the US equity market peaked in February and are potentially at risk for cuts down the road,” says Boris Lerner, an analyst at Morgan Stanley.

Egyptians face economic pain despite looser lockdown Construction sites, factories and public transport are busy but business is still struggling

HEBA SALEH

nxious to protect a fragile economy, Egypt has imposed looser coronavirus restrictions than other countries but the pandemic is still exacting a heavy economic toll. The streets of Cairo are choked with traffic, workers fill construction sites and millions travel on the underground to work. Yet even with only partial restrictions and most companies still operating, commercial activity in the Arab world’s most populous country has slowed and vital sectors such as tourism have come to a complete halt. “The hit has been 100 per cent,” said Mounir Wissa, who owns two Nile cruise boats and rents a third. He had lost two months of the cruising season, he said, and there was no certainty when tourists would return. International

flights have been suspended since March. Mosques, churches, cafés and restaurants are closed but shops are allowed to stay open until 5pm, and factories are still running. A nightly curfew was eased last month by an extra hour to 9pm ahead of Ramadan, although vehicles transporting factory workers are allowed to travel after the curfew. Yet company revenues have collapsed. “Businesses lucky enough to remain open scaled back activity on a massive scale [citing] sharp falls in domestic sales and foreign demand,” said David Owen, an economist at IHS Markit, which monitors private sector activity. A clear sign of business contracting has been the hundreds of blank advertising billboards that loom over Cairo’s main avenues and flyovers. The damage is also reflected in www.businessday.ng

the drop of television advertising demand during Ramadan, which is traditionally a peak viewing season. Mohamed Khalifa, head of the Creative Lab Group advertising agency, said business was down 50 per cent from the same period last year. “Many clients are not sure what will happen,” he said. “Some projects are in the pipeline, but clients want to wait until towards the end of Ramadan to decide if they will run them.” Raouf Ghabbour, chief executive of GB Auto, which accounted for a fifth of the passenger car market in Egypt last year, said sales had been damaged by the restricted shopping hours and by the shuttering of the government traffic department for six weeks. “Showrooms are required to close by 5pm but the car market in Egypt usually operates in the evening,” Mr Ghabbour said. “Also, people don’t buy cars if they can’t license them.” His April sales were

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more than 40 per cent lower than in February, before the pandemic struck. Vehicle licensing resumed this month following complaints from car manufacturers. To combat the economic crisis, the government plans to ease restrictions by allowing hotels to reopen for domestic tourists — although there will be extra measures in place to prevent the virus spreading between guests. But some Egyptians fear that relaxing restrictions while the case numbers are still rising could overburden the health service. Others, such as Mona Mina, a former official at Egypt’s doctor’s union, have called for a more restrictive lockdown for the next two weeks. Egypt had recorded almost 12,000 coronavirus cases and more than 600 deaths by Saturday, a low number by global standards given its population of more than 100m. But the country @Businessdayng

has conducted only about 111,000 polymerise chain reaction (PCR) tests. The government has urged business owners to retain their workers and made it a condition to receive state aid. To cushion the blow, Cairo has enacted support measures including postponing taxes, paying some salaries in the tourism sector and extending low interest loans. Mr Ghabbour said he did not plan to lay off workers, but would furlough some staff and freeze capital expenditure and new hiring. To shore up its finances, the government has returned to the IMF, just months after it completed a three-year programme under a $12bn loan agreement. This time it has received $2.8bn of emergency funding and is seeking a new loan under a one-year standby agreement, reportedly for as much as $5bn, according to local press reports.

Monday 18 May 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Will Italy’s borrowing costs rise even further? Market Questions is the FT’s guide to the week ahead FT REPORTERS

ill Italy’s borrowing costs rise even further? Investors have become increasingly nervous about the damage inflicted on the debt-laden economy of Italy during the coronavirus pandemic. The additional yield demanded by investors to hold the country’s 10-year bonds over German Bunds has risen from 1.6 percentage points in late March to about 2.4 percentage points. The fear is that this vital measure of its prospects will weaken further. The poor sentiment follows signs that Italy’s economy has been operating at much lower capacity than Germany’s during lockdown. Italy’s economy shrank 4.7 per cent in the first quarter, compared with Germany’s 2.2 per cent contraction. Some fear Italy’s credit rating could be heading for junk status, which would force many investors to dump their bond holdings. However, the European Central Bank has ramped up its bondbuying programme and is widely viewed as being prepared to buy Italian bonds even if the country were to be downgraded. And despite a perceived lack of financial support from richer, northern European countries, an “Italexit”

Italy’s debt-laden economy will continue to be watched closely by investors this week, as will further details on the Fed and China’s next policy moves © FT montage

from the eurozone is seen as unlikely. “I’d be more concerned if there was a credible path for Italy or other countries outside of the eurozone,” said Jonathan Gregory, head of fixed income UK at UBS Asset Management, whose funds own Italian government bonds. “The recent widening [in the spread over Germany] is probably overdone.” Unlike 2018, when hedge funds such as Brevan Howard and Discovery Capital Management made big gains betting against Italian debt, there has been little interest from short sellers so far. Bond borrowing — a good indicator of short-selling interest — jumped from $12bn at the start of March to

$17.4bn by March 23, but has since fallen back below $9.5bn, according to data group IHS Markit. For now, at least, it seems few funds are ready to wager on higher borrowing costs. Laurence Fletcher What more will the Fed do to address the economic crisis? After Federal Reserve chairman Jay Powell last week painted a grim picture of the economic outlook, investors are eager to find out what further measures the central bank is considering as the coronavirus crisis unfolds. They will get that opportunity on Wednesday with the release of minutes from the Fed’s most recent monetary policy meeting. Ahead of the meeting last month, investors were keen for

Mr Powell to provide more guidance on the future path of interest rates, and perhaps even introduce new metrics regarding the unemployment rate or inflation to steer long-term monetary policy. Investors also sought additional clarity from the Fed about its asset-purchasing programme and how it would adjust it, now that trading conditions have improved in the markets for US Treasuries and agency mortgage-backed securities. Mr Powell did not offer clear answers to these two questions at his press conference at the end of April, but Wednesday’s minutes could provide detail on where the debate is headed. What is clear is that the Fed is not considering a policy of negative interest rates, despite recent market pricing indicating they are an increasing possibility. Mr Powell reiterated this point last week in his remarks to the Peterson Institute for International Economics in Washington, as did a handful of his colleagues. The message from Fed officials on negative rates has been “fairly clear”, said Chris Iggo, chief investment officer for core investments at AXA Investment Managers. “This is a last resort and not one they are going to choose any time soon.” Colby Smith What policy measures will China set at its annual party meeting?

The coronavirus pandemic and renewed trade tensions with the US have sharpened investors’ focus on China’s economic policy options. This week, investors will get their clearest insight yet into policymakers’ intentions as the nation’s elite convenes on Friday in Beijing for the long-delayed National People’s Congress. The annual conclave of the ruling Chinese Communist party had been scheduled for early March but was postponed as Covid-19 tore across the country. As recently as two weeks ago, it still did not have a firm start date. President Xi Jinping’s politburo has already announced priorities including protecting employment and supply chains. Analysts expect at least some type of large-scale support programme after the People’s Bank of China did not repeat its time-honoured vow to refrain from “flood-like” stimulus to support growth in its monetary policy statement last week. Further impetus for such stimulus has come from this month’s threat by US president Donald Trump to impose new tariffs on Chinese goods. Last week tensions escalated further, with Mr Trump warning that he could “cut off the whole relationship” with China. Analysts expect the central bank would allow the renminbi to weaken in response, cushioning the blow to exporters.

US companies set aside billions for late payments Reserves for credit losses jump as crisis ripples through supply chains ALISTAIR GRAY

orporate America is preparing for billions of dollars in unpaid bills as the effects of the coronavirus shutdown ripple from shopping malls, offices and factories through global supply chains. Paint suppliers, food manufacturers and truck rental operators are among a diverse group of listed US companies that have disclosed higher provisions in recent days against losses they expect from business partners falling behind on payments. “It’s just industry-wide carnage,” said Howard Steel, partner at the law firm Goodwin Procter. “Everybody is stretching payables throughout the supply chain.” The rising credit problems facing non-financial companies in the US come on top of the growing bad debt woes at banks, which boosted reserves for loan losses by tens of billions of dollars during the first quarter. Accounts published this month show Amazon increased its al-

lowance for credit losses by $380m in the first quarter to $1.1bn, in part because of late payments for its cloud computing services, while Disney’s rose by $160m in the six months to the end of March to $535m. Disney said “liquidity issues” among cinemas and other clients had “impacted timely payments”. Suppliers to the retail and fashion industries face particular challenges. Columbia Sportswear’s bad debt provisions more than trebled from a year ago to stand at $28m by the end of March. Jim Swanson, chief financial officer, said on the sportswear brand’s earnings call that the reserves were far bigger than anything it had set aside during the financial crisis. Avery Dennison, the S&P 500 materials science group that makes and designs labels, said its provision for credit losses more than doubled from last year, from $15m to $31m. The company cited particular difficulties in the clothing industry and said clients in south Asia and Central America www.businessday.ng

had been badly hit by the pandemic. Several companies said most clients continued to pay bills in a timely fashion and that distressed accounts comprised a small proportion of total receivables — products that have been delivered or used but not yet paid for. However, the ramp-up in reserves within such a short period shows executives are bracing for more distress in supply chains in the months ahead. US companies have been forced to increase the provisions in part because of an accounting change introduced this year. Previously, they only needed to add to reserves when customers actually missed payments. Under the new standard, they have to do so based on predictions about future creditworthiness. While banks are most affected by the “current expected credit losses” regime, because they make loans, listed non-financial companies also need to comply. Reza Van Roosmalen, principal

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at KPMG, said the accounting change had coincidentally taken effect in the “most extreme circumstances” and the sharp rise in reserves had been driven in part by the underlying economics. “In a lot of sectors right now there are major issues with folks either looking at delaying payment terms or defaulting on payments,” he said. Fast food brands are among the exposed as franchisees run into financial difficulties. Yum Brands recognised another $29m of bad debt expenses in the first quarter, bringing the total to $101m, after some KFC franchisees in Europe and Latin America and Pizza Hut franchisees in the US fell behind on payments. Chris Turner, chief financial officer, said on an earnings call: “It’s a really unprecedented situation and the pandemic is causing strain on our franchisees, particularly in markets where stores have been closed.” Other S&P 500 companies that increased allowances for credit @Businessdayng

losses in the first quarter included the fleet management and logistics company Ryder System, where they rose from $23m to $41m. The company cited “slower Covid-19 related payment activity”. PPG, the coatings supplier, more than doubled its allowance for uncollectible accounts during the first quarter, bringing its total to $50m. Vince Morales, chief financial officer, said PPG had added to reserves “in every one of our businesses, in every one of our regions”, adding executives were particularly concerned about small businesses. Pepe Rodriguez, managing director and partner at Boston Consulting Group, said companies were being “selectively lenient” in dealing with late payments to avoid alienating business partners or pushing them out of business. “If you push too hard, you’re going to find yourself better able to weather the storm, but not necessarily to be in the position you want to be in the recovery,” he said. “There’s always a rebound.”

Monday 18 May 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Musicians and social distancing

he economic effects of the Coronavirus with its social distancing restrictions have had a severe impact on the global entertainment industry with creatives seeing a significant loss of income. The temporary break in playing live has removed one relatively dependable source of income. Many musicians survive from gig to gig with typical sources of other income from entertaining at events, playing in church and teaching. As all these areas have been affected by the pandemic, there is a compounded loss of work as live gig dates and tours have been postponed indefinitely or cancelled. Here are some ideas for musicians and other entertainers as you navigate these challenging times: Sort out your admin Many creatives can be somewhat lax about important administrative matters; freelancers operating largely without structure. Use this quiet time to put your books up to date and craft out a sustainable business plan. You are your business; things are different now, so it does need some deep reflection to review how you did business in the past, and what the future might hold. Review your finances Take a critical look at your finances. A strict budget will help you to prioritise as you must cut back drastically on expenses, except for essentials. It is at times like this that the need for an emergency fund to tide you over for a period of say six months of little or no income, becomes glaring. Without the safety net of emergency savings, health insurance or a pension plan, one is very vulnerable to any shock. Start to be proactive about building savings. Start with what you have, no matter how little. There will be another crisis; that is part of life. Be prepared. Map out a digital strategy With everyone having to spend so much more time

at home, your audience is looking for ways to fill that time. Are you online? Your entire fan base probably is, as well as millions of others that don’t yet know about you. The internet makes it possible to share and promote your work to a global audience reaching millions cheaply and efficiently. With the right strategy, you can build a following in faraway lands that are happy to watch you on their devices. Take your online presence seriously. If you cannot handle this yourself, hire help. You do need to be out there. This is the time to complete some of the tasks that you’ve neglected. This could include a merchandise range, a revamp of a tired website and social media accounts or a YouTube channel. An elegant website with easy navigation and designed for e-commerce may get you some sales over time. An online concert? Why not host an Instagram or YouTube live concert? Advertise the live stream and prepare a small set just as you would for a normal gig. With the curfew and venues closed you have a better chance of getting a large group to watch you perform online now than you would have before. The best part is that both you and your audience are staying safe but you will also be getting your music out there.

No one can survive on totally free gigs for the foreseeable future. There is nothing wrong with including a donation link for people to pay something if they enjoyed the show. Don’t be embarrassed to ask for money that you need. Ticket sales, yes even for an online concert are likely to become the norm. An online concert is not the same as seeing you in person but it may be all we have for a while. At the end of this, audiences will have a new appreciation and desire for that special connectedness, that special magic that live music brings. Live music at Zoom events There are still opportunities to perform at online events; webinars, birthdays, weddings, funerals etc. Don’t be mediocre; practice makes perfect and you should also be able to manage the online platform as best you can to give viewers an excellent experience. There is nothing more frustrating than a musician struggling with the network as hundreds of people listen in. Keep creating content Yes you can’t gig or tour, but you have gained precious time to work on your creativity and create content. Write new songs and scripts, create new beats, make new music. Build a war chest of material that you can pull off the shelf at

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any time. Keep it fresh and current. Revisit old work that you never got round to releasing and perfect it. Continue to produce, even during the quiet times. Sometimes the best work comes from challenging times such as this. Develop yourself Invest in yourself constantly and be proactive about developing both personally and professionally. Self-development is one of the greatest investments that you can make. When last did you enroll on a course or have some training? There are so many free or affordable webinars. Find one or two that meet your needs and enrol. You should always be learning, growing and adapting. Endorsements Large corporates are willing to invest significant sums to associate with particular entertainers that come with a significant fan base and audience. Take deliberate steps to develop and position a strong and timeless personal brand. Your image, credibility, reputation and style play a role in determining a brand’s interest and can significantly supplement and diversify revenue streams. The popularity and success of celebrity endorsement have prompted stars to expand their portfolios by launching their own clothing, perfume, real estate, children’s products, or col-

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laborate with major brands to keep their names out there and secure their earning potential. Create multiple streams of income Whether it is from a pandemic or during normal times, the need to diversify earnings becomes even more glaring for entertainers for whom irregular income is the norm. Passive income comes from having a diversified portfolio includes investment income, dividends, rent, royalties and so much more. Licensing fees For composers, commissions are perhaps the most sought-after method of making money for original work. If you are a prolific songwriter, you can write songs for other musicians or compose specifically for movies, Television shows, adverts, jingles and so on. A composer could be paid a licensing fee to write music score for a production. Commissions also come in the form of either a lump sum for a one-time project, such as a movie score, or in a recurring contract, such as scoring a television series. It is possible for talented composers to find consistent work by being commissioned to write television scores. Thankfully TV and radio are now needed more than ever. Can you teach? There is a captive audience with the students of

@Businessdayng

the world learning at home. It is not just about academic subjects; parents will not want their children to miss out on important extracurricular activities. A tutor with high quality online lessons will be highly sought after. Can you teach your instrument to individuals and groups? This is a great way to supplement your stricken income doing what you love and leaving you enough time to build back your business. Support others There will always be someone far worse off than you. If you are able to support others financially, through your network or in other ways, do so. Harness opportunities to collaborate; this is the time for collaboration and not competition; together everyone can achieve more. It goes without saying that these are trying times for us all. It will require focus, innovation, and collaboration to navigate these choppy waters. It will be those that think outside the box, continue to develop themselves and are willing to collaborate that will come out stronger on the other side. Above all remember that health is wealth. Be mindful of your mental and physical health and do all you can to remain positive, healthy and safe.

Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

Monday 18 May 2020

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 15 May, 2020

Top Gainers/Losers as at Friday 15 May 2020 LOSERS

GAINERS Company PRESCO

Opening

Closing

Change

N36.45

N40.05

3.6

Company

Opening

Closing

Change

DANGCEM

N146

N143.5

-2.5

ASI (Points)

23,871.33

DEALS (Numbers)

STANBIC

N29.25

N32.15

2.9

MTNN

N110

N109.5

-0.5

NASCON

N10.05

N10.55

0.5

CILEASING

N5.1

N4.6

-0.5

VOLUME (Numbers)

GUARANTY

N22

N22.5

0.5

GUINNESS

N17.8

N17.5

-0.3

VALUE (N billion)

GLAXOSMITH

N5.9

N6.35

0.45

WAPCO

N10.8

N10.7

-0.1

4,330.00 221,447,170.00

MARKET CAP (N Trn)

2.448

Stories by Iheanyi Nwachukwu

Kayode Akinkugbe, managing director, FBNQuest Merchant Bank

Others. The offer was 2.3 times oversubscribed, which assisted in driving the closing price down to 10.50percent and the Net Proceeds will be utilised for the purchase of three-year 10.50percent Senior Unsecured Notes issued by FBNQuest Merchant Bank Limited, pursuant to the terms and conditions in the executed transaction documents. The transaction adds to the organisation’s impressive portfolio, and highlights its capabilities in the successful

execution of sizeable capital market and commercial debt transactions. Speaking on the transaction, Akinkugbe stated, “We are pleased to announce the listing of the FBNQuest MB Funding SPV Plc Bond on the Nigerian Stock Exchange. This is the debut bond issued by the organisation, and the success recorded attests to the degree of confidence investors have in the business”. He further stated that “As a full-service investment bank and asset manager, we advised on the bond issuance and structure;

and also leveraged our extensive distribution capability to ensure the success of the transaction.” Commenting on the listing, Onyema said, “We welcome FBNQuest Merchant Bank’s debut listing of its N5 billion Series 1 Bond on the Exchange, as we continue to support the Bank in meeting its capital raising needs and business objectives. We also commend all the parties to the transaction. “At t h e N S E , w e a re committed to giving issuers and investors a platform to access right-sized capital even in the toughest of times as well as providing opportunities for secondary market trading activities across multiple asset classes – equities, bonds, ETFs”, he said. FBNQuest has advised on the issuance of several bonds and commercial papers for organisations such as Interswitch; Mixta Real Estate plc, Dangote Cement Plc, Nigerian Breweries Plc (NB), Lafarge Africa Plc, Flour Mills of Nigeria Plc (FMN), Wema Bank Plc, and UACN Property Development Company Plc (UPDC) to mention a few. The organisation received the award for the Most Innovative Registration Member at the 2019 FMDQ Gold Awards, in recognition of its continuous deliver y of value in the registration of bond-related transactions at the FMDQ Securities Exchange.

Covid-19: Julius Berger donates to isolation centres in Kaduna, Kano States

igeria’s leading engineering construction company, Julius Berger Nigeria Plc during the week continued its strategic commitment, consistent efforts and vigorous voluntary operations to support the Nigerian Government and people in the fight to contain the spread of corona virus in the country. Sequel to extending its “Food for our Communities Campaign” to Kaduna and Kano States last week, Julius Berger Nigeria Plc yesterday also sent its hospital palliatives donation team to deliver hospital beds and mattresses to isolation centres in the two States. The Julius Berger team

was led by the company’s Project Coordinator for the AbujaKaduna-Kano Road construction project, Mr Ibrahim Yusuf. The hospital beds and mattresses donation in Kaduna State took the Julius Berger team to the office of the Secretary to the State Government (SSG), Hassan Usman Katsina House, Kawo Kaduna, where the Julius Berger team leader, Ibrahim Yusuf, handed the beds over to the Permanent Secretary, Office of the SSG, Alhaji Bashir Muhammed. The Permanent Secretary, on behalf of the Governor and people of Kaduna State, thanked Julius Berger for the support the company offered Kaduna State “at this critical www.businessday.ng

time of the covid-19 pandemic”. Bashir commended the company for its show of goodwill and asked the Julius Berger team to convey “the appreciation of the Kaduna State Government and people to the Management of Julius Berger for the company’s sensitivity, empathy and magnanimity”. From Kaduna, the Julius Berger team travelled to Kano State where the company also donated more hospital beds and mattresses to the Aminu Kano Teaching Hospital. The items were handed over by Julius Berger’s team leader Ibrahim Yusuf to the Chief Medical Director (CMD) of the hospital, Abdulrahman Abba Sheshe. Yusuf said the donation of the

beds and mattresses to the hospital’s isolation centre was Julius Berger’s sincere way of identifying with the immediate and critical needs of the hospital and the Kano community. The CMD, speaking on behalf of the Honourable Minister of health, the Aminu Kano Teaching Hospital and the Kano communities, expressed gratitude for the donation by Julius Berger. He requested the Berger team to also convey the hospital’s sincere appreciation to the Management of Julius Berger for the kindness of the voluntary donation, adding that it will go a long way to assist the work of the frontline health workers in the fight to contain the spread of the covid-19 pandemic in Kano.

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12.440

FBNQuest lists N5bn MB Funding SPV Bond on Nigerian Stock Exchange BNQuest Merchant Bank, the investment banking and asset m a n a g e m e n t subsidiary of FBN Holdings Plc, on Friday May 15 at the Nigerian Stock Exchange, listed the FBNQ MB Funding SPV Plc Series 1 Bond out of the N50 billion Bond Issuance programme. The NSE CEO, Oscar N. Onyema hosted the Managing Director, FBNQuest Merchant Bank, Kayode Akinkugbe to a digital closing gong ceremony by 2:15pm. The ceremony commemorates the successful debut listing of the company’s N 5 b i l l i o n B o n d o n Th e Exchange and was streamed live. FBNQuest coordinated the principal activities of the transaction ranging from the structuring, arranging, and issuing the Series 1 Bond out of the Bond Issuance Programme launched in November 2018. The organisation advised on the transaction structure and marketing strategy for the bonds including investor engagements. The Bonds were successfully distributed to a diversified mix of investors which included Pension Fund Administrators (PFAs), Insurance Companies, Asset Managers, HNIs and

Covid-19: Nigeria’s SEC says leveraging fintech in regulation

o e n s u re p ro p e r regulation of Ni g e r i a’s ca p i t a l market in the face of the Covid-19 pandemic, the Securities and Exchange Commission (SEC) said it is leveraging the various opportunities available in the Fintech space. Mar y Uduk, acting Director General of SEC who said this over the weekend noted that the apex regulator had to employ various means to ensure that the market is able to operate remotely and also ensure that investors are able to get the benefit of their investments at this critical time when they need them. “No one saw this coming, but here it is with us. We had to quickly activate our Business Continuity Plans to ensure that there is no gap in regulation. So most of us are leveraging technology, and staff are working remotely, we are interacting with market operators who are also working remotely. “Our staff are equipped to be able to continue to work remotely and support the market in every area. We have also issued circulars to capital market operators guiding them on how we expect that the market remains open and continues to function Seamlessly. “You are aware that many companies have been able to hold virtual AGMs and have also paid out dividends to their shareholders in spite of the lockdowns. This they have been able to do with the aid of technology” Uduk stated. Uduk said the pandemic has disrupted the market and everything else but added that with the deployment of technology the market is able to remain open and function. According to the SEC acting DG, “In the past we talked a lot about FinTech or Financial Technology and how it has disrupted the market but now its Covid-19 that has so disrupted the market, disrupted everything the way it is and therefore as human beings we have to adapt to be able to ensure that our lives continue and not allow Covid-19 to put our lives on hold. Therefore, we are

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leveraging technology to be able to continue to function. Initially people were afraid of technology but right now it has become a saving grace given the Covid-19”. She disclosed that there are recent developments and opportunities in the Fintech space and said the Commission is leveraging these opportunities. “We are adopting technology in our regulatory and operational activities and have established a Division dedicated to Fintech and Innovation. We are engaging and guiding Fintech startups that seek to operate in the Nigerian capital market, while we encourage those we regulate to embrace Fintech,

Mary Uduk, acting director general, SEC

not as competitor, but as enablers to their existing operations and processes. “We are finalising some existing regulations in the areas of crowdfunding and other Fintech-based trading and investment platforms. We are aware that Fintech provides opportunity to bring efficiency into our activities, introduce new products and new platforms as well as supporting development of technology start-ups” she added. The Commission had launched the Fintech Roadmap for the Nigerian Capital Market and a dedicated committee is working with the commission and other key stakeholders to implement the recommendations of the roadmap report.

Monday 18 May 2020

BUSINESS DAY

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Monday 18 May 2020

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 15 May 2020 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. 222,157.66 6.25 -0.79 217 21,108,052 UNITED BANK FOR AFRICA PLC 213,746.38 6.25 2.46 165 15,472,012 ZENITH BANK PLC 485,075.83 15.45 0.32 393 18,696,342 775 55,276,406 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 177,681.70 4.95 -1.01 272 19,709,712 272 19,709,712 1,047 74,986,118 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,228,819.18 109.50 -0.45 154 1,433,765 154 1,433,765 154 1,433,765 BUILDING MATERIALS DANGOTE CEMENT PLC 2,445,312.81 143.50 -1.71 182 2,201,176 LAFARGE AFRICA PLC. 172,353.41 10.70 -0.93 132 2,468,604 314 4,669,780 314 4,669,780 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 280,334.99 476.40 - 10 2,917 10 2,917 10 2,917 1,525 81,092,580 REAL ESTATE INVESTMENT TRUSTS (REITS) SFS REAL ESTATE INVESTMENT TRUST 1,386.00 69.30 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 8,938.70 3.35 - 7 64,836 UPDC REAL ESTATE INVESTMENT TRUST 7 64,836 7 64,836 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 3,312.39 103.20 - 0 0 VALUEALLIANCE VALUE FUND 0 0 0 0 7 64,836 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 52,512.75 55.05 - 7 15,403 PRESCO PLC 40,050.00 40.05 9.88 45 622,046 52 637,449 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 2,100.00 0.70 - 10 175,574 10 175,574 62 813,023 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 198.47 0.51 - 0 0 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 29,266.55 0.72 1.39 36 2,922,830 20,025.01 6.95 -1.44 55 29,509,292 U A C N PLC. 91 32,432,122 91 32,432,122 BUILDING CONSTRUCTION ARBICO PLC. 344.52 2.32 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 35,574.00 26.95 - 73 608,432 165.00 6.60 - 0 0 ROADS NIG PLC. 73 608,432 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,078.72 0.80 - 1 500 1 500 74 608,932 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 5,950.42 0.76 - 25 101,854 GOLDEN GUINEA BREW. PLC. 829.98 0.81 - 0 0 GUINNESS NIG PLC 38,331.70 17.50 -1.69 133 1,581,984 INTERNATIONAL BREWERIES PLC. 128,937.93 4.80 - 38 6,527,021 NIGERIAN BREW. PLC. 299,883.83 37.50 - 53 424,987 249 8,635,846 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 153,600.00 12.80 - 48 57,136 FLOUR MILLS NIG. PLC. 86,107.97 21.00 - 44 557,710 HONEYWELL FLOUR MILL PLC 7,771.59 0.98 - 7 130,500 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 27,951.57 10.55 4.98 42 221,632 UNION DICON SALT PLC. 2,993.06 10.95 - 0 0 141 966,978 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 14,086.52 7.50 - 53 545,444 NESTLE NIGERIA PLC. 824,362.50 1,040.00 - 86 118,679 139 664,123 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 6,254.22 5.00 -1.96 11 3,242,246 11 3,242,246 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 17,867.15 4.50 - 26 405,350 UNILEVER NIGERIA PLC. 72,961.57 12.70 - 61 379,231 87 784,581 627 14,293,774 BANKING ECOBANK TRANSNATIONAL INCORPORATED 91,747.76 5.00 - 42 2,074,589 FIDELITY BANK PLC 52,154.63 1.80 0.56 44 4,190,834 GUARANTY TRUST BANK PLC. 662,201.53 22.50 2.27 359 29,819,730 JAIZ BANK PLC 17,383.91 0.59 -1.67 11 509,773 STERLING BANK PLC. 37,427.54 1.30 0.78 356 2,350,121 UNION BANK NIG.PLC. 186,372.82 6.40 - 27 629,984 UNITY BANK PLC 5,260.20 0.45 2.27 14 465,027 WEMA BANK PLC. 21,987.45 0.57 1.79 46 2,639,220 899 42,679,278 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 9,857.28 0.87 1.16 76 3,846,500 AXAMANSARD INSURANCE PLC 17,955.00 1.71 - 8 42,200 CONSOLIDATED HALLMARK INSURANCE PLC 2,926.80 0.36 - 0 0 CORNERSTONE INSURANCE PLC 8,690.41 0.59 - 0 0 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 0 0 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,977.33 0.27 - 4 38,267 LAW UNION AND ROCK INS. PLC. 4,296.33 1.00 - 1 95,696 LINKAGE ASSURANCE PLC 3,280.00 0.41 - 0 0 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 7 1,650,640 NEM INSURANCE PLC 10,561.01 2.00 - 2 4,500 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 3,229.53 0.60 - 14 987,500 REGENCY ASSURANCE PLC 1,333.75 0.20 -4.76 15 11,380,900 2,272.89 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 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 - 1 1,000 WAPIC INSURANCE PLC 7,677.34 0.32 3.23 6 182,322 134 18,229,525 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 4,070.22 1.78 9.88 58 3,826,248 58 3,826,248

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 6,784.62 1.05 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,671.82 1.36 - 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 7,500.00 3.75 - 37 324,316 33,526.63 5.70 - 3 11,000 CUSTODIAN INVESTMENT PLC 495.00 0.33 - 0 0 DEAP CAPITAL MANAGEMENT & TRUST PLC FCMB GROUP PLC. 34,060.66 1.72 -4.44 45 489,451 ROYAL EXCHANGE PLC. 1,131.98 0.22 - 0 0 STANBIC IBTC HOLDINGS PLC 337,734.70 32.15 9.91 44 1,947,335 UNITED CAPITAL PLC 14,820.00 2.47 -0.80 86 7,892,290 215 10,664,392 1,306 75,399,443 HEALTHCARE PROVIDERS EKOCORP PLC. 2,991.61 6.00 - 1 10 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 1,030.41 0.29 - 3 329,837 4 329,847 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 593.50 0.60 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 5,946.13 2.85 8.78 138 4,486,000 GLAXO SMITHKLINE CONSUMER NIG. PLC. 7,593.82 6.35 7.63 53 804,667 MAY & BAKER NIGERIA PLC. 5,382.73 3.12 0.32 85 2,959,321 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 1,367.39 0.72 9.09 21 1,401,128 556.71 3.62 - 0 0 NIGERIA-GERMAN CHEMICALS PLC. PHARMA-DEKO PLC. 325.23 1.50 - 0 0 297 9,651,116 301 9,980,963 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 710.40 0.20 - 0 0 0 0 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 911.95 0.31 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 216.00 2.00 - 0 0 TRIPPLE GEE AND COMPANY PLC. 287.07 0.58 - 0 0 0 0 PROCESSING SYSTEMS CHAMS PLC 1,033.13 0.22 - 28 401,258 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 0 0 28 401,258 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 8 422 8 422 36 401,680 BUILDING MATERIALS BERGER PAINTS PLC 2,028.76 7.00 - 16 202,972 1,070,113.59 31.60 - 24 288,693 BUA CEMENT PLC CAP PLC 14,455.00 20.65 - 21 70,939 MEYER PLC. 265.62 0.50 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,769.32 2.23 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 61 562,604 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,192.12 2.03 - 0 0 CUTIX PLC. 2,395.40 1.36 - 14 108,615 14 108,615 PACKAGING/CONTAINERS BETA GLASS PLC. 34,998.04 70.00 - 2 437 GREIF NIGERIA PLC 388.02 9.10 - 0 0 2 437 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 77 671,656 CHEMICALS B.O.C. GASES PLC. 1,519.29 3.65 - 0 0 0 0 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 77.00 0.35 - 0 0 0 0 0 0 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 8 1,216,023 8 1,216,023 INTEGRATED OIL AND GAS SERVICES OANDO PLC 33,689.13 2.71 -3.21 35 1,203,717 35 1,203,717 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 63,789.30 176.90 - 7 3,590 ARDOVA PLC 20,839.70 16.00 - 7 65,950 CONOIL PLC 13,254.49 19.10 - 12 81,424 ETERNA PLC. 3,338.61 2.56 - 14 63,101 MRS OIL NIGERIA PLC. 4,206.05 13.80 - 1 50 TOTAL NIGERIA PLC. 34,902.84 102.80 - 33 39,190 74 253,305 117 2,673,045 ADVERTISING AFROMEDIA PLC 1,376.10 0.31 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 235.27 0.20 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,779.06 3.00 1.35 32 825,583 TRANS-NATIONWIDE EXPRESS PLC. 412.59 0.88 - 0 0 32 825,583 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 1 250,000 1 250,000 HOTELS/LODGING CAPITAL HOTEL PLC 4,181.71 2.70 - 0 0 IKEJA HOTEL PLC 2,182.74 1.05 - 0 0 TOURIST COMPANY OF NIGERIA PLC. 7,076.28 3.15 - 0 0 TRANSCORP HOTELS PLC 30,401.62 4.00 - 0 0 0 0 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 3,960.00 0.33 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 181.44 0.30 - 2 6,600 LEARN AFRICA PLC 925.74 1.20 - 3 22,784 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 448.67 1.04 - 2 13,960 7 43,344 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 580.20 0.35 - 2 501 2 501 SPECIALTY INTERLINKED TECHNOLOGIES PLC 688.80 2.91 - 0 0 SECURE ELECTRONIC TECHNOLOGY PLC 1,126.31 0.20 - 1 1,363

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BUSINESS DAY Monday 18 May 2020 www.businessday.ng

MTN Nigeria: Opportunities, challenges as COVID-19 headwinds stoke Nigeria’s digitalisation embers Segun Adams

cross Nigeria, and the rest of the world, the cost of the novel coronavirus pandemic is still being counted as some businesses in sectors like hospitality and aviation approach a precipice, while a few others like those in technology have been dealt softer blows. For MTN Nigeria, the country’s biggest mobile phone service provider, there have been gains and costs from the spillover effects of the pandemic, showing how Telcos are not only faced with unique opportunities but also challenges amid the coronavirus outbreak. In light of extensive socialdistancing measures put in place to curb the spread of COVID-19 in Nigeria, businesses across industries in the key affected states activated their business continuity plans and employed or accelerated the adoption of digital technology to enable remote working, supporting data revenue of service providers. MTN Nigeria, for instance, recorded a double-digit surge in data revenue in the first quarter of 2020. The 59.2 percent year-on-year increase in data revenue, which made up around 22.6 percent of service revenue (~N328bn) in the quarter, indicated a 12.3 percent growth from Q4 2019. The revenue increase followed a 130.4 percent yearon-year growth in data traffic supported by the addition of 1.7 million active data users and increased 4G population coverage in the period. During the quarter 1.6 million new users drove active base for digital subscription to 3.8 million users, and revenue growth by 63.7 percent (8% Q/Q). Also, 4.2 million new subscribers were added to MTN network of now 68.5 million users, driving voice revenue up by 7.4 percent. While the total lockdowns in key states like Lagos, Abuja and Ogun (now being eased whilst a nation-wide interstate lockdown is in place) supported data revenue, Telcos face supply-chain and cost risks from the reduction in mobility in the country and across borders and risks emanating from decline earnings of their customers. MTN Nigeria said post-lockdowns, it has witnessed a voice traffic decline due to a slow-

down in economic activities and weakening in workers’ earning capacity. “Voice revenue has experienced an immediate impact from the current macro disruptions, based on early trends, especially in the mass market segment,” the Telco noted. “Although we have witnessed growth in data revenue, it does not fully offset the decline in voice revenue.” Also, the Telco reported an increase in cost arising from exchange rate adjustment and significant operational challenges and supply chain disruptions due to the lockdown. “The remainder of the year will be shaped by the impact of these developments which remains highly uncertain at this time,” said Ferdi Moolman, MTN Nigeria’s CEO in a commentary on the result. Despite the unprecedented challenges, MTN Nigeria showed resilience across most of

its revenue segment even several developments in the quarter including the increase in VAT from 5 percent to 7 percent adversely affected both revenue and costs. While MTN Nigeria noted a rise in different categories of expenses, digital revenue rose 63.7 percent and Fintech revenue, from services like Mobile Money (MoMo), jumped 36.1 percent with the MoMo agent network expanding by 70,000 agents to a total of 178,000 agents’ strength nationwide in the quarter. Fintech revenue was up 36.1 percent year-on-year due to increased adoption of MTN Xtratime, an airtime lending service. MoMo agents processed over 5.6 million transactions (volume) of which 80 percent were airtime vending. Notably, transaction fees for all money transfers using MoMo agent network were suspended for an initial one-month period from March 23 as part of the Y’ello Hope Package.

‘‘

Despite the unprecedented challenges, MTN Nigeria showed resilience across most of its revenue segment even several developments in the quarter including the increase in VAT from 5 percent to 7 percent adversely affected both revenue and costs

EBITDA grew 15.3 percent to N173.5bn with EBITDA margin moderating by 0.6 percent points to 52.7 percent. Profit before tax rose 8.9 percent to N76.3 billion and profit for the period increased by 5.6 percent to N51.146bn in Q1. Outlook for 2020 MTN said it is moderating its near-term outlook due to highly uncertain external factors and given the impact of the virus on the exchange rate and oil price. In response to the fallout from the novel coronavirus outbreak, MTN Nigeria said it has put in place measures to minimize the temporary disruption in the supply chain on operational capacity and has deployed additional resources to upgrade the capacity of its network and expand population coverage. MTN Nigeria said it is currently diversifying funding strategies, has strong free cash flow and has approved loan facility headroom to meet financial obligations. The Telco noted that in line with existing banking covenants, there is headroom to leverage the balance sheet optimally for strategic investments. In addition, it said major credit exposures are from trade partners but are secured by bank guarantees which enable the trade partners to improve sales turnover even during the period of lockdown. Notable, MTN Nigeria’s balance sheet carries low foreign currency exposure with debt split 92% in local currency compared to 8% in foreign currency,

a move that enables the company to withstand currency volatility. For 2020, MTN said outlook would be measured but it is well placed to withstand the macroeconomic and social turmoil. The company said it would continue to monitor and analyze developments and their potential impact on the business, implementing mitigating interventions. MTN Nigeria said it would continue to invest in the network to provide adequate capacity and resilience. Analysts say they expect MTN’s Voice revenue to remain strong for the year especially on the moves by the Telco to deepen its reach in rural areas, while segments like Data and Fintech will remain upbeat with a possible PSB license this year as a plus. MTN contributed a billion naira as part of a private sectorled coalition, CACOVID, to assist the FG in curbing the pandemic while it rolled out other initiatives targeted at individuals and customers. Market performance Shares of MTN Nigeria have gained 4.29 percent this year to trade at N109.5 per share as at the close of trading on Friday. In comparison, the broader market measured by the NSE All-Share Index has declined by around 11 percent since the start of the year. MTN Nigeria shares dipped to as low as N90 a unit in late March, at the onset of the lockdowns in select states, but has since then gained roughly 22 percent.

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