BusinessDay 18 Nov 2019 by BusinessDay

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GUINNESS MTNN N28.60 10.00pc N121.00 26,851.68

FMDQ Close

Everdon Bureau De Change

Bitcoin

NSE

-0.74pc

Foreign Reserve - $40.08bn Cross Rates - GBP-$:1.29 YUANY-N 51.58 Commodities Gold

Cocoa

US$ 2,685.00

₦3,111,757.97

Crude Oil

N300

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$-N 357.00 360.00 £-N 459.00 466.00 €-N 390.00 398.00

-0.46pc

$1,467.44 $63.53

news you can trust I **MONDAY 18 NOVEMBER 2019 I vol. 19, no 437

Buy

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Market

Spot ($/N)

I&E FX Window CBN Official Rate Currency Futures

($/N)

fgn bonds

Treasury bills

362.58 306.90

3M 0.00 8.59

NGUS JAN 29 2020 362.99

5Y 0.00 8.30

0.00

12.28

NGUS APR 29 2020 363.96

10 Y -0.12

30 Y -0.14

12.83

13.19

NGUS NOV 25 2020 366.22

Emefiele buys time for Buhari as OMO policy stimulates economy, for now FG, firms’ borrowing costs fall, stocks soar Zenith, UBA’s dividend yields surpass 1yr T-bills

LOLADE AKINMURELE

igeria’s central bank Governor Godwin Emefiele has unleashed unorthodox monetary policy that is temporarily boosting financial indicators, buying some badly-needed time for President Muhammadu Buhari to unveil wider reforms to stimulate a slow growing economy. Emefiele’s ban on Nigerian pension funds and other nonbank financial institutions buy-

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L-R: Dami Owolabi, senior marketing manager, PalmPay; Adebiyi Niyi, director of corporate communications, VISA; Sofia Zab, global head of commercial and marketing, and Chidi Okonkwo, deputy GM, TECNO Nigeria, at the PalmPay press conference, in Lagos.

FG’s protectionist policies leave investors guessing ODINAKA ANUDU

he Federal Government’s disposition to technically ban everything from ethanol to milk is creating huge uncertainty and distortions

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Inside Sanwo-Olu visits China for increased collaboration with Lagos P. 2

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news Sanwo-Olu visits China for increased collaboration with Lagos JOSHUA BASSEY

L-R: Idowu Olayinka, vice chancellor, University of Ibadan (UI); Mutka Joshua Waklek, pro-chancellor, UI; Rauf Olaniyan, deputy governor, Oyo State; Adegboyega Oyetola, governor, Osun State/chairman of occasion; Isaac Adewole, former minister of health and his wife, Olubukola; Uduimo Itsueli, chairman, University of Ibadan Research Foundation (UI-Research Foundation), and his wife Bridget, at the unveiling of Uduimo Itsueli Foundation building and Isaac Folorunso Adewole Library of Tomorrow (IFA-LoT), in Ibadan, Oyo State. Pic by Olawale Amoo

Access, FBNH, UBA, Zenith still on bid as bulls aim for Santa rally IHEANYI NWACHUKWU

ince Treasury Bills rates hit south, the bulls are now locking horns with bears in the equities market, still leaving the Nigerian Stock Exchange (NSE) All Share Index (ASI) northbound and looking to engineer a Santa rally or bullrun into the end of the year. Sentiment around banking stocks remains strong and it reflects on investors’ bid cart. Chief among their picks are tier-1 lenders – Access Bank plc, GTBank plc, FBN Holdings, Zenith plc, and UBA plc. They are preferred counters by research analysts based on their dividend and yield potential. At N10.50 per share as at Friday, November 15, Access Bank has outperformed the NSE ASI, showing a strong positive return of 54.4 percent year-to-date (YTD). The NSE Banking Index,

which provides an investable benchmark that captures the performance of most capitalised and liquid banking stocks, has seen remarkable positives lately. It gained 6.77 percent in the trading week ended November 15, 2019 while it has gained 17.06 percent this month. The record upward trend of the ASI was limited by profit-taking action by investors during the trading session on Friday which moderated the gains. The market gained marginally by +0.03 percent. The record upward trend of the ASI was limited by profit-taking action by investors during the trading session on Friday which moderated the gains. The market gained marginally by +0.03 percent. This is happening barely two weeks after the CBN banned non-bank financial institutions from participating in Open Market Opera-

tions (OMO) auction. In show of supremacy of the bulls, equity investors have seen about N300 billion added to their pockets despite bouts of profit-taking activities. Vetiva Securities expects the equities market to remain positive in the next trading session evidenced by increased transaction sizes, strong positive market breadth as well as renewed investor confidence. “When money market rates are down, the equities market becomes attractive for better returns,” said Capital Bancorp. FBN Quest research also expects “the market to maintain the same trading pattern in the next session”. While investors continued to bet on most value stocks, some of them have also shown resilience despite pockets of sell pressure. “With excess liquidity in the overall financial system,

and the ripples occurring in the fixed income market, we could see continued interests in the local equities,” said research analysts at Lagosbased United Capital plc. This rally at the stock market has made stockbrokers happy, according to some of them who spoke to BusinessDay ahead of their upcoming conference. They see the upward trajectory continuing. From N12.81 trillion in the week ended November 8, equity value has risen to N13.071 trillion as at November 15. The NSE ASI has also risen to 26,851.68 points from 26,314.49 points in the same period, representing an increase of 2.04 percent in one week and 1.87 percent this month. This record positive helped reduce equity investors’ negative year-to-date return to 1.87 percent.

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...with Seven Energy acquisition

avannah Petroleum plc, the British independent oil and gas company focused around activities in Niger Republic and Nigeria, said it had completed the acquisition of Seven Energy started in December 2017, making it the latest entrant in Nigeria’s exploration field in dire need of investments. The transaction involves the acquisition by Savannah of Seven Assets and the restructuring of Seven Energy’s existing indebtedness of over $900 million, buy-out of minority shareholders in Universal Energy Resources Limited, acquisition of an additional 60 percent interest in Accugas, as well as the sale of a 20 percent interest in Seven Uquo Gas Limited and Accugas to African Infrastructure Investment Managers (AIIM). At a court hearing on November 13, administrators

were appointed to Seven Energy International Limited and on November 14 effected the transfer of the Seven Assets to group companies controlled by Savannah and AIIM. Following this step, final long-form documentation with respect to the transaction was executed in accordance with the agreed steps as set out in the Implementation Agreement, and the transaction has now been completed, the company said. Andrew Knott, CEO of Savannah Petroleum, said the deal transforms Savannah into a full-cycle E&P company in West Africa and “marks the start of a very exciting time for us”. “We have acquired a business with great people and a strong set of exploration, appraisal, development and production assets which are expected to be highly cash flow generative for the com-

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pany,” Knott said. Following the completion of the transaction, Savannah now owns the Seven Assets, which comprise an 80 percent interest in Seven Uquo Gas Limited which in turn holds a 40 percent participating interest in the Uquo field located in South East Nigeria (with SUGL assuming responsibility for all operations of the gas project at the Uquo field following the occurrence of the Frontier Transaction). Savannah also owns a 51 percent interest in the Stubb Creek field located in South East Nigeria through 100 percent ownership of Universal Energy Resources Limited and an 80 percent interest in the Accugas midstream business, comprising the 200 million standard cubic feet a day (mmscfd) Uquo gas processing facility, a c.260km pipeline network and longterm gas sales agreements

…Overnight rate rises to 14.07% HOPE MOSES-ASHIKE

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Naira stabilises at N358/dollar as CBN injects $341.75m, CNY14.7m

he naira-dollar exchange rate stability at the foreign exchange market remained strong on Friday as the Central Bank of Nigeria (CBN) intervened in the Retail Secondary Market Intervention Sales with downstream customers. (SMIS) to the tune of $341.75 One of Savannah’s part- million in addition to CNY14.7 ners in the transaction is Afri- million in the spot and shortcan Infrastructure Investment tenored forwards segment of Managers which, as part of the inter-bank foreign market. the transaction completion, Naira traded at the rate of acquired 20 percent interests N358 per dollar at the Bureau in SUGL and Accugas in re- De Change (BDC) segment of turn for cash consideration the foreign exchange and the to Savannah of US$54 million parallel market. which has now been received. The dollar intervention was This transaction gives Sa- for requests in the agricultural vannah a material producing and raw materials sectors. The asset base which is expected Chinese Yuan, on the other to generate significant asset- hand, was for Renminbi-delevel free cash flows, comple- nominated Letters of Credit. menting the company’s prolific Isaac Okorafor, CBN direcNiger exploration and develop- tor in charge of corporate comment assets, exposure to signif- munications department, reiticant upside potential, through erated that the market continboth volume and margin uplift, ued to enjoy stability because through the utilisation of addi- of the regular interventions by tional capacity within Accugas’ the bank. infrastructure and a strong platHe also noted that the deform in the well-established mand management approach and high potential Nigerian oil introduced by the bank had and gas industry. yielded positive results, add•Continues online at ing that the CBN management

Savannah Petroleum enters Nigeria’s oil exploration sector ISAAC ANYAOGU

arely three months after his trip to Japan with President Muhammadu Buhari for the 7th Tokyo International Conference on African Development (TICAD7), Lagos State Governor Babajide Sanwo-Olu has returned to another Asian country to seek increased collaboration with Lagos State. The governor, who is on a working visit to China, the world’s second-largest economy, is expected to execute meaningful partnerships that will support Lagos State’s aspiration of becoming a 21st century economy. He will also visit China Railway Construction Company (CRCC) and China Civil Engineering Construction Company (CCECC) for project appraisal. On this visit, Sanwo-Olu will explore his presentation to China-Africa Business Council to put Lagos before the Chinese investment community and declare Lagos State’s openness to investors. Likewise, the governor’s economic ambassadorial role will take him to Zhuhai Changiong Ocean Park, Huawei, GAC Motor Factory and GREE Electrical Appliances, Inc. of Zhuhai for possible collaboration in the areas of industry, tourism and facility development. Specifically, Lagos State

is seeking investments in infrastructure development, industry, energy, information & communication technology and transportation, and SanwoOlu’s administration has been unequivocal about its quest for both local and foreign investors to actively participate in the economic and infrastructural development of the state. While presenting the proposed Lagos State budget of N1.1 trillion for 2020 to the State House of Assembly recently, Sanwo-Olu had noted that “the state has revised some of its approval procedures and operating laws to enable business thrive”. Interestingly, these efforts were corroborated in the acknowledgment of Lagos State by the World Bank for its significant contribution to Nigeria’s impressive performance in the World Bank Ease of Doing Business Index published last month, which saw the country move 15 places higher in the global ranking of countries. “Our recorded 15 places upward-movement in the World Bank Ease of Doing Business has impressively positioned Nigeria as one of the most improved economies globally for business operation. However, it is important we identify and consciously leverage the feat to attract opportunities and investments into the country”, Sanwo-Olu said.

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would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange. It will be recalled that the Bank on Tuesday, November 12, offered authorised dealers in the wholesale segment of the market the sum of $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments each received the sum of $55 million. At the money market, the overnight rate, which is the rate at which Deposit Money Banks (DMBs) borrow and lend to each other, increased by 6.29 percent to close at 14.07 percent. Also, the Open Buy Back (OBB) rate, the money market instrument used to raise short-term capital, increased by 6.36 percent to close at 13.07 percent. Nigerian firms expect the naira to appreciate in the current month, next month and next 12 months as their confidence indices stood at 23.8, 36.7 and 49.5 index points, respectively, CBN’s business expectation report for the month of October indicated.

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Lumumba to address African governance and corruption challenge at 6th GJF public lecture

former director of Kenya anti-corruption commission and Kenya School of Laws, Patrick Loch Otieno Lumumba will expectedly address the age long continental challenge that has placed Africa on the spotlight, as he tries to proffer solution to the issues of ‘Governance, insecurity, poverty and economic development: whither Africa?’ at the 6th biannual public lecture of the Goddy Jidenma Foundation, tomorrow. The Goddy Jidenma Foundation has been at the forefront of thought leadership in the Africa continent and especially in Nigeria. Every two years its flagship lecture series berths contemporary thought provoking and in depth public lecture on issues facing the continent. The event will take place at the Nigerian Institute of Foreign Affairs under the chairmanship of Joy Ogwu, a former minister of foreign affairs and former permanent representative of Nigeria at the United Nations. “The foundation believes in original thinking and the evolution of unique solutions in tackling our problems while gaining a full understanding of their root causes and historical antecedents and also being abreast with international and universal paradigms,” said Pat Utomi, the chairman of the board of GJF, stating that the foundation creatively does so by involving Nigerians and the general public in the situational analysis, and in finding workable solutions to these problems. According to Utomi, over the years, the foundation has left solid foot prints in its quest to provoke deep thinking and point to possible paths to success, hence the reason for inviting Professor Lumumba to deliver the keynote address on governance and anti-corruption in Africa.

Over 300 applicants to get civil service Job in Taraba Nathaniel Gbaoron, Jalingo

overnor Dar ius Ishaku has approved the employment of over 300 people into the Taraba State civil, as part of efforts to address the manpower need of the state,. Chairman, Taraba State Civil Service Commission, John Mamman disclosed this on Sunday in an inter-

view with our correspondent in Jalingo. Mamman said the governor had noticed the gap in the junior, middle cadre and even at the top level of civil service in the state and gave the approval to rejig the service for better service delivery. “There is a gap because most of the experienced civil servants were inherited from old Adamawa State and are now retiring. “ In the next tw o or

three years if we don’t employ, we will have more pensioners than regular civil service servants. “The Governor has noticed this and has grac i ou s l y ap p rove d t hat we should employ over 300 people which we are about to start. “We have already interviewed some people since 2017; we will brush over the exercise and get people whose ser vices are needed based on their

disciplines and the areas we need people, and employ them. “It is very necessary we do this. Otherwise, we will wake up one day and discover that we don’t have the work force,” he said. Mamman, who pledged to reform the state civil s er vice through training and retraining, noted that he would bring sanity and discipline in the service and ensure due diligence for optimum

Mambilla Beverages launches Highland Tea in Lagos BUNMI BAILEY

a m b i l l a B e verages Nigeria Limited, an arm of the Taraba State Investment and Properties Limited, will debut its Highland Tea brands into the Southern region on Tuesday, November 19, 2019 at the Civic Centre, Victoria Island, Lagos. The launch is part of the Taraba State governor’s vision to promote the state’s products, expand its operations to the Southern region of the country and open up the state as an investment haven. Darius Dickson Ishaku, Taraba State governor, is expected to grace the occasion alongside other dignitaries across the country.

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performance. He explained that very soon, the commission would introduce a system where civil servants would pass through examination before they are confirmed and promoted, as is done in the federal service. Mamman noted that the reforms would make civil servants to sit up and know the rudiments of their duties before they get promoted to higher positions of responsibilities.

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Why should we care: Toxic state of our environment (Fourth in the series of address delivered at Dowen College, on 7th October 2019)

Bashorun J.K Randle

onsidering the enormity of the power of social media, we as parents have to be mindful of what is in the public space and may remain viral until eternity. Here are a few samples: “We steal because you never stoned us for it” – Governor Rotimi Amaechi of Rivers State – Politics in Nigeria. “On Thursday 12th December 2013, an event to honour the life and times of former South African president and Human Rights icon Nelson Mandela was held at Freedom Park, Lagos. The governor of Rivers State Rotimi Amaechi was present at the event among other dignitaries. When invited on stage, he spoke on the high rate of corruption in Nigeria and why many politicians will continue to steal. He was quoted as saying: “If you see a thief and you allow him to continue stealing what will happen? You have stoned nobody that’s why we are stealing. What have any of you

done? If you don’t take your destiny in your hands, we will go and other leaders will come. They will continue to steal.” “Nigerians are cowards” – Rotimi Amaechi in tape leaked by Reno Omokri – Sahara Reporters “another audio clip credited to Rotimi Amaechi, Nigeria’s Minister of Transportation, has surfaced. Amaechi has been in the news over the past few days over some audio clips bearing his voice. In an earlier audio released by Phrank Shaibu, an aide of Atiku Abubakar, presidential candidate of the Peoples’ Democratic Party (PDP), Amaechi had said: “This country can never change, I swear. The only way this country can change is in a situation where everybody is killed. This country is going nowhere. When Magnus (Abe) was secretary to the Rivers State Government (SSG), I told him that this country is hopeless and helpless and he told me, ‘Oga, stop it’. This cannot be coming from a governor. But two months later in Abuja, Magnus came to meet me and said, I agree with you; this country is hopeless and helpless. All they do in Abuja is to share money.” In a fresh audio published by Reno Omokri, former media aide to former ex-President Goodluck Jonathan, on Tuesday, Amaechi seemed to have suggested that Nigerians are cowards. “Nigerians are cowards,” he said in the eight-second-long video. “The reason why Nigerians behave the way they behave is that there is

no enforcement.” The context in which Amaechi made the comment is, however, still unclear. We also have the case of Diezani Madueke who during her brief spell as the Minister of Works went on an inspection tour of the Lagos/Ibadan expressway. She was shocked by the state of the road. She broke down in tears and lamented in public. That was almost fifteen years ago. As we speak, that road is still a death-trap and a recurring nightmare. Even the President of the United States of America, Donald Trump threw caution to the wind when in a Twitter message he raised the prospects of civil war in America over the whistle-blower scandal. “They know the only Impeachable offense that President Trump has committed was beating Hillary Clinton in 2016. That’s the unpardonable sin for which the Democrats will never forgive him. If the Democrats are successful in removing the President from office (which they will never be), it will cause a Civil War like fracture in this Nation from which our Country will never heal.” In essence, while we cannot but encourage the youths to follow their dreams, we must avoid sending mixed signals – by preaching morality, integrity and uprightness while we practise the opposite. It is a delicate dance which can destroy trust and confidence if the dancers are listening to different tunes or sym-

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In essence, while we cannot but encourage the youths to follow their dreams, we must avoid sending mixed signals – by preaching morality, integrity and uprightness while we practise the opposite. It is a delicate dance which can destroy trust and confidence if the dancers are listening to different tunes or symphony

The role of research for informed decision making

he impact of research, influence a wide variety of phenomena and trends in society over the long term. Such impact, will be dependent on the specific project; therefore, like the research itself, the impact can be far-reaching and varied. Research impacts business, culture, economy, environment, society, health and wellbeing, policy, laws, technological developments, and generally every aspect of life. Continually, information and data generated by research are used to enhance products and services and develop policies and interventions by providing solutions for upgrading and streamlining business operations, aid and sustain policy-making by providing reliable background information; boost business operations, generate knowledge and skills, and support growth and development. Over the years, it has been evident that research has an impact on business and on the economy at large. For a business to develop and grow, a well-developed business strategy must be in place. Developing a business strategy of this nature requires an understanding of the dynamics of the intended market. This can only be achieved through market and business research. Market research verifies the assumptions about a business – the right customers, partners, cost structures, revenue streams, channels, strategy (if the business is in the right direction), and among others, profitability. Through research, companies become aware of their customers’ preferences, lifestyle, needs and other issues relating to the company’s products and services. Since customers are the determinants of the

success of a business, understanding their needs and improving their satisfaction will directly influence the bottom line. To this end, many businesses use market research to evaluate their performance, market share, products or services, and to stay ahead by avoiding possible risks. Market research is the systematic and objective identification, collection, analysis, and dissemination of information to assist management in decision-making. It is used to provide accurate information that reflects the true state of affairs of businesses and organisations. With market research, businesses understand market demands, recognise business opportunities, design the perfect marketing campaign, improve products and services, minimise losses, and keep track of the competition. It allows them to identify and follow current trends and take advantage of the same by innovating to meet the demands and needs of their target audience. Through the provision of relevant information, market research eliminates uncertainties and links the marketing variables with the environment and consumers. Marketing research provides information on controllable and uncontrollable factors and enhances the effectiveness of decisions made by marketing managers. Marketing decisions depend on research information and data to succeed, and withstand competitions and other external pressures. This key role of research on business has prompted more corporations to become proactive with funding research. Apart from providing information and data for their business strategy, companies may fund research www.businessday.ng

as part of their Corporate Social Responsibility (CSR) or to promote their brands. Research funding can be considered a CSR which can lead to a positive public image for companies that have socially conscious investors or clients. Some investors, specifically those who take into consideration Environmental, Social, and Governance (ESG) issues, believe that a company that has strong CSR initiatives will deliver better returns in the long-term. In some countries, research funding fulfils the government’s CSR requirements. For instance, in India, the Companies Act requires companies falling within certain categories to spend at least 2 percent of their profits for CSR activities targeted at social development. Companies do not have to spend it on research funding, but it is an option for them. Consequently, many companies have embraced CSR activities in the education sector through the building of institutions, creating centres of excellence for thought leadership and research. This way, meaningful and effective research is conducted, which serves both the industries and support policy development. This empowers the government to use the data and results from research to move from ideologically-driven policy-making to data-based policymaking. Research aids the production of quick, quality, and effective policies which are citizen-centric and sustainable. Through research, governments can get insight into what the public wants, what the economy lacks, which sector needs immediate help or modifications amongst others. Therefore, it is critical that governments and policy-makers leverage on verified and analysed data for decision making. According

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phony. Matters are not helped by the toxic environment in which we are compelled to operate. The last word belongs to the government. However, to convince government to shift on any matter of public policy, you must be prepared to go through the pain barrier. It can be most frustrating. I speak from personal experience having been involved in advising government on the critical issue of fixing the salaries and allowances of political office holders and public servants under the aegis of RMFAC [Revenue Mobilization and Fiscal Allocation Committee] led by Hamman Tular; and Office of the Secretary to the Government of the Federation under Ufot Ekaette (an old boy of King’s College, Lagos.) I need not add that history and experience did a repeat performance with regard to removal of petroleum subsidy; and exchange rate subsidy versus realistic exchange rate. We need not dwell on the imbroglio in which the Power Generating Companies (GenCos); Transmission Company of Nigeria (TCN) and the Distribution Companies (Discos’) have become entangled over tariffs. Sadly, many of the problems have been festering for over ten years while the government struggled to come to terms with or grasp the enormity of the consequences of delaying action or the price of subversive inertia. Politics has always trumped economics. Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

UCHECHUKWU ANAGBOSO to Peter Sandergaad, “Information is the oil of the 21st century and analytics is the combustion engine”. We can add that research is the mining of the oil; hence a thorough process of data collection and analysis must be employed for results that can be utilised for policy development. This highlights the importance and role of data gathering institutions and knowledge centres. Researchbased/evidence-based policies have better success rates, acceptance and outcomes. In a developing business environment like Nigeria, research is vital because of its multi effect on businesses, economy, society and policies. For businesses, it aids informed decisions, improved business process, cost savings and to devise new business models, while policies are data driven, acceptable, effective and sustainable. These combine to drive growth and development in the society and the economy which creates a positive people, planet and profit. Making business decisions and policies that are not research driven may work in the short-run, but without continuous efforts at assembling accurate information through research, and making decisions that are not based on research findings, failure may be inevitable in the long-term. This article is written by Uchechukwu Anagboso for the Christopher Kolade Centre for Research in Leadership and Ethics (CKCRLE) at Lagos Business School (LBS). CKCRLE’s vision is creating and sharing knowledge that improves the way managers lead and live in Africa and the World. You can contact CKCRLE at crle@lbs.edu.ng.

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Markets pass vote of confidence on Access-Diamond merger Patrick Atuanya

n my first column of 2019, published in January and titled ‘Unlocking value in the Access Bank – Diamond merger’, I noted that most of the negative sentiment that had followed the merger announcement was backwards looking and in our opinion missed the point completely. I went on to add that “investors should instead be asking themselves what kind of Nigerian banking/financial services sector will emerge from 2020…and who will be in the dominant position then to drive profitability. We think Access – Diamond will be a major winner in the evolving financial services landscape.” Trading at N10.50 per share at the close of the stock market on Friday November 15, Access Bank has outperformed the Nigerian Stock Exchange (NSE) All Share Index (ASI) and most other stocks with its strong positive return of +54.4 percent year-to-date (YTD). Original Diamond Bank shareholders who received 2 new Access Bank shares for every 7 held are also sitting pretty on solid gains. Back in January part of my thesis for Access Bank was that the combined entity should have a fair

value of about N11.40 per share and a market capitalisation of just over N400 billion. The bigger merged entity Access Bank today has a market capitalisation of N373 billion, up 61 percent from the N230.75 billion it was at on March 20th when the merger officially successfully closed. It’s most recent results also show that growth is accelerating. Over the nine months period of 2019 (Jan – Sep), Access Bank recorded profit before tax (PBT) and profit after tax (PAT) growth of 47 percent and 44 percent year on year. This was equivalent to N103.1 billion (N70.2bn, 2018) for PBT and N90.7 billion (N62.9BN) for PAT. Net interest income for the period came in at N210.2 billion, net impairment charges for bad loans remained flat at N10.6 billion, despite an enlarged balance sheet, while fee and commission income surged to N66.8 billion (N43.5bn, 2018), as a larger customer base engaged in more transactions as a result of the merger. Total assets came in at N6.6 trillion, largely as a result of a surge in loans and advances to customers to N2.76 trillion. Loans to individuals including credit card loans, auto loans, mortgages, personal loans and overdrafts surged to N80.5 billion in the period, from N32 billion a year earlier, before the merger. Loans to corporates also moved higher to N2.27 trillion from N1.64 trillion. Access Bank recorded loan

growth of N60.8 billion in Q3 alone, and booked N4.6 billion write-back on previous impairment of financial assets, which moderated total provisioning. The banks cost to income ratio fell to 67 percent which is positive as the lower percentage denotes improved efficiency, while Non Performing Loans ratio improved also improved quarter on quarter to 6.3 percent and capital adequacy ratio remained strong at 20.3 percent. Access Banks Loan to Deposit (LDR) Ratio is ahead of the 65 percent regulatory minimum effective 31st December imposed by the Central Bank of Nigeria (CBN), as it came in at 67.4 percent. Deposits from customers as expected surged to N4.23 trillion, compared to N2.56 trillion in 2018. The deposits breakdown was term deposits at N1.93 trillion, demand deposits at N1.485 trillion and savings deposits at N820.9 billion. Access Bank is currently trading at 0.6x book value, which gives it some upside potential as we believe fair value is closer to 0.8x book. I had noted in my earlier article that the coming mobile money, plus digital financial inclusion is an opportunity for the new bank given Access adoption of technology. The Banking sector (assets) has grown at circa 10 percent per annum on average since 2010 in Naira terms. This should provide steady lift to profits assuming more financially excluded are gradually being lifted into the formal space

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The bigger merged entity Access Bank today has a market capitalisation of N373 billion, up 61 percent from the N230.75 billion it was at on March 20th when the merger officially successfully closed

the black market, everyone had access and could buy at whatever price without rules. In the official markets you had all sorts of restrictions. The 41 items restriction had the effect of forcing participants out of the official markets and into the black market, and we saw the effects. The price for dollars and other foreign currencies in the official market remained “stable” while the price in the black market exploded. At some point the premium between the official and black markets was more that 100 percent. The arbitrage opportunities were exploited, and we kept hearing all sorts of stories of people buying dollars on the official market and then turning around and selling it on the black market. And of course, the economy suffered. No one wanted to sell dollars in the official market and investors who had to go through official channels opted out. The chaos from that foreign exchange market splitting policy did not end until the CBN backtracked and tactically unified the major foreign exchange markets. I say tactically because the “windows” are still there but the CBN tries to make sure the prices in most markets are about the same. Here we are and a few years after that policy misadventure we are back again. A series of circulars released by the CBN has www.businessday.ng

ECONOMIST

essentially split the debt securities market into two. Non-bank corporates and private individuals have essentially been banned from participating in the CBN securities markets on the one hand, with the federal government securities market still open to all participants. In essence the CBN securities are now similar to the official foreign exchange market with the federal government securities similar to the black market. Everyone has access to the “black market” but only bank and foreign portfolio funds have access to the “official market”. As with the foreign exchange policy in 2015 so with the debt securities markets in 2019. The price for CBN securities has gone one way while the price for federal government securities has gone the other way. The interest rates for CBNs securities continue to climb while the interest for the federal governments similar securities have collapsed. As at the time of writing this there was a more than 200 basis points spread between one-year debt securities. Or translated in English, the federal government can borrow for an almost two percent lower rate than what the federal government via the CBN can borrow. The arbitrage opportunities are there but they will be more difficult to exploit. Human beings are geniuses though, so you never

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Access Bank probably still has a lot of profit levers to pull including reducing operating and personnel expenses as synergy gains from the merger continues to materialise into 2020. We expect this will have direct positive impact on the bottomline. The Access Bank team has also learnt a lot from the experience of swallowing Intercontinental Bank and other earlier mergers it undertook. The bank has absorbed six institutions in the past 15 years. According to management, the same team who led the past successful integration were responsible for delivering the merger with Diamond Bank and are overseeing the transition to the enlarged entity. The markets are clearly elated with the trajectory of the bank. It is a welcome development considering some earlier negative sentiment around this transformative merger for Nigeria’s banking sector! Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

How will the debt market windows policy end?

éjà vu seems to be a common thing in policy circles nowadays. We see the same policies repeat themselves over and over again sometimes with the same outcomes. More recently we are seeing the CBN replicate its “windows” policy in debt securities markets like it did with the foreign exchange markets in 2015. Will the outcome be the same? At this point it is useful to understand what happens when, for whatever reason, people get kicked out of what used to be a unified market and the market is split into two (or three of four). The market where everyone still has access to will have a different price compared to the market that has some restrictions. If the gaps are large enough then you create all sorts of profitable arbitrage opportunities. But even if you somehow manage to stop the arbitrage you end up with distorted prices and participants who do not know how to deal with these distortions. Overall you end up with worse outcomes. We saw this with the foreign exchange market in 2015. Remember, in that year we had the now infamous 41 items banned from accessing foreign exchange in official markets plus all other sorts of restrictions on who could or could not buy foreign exchange. In essence we had the foreign exchange market split into two. In one market,

using digital financial services (DFS). Access Bank today has 29 million customers, including more than 13 million mobile customers, as well as 3,100 ATMs, 15.9 million cards and around 32,000 Point of sales terminals. Expectedly income from electronic channels and other E-business surged by 58 percent to N8.85 billion from N5.59 billion in 2018.

NONSO OBIKILI know. But the outcome on the economy will probably be similar to the negative outcome witnessed when we did this with foreign exchange. Interest rates for official securities have already fallen below the inflation rate with the inflation rate still looking upwards. Investors might look for better returns in the “real economy” like the CBN hopes. Or they may just buy foreign exchange. On the other hand, the CBN is going to face a struggle to mop up all the liquidity from its own maturing securities as foreign investors are unlikely to be able to pick up the slack. Even if they did it would come with a hefty price in foreign exchange that the CBN does not have. Either way, as our parents say; “it’s like we don’t like to hear word”. So as usual we will wait for the negative effects to show up before we try to backtrack. A few years will be lost but who cares. Dr. Obikili is chief economist at Business Day

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Monday 18 November 2019

EDITORIAL Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Chuks Oluigbo 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

Misunderstanding self-sufficiency

he rhetoric around self-sufficiency in rice, textiles, automobiles and every other thing we need in Nigeria is reaching manic levels and we think Nigerians should understand that resisting free trade is a dangerous policy. We have watched with growing unease supposedly intelligent people take to the airwaves arguing against importation and why shutting the borders is a patriotic duty. At conferences, some of the first questions asked anyone with a novel idea or product is why are they not manufacturing in Nigeria? Hameed Ali, Comptroller General of the Nigerian Customs has incorrectly insinuated that China attained economic greatness because it shut its borders to the world for 40 years. China’s most recent experiment with a closed economic system began in 1949, when the communists took power; it failed woefully, resulted in famine and the death

of millions until 1979 when it gradually changed policies and began to trade with the world. It’s unfortunate that many Nigerians are swayed by this rewriting of history, it appeals to sentiments. Simply checking Wikipedia, however, would set records straight. We agree on the need to grow Nigeria but demonising free trade will not help us any more than it did in 1984. It will only set us back. No country in the world, not even the economic superpowers, produces all that it needs. Last year, machinery including computers and electric equipment worth $753 billion accounted for 29 percent of total imports in the US. Our leaders have a terrible habit. China, Russia, India, and all the countries they use as examples to validate their failed ideas, import goods and services they can’t provide locally; sometimes from us (they also paid dearly when they closed their economies). Data shows the folly of deterring free trade. In the first 9

months of 2019, Vietnam imported from Nigeria goods worth about N11.6 billion while Nigeria imported goods worth about N2.8 billion from the Asian country according to data from its Customs. Vietnam bought our cashew nuts and liquefied petroleum gas while we imported, handbags, purses, umbrellas, suitcase, headgear, textiles and garments, and phones. While they bought from us what they need to produce other things, we merely bought headgears and gadgets. We do not win points for rejecting their rice; we should rather pray they don’t reject our gas someday. Apart from the fact that we depend more on Vietnam than it does on us, we risk alienating ourselves due to a misunderstanding of selfsufficiency. In the late 1970s, Deng Xiaoping began to reform the Chinese economy; opened it to international trade and investment. Peasants were granted rights to farm their own plots, improving living standards and easing food shortages.

Today, China is s eeking global economic dominance through the Belt and Road Initiative and the Silk Road: massive infrastructure projects that will connect half of the world’s population. China also has the largest number of neighbours (14) sharing its 22,000km land borders. China has had to close some of its borders mainly due to border disputes rather than curbing imports. If China closes its borders at all, smuggling or incompetent Custom officials won’t be the reason. Yet in 2019, Buhari and Hameed are prescribing, the pernicious policies China renounced to become an economic power. We understand the limited worldview of many in government today, brought up in the era of the Cold War. Well, the world has since moved on and even Russia is a democracy, however, warped. Buhari and his socialist co-travellers must reeducate themselves and at the very least listen to the counsel of people with a better grasp of economics.

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Nigeria’s economic future lies in being a serious trading nation global Perspectives

OLU FASAN

very great nation is a trading nation. As Charles Molloy, the 17th century Irish maritime lawyer, famously said of his country: “What would this island be without foreign trade. It is foreign trade that renders us rich, honourable and great, that gives us a name and esteem in the world”. So, trade makes a great nation. But trade in what? Well, as Adam Smith said: “No nation is ever rich by the exploitation of the crude produce of the soil but the exportation of manufactures and services”. Being a great trading nation is thus not about exploiting and exporting raw materials, but about, as Adam Smith said, “the exportation of manufactures and services.” Every nation with talents can achieve this if they are willing to do the needful. Hence, David Hume said, no nation should be jealous of another’s trading prowess when it could exploit its own human talent and ingenuity to produce quality goods and services for export. But Nigeria is so defeatist about its trading potential that it wants to turn itself into an autarchy. Yet, the problem is that, despite its abundant human and natural talents, it lacks the willingness to do what is needed to become a major exporter of manufactured goods. Truth is, it’s all about orientation and willingness; it’s about a nation’s policy choices! Take the so-called Asian Tigers. They were once poor, with rudimentary manufacturing capacities. But they made a conscious decision to pursue exportoriented industrialisation. Or consider even South Africa, which is now Africa’s industrial powerhouse. It was once an inward-looking country, focusing only on mining. But it later decided to become an export-oriented country, with a focus on manufacturing and services. As a

result, during the Uruguay Round trade negotiations, South Africa negotiated as a developed country, taking on challenging commitments to liberalise its economy faster than other African countries. Today, it is, at least within Africa, a major exporter of manufactures and services. By contrast, Nigeria has been talking about promoting non-oil exports for years, but every policy choice it makes undermines that ambition. It is clear, for instance, that you cannot pursue importsubstitution and export-orientation at the same time. The policies you need to achieve import-substitution – which are protectionist policies – cannot work for export-orientation, which requires trade openness in order to enhance the productivity and competitiveness of your industries and to secure overseas markets for their products. Yet, Nigeria thinks it can be a protectionist, importsubstituting economy and, at the same time, be a major non-oil exporter. Such as a Janus-faced approach doesn’t work in trade! And, of course, the results show it. In an interesting paper, titled “The African trade profile for manufactured goods”, the economist Ron Sandrey shows how ridiculously miniscule Nigeria’s share in Africa’s total manufacturing exports has been. Nigeria accounted for 0.9 percent of total African manufacturing exports to the world in 2013, compared to South Africa’s 38.6 percent. Indeed, Nigeria’s share fell below Egypt’s at 11.1 percent, Zambia’s 7.6 percent and even Cote d’Ivoire’s and Ghana’s at 1.1 percent each. Nigeria’s share of total intra-Africa manufacturing exports was just 0.8 percent in 2013, compared to South Africa’s 48 percent, Egypt’s 7.1 percent, Congo’s 4.9 percent, and below Ghana, Zimbabwe and Kenya at 2.4 percent, 2.2 percent and 2.0 percent respectively. Of course, those figures were for 2013, but the situation has hardly changed. For instance, according to the Economic Complexity Index, although Nigeria exported $46.8 billion worth of goods in 2017, making it the 49th largest exporter in the world, 90 percent of the exports were crude oil and gas products. Statistics for the second quarter of this year show that crude oil continues to dominate Nigeria’s export basket, accounting for 86 percent of total exports, with manufactured goods representing a tiny 2 percent.

It’s not surprising that Nigeria ranked 124th out of 129 in the 2017 Economic Complexity Index because the knowledge intensity of the products it exports is very low. I mean, think of it, what amount of knowledge is involved in exploiting and exporting crude products, which is why Adam Smith said, “no nation is ever rich by the exploitation of the crude produce of the soil.” But why is Nigeria not a major non-oil exporter? Well, there are basically three problems. The first is the lack of productive capacity; the second is the lack of quality infrastructure to ensure Nigerian products meet international standards; and the third is the lack of seriousness about securing access to foreign markets and about export promotion. Let’s start with the first. The fundamental determinant of a country’s ability to trade internationally is its productive capacity, but Nigeria lacks any serious manufacturing capacity. But why? Well, leaving aside the supply-side impediments, the truth is that Nigerian industries are too cocooned within protectionist walls and shielded from the foreign competitive pressure to adapt, innovate and build productive capacities. There is a strong link between open trade and developing productive capacities. Then, the second problem: poor quality infrastructure. International trade is now significantly subject to standardisation. As a result, exporters must meet stringent quality and packaging requirements in foreign markets. But Nigerian agricultural products are often rejected by the EU for failing to meet safety standards. Similarly, Nigerian exporters of agro-based products can’t take advantage of the preferential US African Growth and Opportunity Act (AGOA) to export to the huge US market because of standardisation requirements. Surely, a country that is serious about increasing non-oil exports should prioritise building quality infrastructure and ensuring its export products meet international standards. But here is the third problem. Even if Nigerian manufacturers have productive capacities and can produce products that meet international standards, they lack the necessary market-access and export-promotion support. Serious export-oriented countries enter into free trade agreements and establish efficient

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Nigeria has been talking about promoting non-oil exports for years, but every policy choice it makes undermines that ambition. It is clear, for instance, that you cannot pursue importsubstitution and exportorientation at the same time

export promotion agencies to help their manufacturers to take advantage of export opportunities, as Japan’s “JETRO” and South Korea’s “KOTRA” do! But Nigeria has an antipathy towards free trade agreements; as such, it’s not interested in securing market access, let alone engage in serious export promotion. Think of it. Nigeria is hostile to the EU-West African Economic Partnership Agreement; it is, as the recent border closure shows, uncommitted to the ECOWAS Trade Liberalisation Scheme and Common External Tariff; and it is taking a cynical view of the new African Continental Free Trade Area, AfCFTA. Surely, when a country is not truly export-oriented, when it’s not genuinely embracing free trade agreements, and thus not interested in securing market access, you can’t expect it to engage seriously in export promotion. To be sure, Olusegun Awolowo, the executive director and chief executive of the Nigerian Export Promotion Council, NEPC, has demonstrated intellectual commitment and good leadership in promoting non-oil exports. But other government policies undermine his efforts. Recently, the NEPC organised an international trade seminar, with one of its themes being “Nigeria’s preparation in non-oil sector in the face of the AfCFTA”. Yet, one of the special guests was Godwin Emefiele, Central Bank governor, who doesn’t believe in AfCFTA and has introduced protectionist policies that create anti-export bias and undermine Nigeria’s non-oil export capacity. The second guest speaker, Adeniyi Adebayo, trade minister, recently cited several obstacles to the implementation of AfCFTA in Nigeria. No one in the Nigerian government is talking about the huge opportunities that AfCFTA offers to promote non-oil export; no one is talking about using AfCFTA to build Nigeria’s productive and export capacities. To them, AfCFTA is all doom and gloom! Yet Nigeria can’t be a great nation without being a serious non-oil trading nation. But to become one, it must have the orientation and willingness. It must make the right policy choices! 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

Three reasons why African mobile connectivity is misleading

s smartphones become cheaper, a rising number of Africans are getting online. While Africans have typically feature phones, smartphone ownership is more popular among younger mobile users. At the end of 2017, the number of smartphone connections reached 250 million, which is expected to increase to 440 million by 2025. This rapid growth in smartphone adoption across the continent has led a number of observers to declare that Africa’s connectivity has finally taken off. The reality is far more nuanced. While Africans are more accessible than ever, the vast majority are still difficult to reach. In the US and Europe, mobile phone users have access to unlimited data plans, putting them within easy reach. But this is not the case in sub-Saharan Africa. Phone ownership does not reflect unlimited connectivity due to consumer behaviour around mobile phone usage. Here are three ways to look at African connectivity differently. Africans prepay for mobile and use data sparingly: Data in Africa is expensive. After obtaining a free or nominally-priced SIM card, subscribers prefer to pay upfront for services. With prepaid plans, users avoid contracts and have more flexibility. Despite a 44 percent mobile penetration rate, Africa still has the world’s most expen-

sive prepaid mobile data plans in relation to median incomes; on average, mobile data prices represent a staggering 8.76 percent of income. In Zimbabwe, a gigabyte costs $75.20, 289 times as much as in India, making it the most expensive country for data. MTN Nigeria’s lowest and cheapest data plan costs N100 or $0.28 for 50 megabytes of data and is valid for only 24 hours. Given median incomes, this corresponds to a high market share as subscribers spend at least 7 percent of their monthly income on data, considerably above the UN Broadband Commission’s target of 2 percent of monthly income for developing countries. These high data costs prevent many Africans from being consistently online. Often times, data connections are completely turned off or data plans are reloaded as needed to use specific products, such as WhatsApp. This behaviour has thus cultivated a distinct pay-as-you-go mobile culture among Africans. Africans have multiple SIM cards: In 2018, 4 of the top 10 countries globally using dual or multi-SIM phones are in Africa. The highest percentage usage by country was Kenya at 87 percent, with Nigeria in a close second. Juggling multiple SIM cards is a result of variable infrastructure quality as much as price point sensitive customers. In more remote areas, network reception can be spotty, or non-existent. Given the variability of telwww.businessday.ng

ecoms tower infrastructure across providers, users have access to better coverage with multiple SIM cards. Additionally, because African consumers are price point sensitive, they have multiple phone subscriptions and seek out deals from operators. Carriers try to attract subscribers with special plans offering cheaper-on network calls, airtime specials, bonus monthly data plans, unlimited SMS per month, roaming deals, etc. Africans move seamlessly from one SIM card to another throughout the day; consumer loyalty to a particular mobile phone operator is non-existent. For example, in Nigeria, users flock to MTN for reliable network coverage and to Globacom for its cheap data offerings USSD & SMS technology still reign supreme: Over two decades of Africa’s mobile phone revolution, USSD and SMS (two technologies that are the backbone of feature phone communications) have become deeply ingrained in consumer behaviour. As subSaharan Africa is still predominantly a feature phone market, companies heavily depend on using USSD/SMS to reach end-users. USSD and SMS are easy to use; Africa’s relatively high rate of illiteracy makes these channels, which do not require high literacy levels, even more well-tailored to meet consumer needs. Since they do not require an internet connection, USSD and SMS are also inexpensive.

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ELO UMEH Given their easy to use interface and accessibility, USSD and SMS have also changed interactions between users and service providers. Customers can contact mobile phone operators directly to inquire about balances, promotions, and data bundles via USSD/SMS. A prominent use of USSD & SMS across Africa is digital financial services, and the region leads the world in mobile money transactions. In Nigeria, USSD transactions grew by 35 percent in 2018, generating transfer payments of N261 million. In Kenya, more than 16 million transactions occur daily on M-Pesa, the country’s leading mobile money platform. The simplicity of dialling a code on one’s mobile device has allowed feature phone technology to reign supreme in Africa’s digital financial services sector and created consumer behaviour that is wedded to USSD/SMS. The digital revolution in Africa has come to stay — but not without its challenges. Despite the increasing number of smartphones and internet users across the continent, a significant portion of its fast-growing consumer market is still far from reach. To truly leverage the business opportunities Africa presents, rethinking connectivity across the continent is a must.

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Monday 18 November 2019

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Netflix, Disney and the battle to control eyeballs

A Balkan Teflon Donbetrayal

Who will win the media wars? Disney’s new streaming service and the media wars

MERICA HAS seen some spectacular investment booms: think of the railways in the 1860s, Detroit’s car industry in the 1940s or the fracking frenzy in this century. Today the latest bonanza is in full swing, but instead of steel and sand it involves scripts, sounds, screens and celebrities. This week Disney launched a streaming service which offers “Star Wars” and other hits from its vast catalogue for $6.99 a month, less than the cost of a DVD. As the business model pioneered by Netflix is copied by dozens of rivals, over 700m subscribers are now streaming video across the planet. Roughly as much cash—over $100bn this year—is being invested in content as it is in America’s oil industry. In total the entertainment business has spent at least $650bn on acquisitions and programming in the past five years. This binge is the culmination of 20 years of creative destruction (see Briefing). New technologies and ideas have shaken up music, gaming and now television. Today many people associate economic change with deteriorating living standards: job losses, being ripped-off, or living under virtual monopolies in search and social networks. But this business blockbuster is a reminder that dynamic markets can benefit consumers with lower prices and better quality. Government has so far had little to do with the boom, but when it inevitably peaks the state will have a part to play, by ensuring that the market stays open and vibrant.The entertainment business is fast-moving by its very nature. It has few tangible assets, it relies on technology to distribute its wares and its customers crave novelty. The emergence of sound in the 1920s cemented Hollywood as the centre of the global film business. But by the end of the 20th century the industry had grown as complacent as a punchline in a repeat episode of “Friends”. It relied on old technologies—analogue broadcasting, slow internet connections and the storage of sounds and sights on fiddly CDs, DVDs and hard drives. And the commercial approach was to rip

tainment firms have a plausible strategy, but too much cash is now chasing eyeballs. Netflix is burning $3bn a year and would need to raise prices by 15% to break even—tricky when there are over 30 rival services. It hopes that its fast-growing international markets will create economies of scale. As well as saturation, the other danger is debt. Deals and high spending have caused American media firms to build up $500bn of borrowing. When the shake-out comes, history offers two dispiriting examples of how a consumer-friendly boom can turn into a stitch-up. Telecoms and airlines in America saw a riot of competition in the 1990s only to become financially stretched and then reconsolidated into oligopolies that are known today for poor service and high prices.

off consumers by overcharging for stale content packaged into oversized bundles. The first shudder came in music in 1999, with internet services soon putting established music firms such as EMI and Warner Music under pressure. In television Netflix broke the mould in 2007 by using broadband connections to sell video subscriptions, undercutting the cable firms. When the smartphone took off it tailored its service to hand-held devices. The firm has acted as a catalyst for competition, forcing the old guard to slash prices and innovate, and sucking in new contenders. The boom has seen star writers paid as if they were Wall Street titans, sent rents for Hollywood studio lots into the stratosphere and overtook the 20th century’s media barons, including Rupert Murdoch, who sold much of his empire to Disney in March. Amid the debris and deals the outlines of a new business model are becoming clear. It relies on broadband and devices, not cablepackages, and overwhelmingly on subscriptions, not advertising. Unlike in search or social media, no firm in television and video streaming has more than a 20% market share by revenues. The contenders include Netflix, Disney, AT&T-Time

Warner, Comcast and smaller upstarts. Three tech firms are active, too—YouTube (owned by Alphabet), Amazon and Apple, although their collective market share is still small. The music industry is also contested, with the biggest firm, Spotify, having a 34% market share in America. Disruption has created an economic windfall. Consider consumers, first. They have more to choose from at lower prices and can pick from a variety of streaming services that cost less than $15 each compared with $80 or more for a cable bundle. Last year 496 new shows were made, double the number in 2010. Quality has also risen, judged by the crop of Oscar and Emmy nominations for streamed shows and by the rising diversity of storytelling. Workers have done reasonably. The number of entertainment, media, arts and sports jobs in America has risen by 8% since 2008 and wages are up by a fifth. Investors, meanwhile, no longer enjoy abnormally fat profits, but those who backed the right firms have done well. A dollar invested in Viacom shares a decade ago is worth 95 cents today. For Netflix the figure is $37. Many booms turn to bust. Unlike, say, WeWork, most enter-

This is why government has a role in keeping the entertainment business competitive. First, it should prevent any firm—including the tech giants—from acquiring a dominant share in the content business. Second, it should require the companies that own the gateways to content, such as telecoms firms or handset providers such as Apple that can control what screens show—to have an open-access policy and not discriminate against particular content firms. Last, it should make sure subscribers can move their personal data from one firm to another, so they do not become locked in to one service. Don’t lose the plot Few people look to Hollywood for economics lessons. But the entertainment epic has featured vibrant capital markets. Buy-out firms, stockmarkets and junk bonds have all financed the industry’s reinvention. The stars have been billionaire entrepreneurs such as Reed Hastings, Netflix’s boss. And open borders have set the scene, since talent comes from around the world and a majority of streaming subscribers now live outside America. Across the economy, these elements are at risk as politicians and voters veer away from open trade and free markets. For a reminder of why they matter, turn on your screen and press play.

Democrats want impeachment hearings to change opinions on Donald Trump That will be difficult

Y 8AM ON November 13th, the line to get into the Ways and Means Committee room already stretched all the way down the long hallway, though the hearing was not scheduled to begin until ten. Cameras bristled at the building’s entrance. Congressional interns, journalists and political junkies jostled for position as if they were on a crowded train carriage, and police officers trying to keep a path open grew increasingly frustrated. The spectators were waiting to watch a political drama rarely seen in America. For nearly two months, Democrats have held their impeachment inquiry privately. Those hearings have become public. Over the next two weeks, Americans will hear testimony from witnesses concerning the allegation that President Donald Trump ordered military aid to

Ukraine to be withheld until his counterpart, Volodymyr Zelensky, announced an investigation into Hunter Biden, son of a Democratic presidential front-runner, who served on the board of a Ukrainian natural-gas firm. These hearings may be the only time that Americans will get to hear from those who know most about the allegation. Republicans control the Senate and will vote on the rules governing a trial there. Unlike public impeachment hearings for Richard Nixon, these hearings are not designed to uncover new information; the witnesses have already testified in closed sessions. They are designed to build a case for Mr Trump’s impeachment, which means they must meaningfully shift public opinion about the president. That Continues on page 15

Monday 18 November 2019

BUSINESS DAY

In Association With

Lexington

The strange love-in between Donald Trump and Recep Tayyip Erdogan

It is killing the US-Turkish alliance

O ONE KNOWS why President Donald Trump is so fond of autocrats—including his “friend” Muhammad bin Salman, “highly respected” Viktor Orban, beloved Kim Jong Un and of course Vladimir “so highly respected” Putin. But there is little doubt his predilection has turned out better for the strongmen than for America. Compared with subjugating a country, handling Mr Trump is not hard. The autocrats quickly realised the president wants a special rapport with them more than almost any policy outcome. That is why Abdel-Fattah al-Sisi—Mr Trump’s “favourite dictator”— felt able to pull Egypt out of the administration’s main Middle Eastern gambit, its so-called “Arab NATO”, a day after visiting the White House. It is why even Xi Jinping, at the rough end of Mr Trump’s tariffs, has received a few plums, such as the president dismissing prodemocracy protests in Hong Kong as “riots”. Yet no foreign leader has taken more skilful advantage of Mr Trump’s soft spot than his guest in Washington this week, Recep Tayyip Erdogan. Even before he persuaded Mr Trump to abandon the Syrian Kurds last month, Mr Erdogan was responsible for a serious deterioration in American-Turkish relations. Angered by Barack Obama’s failure to intervene more forcefully against his enemy Bashar al-Assad, among other grievances, the Islamist leader refused to take strong action against the jihadists crowding across Turkey’s southern border to join Islamic State. When the Obama administration backed another of his enemies, the Syrian Kurds, against the jihadists, Mr Erdogan looked for other ways to hit back. He has strained Turkey’s relations within NATO and pushed it further away from the European Union. He has embraced America’s regional adversaries, Iran and Russia, from which Turkey has bought a missile-defence system that could give Mr Putin access to NATO military secrets. Lest America miss the hint, Mr Erdogan’s bodyguards roughed up

journalists outside the venerable Brookings Institution during the Turkish leader’s last call on Mr Obama, in 2016. During his first call on Mr Trump, they launched a more vicious assault on anti-Erdogan protesters and American police officers that left blood on the pavement outside the Turkish ambassador’s residence in Washington. Already alarmed by Mr Erdogan’s democratic backsliding, Congress, the Pentagon and State Department were appalled. Many questioned whether Turkey was still the crucial democratic Muslim ally, and “window onto the Middle East”, that Mr Obama and his predecessor George W. Bush saw it as. Yet Mr Trump, subject to an unrelenting charm offence by Mr Erdogan, declared the two countries “as close as we’ve ever been.” Beyond his usual regard for strongmen, he perhaps noted the many coincidences between himself and Mr Erdogan. Both are populists with a flair for stirring up religious conservatives. Both are fixated on interest rates and the “deep state” (a phrase that originated in Turkey). Both mix politics, family and business. Both have promoted a son-in-law—in Mr Erdogan’s case his finance minister, Berat Albayrak—over two less able businessmen-sons. Mr Erdogan’s approach stressed these similarities, with Mr Albayrak contacting Jared Kushner via a Turkish business partner of Mr Trump’s. Some suspect there may be more than national interests at stake. Mr Trump had investments in Turkey (and claimed to have a “little conflict” of interest there)

Democrats want impeachment hearings to change opinions... Continued from page 14

before he became president. It seems equally possible Mr Erdogan has endeared himself to the president merely by making the bilateral relationship feel like a mano-a-mano business one, with no side-deals involved. Mr Trump, who calls the Islamist a “hell of a leader” and “friend of mine”, has deferred legally mandated sanctions on Turkey for its Russian missile-defence deal. His administration has also delayed penalising a Turkish bank for sanctions-busting in Iran. And the more anger this has stirred in Washington, among Elizabeth Warren, Mitch McConnell, in fact almost everyone outside the president’s family, the more vindicated Mr Trump seems to feel. He considers squealing from the Washington establishment an end in itself—and Mr Erdogan has egged him on. “The US has an established order that we can call a deep state—of course they are obstructing,” Turkey’s president lamented. Mr Erdogan’s mastery of Mr Trump was even clearer over the Syrian Kurds. In demanding America step back while his troops pushed them from his border, he appealed to Mr Trump’s inchoate desire to withdraw from Middle Eastern wars. Yet the US-backed Kurdish operation in north-eastern Syria was a textbook example of America not exposing its troops to a necessary war. The Kurds were doing the fighting on its behalf. That is a role Turkish troops might have been expected to fill; yet Mr Erdo-

gan considered Islamic State a lesser enemy than Mr Assad or the Kurds. Mr Trump’s abandonment of the Kurds was an equally textbook blunder. It has empowered Mr Assad and Russia, with whom the Kurds have made a desperate alliance. It has made America look fickle and weak. It will lead to no significant withdrawal of American forces. It was also unnecessary, because American envoys were already hatching a plan to move the Kurds back from the Turkish border. And it has further aggravated anti-Turkish feeling in Washington—as shown by the House of Representatives’ vote to recognise the Ottoman empire’s onslaught against Armenians as a genocide and sanctions bills against Turkey in both chambers. This seems to have constrained Mr Trump’s largesse to Mr Erdogan a bit. Though he showered him with endearments at the White House this week, he did not promise the sanctions’ let-off Mr Erdogan craves. His restraint may be brief—with Mr Trump’s Republican critics about to switch to defence mode as his impeachment looms. Yet the mutual resentments unleashed by Mr Erdogan’s grandstanding and Mr Trump’s pandering will in any event be enduring. At every level beneath the presidency, America and Turkey have turned away from each other, even as the foundations of their alliance, NATO, the EU and American ambitions in the Middle East, are being eroded. It is not certain they can be turned back.

is not impossible, but neither does it look likely. A cynical strain of conventional wisdom says that nothing moves public opinion of Mr Trump. That is not quite true, though his approval rating moves in a narrower band than those of past presidents. It has a low ceiling in part because Mr Trump has made so little effort to broaden his appeal beyond his base. It has a high floor partly because he has done an outstanding job of cultivating that base, partly because America is deeply polarised and because, unlike in Nixon’s time, when Democrats and Republicans read the same newspapers and watched the same three main news networks, partisans today get their news from different sources, many of which exist to confirm viewers’ biases. But Mr Trump’s approval rating is not entirely insulated from external events (see chart). It stood at around 45% when he was inaugurated. His first few months generated ample headlines—a chaotic cabinet-filling process, Michael Flynn’s tenure as national security adviser and the failure of the first travel ban—but his rating did not decline until House Republicans introduced the American Health Care Act, their first effort to repeal Barack Obama’s Affordable Care Act (ACA). Over the next several months, Mr Trump’s popularity had an inverse relationship with that bill’s viability. Whenever it appeared to be dead, or dropped out of the news cycle, his rating rose; when Republicans revived their efforts to repeal the ACA, his rating fell— dropping to 37% in September 2017 when two Republican senators made a last-ditch repeal effort. Prominent Republican opposition to these efforts may have helped drive Mr Trump’s ratings down. John McCain, a late Republican senator from Arizona, voted against the bill. This may have allowed Republicans who liked Mr McCain to register their disapproval, just as support for impeachment among Democrats rose once it won the backing of Nancy Pelosi, the House Speaker.

Monday 18 November 2019

BUSINESS DAY

In Association With

America’s multi-trillion dollar pension hole

Public pensions are woefully underfunded The crunch point is coming soon

ANY WORKERS in the private sector no longer have them. But most publicsector employees in America are still entitled to a valuable benefit: a pension linked to their final salary. A long-standing problem is that states and cities, which fund their plans differently from the federal government, have been lax about putting aside enough money to cover these promises. The resulting black hole is becoming ever more alarming (see article). Although the American stockmarket has been hitting record highs, the average publicsector pension fund has a bigger deficit in percentage terms than it did in either 2000, or the start of this decade. In some states and cities schemes are less than 50% funded; Illinois has six of the worst. The cost of pension promises has risen because people are living longer, so they end up taking more out of the pot. Some states and cities have responded by trying to wriggle out of their obligations and cut the benefits retirees get, but courts have often decided against them, ruling that a contract is a contract. As a result states, cities

and other public bodies are being forced to funnel ever more into pension schemes. Having chipped in the equivalent of 5.3% of their ordinary payroll bills in 2001, public-sector employers now pay in, on average, 16.5% a year. Even those contributions have not been enough. Politicians have often failed to pay in as much as the actuaries recommend. In 2009 the actuaries for the Illinois Teachers scheme asked the state to cough up $2.1bn; it paid just $1.6bn. By 2018 the annual bill had risen to $7.1bn but the state paid only $4.2bn. The hole in the pension scheme deep-

ened to $75bn in 2018, or about $6,000 for every citizen in the state. And that is just for teachers. The problem could yet worsen. Pension schemes are vulnerable to a market downturn and many were left reeling after the global financial crisis of 2008-09. Even if markets do not tumble, they would suffer in a long period of sluggish returns. That looks plausible given that 30-year Treasury bond yields are just 2.4% and American equity valuations are stretched relative to their historical average. Some schemes are betting on “alternative assets” like hedge funds and

private equity to fill the gap. But hedge-fund returns have been disappointing over the past decade, and the private-equity industry is not large enough to absorb $4trn of public-sector pension assets. And there is a final problem: the schemes’ accounting. When working out how much they need to put aside today, all funded schemes must calculate how much they are likely to pay out in future. This means using a rate to discount the cost of tomorrow’s pension payments. The higher the rate used, the lower the cost seems to be. Publicsector pension schemes are allowed to use the assumed rate of investment return as their discount rate, even though they will still have to pay pensions whether they earn that return or not. This has naturally led to a degree of optimism about future returns: many assume 7-7.5% a year. In the private sector, a pension promise is seen as a debt and has to be discounted at corporate-bond yields, which are at historically low levels. This makes pensions look more expensive and explains why many companies have closed their final-salary schemes. If the public sector had to use the same approach, its average funding ratio would be a

lot lower than today’s 72% and the resulting hole, currently $1.6trn in total would be a lot bigger. Public bodies are going to have to boost their contributions even further. A study by the Centre for Retirement Research found that in the worst-affected states—Connecticut, Illinois and New Jersey— pension costs in 2014 were already 15% of total revenues. That will trigger a squeeze on the public finances, as other spending has to be cut or taxes have to be cranked up. Either will be especially hard on younger people and workers in the private sector, who do not get the same benefits. The pensions crisis has been rumbling on for years, but some states and cities will soon enter a downward spiral, in which pension costs lead to bad public services or tax rises, in turn encouraging workers and firms to move out, which then shrinks the tax base, making promises even less affordable. When that happens some states and cities will tumble into a black hole. Correction (November 15th): A previous version of this article stated that the hole in public-sector pensions is $1.6bn. It is in fact $1.6trn. Sorry.

Grubs up

Why eating bugs is so popular in Congo The creepy superfood is rich in protein and magnesium

T A MARKET in Goma, a city in the east of the Democratic Republic of Congo, an old woman pulls the wings off live grasshoppers and tosses their wriggling bodies into a bucket. She collected the insects from the airport at 5am that morning, and will go back the next day. Grasshopper season has just begun. Throughout November dozens of grasshopper-hunters gather at Goma airport most mornings. It is one of the few buildings in the city with constant electricity, and the lights that mark the runway attract swarms of the bug. People stuff them into plastic bottles to take to market. Buyers season them with salt and eat them with rice or cassava. Selling insects is more lucrative than selling fruit. A small pile of grasshoppers fetches the equivalent of $0.60 (Congo’s GDP per person is $562). Gathering them costs nothing but time. Caterpillars are more valuable still. Once they are boiled and salted, a large handful will sell for $1.20—the same price as ten bananas. Households in Kinshasa, the country’s sprawling capital, consume about 300 grams of caterpillars (about 80, if they are averagely juicy) a week. The Congolese have been eating bugs for centuries. People

lead to bad outcomes. The wrong variety of insect can poison consumers. Mrs Lukambala says she knows which caterpillars to pick because her family has gathered them for generations (the safe kind have red heads and fall out of trees). Your correspondent tried a sample: it was brittle and had a smoky taste. Add one more to the 2bn people worldwide who chomp insects.

say caterpillars, in particular, are not just tasty but healthy. “Our ancestors taught us to eat them to protect us from illnesses,” says Leonie Lukambala, a seller. She believes they can even help people infected with HIV. Caterpillars are packed with potassium, calcium and magnesium. A hundred grams of them will provide a person with the required daily intake of each of

these minerals. They are richer in protein than beef or fish. A handful is packed with about 500 calories, more than are in a fast-food cheeseburger. But that is a boon, not a drawback, in a country that suffers from one of the world’s highest rates of malnutrition. Others around the world should catch up. Bug farming takes up less land, requires less food and does less damage to the

environment than meat or fish farming. Crickets, for example, need 12 times less food than cattle to produce the same amount of protein. Bugs can even be fed farm and kitchen waste, such as rotten fruit and vegetables. Hunting insects is easy, too. Anyone can wander into the forest—or, indeed, to the airport— and gather caterpillars, ants and grasshoppers. But that can also

Monday 18 November 2019

BUSINESS DAY

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BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY

cityfile Agency destroys 40 hectares of hemp in Oyo REMI FEYISIPO, Ibadan

Some prospective electorates board a boat to sail across the River Niger at Ganaja jetty to communities in eastern Kogi, in preparation for 2019 Kogi governorship election in Lokoja. NAN

How to resolve Lagos’ gridlock challenge - Expert

n architect, Olusegun Ladega has suggested a strategic engineering evaluation of the twin problems of collapsed roads and gridlock in Lagos, in order to resolve their associated socio-economic impact on the state. Ladega, a former president, Association of Consulting Architects Nigeria (ACAN), made the suggestion while speaking to journalists during the 2019 ACAN symposium and business forum held in Lagos. According to him, in dealing with bad roads, issue of quality construction, methodology and specification, among other factors must be considered and addressed. Ladega, also managing director, Interstate Archi-

tect Ltd., noted that the peculiar weather condition, road abuse by users, quality of construction, heavy duty vehicles, were among the factors promoting bad roads. “They opened the dam from Osun State and Lagos became a recipient of the flood because of its peculiar location. There are solutions to the gridlock, though the solutions may not come overnight but we have to deal with the issue of heavy duty vehicles, road abuse, bad vehicles, among other factors on our roads,” he said. Ladega explained that a number of things must be understood when complaining about the prevailing bad roads in the state, as there was an extreme weather pattern this year. He said that the rain this year had been unseasonable, while the period

available for construction outdoor had been drastically reduced by the prolonged rainfall. “This may not repeat itself next year but the intervals between extreme weather patterns are also increasing, so we must plan ahead. “The last experience we had was in 2017. Before then we had same in 2012 which was about five year’s interval. “Between 2017 and this year is two years and we don’t know how high the frequency might go,” he said. According to him, the g overnment and engineers must bring in technologies that would enable th e m cove r more areas faster. Ladega said that such technologies exist but government must encourage its acquisition by intro-

ducing measures such as duty waiver, duty concessions and others. He suggested a Built Env i ro n m e nt In d u s t r y Inter vention Fund that would enable engineers to acquire technologies for faster construction as the window of dry season is now shortened. “Following the shortened window of dry weather, we need a response to enable us work faster and smarter at quantum measures and the government must intervene. “Since the government is not in the business of major engineering construction, it has to make business conducive for the practitioners to acquire equipment that can work faster in an adverse weather. For a practitioner to invest in such equipment, he or she must have a level of guarantee of patronage.

Flood: Our children no longer go to school - Delta community FRANCIS SADHERE, Warri

lood ravaged Okoloba federated community in Burutu council area of Delta State have appealed to Governor Ifeanyi Okowa, to sandfill the proposed site of their new secondary school before building the structures. Leaders of the community, who spoke to journalists when the delegation from the ministry of basic and secondary education inspected the land, said they were making the appeal because their children no longer go to school as a result of the flood. They lamented that the flood has made their children to skip school for

more than a term as all the structures in the community, including the only secondary school, remain flooded. One of the leaders of the community, Matthias Young, said the sand filling would raise the land a little above the sea level, thereby preventing the school from being submerged like every other building in the community whenever there is flood. Young also appealed that an Environmental Impact Assessment (EIA) be carried out before erecting the structures. “We want to appreciate the state government for the step they have taken so far. But we want them to sand fill the land before www.businessday.ng

building the new structures that will house the school. This way our children will continue to attend school even when there is flood,” Young said. The senior special assistance to Governor Okowa on research and youth development, Davids Akpoblokeme, who hails from the community, speaking in the same manner, said that their children were suffering as a result of the perennial flood. “I want to join my brothers to appeal to the state governor to assist us because we have been suffering. Each time there is flood in the community; all the houses are submerged in the water, including the schools.

“You can see what has been done at the permanent site of the NIMASA Science and Technical College, which is just few kilometers from the proposed site of the secondary school. In spite of the flood you can see that this place is not affected because it was sand-filled,” Akpoblokeme said. Chairman of the community, Stephen Koki, said, “This is why we are appealing that this time around, they should sand fill the area where the school is going to be built so that even if there is flood in the future, it would not affect the school and our children will continue going to school.”

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he National Drug Law Enforcement Agency (NDLEA) has destroyed over 40 hectares of hemp plantation in Abatade in Oluyole local government area (LGA) of Oyo State. Addressing newsmen during the exercise, weekend, the state commander of the agency, Ralph Igwenagu, said the command had previously destroyed six hectares of plantation in Ibarapa local government of the state. According to Igwenagu, the discovery of the plantation was an indication that several farmers in the state engaged in cultivation of hemp. He said five suspects hav e b e e n a r re s t e d i n connection with the plantation while investigation was on to arrest others. He said that the agency was not only determined to

destroy hemp plantations, but to also reduce its abuse to the barest minimum in the state. The commander warned community leaders against giving their land to cultivation of illicit substances. “The owners of the plantation are not from the village but they got t h e l a n d f ro m t h e v i l lage head. If the villagers refused to give them the land, the people will not get land to cultivate again and eventually they will leave the illegal business,” he said. He urged members of the community to always report to the agency anytime they noticed farmlands being used for hemp cultivation. Mutiat Okuwobi, the state’s Public Relations’ Officer of the agency, said the command would continue to monitor farmland to prevent cultivation of hemp.

3 charged with theft of $5,000 from Egyptian

hree suspects have been arraigned before an Ikeja Chief Magistrate Court, Lagos for allegedly stealing 5,000 dollars from an Egyptian. The suspects- Musa Adamu, 39; Nasiru Usman, 24, and Moses Olusoji, 24, who live in Agege area of Lagos State, are charged with conspiracy and theft. Clifford Ogu, an Assistant Superintendent of Police (ASP), told the court on Thursday that the defendants committed the offence on July 27 at No.34, Onafuwa Street, Agege, Lagos. Ogu said that the defendants broke into the residence of Amro Mohammed,

an Egyptian, at 2 a.m and stole $5,000 (about N1.8 million) and an ATM card. He alleged that the defendants also stole Mohammed’s Infinix hot 4, valued at N47,000 and also criminally transferred N102,000 from the complainant’s account to one of their accounts. The offence, he said, contravened the provisions of sections 287 and 411 of the Criminal Law of Lagos State,2015. They pleaded not guilty to the charges. Chief Magistrate J.A. Adegun admitted the defendants to bail in the sum of N500,000 each with two sureties each in like sum. Adegun adjourned the case until December 4 for mention.

Flood: Lawmakers in Rivers seek collaboration from IOCs, others SABY ELEMBA, Port Harcourt

ivers State House of Assembly is to collaborate with operating companies towards supporting flood victims and tackling flood in the state. Dumle Maol, chairman of the house committee on environment made the pledge, Friday, in Port Harcourt during a meeting with NLNG, INTELS and other private companies operating in the state. @Businessdayng

Maol said that the collaboration has become necessary to help relevant stakeholders brainstorm on best ways of tackling flooding in the state. “This move is a part of our continued efforts to canvass support for residents affected by flood in the state. We shall continue to seek collaboration with the private sector including resident international oil companies until we find a permanent solution to the menace.

Monday 18 November 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: November 15 – November 22, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

1.94

Q2 2019 — lower by 0.16% compared to 2.10% in Q1 2019

Broad Money Supply (N’ trillion)

35.03

Decreased by 0.53% in Sep’ 2019 from N35.22 trillion in Aug’ 2019

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

25.47 2.01

Increased by 2.61% in Sep’ 2019 from N24.82 trillion in Aug’ 2019 Decreased by 0.66% in Sep’ 2019 from N2.02 trillion in Aug’ 2019

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

11.24

Increased to 11.24% in September 2019 from 11.02% in August 2019

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

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

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

40.08 62.85 1.81

November 13, 2019 figure — a decrease of 0.87% from November start November 14, 2019 figure— an increase of 0.24% from the previous wk October 2019 figure — a decrease of 2% from September 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday 15/11/19

NSE ASI Market Cap(N’tr)

Friday

Change(%)

26,314.49 12.81

Volume (bn)

0.47

0.43

8.67

Value (N’bn)

5.59

5.58

0.21

2.04 2.04

MONEY MARKET NIBOR Friday Rate (%)

15/11/19

1-week Change

YTD Change

62.85 2.61

(%) 0.24 (6.79)

(%) (2.50) (14.59)

2663.00 110.65 66.16 12.76 509.50

8.25 (1.73) 3.04 3.32 (0.24)

37.55 (15.02) (14.63) (16.76) 17.53

1465.38 16.88 263.85

(0.07) (0.59) (2.49)

11.22 (1.80) (19.51)

8/11/19

26,851.68 13.07

Tenor

Indicators

Friday Rate (%)

Change (Basis Point)

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

15/11/19

8/11/19

OBB

14.0700

4.4300

964

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

13.0700 13.5500 12.7625

5.5700 4.9375 13.2460

750 861 (48)

Tenor

90 Days

11.7800

13.9533

(217)

1 Mnth 3 Mnths 6 Mnths

9.80 9.45 9.92

12.22 12.65 13.11

(242) (320) (319)

9 Mnths 12 Mnths

10.19 12.84

11.98 14.78

(178) (193)

Friday (N/$)

Friday

15/11/19

1 Month

(N/$)

Rate (N/$)

15/11/19

8/11/19

15/10/19

Official (N) Inter-Bank (N)

306.90 362.58

306.90 362.77

306.95 362.63

BDC (N) Parallel (N)

0.00 360.00

Indicators

(Basis Point)

8/11/19

Friday

(%)

AVERAGE YIELDS Friday

Friday

Change

(%)

15/11/19

8/11/19

3-Year 5-Year

0.00 11.60

0.00 12.07

0 (47)

7-Year 10-Year

12.28 12.25

12.34 12.81

(6) (56)

20-Year 30-Year

Change

(%)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

BOND MARKET Tenor

Friday

(%)

FOREIGN EXCHANGE MARKET Market

Friday

12.85 13.19

(Basis Point)

13.19 13.81

(%)

Change (Basis Point)

15/11/19

8/11/19

Index

3,159.92

3,111.80

1.55

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

9.87 6.46

9.72 6.32

1.54 2.12

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

28.64 -27.15

26.68 -29.11

1.96 1.96

TREASURY BILLS (MATURITIES) Tenor

(34) (62)

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

Amount (N' million)

91 Day

4,384.18

182 Day

12,920.90

364 Day

107,938.48

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

Rate(%) 7.7998

Date 13-Nov-2019 13-Nov-2019

9 12.94

13-Nov-2019

Global Economy In the US, the nation's budget deficit widened by $33.5 billion in the month of October to $134 billion from $100.5 billion a year earlier. Individual income taxes accounted for $126 billion, customs duties accounted for $8 billion and corporate income taxes for $7 billion amongst other with receipts. According to the US treasury department, under the economy's purchases, social security recorded $89 billion, national defense $71 billion, health for $51 billion, and education for $11 billion amongst others. The US fiscal year for 2018/2019 ended in September 2019 and the economy recorded a budget gap of $984 billion. This is the largest budget deficit since 2012. Elsewhere, the Japanese economy advanced at a significantly slower pace in the third quarter of 2019. The nation expanded at 0.2% year-on-year in the said quarter, much slower than the growth of 1.8% in the previous quarter and 2.2% in the first quarter. This is the slowest expansion this year arising from poor global growth prospects and rising trade restrictions weighing on the external sector of the economy and spreading to the allimportant manufacturing activities. In a separate development, India's inflation rate climbed to 4.62% year-on-year in October 2019, above the Reserve Bank of India's medium-term target of 4%. This is the highest inflation rate since July 2018 according to the Ministry of Statistics and Program Implementation (MOSPI). The nation recorded a rate of 3.99% in the previous month. Food prices jumped to 7.89% in the reference month from 5.11% in September mainly due to disruption in supply chain and acquisition restrictions on traders. Domestic Economy The Central Bank in its recent economic report for third quarter 2019, revealed that the Federal government revenue from the non-oil sector rose to N 1.36trn. The CBN said, “Non-oil revenue (gross), at N1.36trn, rose above the quarterly budget of N1.34trn by 1.4%. It, similarly, rose above the level in the preceding quarter by 28%. According to the report “The higher non-oil revenue, relative to the quarterly budget, was as a result of increased receipts from corporate taxes, and improvements in the collection of the Nigeria Customs Service. The report also said that the gross oil revenue, at N1.34trn or 49.6% of the total receipts, was below the quarterly budget by 44.6%, but was above the receipt in the preceding quarter by 9.9%. The contraction in oil revenue, compared to the quarterly budget, was due largely to shortfalls in all the components of oil revenue, except domestic crude oil and gas sales. In a separate development, the Debt Management Office (DMO) has said the Federal Government will auction N150bn worth of bonds by subscription on November 20. A recent circular by the DMO showed that a N50bn five-year reopening bond maturing in April 2023 would be offered at 12.75%; a N50bn 10-year reopening bond maturing in April 2029 would be auctioned at 14.55%; while N50bn 30-year reopening bond maturing in April 2049 would be auctioned at 14.8%. According to the DMO, the auction date is November 20, while the settlement date is November 22. The circular said the DMO, on behalf of the Federal Government is offering the bonds for subscription by auction and is authorised to receive applications for them. Stock Market Nigerian Stock exchange indicators closed higher last week as demand for value and high dividend yield stocks gained momentum on funds inflow to equity assets due to the recent crash in money market rates, as well as the undervalued state of the market. Consequently, the All Share Index (ASI) jumped 2.04% to 26,851.68 points from 26,314.49 points the preceding week. Similarly, market capitalization

rose 2.04% to N13.07 trillion from N12.81 trillion the prior week. This week, we see mixed performance on the back of profit-taking, repositioning in value stocks and portfolio adjustment as market players digest the Q3 scorecards. Money Market Rates at the money market edged upwards last week as liquidity was wiped out of the market due to Retail Secondary Market Intervention Sales (SMIS). Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates rose slightly to 14.07% and 13.07% from 4.43% and 5.57% respectively the previous week. However, the 30-day and 90-day Nigeria Interbank (NIBOR) rate dropped to 12.76% and 11.78% from 13.25% and 13.95% the prior week. This week, rates are expected to trend lower due to expected Open Market Operation (OMO) maturity and Retail Secondary Market Intervention Sales of about N606 billion. Foreign Exchange Market Last week, the local currency recorded relative stability against the dollar across all market segments. The official rate remained unchanged at N306.9/$. In the same vein, at the parallel market, the local unit closed flat at N361/$. At the NAFEX window the local currency witnessed a marginal depreciation of 2 kobo to close at N362.79/$. This week, we expect foreign exchange rates stability to continue as the CBN continues intervening in the market Bond Market Average bond yields further ticked downwards across most segments in the week ended November 15th, 2019 with increased demand for various maturities across the curve following the CBN directive that exempts individuals and corporates from participating in Open Market Operation (OMO) T-bills auction. Yields on the five-, seven-, ten- twenty-year, and thirty-year debt papers closed lower at 11.60%, 12.28%, 12.25%, 12.85% and 13.19% from 12.07%, 12.34%, 12.81%, 13.19% and 13.81% respectively the previous week. The Access Bank Bond index rose by 48.12 points to finish at 3159.92 points from 3111.80 points the prior week. We expect the bullish sentiments to prevail this week as investors continue to look for investment outlets for their idle funds. Commodities The price of oil rose slightly last week as the American Petroleum Institute (API) reported that crude inventories fell by about 500,000. The comments by Secretary General of the Organization of the Petroleum Exporting Countries, that global economic fundamentals remained strong, and that he was still confident the U.S. and China would reach a trade deal also supported oil prices. Bonny light, Nigeria's benchmark oil crude, went up $0.15, or 0.24%, to $62.85 a barrel. In contrast, precious metal prices dipped further compared to the prior week as comments from White House economic adviser that the US is nearing an interim trade pact with China affected price of bullions. Gold dropped to $1,465.38 an ounce, down 0.07% from the preceding week's price, while the silver closed lower at $16.88 per ounce, compared to the prior week's close of $16.98 per ounce. This week, we see oil prices being affected by the USChina trade talk. Precious metal prices are expected to become bullish as US Treasury yields have pulled back, giving gold prices room to recover. MONTHLY MACRO ECONOMIC FORECASTS Variables

Nov’19

Dec’19

363

362

363

Inflation Rate (%)

11.3

11.33

11.4

Crude Oil Price (US$/Barrel)

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

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Jan’20

Exchange Rate (NAFEX) (N/$)

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Monday 18 November 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

CONSUMER GOODS

Guinness sees turnaround with biggest gain in 2 years OLUFIKAYO OWOEYE

hares of Guinness Plc regained momentum on Friday as the bears whipsaw the bears on the floor of the Nigerian Stock Exchange. Diageo-owned Guinness gained 10percent to close trading at N28.60, the biggest daily gain since September 7th 2017, its share price had earlier in the month plunged to N23.30, the lowest in five years. Interestingly, as the effects of the apex bank’s policies in the fixed income market continue to ripple across the capital markets, investors flocked to the equities market this week in search of yield and drove the domestic bourse to its largest weekly gain since the week of the 23rd August 2019. At the close of trading on Friday, All-Share index rose 2.0percent to 26,851.68 points, closing in the green on 3 of 4 trading sessions, which reduced the YTD loss to -14.6percent. On sectors, the Banking gained 6.8percent,

Industrial Goods gained 3.2percent indices sustained last week’s gains, with the Consumer Goods (+2.6%) index joining the leaders’ list. Conversely, the Oil & Gas

(-1.8%) and Insurance (-0.6%) indices closed in the red. Analysts expect to see gains in fundamentally sound stocks as investors’ sentiment towards the

equities market improve. “Nonetheless, we maintain that this might be short-lived as economic buffers are still absent,” Afrinvest said.

Wale Okunrinboye, head of research at Lagos-based Sigma Pensions Ltd, in terms of sustainability, this is not fundamentally driven because the economy is yet to improve. The renewed market resurgence follows a move by the CBN to limit participation in highyielding OMO market which sent real returns on T-bills below zero, forcing big domestic investors back to equities. The move to restrict the OMO market to banks and foreign investors have left big domestic investors, mostly pension funds and insurance companies, with idle funds and caused heavy demand at a primary market NTBills auction on Wednesday. The OMO bills accounted for N13trn of total liquidity in the money market, while treasury bills accounted for N2trn. Consequently, the interest rates on Nigerian Treasury bills collapsed to within single digits for the first time since 2016, fuelling a hunt for lucrative opportunities outside the fixed income space.

LOGISTICS

Red Star Express to raise N1.35bn through rights issue …grows revenue by 51% in 5 years HOPE MOSES-ASHIKE

aving consistently increased revenue for the 5-year period by 51 percent from N6.6 billion in 2015 to N10.0 billion in full year (FY) 2019, Red Star Express Group Plc, Nigeria’s leading logistics provider, was at the stock market to raise fresh capital to the tune of N1.35 billion by way of Rights Issue to existing shareholders. The offer, which opened on Monday 11th November 2019, is aimed issuing 336,855,291 ordinary shares of 50 Kobo each at N4 on the basis of four new ordinary shares for every

seven shares held as at August 21, 2019. The purpose of this exercise is to raise additional capital to finance the expansion of the company’s current operations, the deployment of modern technology and improvement of its working capital. Speaking during the facts behind the figures at the Nigeria Stock Exchange (NSE) on Thursday, Sola Obabori, group managing director, said the expected net issue proceeds of N1,309,936,278 will be applied to developing warehouse facilities along Lagos-Ibadan Expressway and at Murtala Muhammed International Airport Cargo Terminal, purchase of trucks, group ICT Improve-

ment/Enterprise Resource Planning Solution, and working capital. He disclosed that the additional capital is to accentuate the growth potentials already put in place by the company’s management. “This move underlines our ambition to maintain the expansion activities undertaken in the last few years. After opening international offices in Niger Republic, Burkina Faso and Benin Republic, we have established new business lines in the Agricultural and Technological sectors of the economy. This Right Issue represents the next logical step in this regard,” he stated. “We have a promise to keep towards our shareholders; which is to continue providing superior returns on their investment in our business. With this additional capital, we will be able to ensure considerable growth of the company; making it more profitable and in a position to continue fulfilling that promise (of providing superior returns),” he said. FBN Quest Merchant Bank Limited is the lead issuing house for the Rights Issue while Meristem Capital Limited is involved as the joint issuing house.

The subsidiaries contribution has been hovering between 42 percent - 48 percent during the periods under review. As a percentage of revenue, the Group has consistently maintained a Profit Before Tax (PBT) margin between 7.3 percent and 9.2 percent with Profit After Tax (PAT) margin ranging from 4.1 percent and

6.3 percent in the last 5 years which is above industry average of 4 - 5 percent. The PAT margin increased on a year-on-year (YOY) from 4.1 percent in FY 2018 to 4.6 percent in FY 2019, while PBT increased YOY from 7.3 percent in FY 2018 to 7.4 percent in FY 2019: which is as a result of several cost savings initiatives being implemented with

the hope of more positive impact in the future years. The Group has successfully maintained an upward trend in dividend payment over the last 5 years, with the highest record of 43kobo in FY2019. The Earnings Per Share recorded its highest of 79kobo in FY 2019 over the 5-yearperiod, which is 34 percent above 59kobo recorded in FY2018

L-R: Ismail Omamegbe, head, CR&S/media, and external relations; Samuel Asabia, member, board of trustees; Adeola Asabia, chair, business ethics, University of Lagos, First Bank endowment programme ; Banji Fehintola , president, CFA Society Nigeria, and Razaq Ahmed, chairman, University Relation Committee, CFA Society Nigeria, at the regional preliminary level of the 2019 ethics challenge competition in Lagos.Pic by Pius Okeosisi

Monday 18 November 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

TELECOM

Airtel Africa acquires additional spectrum to expand network in $70m deal SEGUN ADAMS

irtel Africa, listed panAfrican Telco, announced an agreement between its subsidiary, Airtel Nigeria limited, and Intercellular Nigeria Limited to acquire additional spectrum to expand and strengthen its LTE network across Nigeria, the company said Thursday. The acquisition which is subject to regulatory approval by the Nigerian Communications Commission (NCC) will add 10 MHz spectrum in the 900 MHZ band in Nigeria and the $70m consideration excludes fees to be paid to NCC. “Nigeria presents a significant growth opportunity in data,” Airtel said. “The acquisi-

tion of this spectrum will enable us to further deliver on this growth opportunity and continue to offer our Nigerian customers enhanced user experience.” Nigeria is Airtel Africa’s largest market and the telco in six months to September 2019 grew revenue by 23 percent with data driving the growth. Data revenue surged 76 percent on the back of accelerated roll-out of 4G network, with an increase in data customer base of 20.8 percent and an Average Revenue per User growth of 43 percent. During the period, 4G data usage increased by almost 20 times, the company said. “Data is a key pillar of our growth strategy, driven by increasing 4G networks and

supported by the increased affordability and increasing penetration of smartphones,” said Raghunath Mandava, CEO of Airtel Africa. Mandava noted an overall smartphone penetration of more than 35 per cent and data consumption growing by 92 per cent in the six months’ period ended 30 September, 2019. Airtel operates across 14 African countries, Airtel Africa and is listed on both the London Stock Exchange (LSE) and the Nigerian Stock Exchange (NSE). Industry data from telecommunications sector regulator show that as of September 2019, Airtel is the third-largest operator in the GSM space, with a market share of 27.34 percent or 48.91 million subscribers, slightly trailing Glo’s 27.51 percent.

L-R: Julie Mogbo, Family bond nurse; Michael Adegbite, naturopathic doctor; Daniella Akpakwu, founder, Wellnesspatron/convener, Diabetes Demystified; Matilda Ogwa Abah, founder, Beautiful Naturally Platform; Olufemi Fasanmade, endocrinologist, Chinasa Amadi, Lifestyle Medicine physician, at the Diabetes Demystified, a diabetes awareness pregramme

COMPANY RELEASE

Dana Air celebrates 11th anniversary, rewards passengers IFEOMA OKEKE

igerian carrier, Dana Air, on Sunday celebrated the 11th anniversary of its flight operations by rewarding customers with various gifts ranging from free tickets to souvenirs. Obi Mbanuzuo, the Chief Operating Officer, while speaking at a brief ceremony in Lagos said that the airline would never have made it this far but for its loyal guests and staff who believed in what the airline stood for and have kept it going, hence the reward and celebration with customers Obi stressed that Dana Air coming this far as a domestic airline in Nigeria has not been rosy as the airline has suffered among other issues incessant peddling of fake news about its operations, but for the resolve

and renewed passion of its staff and loyal customers who have kept faith with the airline, by consistently flying knowing full well that the airline has built a strong safety reputation in the last few years. “For us, 11 years means we are doing the right things and making the right decisions at the right time. We have been methodical, careful and realistic in our steps and we hope to consolidate our existing routes to provide full capacity, seamless travel and options for our guests to travel conveniently yuletide while still reviewing our route expansion plans. “So many airlines have come and gone maybe due to some incidents in the past or inability to cope with the operating environment but we have been here for 11 years and still counting because of our loyal customers, dedicated staff strength and above all a

sound management team with a massive experience in the Nigerian aviation industry running the airline with a model worthy of emulation,” he said. He thanked the present administration led by President Muhammed Buhari, for gradually creating the ambience for airlines to thrive and the efforts so the area of infrastructure is commendable, adding that he hopes that these efforts are sustained in the coming years and other areas hampering the growth of airlines reviewed. “For us, it has been about commitment, promise and fulfilment and we are delighted to have kept the promise we made to our guest last year about fleet expansion and capacity with the recent acquisition of 2 new Boeing 737 aircraft bringing the number of aircraft in our fleet to 9. Our guests should expect more as our commitment and promise has not changed.”

Princess Nnaji, senior brand manager, Home and Hygiene & Bars; Bimpe Adio-Abiola, homecare category manager; Ifeoma Idigbe, trustee, WIMBIZ; Tosin Bamiro, winner of Sunlight 1m grant; Soromidayo George, corporate affairs and sustainable business director, Unilever Ghana and Nigeria; Azukaego Chukwuelue, founder Truss Foundation; Bunmi Adeniba, homecare category director, Unilever Ghana and Nigeria, and Bunmi Aboderin-Talabi, outgoing WIMBIZ chairperson, at the Sunlight moment checque presentation, at WIMBIZ Conference 2019

COMPANY RELEASE

Platview Technologies partners with LinkShadow on cyber security in Nigeria

igerian foremost cyber security company Platview Technologies unveiled its cyber security partnership agreement with multiple award-winning U.S. registered security company LinkShadow while it announced Platview Technologies as its brand Certified Platinum Partner in Nigeria. The global cyber defense firm announced the partnership after it signed a partnership agreement with the Nigerian cyber security and IT solutions counterpart Platview Technologies during an event at The George Hotel, Ikoyi Lagos, on Tuesday 29, October 2019. This event was attended by top management from both companies. In a statement by Mr. Dapo Salami, who is the director of business development at Platview Technologies, he said, “strategic partnership is always a driver

to delivering value to customers; our partnership with LinkShadow is a choice, commitment to our customers and the ecosystem, to experience the endless possibilities and value of machine learning, artificial intelligence and further reduce the attack/threat landscape while prioritizing ROI for cyber security.” “Cyber security has been a major hazard on the Internet world so this partnership is envisaged to further boost the safety of Nigerians online data, corporate organizations, banking sector and government agencies etc.” he said. The award-winning cyber security firm reiterated that the newly signed partnership between the duo Cyber Security firms will deliver the highlighted solutions to its Nigerian customers to ensure their online and corporate activities are hazard free and

secured from various online threats. The partnership services are built on four pillars which are Behavioral Analytics, CXO Visibility, Threat Hunting and Security Synopsis. The aforementioned partnership services which the duo Cyber Security firms will render also includes; Faster Detection of Threats, Realtime response to Threats, Behavior and Predictive Security Analytics, Automated Discovery of Users and Assets, CXO Managerial Dashboards and Reports, Machine Learningbased, Cyber Security Threat detections and Threat Intelligent Feeds. LinkShadow is a next generation cyber security analytics platform with behavior analytics and extensive machine learning capabilities to detect both cyber and internal threats.

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R-L: Victor Etuokwu, executive director, retail banking division, Access Bank PLC; Bola Oyebamiji, Osun State commissioner for finance and representative of the State governor, and Bayo Adeleke, commissioner for local government and chieftaincy affairs, at the commissioning of the new Access Bank Branch at Iree town, Osun State.

L-R: Opeyemi Awojobi, Sponsorship manager, Tolaram Group; Bola Alonge, head of dentistry & oral health, Federal Ministry of Health; Omotayo Abiodun, public relations manager, Colgate Tolaram Group; Evelyn Eshikena, president, Nigerian Dental Association, and Hajaru Salisu, a pry 2 pupil of Gidan Salihu Model Pry School, Gidan Igwai, Sokoto, at the Awareness Campaign on NOMA Disease in Sokoto.

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Monday 18 November 2019

BUSINESS DAY

COMPANIES&MARKETS

TECHNOLOGY

Jumia’s Q3 results show silver lining in rising digital payment platform JumiaPay LOLADE AKINMURELE

umia’s in-house digital payment platform, JumiaPay, is flashing signs that it could well become a revenue spinner for Africa’s largest e-commerce firm in the near future. The e-tailer’s third quarter results showed tremendous growth in the acceptance of JumiaPay by online shoppers, as total payment volume on the platform increased by 95 percent to 32 million Euros from 16.4 million Euros in the third quarter of 2018, while the number of transactions spiked by 262 percent over the same period. The traction being made by JumiaPay is significant for two reasons. First is that it means Jumia’s ambition to generate more revenue from digital payment products is truly on and could even happen faster than expected. It also gives Jumia a leeway out of an expensive and problematic cashon-delivery option which hinders efficiency and could be ridden with security lapses- as e-commerce firms in Nigeria have come to find. JumiaPay is following in the steps of US-based Paypal, Alipay in China and Latin American fintech firm, MercadoPago. All three companies were established by and started out as the in-house payment platforms for Ebay, Alibaba and MercadoLibre respectively. By leveraging on the market place of their parent companies, digital payment platforms have often thrived like JumiaPay is finding out now even though it hasn’t even scratched the surface in terms of usage. That’s because, JumiaPay’s total payment volume, though up from 8.3 percent in the third quarter of 2018, was only 11.6 percent of the parent company’s total sales (referred to as Gross Merchandise Value, GMV in online retailing) of 275 million euros in the third quarter 2019. While revenue came in strong and customer base grew 56 percent to 5.5 million, Jumia also recorded some losses. The firm’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) remained negative in the period, worsening by 26 percent to 45.4 million Euros from 35.8 million euros in the third quarter of 2018. A large portion of the loss was attributed to an “increase in fulfilment expenses due to more cross-border goods transactions”, the company’s management team said over an investor conference call. Since its founding in 2012, the e-commerce firm’s costly model of delivery and the relentless pursuit of growth in 14 African markets

have come at the cost of recurring losses. Jumia’s CEO, Sacha Poignonnec believes the most relevant monetisation metrics for the loss making firm is market-based revenue and gross profit rather than net profit “which is impacted by shifts in the revenue mix between first party and market place.” The company, whose target for profitability is late 2022, will also be looking for faster growth from JumiaPay as a leeway out from its expensive cash-on

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delivery services. “We are focused on driving the adoption and penetration of JumiaPay within our own ecosystem,” Poignonnec said during the investor call. “E-commerce marketplaces are very powerful engines to drive payment. Everywhere in the world some of the leading payment companies were born out of and grown by market places.” “We are following the same path to ultimately create the leading payments

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system in Africa,” Poignonnec said. Since its launch, JumiaPay has spread across six countries and is targeting a larger share of the electronic payments market, according to Poignonnec who also said the payment platform’s bright future has been somewhat validated by the backing of global card giant, MasterCard, which invested 50 million euros in the firm before an initial public offering in New York.

Monday 18 November 2019

BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY

PHOTOSPLASH 2oth Year Anniversary of Nigerian Gas Association (NGA) in Lagos

??????????ww L-R Audrey Joe-Ezigbo, president , NGA;,. Sanjay Narasimhalu, director, Chevron Downstream Gas; Justin Ezeala2nd VP NGA, receiving the award of recognition - Corporate Category for decades of support

L-R: Audrey Joe-Ezigbo, president, NGA; James Odiase , senior manager commercial, Acugas Limited; 2nd VP, NGA and Justin Ezeala, receiving the award of recognition - Corporate Category for decades of support

L-R: Oni Seun, BusinessDay Media, Simbi Wabote , executive secretary, NCDMB , Kristabel Eriaye of BusinessDay Media L-R: Audrey Joe-Ezigbo, president , NGA; CEO , Frontier Oil and immediate past NGA president, Thomas Dada; Justin Ezeala ,2nd VP, NGA, receiving the award of recognition - Corporate Category for decades of support

L-R: Audrey Joe-Ezigbo, president , NGA; Joseph Ezigbo, founder and MD, Falcon Corporation Ltd and Justin Ezeala 2nd VP NGA

L-R: Audrey Joe-Ezigbo, president, NGA; Bolaji Osunsanya, chief executive officer, Axxela Group, and Justin Ezeala 2nd VP, NGA

L-R: Audrey Joe-Ezigbo, president, NGA; Gregory Germani, managing director , West African Gas Pipeline Company Limited and Justin Ezeala, 2nd VP, NGA

L-R Audrey Joe-Ezigbo, president, NGA; Odianosen Masade, corporate communication/team lead, Aiteo Group and Justin Ezeala, 2nd VP, NGA receiving the award of recognition - Corporate Category for decades of support

R-L: Audrey Joe-Ezigbo, president, NGA and Misan Jekhine, chairman organising committee.

Monday 18 November 2019

BUSINESS DAY

real sector watch Where is Adebayo’s industrial blueprint? ODINAKA ANUDU

tunba Adeniyi Adebayo has been the minister of industry, trade and investment for three months. He has made public statements to reflect his vision for local and international trade as well as the investment environment. As soon as he became minister, his first pledge was to work with his counterpart in the ministry to attract investments and boost trade in the country. He has since spoken on job and investment creation. On October 5, he urged the business communities in Poland to consider Nigeria as a profitable investment destination. However, the minister is yet to provide his blueprint on industrialisation of the mono-product Nigeria. He has left manufacturers guessing on what his policies are on critical issues such as backward integration, incentives, import restrictions, waivers, Export Expansion Grant and small businesses. Many manufacturers are asking in hushed tones whether Adebayo’s policy centres around import substitution, export orientation or resource-based manufacturing. Currently, the manufacturing sector is challenged. Firms such as Grif, Universal Steel, Evans Medicals, Swiss Pharma, Procter &Gamble, among many others, have exited Nigeria recently for diverse reasons ranging from poor policies to tough operating environment and debt. What is Adebayo’s magic wand for arresting closure of industries? In 2014, pharmaceutical companies like Emzor, GSK, and a number of others earned $7.708 million from export of medicines to the African market, according to the International Trade Centre (ITC). Four years later, however, the companies made only $708,000. Naira has weakened from N199/$ in 2014 to N360/$ in 2018 (80.9 percent), but export earnings fell by a whopping 90.8 percent. Okey Akpa, chief executive of SKG Pharma and former chairman of the Pharmaceutical Manufacturers Group of the Manufacturers Association of

Adeniyi Adebayo

Nigeria (PMG-MAN), said that increased import of medicines jeopardises Nigeria’s drug and national security. “Local companies in the pharmaceutical industry are struggling to remain in business and some have gone into extinction. And to meet the shortfall in demand, import increases,” Gbolahan Ologunro, a research analyst at Lagosbased CSL Stockbrokers, told BusinessDay recently. The Export Expansion Grant has been suspended since 2013. Up till now, it has not been reinstated. The EEG was originally established in 1986 to help Nigerian exporters to become competitive at the global market. It is a practice in many developing and developed countries such as China, India and Australia to provide concessions or cash rebates/grants to companies penetrating new markets or consolidating already established markets to enable them rival competitors. In Nigeria, companies that exported different kinds of products or commodities between 2006 and 2016 were owed billions of naira in claims as the federal government did not meet the obligation of settling them as promised. The National Assembly www.businessday.ng

approved the promissory notes of 269 companies worth N193.042 billion, but 38 exporters have been left in the lurch. According to Ede Dafinone, chairman, he Manufacturers Association of Nigeria Export Promotion Group (MANEG), continuous drop in the non-oil exports since 2013 may not be unconnected with the suspension of the only incentive that helps to drive exports. More so, what is Adebayo’s blueprint on the Central Bank of Nigeria’s list of 43 items not eligible for foreign exchange? Annealed cold rolled steel is on that list even when no firm produces it in Nigeria—rendering end users in the industry hopeless and jobless. Textile is on the list even, though the number of textile makers in the country today is fewer than four. There is no evidence of improved

‘

local production and new investments in textile production, industry players say. In fact, most of the socalled textile makers are producers of rugs, handkerchiefs, and towels. “The textile industry has been a beneficiary of several fiscal incentives and protectionist measures over the years, yet it has remained in stagnation,” Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry, said in a recent statement. “Some of them have even gone into receivership as they could not repay their loans. The lesson is that we should deal with the fundamental issues of production competitiveness in our economy,” he added. Though tomato is still one of the items, yet local production is still very low. About $360 million is still spent on import of tomato paste. Much of the paste that comes into Nigeria is

We are sure that there is a need to review of the industrial plan, assess the level of achievement of the plan and project for the next five years https://www.facebook.com/businessdayng

smuggled. Local industries are not faring better, with Dangote Tomato just reopening its Kano plant. Others are either not functional or operating below 25 percent capacity. Moreover, what is Adebayo’s position on dishing out import waivers on one company to the detriment of others? A number of large firms have been beneficiaries of the flip-flop to the detriment of other players. Will this continue or stop? Many firms are struggling to stay afloat as their margins continue to drop. On September 4, the Flour Mills of Nigeria had its annual general meeting in Lagos. Its group financial statement showed that revenue fell 3 percent to N527.4 billion in March 2019, as against N542.7 billion in March 2018. Profit from continuing operations slumped by 71 percent to N4 billion, from N13.61 billion in the previous year. McNichols, a producer of consumer goods, was hit by the economic headwinds as its revenue dropped by 17 percent to N355 million, from N430 million in the 2018 financial year. The company’s profit before tax was N20.9 million in 2018 but it dropped to N15.4 million in 2019. Okomu Oil Palm had its turnover fall by 22 percent to N4.34 billion in 2019, from N5.59 billion in 2018. The company’s gross profit also dropped to N3.49 billion, from the N4.45 billion in 2018, representing a 21.6 percent decline. Its total comprehensive income dropped significantly by 38 percent from N2.46 billion in 2018 to N1.52 billion in 2019. Guinness Nigeria recorded N131.5 billion in turnover in the year ended June 30, 2019, which was a decline of 8 percent when compared with N143 billion in the corresponding period of 2018. The decline cut across both the domestic and export sales. In the domestic market, Guinness realised N124.9 billion, a decline of 7.9 percent when compared with N135.7 billion it made in the same market during a corresponding period of 2018. Nigerian Breweries’ sales fell by 5.9 percent. Local sales in the financial year ended stood at N324.20 billion, representing 5.9 percent decline. @Businessdayng

Dangote sugar, a division of the Dangote conglomerate, experienced a decline in its revenue by 2.24 percent, from N80.4 billion recorded in half year 2018 to N78.6 billion in the half year of 2019. Its gross profit dropped by 8.19 percent to N21.3 billion from N23.2 billion, though profit after tax grew marginally to N12.8 billion in 2019 from N12.7 billion in 2018. PZ Cussons is also facing tough times with series of losses. Portland Paints’ three months to June 2019 fell to N207.34 million from N319.23 million, as profit from operations crashed from N95.2 million to N5.4 million, according to the company’s unaudited financial report for the period ended June 2019. This is coming on the heels of the imminent African Continental Free Trade Area (AfCFTA). Today, Nigeria’s most comprehensive and ambitious industrial plan has been left in the shelves of his ministry to gather dust five years after it was launched in 2014. The five-year plan was conceived and prepared by Nigerian experts, the United Nations Industrial Development Organisation (UNIDO) and several technical partners with a view to building a resilient manufacturing sector that would drive jobs, generate wealth, diversify the economy, substitute imports, boost exports, and broaden the tax base in three to five years. But this plan will end next year in the shelves, with most of its parts unexecuted. “We are sure that there is a need to review of the industrial plan, assess the level of achievement of the plan and project for the next five years,” Mansur Ahmed, president of the Manufacturers Association of Nigeria (MAN), told BusinessDay on the phone. “There are areas where the plans have not met expectations in terms of today’s realities and we have to review it to make it more realistic for today’s situation,” he further said. Will Adebayo review or implement the NIRP? Manufacturers expect him to start work on local industries as time ticks fast.

Monday 18 November 2019

BUSINESS DAY

real sector watch Manufacturers in Amuwo-Odofin, Kirikiri lose N20bn to poor infrastructure — MAN

…as MAN foresees challenges ahead AfCFTA MICHAEL ANI

he Manufacturers Association of Nigeria (MAN) s ay s i t s m e m bers within the Amuwo Odofin and Kirikiri industrial zones lose N20 billion annually to poor infrastructure. At a recently held stakeholders’ forum in Lagos, Frank Onyebu, chairman, MAN, Apapa branch, said beyond the challenges of dilapidated roads, poor power supply, multiple taxation, and security challenges, manufacturers, especially those within the Amuwo Odofin and Kirikiri industrial areas, are faced with additional challenges of access to their factories owing to the invasion of trailers and other articulated vehicles into the industrial areas. Onyebu, while speaking at the 10th edition of the business luncheon organised by the association, said the precarious situation has brought about most factories accumulating large stocks of unsold inventories since customers no longer have access

to the affected factories. “Overall, it is estimated that over N20 billion is lost annually by manufacturers within the Amuwo Odofin and Kirikiri industrial zones as a result of dilapidated infrastructure and this is not good for a nation that wants to open up its economy to trade with others in the con-

tinent,” he said. He predicted challenges ahead of the resumption of the African Continental Free Trade Area (AfCFTA), saying that the trade treaty could have a negative impact on local businesses and the economy at large. According to the association, Nigeria would need to

fix several structural challenges and infrastructural bottlenecks for it to enjoy the $3trillion market that the AfCFTA presents, otherwise it would be at the losing end. Onyebu who addressed stakeholders on the theme ‘Repositioning the Nigerian Manufacturing Sector to cope with Africa Continental Free

Trade Agreement (AFCFT),’ explained that some members have, in desperation, turned to using barges/pontoons to ferry customers’ trucks in order to sell their inventories. Nigeria had, in July this year, joined 53 other African countries in signing onto a trade agreement that will see it open its economy to free trade on virtually 90 percent of its imports. With the trade pact, Nigeria alongside other parties to the agreement would be open to an estimated $3 trillion market with trade among 1.2 billion people. While the agreement is expected to come with several benefits, stakeholders have raised concern on the possibility of Nigeria losing big to other smaller African nations in the deal given its huge infrastructural deficit. In order for Nigeria to benefit from the African trade agreement, MAN highlighted several recommendations that must be looked into by the government. “Normally trade amongst African nations should be a welcome development, and this has always existed infor-

mally. However, for Nigeria to maximally tap the benefits of the AFCFTA, she must urgently address the current infrastructural as well as other challenges,” Onyebu further said. He noted that the menace of trailers and other articulated vehicles must be given the urgent attention it deserves with the government working alongside manufactures and other stakeholders to improve the ease of doing business by finding ways of clearing access roads to the ports as well as the industrial areas. “Our security operatives (Customs, Immigration and other security agencies) need to wake up to their responsibilities in checking sharp practices at our borders while working to improve the efficiency of our port operations,” Onyebu recommended. He tasked manufacturers to make necessary changes in the face of a fast-changing world. “I have no doubt that Nigerian manufacturers will beat the odds so long as the government plays its part by eliminating the cankerworm of corruption in the system,” he added.

mer would engage the local people and would not take their profit out of the state. In her submission, Bolanle Iyaduni Yusuf, vice chairperson of Kamwire Holding, called for continuous advocacy for diversification of the economy, most importantly in favour of steel sector, stressing the need to guard against economic saboteurs who, she said, had held the country to ransom through smuggling and illegal importation of galvanised, aluminium and corrugated roofing sheets into Nigeria. She also stressed the need for more attention in the iron and steel sector to become a national product for diverse economic benefits due to the numerous opportunities such as job creation, revenue generation and improved social welfare of the people. “Despite the recent closure of land borders, seaports

are still porous and at the moment, Nigeria market is flooded with substandard roofing sheets, a sad scenario which calls for urgent national debate,” she said. According to her, conspiracy and sharp practices among law enforcement agencies and importers are out rightly negating the Federal Government’s drive against criminality among Nigerians. “The goal in the iron and steel sector’s roadmap is that it would contribute about 10 percent to our national GDP by 2025 and help diversify the nation’s economy. “In order to realise this dream, there is an urgent need for Your Excellency to engage the authority of Standards Organisation of Nigeria (SON) and Nigeria Customs Service, (NCS) to work closely with us in this regard,” she further said.

FG promises to revamp Ajaokuta Steel …commends Kamwire Industries for job creation SIKIRAT SHEHU, Ilorin

he Federal government has vowed to revamp Ajaokuta to produce steel, reiterating its commitment to encourage local investors in mine and steel sector to provide more job opportunities for Nigerian youths. Olamilekan Adegbite, minister for Mines and Steel, stated this yesterday during official visit to Kamwire Industries Limited, a local steel manufacturing company in Ilorin, Kwara State. Adegbite disclosed that government would consider total ban on steel importation to encourage local steel manufacturers. He said government was determined to stop importation of substandard steel products into Nigeria. “The Nigerian steel indus-

try in Ajaokuta has become very emotional to the whole country. By the grace of God, with the President backing, we will deliver Ajaokuta. Ajaokuta will produce steel,” he said. “First, we are working with the Standards Organisation of Nigeria (SON) to address the issue of fake products. The ministry is not in control of the quality of steel products that come into the country, though we are responsible for steel production. “We’ll work with the standards agency to control what comes in. The ultimate aim is to ban steel importation totally. But before we do that, we will ensure we are able to satisfy local consumption from local production and still have excess to export. That’s where we’re heading,” the minister explained Adegbite had while comwww.businessday.ng

mending the effort of Kamwire Industry based on what he saw, noted that “We welcome local industrialisation and local entrepreneurs. “We want to encourage them. I can see the depth of backward integration here from raw material to finished product. This is an example of what Nigeria should do. “If you do this, you can imagine this complex provid-

ing over 4,000 employment opportunities. If we have replication of this all over the country, it will reduce rate of restiveness and banditry we have in the country”. The minister, who expressed the determination of the Federal Government to effectively harness the mining sector, said local investors are better than foreign investors, because the for-

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Monday 18 November 2019

BUSINESS DAY

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More opportunity for Nigeria, others on InsuResilience solutions funding for climate change products Modestus Anaesoronye

he Nigerian insurance market like many other African countries could benefit more from the InsuResilience solutions funding for climate change insurance products. The InsuResilience Solutions Fund (ISF) has again announced the opening of its third Call for Proposals, which is open till February 7th 2020. It will be recalled Royal Exchange General Insurance Company Limited (“REGIC”), Nigeria’s foremost insurer had benefited from the earler InsuResilience Investment Fund (“IIF”). InsuResilience Investment Fund (“IIF”) had acquired 39.25 percent equity stake in Royal Exchange General Insurance Company .The specific objective of the IIF fund is to reduce the vulnerability of micro, small and medium enterprises (MSME), as well as low-income households, to extreme weather

L-R: Richard Borokini, director general, Chartered Insurance Institute of Nigeria(CIIN); Yetunde Ilori, director general, Nigerian Insurers Association(NIA); Yeside Oyetayo, rector, College of Insurance and Financial Management (CIFM); Eddie Efekoha, president, CIIN; Muftau Oyegunle, chairman, Governing Council (CIFM); and Fatai Adegbinro, executive secretary, Nigerian Council of Registered Insurance Brokers(NCRIB) during the Sod Turning Ceremony of the Auditorium of the CIFM at the College premises on Lagos-Ibadan Expressway in Lagos.

events. Currently, there are two investments in Africa, five in Latin America, one in Central Asia, and one global investment.

On the new funding opportunity: on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW

Development Bank launched the ISF in October 2017 to increase the resilience against extreme weather events at the micro, meso and macro level.

The ISF, now managed by Frankfurt School of Finance and Management gGmbH since January 2019, supports the development of financially sustainable insurance solutions tailored to meet the needs of households, small and medium-sized enterprises, humanitarian organisations and governments in Latin American, African and Asian countries affected by climate change which are eligible to receive official development assistance (ODA). Thereby, the ISF increases the resilience of poor and vulnerable people to extreme weather events such as floods, wind/storm, excess rain, drought or cold spells. Therefore, the ISF provides partial grant funding and advice to partnerships between (local) public entities (e.g. national or regional government bodies), private companies in the insurance sector and NGOs to transform climate risk insurance concepts into products ready for market placement and bring successfully piloted

climate risk insurance products to scale. Grants of up to 2.5 million ruros can be provided for development, introduction and scale-up costs (e.g. staff costs, data collection, modelling, legal fees, sales and distribution channel development etc.) for direct and indirect climate insurance products. The applying partnerships have to consist of at least a user, (e.g. national or regional government bodies, NGOs, local insurer) and an implementing partner and potential risk taker, (e.g. reinsurance company). Further parties, e.g. other product implementing partners such as risk modelling agencies, insurers, brokers, can additionally be involved. By initiating the ISF, KfW is making an important contribution to one of the objectives of the InsuResilience Global Partnership: the identification and development of new climate risk finance and insurance solutions to close the protection gap in the field of climate risk.

College of Insurance gets infrastructure boost with new Auditorium Modestus Anaesoronye

ollege of Insurance and Financial Management (CIFM) has received a boost in infrastructure development with the official flag off of the construction of the school’s Auditorium. The about 1,650 capacity multi-purpose hall, estimated to cost about N310 million on completion, is expected to boost the ambience of the college to accommodate bigger events and ceremonies like

public lectures and public – academic ceremonies. CIFM is a full-fledged college set up by the Chartered Insurance Institute of Nigeria (CIIN) to undertake its training function. The center provides in-depth training in insurance, financial management, marketing and other related fields. The main objective for which the College was established is to provide long lasting solutions to manpower training and development problems of the insurance industry in Nigeria. Eddie Efekoha, presi-

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dent, Chartered Insurance Institute of Nigeria (CIIN), who spoke at Sod Turning Ceremony at the College premises handed over the project to Acropolis Contractors who says the pro-

ject will be completed in 18 months time. Efekoha said that the institute would continue to invest in manpower development which is its core mandate to upgrade insur-

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ance practice and industry in Nigeria to meet up with global standard. He urged the contractors to cooperate with the college during the course of the construction, to ensure timely completion of the project. Muftau Oyegunle, chairman, Governing Council, CIFM said that the college had continued to make tremendous progress in terms of infrastructure development. “Academically, we are forging ahead, and in terms of infrastructural development, we have continued to make progress,” he said.

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Oyegunle commended the CIIN President for carrying out the project during his tenure and also investing in the college. Yeside Oyetayo, rector, CIFM, had said in an interview that the college was depending on a grant from the National Insurance Commission (NAICOM) and support from other sponsors to fund the project. “For now, we are relying on NAICOM grant to fund the project, while expecting that other sponsors would also come up to assist,” she said.

Monday 18 November 2019

BUSINESS DAY

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Côte d’Ivoire makes major claims from African Risk Capacity Insurance Modestus Anaesoronye

he African Risk Capacity Insurance Limited (ARC Ltd) has handed a cheque for FCFA 442,824,819.30 (equivalent of $738,539.88) to the Government of the Republic of Côte d’Ivoire to provide rapid assistance to vulnerable population in the Central Region of the country following severe rainfall deficits in the 2019 agricultural season. ARC had on September 12, 2019 announced the payout to Cote d’Ivoire when the Africa RiskView, the Agency’s parametric tool, detected that the irregular and insufficient rainfall in the central region will affect the food security of an estimated 400 000 people by the end of the season. Following the announcement, and in line with a pre-existing Contingency Plan, the Government and ARC held review meetings on the Final Implementation Plan (FIP) which was subsequently approved by the country’s Peer Review Mechanism (PRM) on October 25, 2019 with clear recommendations on how the payout will be applied. Accordingly, the Government will apply the payout in the already established Cash Transfer Programme implemented by the Ministry of Solidarity. Social cohesion & Fight against poverty in the central region. Accord-

R-L: Bode Opadokun, managing director, FBN General Insurance Limited; Adegboyega Oyetola, deputy governor, Osun State; Benedict Alabi, secretary to the State Government, Osun State; Wale Oyebamiji, at the FBN General Insurance Management Team courtesy visit to the Governor of Osun State.

ing to the FIP, the ARC payout will benefit up to 32,496 persons corresponding to 6,500 households who will receive an additional aid of FCFA50,000 from the Government. Receiving the cheque on behalf of the people of Cote d’Ivoire, Adama Coulibaly, the Minister for Economy and Finance, reaffirmed the Government’s commitment to the citizens’ welfare. “The Government of Cote

d’Ivoire takes the food security of its populations very seriously. Therefore, His Excellency, President Alassane Ouattara supports th collaboration with African Risk Capacity to ensure we can provide timely assistance to our vulnerable population and strengthen their capacity to cope with this kind of disaster.” Côte d’Ivoire has been a member of the ARC Agency since 2014; and subscribed to

the ARC Insurance Ltd pool for the first time in 2019 by signing two policies for rainfall deficit covering its Central and Northern regions. The recorded severe rainfall deficits occurred mainly in the Hambol Valley, Gbeke, and Marahoué regions, “Providing Member States with the innovative tools to respond to natural disaster risks in a more timely and predictable manner gratifies our efforts,” remarked UN-ASG Mohamed Beavogui, the Director-General of ARC Agency. “We are grateful to the Government of Cote d’Ivoire, and especially the Minister of Economy and Finance, for the confidence in our mechanism which has brought hope to the vulnerable population affected by the drought”, ASG Beavogui added. In her message, Dolika Banda, the CEO of ARC Insurance Limited, expressed the optimism that the payout will deliberately target to benefit women. “Often, when natural disasters of this nature occur, the lives and livelihoods of women and, especially femaleheaded households are disproportionately impacted. We are happy that the details of the FIP for the payout adequately reflect our mutual concern for gender”, Ms. Banda said. ARC was established on the principle that investing in preparedness and early warning through an innovative financing approach is highly cost-effective and can save upward of four dollars for every dollar invested ex ante.

Consolidated Hallmark posts 46% rise in PAT Wapic Insurance PBT up 129% in Q3 Modestus Anaesoronye

onsolidated Hallmark Insurance Plc, one of the leading underwriting firms in Nigeria has posted a Profit After Tax (PAT) of N519.6 million in its third quarter 2019 results, as against the N355.9 million recorded in the corresponding period of 2018, representing a 46 percent rise. This is contained in its Group Unaudited Financial Results for the period ended September 30, 2019 presented to shareholders at the Nigerian Stock Exchange. The result also revealed significant improvements in other indices. Gross Premium Written for the period grew by 23.7 percent to N6.687 billion from N5.404 billion reported in September 2018. Also, Total Assets of the Group rose to N11.159 billion from N10.821 billion during the corresponding period. Commenting on the financial result, Eddie Efekoha, managing director/CEO of Consolidated Hallmark Insurance Plc expressed delight with the company’s consistent impressive performance.

Eddie Efekoha, MD/CEO,Consolidated Hallmark Insurance

He said the unwavering support of the Board and Management of the company was pivotal to the success being recorded. According to him, “the strong performance reflects the Board and Management’s commitment towards rewarding its shareholders with good returns. There is no gainsaying that the consistent improvement is also being driven by the increased confidence by our customers.” On plans by the company to increase minimum paid-up capital to N10 billion in line with the new requirements by the National Insurance Commission, Efekoha said arrangements have been finalized to get the approval of shareholders for the raising of additional N4.5 billion during an Extra-Ordinary General Meeting (EGM) scheduled for 21st November 2019 in Lagos. He expressed confidence that the company will successfully beef up its capital base further, ahead of the June 2020 deadline by NAICOM, in view of positive investor confidence displayed during the earlier efforts by the board to raise N500 million through a Rights Issue and an additional N734 million through a private placement, both of which were fully subscribed even before the recent recapitalization mandate by the National Insurance Commission (NAICOM). The growing level of confidence reposed in the company by investors is further attested to by the recent performance of the stock on the floor of the Nigerian Stock Exchange (NSE) as the highest gainer in percentage terms during the month of October, 2019, having garnered over 40 percent during the month on the strength of positive sentiments. Recently, CHI Plc improved its credit rating by Agusto & Co. from Bbb- to a Bbb. The rating symbolizes a ‘stable’ outlook and potential for growth with a definition as Insurer with satisfactory financial condition and adequate capacity to meet claim obligations.

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Modestus Anaesoronye

APIC Insurance Plc. (the group), a multi-line insurance company with headquarters in Nigeria has released its unaudited financial results for the third quarter ended 30th September, 2019, growing the profit before tax by 129 percent. The figure rose from N475 million during the period in 2018 to N1.1 billion during the review period. The Group continued on its growth trajectory within the period with a 26 percent year on year (YoY) increase in gross written premiums for the period. This was driven by its sustained leadership status in some major accounts, attainment of increased market share and enhanced underwriting capabilities, the company said. The Group’s underwriting profit grew to

Yinka Adekoya, managing director, WAPIC Insurance Plc

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N2.45 billion, a commendable 78 percent year on year growth from the N1.38 billion recorded in the preceding period of 2018. The growth in premiums and decrease in net claims expense during the review period had a positive impact on this position. According to the company, the cost optimisation measures put in place continued to pay off as operating expenses dropped by 8 percent to N3.2 billion year on year, compared to the prior period’s position of N3.5 billion. There was a notable growth in profit before tax for the period at 129 percent to close at N1.1 billion compared to the N475 million in the same period of 2018, while the profit after tax sustained the trend, moving from N287.3 million to close at N972.9 million. Commenting on the results at the Company’s headquarters in Lagos, Yinka Adekoya, managing director, WAPIC Insurance Plc said, “Our Group delivered a strong financial performance within the nine months of 2019 despite a challenging macroeconomic and business landscape.” Adekoya said the results, which is largely in line with our growth expectations and strategic aspirations for the year, further reinforces the company’s sustainable business model and brand promise to deliver more to all stakeholders as we work to realise the expected year on year performance. She also said, “The effective execution of our strategies ensured strong top-line figures of ₦12.7 billion, a 26 percent growth from the previous year, on the back of sustained leadership status in some major accounts, attainment of increased share of wallet and enhanced underwriting capabilities.”

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Monday 18 November 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 15 Novemberr 2019

Top Gainers/Losers as at Friday 15 November 2019 LOSERS

GAINERS Company

Closing

Change

N121.9

N121

-0.9

GUARANTY

N29.9

N29

-0.9

ZENITHBANK

N19.15

N18.85

-0.3

VOLUME (Numbers)

N20

ACCESS

N10.8

N10.5

-0.3

VALUE (N billion)

N11.7

0.8

NAHCO

N2.6

N2.37

-0.23

Closing

Change

GUINNESS

N26

N28.6

2.6

FLOURMILL

N15.2

N16.25

1.05

N47.5

N48.5

N19 N10.9

CCNN DANGSUGAR

Company

ASI (Points)

Opening

MTNN

DEALS (Numbers)

MARKET CAP (N Trn)

26,851.68 5,594.00 469,988,723.00 5.590

… Morgan Capital, FCSL register as Due Diligence Advisers on NASD Enterprise Portal Iheanyi Nwachukwu

L-R: Ayodeji Ebo, managing director, Afrinvest Securities; Fiona Ahimie, managing director, FBN Quest Securities; Abiola Adekoya, managing director,RMB Nigeria Stockbrokers; Tunde Amolegbe, first vice President, Chartered Institute of Stockbrokers; Akeem Oyewale, managing director, Stambic IBTC Nominees, and Muyiwa Adeyemi, managing director, Morgan Capital, at Press Conference on 2019 Stockbrokers’ Conference held in Lagos .

2.78percent. On the gainers table, Guinness Nigeria Plc led others from N26 to N28.6, adding N2.6 or 10percent. Flourmill Nigeria Plc advanced from N15.2 to N16.25, adding N1.05 or 6.91percent, while Nigerian Breweries Plc rose from N47.5 to N48.5, adding N1 or 2.11percent. Cement Company of Northern Nigeria (CCNN) gained N1, from N19 to N20, adding 5.26percent. The volume of stocks traded decreased by 24.78percent from 624.842 million to 469.98 million, while the total value of stocks traded decreased by 44.22percent from N10.02 bil-

lion to N5.590billion in 5,594 deals. The Financial Services sector led the activity chart with 411.22 million shares exchanged for N4.401 billion; Conglomerates followed with 23.96 million shares traded for N29 million. At the NASD OTC market for unlisted securities, the market closed with increase in Capitalisation to N513.12 billion from N504.17 billion in the preceding trading weekend, which shows a 1.77percent increase in Capitalisation. Also the NASD Security Index (NSI) for the week ended November 15 recorded increase from 701.76

FTSE 100 Index 7,294.39GBP +1.63+0.02%

Deutsche Boerse AG German Stock Index DAX 13,224.63EUR +44.40+0.34%

S&P 500 Index 3,113.64USD +17.01+0.55%

Nikkei 225 23,303.32JPY +161.77+0.70%

Generic 1st ‘DM’ Future 27,892.00USD +146.00+0.53

Shanghai Stock Exchange Composite Index 2,891.34CNY -18.53-0.64%

13.071

Stock market records marginal gain of N4bn as investors take profit he Nigerian Stock Exchange (NSE) All Share Index (ASI) increased marginally by 0.03percent on Friday November 15, while the Yearto-Date (YtD) return stood at -14.57percent as investors moved to take profit in counters that hitherto recorded gains. While profit taking action continues to pose a threat to the rally witnessed lately, market watchers expect the equities market to remain positive in new trading week. The All Share Index closed on Friday at 26,851.68 points as against the preceding day’s close of 26,843.11 points while Market Capitalisation closed at N13.071 trillion against preceding day’s close of N13.067 trillion, adding N4billion. MTN Nigeria Plc occupied the top losers table after its share price dropped from N121.9 to N121, losing 90kobo or 0.74percent. Also as a result of activities of profit takers, the share price of GTBank Plc declined from N29.9 to N29, losing 90kobo or 3.01percent; Zenith Bank Plc declined from N19.15 to N18.85, down by 30kobo or 1.57percent, while Access Bank Plc dipped from N10.8 to N10.5, down by 30kobo or

Global market indicators

points to 714.21 points. The NASD OTC Plc said Morgan Capital Group and FCSL Asset Management Limited registered unto the NASD Enterprise Portal (NASDeP) as Due Diligence Advisers (DDAs). In order to ensure enterprises on NASDeP are well represented in their bid to access private equity investments, NASDeP DDAs play a critical role in providing guidance and packaging these enterprises in an attractive manner for investors. Eligible DDAs are required to be SEC registered and may include Accountants, Legal Practitioners and Issuing Houses.

Stockbrokers set agenda for market rebound

n a strategic move to reposition its members to drive innovation, grow membership base and renew investor confidence in the capital market, the Chartered Institute of Stockbrokers (CIS) has reviewed the processes and procedures for its annual conference this month. Addressing capital market correspondents on the high points of 2019 Stockbrokers’ Annual Conference, the Chairman, Planning Committee, Abiola Adekoya explained that the Confidence Theme: “Boosting Capital Market Competitiveness in a Challenging Macro Environment “was chosen to articulate policy measures that can reposition the capital market to play its pivotal role as a platform for mobilization of funds from surplus economic units to deficit one. Adekoya stated that issues such as innovation and growth, fintech, attracting talents to securities industry and nexus between agriculture and the capital market shall form the fulcrum of plenary sessions at the Conference, scheduled for Thursday, November 21 to Friday, November 22, 2019 at Oriental Hotel, Victoria Island, Lagos. “With the integrated and digital-driven global economy of today, the barriers to competition are gradually coming down, making it necessary for stockbroking firms with exposure to the domestic market to innovate to retain and attract customers. Given the challenging do-

mestic macroeconomic environment and liberal immigration policies in advanced economies with aging populations, retaining talent in the securities industry has been difficult, with negative implications for performance,”, Adekoya said. Corroborating her, the First Vice President, CIS, Tunde Amolegbe explained that the significance of discussing Fintech at the Conference should be appreciated against the background of the Institute’s efforts at ensuring the success of the government’s policy on financial inclusion. Amolegbe stressed that the Conference would bring about robust ideas on how to reposition the market in view of the unfolding developments in the global economy. Amolegbe also clarified the implication of Fintech on transaction cost by saying that it would rather make the cost cheaper and encourage more participation in the market across the board. The Managing Director, Stambic IBTC Nominees, Akeem Oyewale said that this year’s Conference would spring up conversation around the strategies to make the securities industry attractive to the millennials. In her contributions, the Managing Director, FBN Quest Securities, Fiona Ahimie described the Conference as an opportunity to deepen participants’ understanding of investment opportunities in the capital market and how to take advantage.

from 0.78 kobo to N3.08 kobo. Still in the second quarters, its Total Assets rose by 47.62 percent from N99.58 billion to N144 billion, while return on Investment grew by 18.35 percent from N1.01 billion to N1.2 billion. The Bank’s first quarter results laid the foundation for positive outing as it recorded a profit after tax of N428.68 million, compared to the N124.58 million recorded in the comparable

period in 2018. Key underlying ratios showed improvements in returns and operational strength of the bank. Commenting on its performance, Hassan Usman, managing director of the Bank, said the nine-month ended September 30th 2019 results further demonstrated that the bank has the capacity to grow sustainably in line with its strategic vision of becoming the leading non-interest bank in Sub-Saharan Africa by 2022.

Jaiz Bank’s 9 months financials show N1.25bn profit after tax HOPE MOSES-ASHIKE

aiz Bank Plc bank has again shown its capability of rounding up the year positively by posting impressive nine months (9M) results. Key extracts of the ninemonth report for the period ended September 30, 2019 released to the Nigerian Stock Exchange (NSE) showed that total income rose by 49.2 per-

cent, while pre and post-tax profits increased by 509.47 percent and 673.21 percent respectively. The nine-month report indicated that profit-before-tax increased from N241.3 million to N1.47 billion, while net profit rose to N1.25 billion from N161.7 million in the corresponding period of 2018. The bank also grew its total income by 49.2 percent from N5.14 billion in the corresponding period of 2018 to www.businessday.ng

N7.7 billion at the end of September 30, 2019, while earning per share improved by 670.91 percent, from 0.55kobo to N4.24 kobo. The Balance Sheet showed stronger underlying strength during the period as total assets rose by 40 percent from N108.46 billion to N152 billion, while the Bank’s liabilities also grew by 45.60 percent from N95.35 billion in September 2018 to N138.84 billion in the period

under review. This growth trajectory of the Bank can be traced to its early positive development right from the beginning of the when it posted impressive results in both first and second quarters of the year. For instance, the Bank grew its total income by 42.17 percent from N3.39 billion as at June 30th 2018 to N4.82 billion at the end of June 30th 2019, while earning per share improved by 294.87 percent,

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Monday 18 November 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Money matters for newlyweds a clear plan to achieve certain milestones, you can’t achieve much. By writing goals down and reviewing them periodically, you will have a better chance at success. Create a family budget A budget is one of the most basic tools of money management. It sounds tedious and boring but it really can be a lifesaver. Limit the amount you spend in certain budget categories, such as food, dining out, entertainment, clothing, travel etc. Build in a buffer for unexpected one-off expenses. It won’t be perfect in the early days so you will need to make adjustments. It’s not enough to just make a budget. Are you actually staying within the limits? There are numerous budgeting apps you can download that make it so simple to keep your spending in check; you might want a simple spread sheet like “Nimi’s Personal Budget” (available at www.moneymatterswithnimi.com) that tracks your monthly spending and sums it up at the end of the month. Find the tool that works best for you both. Build an Emergency Fund An emergency fund should be a top priority; it will bring some financial security and help protect your relationship during challenging times. This is money that is set aside should something happen unexpectedly; a major home repair, a medical bill, car problems, job loss etc. Try to build at least six

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You may be someone who is comfortable with risk and that may even bet all your money on an idea and be married to a riskaverse spouse who will happily leave all the money in a savings account! months of your household expenses to tide you over. Place this fund in the money market where it is easily accessible and earning some interest. Avoid placing it in your current account or in account tied to your debit card or you will be tempted to make purchases or to stop at an ATM to withdraw cash. A money market mutual fund is an ideal place to park such funds as you can liquidate units within two to three days and earn a decent return at the same time. Joint, separate accounts or a combination? There is no hard and fast rule about opening a joint bank account or maintaining individual accounts after you are married. Many couples opt to have a joint account for joint expenses and separate accounts for individual purchases. It is only natural to desire some level of independence where you can spend money without having to account for every expense. It can be disconcerting though, if your spouse spends a huge amount of

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fter the euphoria of the wedding, all the attention, the ceremonies and festivities, comes real life; the marriage. Money matters are an important aspect of everyday life in a marriage yet all too often, not enough attention is given to this subject. It is one of the leading causes of friction and troubled relationships so it must be handled with love and care, early and consistently. Managing your own money can be challenging enough; now it is about both of you and the family you intend to build. Here are some things to consider as you plan to build financial security together: Talk about money Communication is one of the most critical ingredients for a successful marriage. Ideally you should have been talking about money well before you tied the knot, certainly as soon as you both realised the relationship was serious. But even if you didn’t broach the money subject before now, not to worry; get started immediately. Ideally you should have a fairly good understanding of where you stand financially as a couple. Look at bank accounts; debt that you may be bringing into the marriage and make plans to deal with it; insurance; your investments, business interests, your individual and joint plans and prospects. Other important questions include the number of children, the sort of education you desire for them, where you will live, any dependents, whether relatives will live with you etc. View yourselves as a team. Periodic money date nights say monthly or quarterly, strengthen communication in the marriage and reduce

money conflicts. Such meetings will cover bills to be paid, home repairs, holidays, etc. Money can be a touchy subject so it is important to try to understand your money personalities. Your attitude to money may stem from the way your parents regarded money, your background, and life experiences, both good and bad. You may be very frugal or even a miser wedded to a spendthrift. If you feel your spouse’s spending is out of control, avoid being confrontational or accusing. Who pays for what? Money management in a marriage should involve both parties working together and sharing responsibilities in decisionmaking, budgeting, and bill paying. If one party earns much more than the other, or one is a homemaker, then naturally they will carry the lion’s share but both should be aware of the overall financial picture. Discuss family goals Even as a couple, it is healthy to have individual aspirations. Discuss your short term goals; what you want to achieve in the first year of your marriage, medium term say in about five years and your long term financial goals. For example, you would like to own a property or move from your rented apartment to your own property in five years. Or it might be about reducing or paying off debt in two years. Perhaps one of you needs to go back to school. Without

money without discussing it. Try one method; if it doesn’t work, change it. Deal with your debt Debt can be a burden on a single person. In marriage you are both responsible, and so must be deliberate about addressing it, particularly if it is not debt that is supporting an asset that will appreciate in value such as property. For some time you may have to dedicate part of your income to ease the pressure. Tackle the high-interest or the most urgent debt first. Living a debt-free life is not only healthy for you financially, but it is also healthy for your marriage. Your approach to risk You may be someone who is comfortable with risk and that may even bet all your money on an idea and be married to a riskaverse spouse who will happily leave all the money in a savings account! Or one might want everything in the stock market whilst the other wants to diversify with property, bonds and art. Talk it over and find some middle ground. You may both be out of your comfort zone and there will be need for compromise. You both bring your respective strengths to the table. Be aware of your own weaknesses and strengths, and leverage on the strengths of your spouse to really benefit from your partnership. There is much to learn from each other. Save for Retirement Talking about retirement may seem absurd but even as young newlyweds, retirement will come and it is to start planning from now. If your employer is part of the contributory pension scheme, that is a good place to start. Many young people are self-employed @Businessdayng

and often neglect this most important aspect of financial planning. Even if your income is irregular, it is important to be deliberate about establishing a pension fund. Transparency matters Honesty and transparency are ideal in a committed marriage. Lying about money or hiding significant purchases can have repercussions, as it builds mistrust. Once those seeds are planted it can put a strain on even the strongest relationship. The money dates are a good time to review things. Accusing or making your spouse feel bad will force them into secrecy. Your own particular circumstance will determine the best approach. For richer for poorer When we recite those vows at the altar, with videographers, cameras and the congregation, it can all be overwhelming for a couple. Yet those words are so profound. Start off on the right footing with a solid plan to deal with budgeting, borrowing, spending, investing and giving. By embedding good money management habits as a newly married couple you give yourself a good chance of living happily ever after.

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 November 2019

BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

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Does your artificial intelligence have users’ best interests at heart? You can’t load software on an iPhone unless it has been authorized by Apple. While Facebook’s actions may have been within the letter of the law, and within the bounds of industry practice, at the time, they did not have the users’ best interests at heart. There may be a simple reason for this. Apple sells products to consumers. At Facebook, the product is the consumer. Facebook sells consumers to advertisers. Your customers will expect you to use their data to create personalized and anticipatory services for them while demanding that you prevent the inappropriate use and manipulation of their information. As you look for your own moral compass, one principle is apparent: You can’t serve two masters.

MIKE WALSH

thical decisions are rarely easy. Nowadays, even less so. Smart machines, cheap computation and vast amounts of consumer data not only offer incredible opportunities for modern organizations, they also present a moral quandary: Is it OK, as long as it’s legal? Algorithmic bias can take many forms — it is not always as clear-cut as racism in criminal sentencing or gender discrimination in hiring. Sometimes too much truth is just as dangerous. In 2013, an academic paper demonstrated that Facebook “likes” (which were publicly open by default at that time) could be used to predict a range of highly sensitive personal attributes, including sexual orientation and gender, ethnicity, religious and political views, personality traits, use of addictive substances, parental separation status and age. When they published their study, the researchers acknowledged that their findings risked being misused by third parties to incite discrimination, for example. However, where others saw danger and risk, one of the authors’ col-

leagues at Cambridge University saw opportunity. In early 2014, Cambridge Analytica, a British political consulting firm, signed a deal with that colleague for a private venture that would capitalize on the work of the trio of researchers. A quiz was created, thanks to an initiative at Facebook that allowed third parties

to access user data. Almost 300,000 users were estimated to have taken that quiz. It later emerged that Cambridge Analytica then exploited the data to access and build profiles on 87 million Facebook users. Arguably, neither Facebook nor Cambridge Analytica’s decisions were strictly illegal, but in hindsight — and in context

of the scandal the program soon unleashed — they could hardly be called good judgment calls. Over the past decade, Apple has been criticized for taking the opposing stance on many issues relative to its peers like Facebook and Google. Unlike them, Apple runs a closed ecosystem with tight controls:

(Mike Walsh is the CEO of Tomorrow, a global consultancy.)

Using artificial intelligence to understand what causes diseases SEMA SGAIER AND FRANCESCA DOMINICI

studies. Second, the ability of causal AI to provide trustworthy conclusions must rely on having accurate and representative data. We can train models to be intelligent only if we give them data of excellent quality that represent the right populations, can be merged with other data sets and have been compared with a good control group. Organizations must invest in building the data infrastructure needed for these algorithms. Creating algorithms that can ask “why?” is harder than creating ones that can make predictions. But it’s not only a worthwhile endeavor, it’s a necessary one.

ealth care leaders are embracing artificial intelligence. But after an extensive review of case studies and research literature, we’ve found that their AI initiatives are predominantly focused on developing algorithms that can predict a problem. Rarely are organizations devoting resources to AI efforts aimed at understanding why diseases occur. To intervene as effectively as possible, both kinds of algorithms are crucial. In health care, the default approach to understanding causality is to conduct a randomized controlled trial. But such trials are expensive, time-consuming, not fully representative of different types of patients and often just not feasible. Causal AI algorithms can infer causal relationships

from observational data, telling us how different factors interact with each other and which one is causing what. New approaches for causal AI are being developed and validated. Some areas where we especially see value

are: discovering mechanisms of disease; treatment optimization; and identifying social determinants of health. How do we make causal AI more central? First, we should understand the breadth of

what it can offer. Health care leaders must take the time to identify problems in their work that would most benefit from it, partner with companies and academics with expertise in this area and conduct a few case

(Sema Sgaier is a co-founder and the executive director of the Surgo Foundation. Francesca Dominici is a professor at the Harvard T.H. Chan School of Public Health.)

Monday 18 November 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

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We need a global standard for reporting cyber attacks MARC BARRACHIN AND ALGIRDE PIPIKAITE

yber threats are a seemingly impossible challenge. By their very nature — fast-changing, borderless, asymmetric — they’re ridiculously difficult to predict and manage. We focused on the main challenge in managing cybersecurity: the data gap. Very little cyber data is broadly available, making it difficult to objectively evaluate the potential impact of incidents. Through our work we propose an approach to identifying what to measure, how to capture the required data and how to make it useful. SHARE INFORMATION: Information is power and, in cybersecurity, it’s the power to prevent other similar events. If a breach occurs in one organization, we can be reasonably confident that the same malicious tactic will be used on another organization in the near

future. If the data about that first known breach is made available, other organizations can prepare themselves. Shared knowledge also allows regulators and law enforcement to objectively manage incentives to guide corporate cybersecurity governance, data gathering and information sharing.

The first step is to figure out what exactly should be measured. To do this, we must agree on a standard taxonomy of cyber events so that we can track and understand the consequences of any attack. To encourage breach-related information sharing, it is important to guarantee anonymity to the organizations reporting

incidents. The cyber threat landscape is constantly evolving, as are regulatory requirements. Cyber preparedness has to be reviewed and adjusted regularly. COMPLIANCE AND COMMUNICATION: Regulators across the globe require companies to disclose incidents,

but our research shows that too often these regulators share too little of the data publicly to be of use, if they share any at all. In our research we observed that while reporting on cyber risks is a purely compliance-based exercise, companies do elaborate in greater detail after they suffer a publicly disclosed incident. We’re just as worried that there are no incentives for organizations to share what data they may have about cyber breaches and vulnerability. To remedy this, we suggest a public-private partnership to give organizations the operational support they need to both monitor their security and share information via a trusted resource.

(Marc Barrachin is a managing director at S&P Global Market Intelligence. Algirde Pipikaite serves as a project lead at the Centre for Cybersecurity, World Economic Forum.)

Midsize companies are growing, but struggling to earn profits smaller startups, must increasingly be taken up by medium-size, middle-aged firms. Their business leaders must increasingly manage like they’re steering a startup, with relentless innovation, just to keep their heads above the water. There’s little hope now for living the quiet life of a maturing firm.

VIJAY GOVINDARAJAN, ANUP SRIVASTAVA AND LUMINITA ENACHE

ccording to our research, a midsize firm today is approximately four times bigger and has been around 7.6 years longer, on average, than a similar firm in 1999. In the same period, however, we’ve also seen a decline in the number of medium firms, due to the large-scale delisting of precarious companies, first during the dot-com bust of the early 2000s and then during the Great Recession of 20072008. The decrease in the number of medium firms, coupled with the increase in their aggregate market capitalization from $434 billion in 1996 to $2,083 billion in 2017, means that average firm size quadrupled, despite adjusting for inflation. Our data also show that the gross margins of medium-size firms steadily rose from the late 1990s to 2017. At the same time, these companies showed a steady

(Vijay Govindarajan is a professor at Dartmouth’s Tuck School of Business. Anup Srivastava is an associate professor at the University of Calgary, where Luminita Enache is an assistant professor.) decline in sales growth. It seems that medium-size firms now pursue less aggressive growth strategies than they did in the late 1990s, and this could indicate a growing maturity of firms’ business models. So what’s happening with these medium-size firms? Are they enjoying the quiet

life now or are they more unstable than ever? The data show that today’s medium firms are larger and older than at any other time in the past 35 years. Yet an increasing percentage of midsize firms incur losses and have lower profits and lower growth, despite spending larger

amounts on experimentation and innovation. These findings have several implications. First, despite their larger size, midsize firms appear to be struggling and must constantly reinvent themselves to survive. Second, the role of experimentation, normally associated with

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Monday 18 November 2019

BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY

Start-Up Digest

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Tokunbo: Fashion designer for top Nigerian celebrities IFEOMA OKEKE

biodun Folashade Tokunbo is the CEO of Anjy Luminee Couture, which is also known as House of Luminee. She is a young indigenous fashion designer who has continued to attract an array of celebrities through her skilful and unique designs. The House of Luminee creator started her career immediately after completing the final year examinations at Lagos State University in 2013. She started with just one sewing machine and a yard of lining. Born over thirty years ago in Ijesha-Isu in Ekiti State, Tokunbo’s passion and talent for fashion designing could be traced to her formative years. In an interview with StartUp Digest, she says that people never always believe that she made the clothes whenever they see it. “It was hard to attach the brand and the personality,” she says. “And when I started paying particular attention, I noticed how all of them resonated and had this glittering feeling. Then I just thought of my brand as an ‘illumina-

tor’ and the word Luminee was formed. Just like light that brightens the atmosphere, my brand brightens the minds and mood of people when they wear them and that is basically what informed the name,” she explains. Tokunbo believes in the promotion of indigenous fashion and culture, which is why she lays particular emphasis on the use of at least a touch of Ankara fabric in most of her works. Speaking on notable people she has so far designed for, she says, “I have been fortunate to work with A-List celebrities from Mercy Aigbe, Shola Shobowale, Ini Edo, Queen Silekunola, Naomi Ogunwusi, Tayo Odueke (Sindodo), Mide Martins, Mercy Johnson, Angela Okorie, Bobrisky, Tonto Dikeh, Ope Dolapo, Eniola Badmus, Fathia Balogun, Olaitan Ogungbile, Eniola Ajao, Oge Okoye, Kemi Afolabi, Omoni Oboli, (Anthony Joshua’s mom) Nkechi Blessing Sunday, Ayo Adesanya, Aduni Ade and Chidinma Ekile, among others.” On how she has been able to attract such high-calibre clients, the indigenous fashion designer says she will describe her rise as a ‘fast

Abiodun Folashade Tokunbo

rise grace’. “It all started that I had a model who usually wore my clothes and used them on the social media. Then, Mercy Aigbe stormed on the post and contacted the lady and asked for the brain behind the collection of designs she wore. That was the breakthrough for me in my career,” she discloses. “I met with Mercy Aigbe

and she spoke of how beautiful my designs are. She then told me to make one for her to wear to an event, which I did. That dress got lots of attention from her colleagues and the public. Since then, I became her designer. This gave me a sort of breakthrough and I started getting many other customers,” she further says. Tokunbo, who draws her inspiration from her rich

heritage, explains that as a Yoruba woman, she grew up with women that prided themselves in their attires because they are party-loving people. “It informed my personality and I draw a lot of inspiration just remembering a lot about my childhood and the richness of my culture,” she explains. Speaking on what motivated her into fashion designing, she says, “I started my career immediately I finished writing my final year examinations at Lagos State University in 2013— then with just one sewing machine and a yard of lining. I didn’t want to be idle while I waited for my results, knowing well that it would be out after two years. And fashion and sewing have always been something I loved and had passion for since I knew anything. Hence, I just explored it and took it seriously.” “I do not have any formal training in fashion and with the way the world works, you have to equip yourself in every sphere. I am going to resume schooling in the United States soon.” The fashion entrepreneur, who shared some of her success stories with Start-Up Digest, says the business

has opened so many doors for her. She hinted that she gets invited to places she never imagined she would go to and is treated as a VIP, adding that the most recent for her was styling Her Royal Majesty, Queen Shilekunola Moronke Naomi Ogunwusi. Tokunbo stresses that what stands her out from other fashion designers in Nigeria is the unique glitz and glamour that naturally come with her pieces, which automatically make people look like superstars. The fashion designer, who is also empowering aspiring fashion designers, owns an academy where she trains and mentors girls and women and helps equip them with necessary skills needed to learn and be independent. She advises upcoming fashion entrepreneurs, who do not have the finance to set up their own outfit, to start small, be diligent and have passion in what they do because that alone will enable them take over the world. “I started by borrowing people’s machines and working late into the night at people’s shops just to meet up with target. So, start small, and be passionate with your work. You will get all you want,” she assures.

Experts urge upcoming event planners to raise their game ODINAKA ANUDU

pcoming event planners have been asked to raise the content of their work and innovate creative ways of improving client experience. At a two-day BusyBee Event Business Summit held at Gbagada, Lagos, last week, the experts said content, partnerships and passion are keys to building a successful event planning and management business. Eunice Adeyemi, managing director, Q21 Solutions Limited, one of the leaders in corporate events and experience management in Nigeria, said there are millions of events but only content makes an event unique. “No one remembers the event planner. What people remember is the content,” she said. “Many people do not care about the venue because Eko Hotel is Eko Hotel, but they think about

the content you give them,” she said. She advised the upcoming players to find their niche and stick to it. “Focus on one thing and be the best on that,” she admonished. It takes a while, but you will get referrals,” he further said. She also urged them to do proper research before delving into any area, stressing the need for them to study the market and be sure of facts before making assumptions. “Follow your passion and do not let anyone tell you that your brand is not good enough,” she said. “Become an expert and advertise your brand. Do not do anything for free,” she further advised. According to her, many young people rush into the event planning industry just because of money. “They see the glitz and glamour and they think it is just money. They fail to realise that people are expecting us to deliver the service,” she explained. www.businessday.ng

She disclosed that her success is down to good content and creativity. Astou N’diaye Djamat Dubois, chief executive of Côte d’Ivoire-based Spotlight Production, an event management agency, urged the upcoming event planners to know their clients and try to satisfy them. Dubois explained that

there is a need to develop partnerships, infuse culture and use local resources to achieve uniqueness. She further gave the event planners a few marketing tips such as defining the target audience, using the client base, and using available media platforms. She explained that the event planning industry in

her country is still where Nigeria was 10 to 15 years ago, but hopes that it will be better. “We have to take Africa higher,” she said. “For the past seven years I have been doing training, I have always said we have to start thinking of managing big global events. We look forward to being asked to

L-R: Somto Nwachukwu, CEO, Event by Claud; Astou Djamat Dubois, CEO, Spotlight Productions Cote d’ivoire; Tobi Fletcher, CEO, Ofadaboy; Bisi Sotunde, convener, BusyBee Event Business Summit; Adeife Adeyemi, CEO, Ifectiv Touch; Bola Okolie, CEO, Bonix Drinks, and Kikelomo Animashaun, CEO, Partyneed Rentals at the BusyBee Event Business Summit in Lagos recently https://www.facebook.com/businessdayng

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organise Emmy Awards,” she stated. Bisi Sotunde, convener, BusyBee Event Business Summit and managing director of BusyBee Group, said her company has been in existence for 10 years. Sotunde said she organised the event because of a gap. According to her, she noticed that entrepreneurs struggle in managing their businesses in the areas of accounting, branding, and structures. “We decided to come in to fill the gap,” she said. “ We d o t ra i n i n g f o r people that want to start business and those that are already in business,” she said, adding that it is an annual event, which is in its third year. She said there are testimonies from those that participated in the previous sessions, stressing that one of them testified that she made in three months what she makes in one year. The theme of the event is ‘Expanding Your Horizon’ and is in its third year.

Monday 18 November 2019

BUSINESS DAY

Start-Up Digest Meet Damilare Ogunleye, the super brand promoter Josephine Okojie

very entrepreneur in Nigeria has a unique story to tell and usually an inspirational one of how their own personal entrepreneurial journey started. For Damilare Ogunleye, CEO and co-founder of Lasiko Limited, his inspiration came when he identified a market potential in merchandising brands. “In America and Europe, movies and musical artistes rake in millions of dollars by just putting their brand logos and elements on things like t-shirts and children bags, among others. But in Nigeria, many of our artistes do not take advantage of such opportunity,” Damilare says. “To change this, I, alongside my other co-founders, established Lasiko Limited in 2015, launching a unique technology platform called suvenia.com, to allow individuals create, design, buy and sell ideas on products

such as apparel, drink ware, and other accessories,” he explains. To achieve this, he and his co-founders undertook training in communication marketing. “To make my transition to a marketing career, I took up courses in marketing to broaden my skills in the sector.” The engineer-turnedentrepreneur tells Start-UpDigest that he started his business with N3 million with each of the co-founders contributing N750, 000. He says the money was raised from their individual personal savings while working. The money was spent on registration of the company, stationaries and as working capital for the first set of projects undertaken. He notes that the business has grown since starting as it has been able to attract grants from the Tony Elumelu Entrepreneurship Program, World Bank GEM Business Plan Grant, Systemspecs NITDA seed funding, and from the Lagos State Employment Trust

Damilare Ogunleye

Fund to expand its operation. “Since we commenced operations, the journey has been filled with lots of sleeplessness, doubts, mistakes, frustrations around the operating environment we find ourselves in and, most definitely, a couple

Enterprise Hubs kick-starts monthly open day for start-ups, entrepreneurs

nterprise Hubs, Ni g e r i a’s f i r s t i n t e g ra t e d re source centre dedicated to entrepreneurs, has kicked off a monthly open day tagged ‘Ventures Day’. The first of the series took place at its Victoria Island centre located at 22, Water Cooperation Drive, Oniru, Victoria Island on Friday, November 8, to the thrill of over 50 attendants made up of start-ups, entrepreneurs and guests. The event which was streamed live on Instagram included a tour of the co-working facilities, a real-time demo of Enterprise Hubs’ integrated operating portal Six Solutions System and climaxed with a long advertised ‘Enterprise Talk’ on the theme ‘Micro-finance and Entrepreneurs: Opportunities and Options’ which explored the wide range of opportunities for both investing profitably in micro-finance sector

and raising working capital through micro-finance institutions. The speaker, Adolphus Abraham, a seasoned former commercial banker, now managing director of Rigo Micro-finance Bank, provided an insight and responses into questions raised by the audience. One of the most unique features of the event was the ‘Venture Pitch’’ - a live window which Enterprise Hubs provided for five innovative entrepreneurs to showcase their products in various sectors, ranging from agriculture to quantum computing to a video streaming application. Based on the audience feedback, the pitching opportunity compared well in favourability with the one-on-one matchmaking, which took place well into the evening at the Enterprise Hubs outdoor garden. Entrepreneurs struck actual transactions at the event, including two who landed potential financing offers www.businessday.ng

for their innovations and ventures. As a way of lightening the mood, attendees watched a short ‘Ice Breaker’ video which was an excerpt from a television programme whose focus was about pitching business ideas to potential venture capital providers. It was used to illustrate the importance of preparation and knowing exactly what entrepreneurs need to secure funding and to succeed for the long term. While commending the guest speaker after the event, Nkechi Arinze, executive director, Pedestal Africa Limited, owners of Enterprise Hubs, confirmed that the Open Day Ventures Day would henceforth be a monthly event to be held on the first Saturday of ever y month to enable more entrepreneurs and start-ups avail themselves of the marketing, learning and capacity building features of the programme.

of wins that compensate for all,” the young entrepreneur says. Currently, the business is made up of 11 team members that see to the daily operations of Lasiko Limited. The accessories used in branding are sourced both locally and internation-

ally. “We source locally and internationally. We source 60 percent locally while we import the rest of our ram materials we use in branding.” Speaking on why people should patronise Lasiko Limited for brand promotions, he says the business prides itself in providing 100 percent quality service delivery. Also, he discloses that the business provides the opportunity for creative individuals to make money through the sales of their designs. He highlights that the country’s huge infrastructural challenge remains the biggest constraint challenging the business. Similarly, he notes that government policy flipflop remains another major business hiccup. “While we do have an amazing team, a challenge I have experienced is also in the quality of human capital available. This is the biggest one that worries and scares me,” he says. He calls on the govern-

ment to bridge the huge infrastructure gaps in the country, adding that it will help speed up industrialisation in the country. On the business expansion plans, he states that Lasiko plans to launch in other markets outside the shores of the country. Also, it is seeking to execute some major brand partnerships on a scale. Answering question on his biggest piece of advice to other start-ups, he says, “Do not get fooled by the hype of how some entrepreneurs are succeeding and doing well and it looks like they have it easier. Nothing could be further from the truth. “Overnight success is sometimes the outcome of over 10 years of consistent handwork. So, keep putting your bit daily into your business. It may not look like what you are seeing, but in the end it will make sense. “However, as you do this, be very attentive to the market you are serving. The market is always talking, but are you listening and adapting to it?” he asks.

Egunjobi nominated for AMBA MBA entrepreneurship venture award

oke Egunjobi, founder and CEO, Paper Craft-I-impact Product Services Ltd, a thermal paper roll manufacturing plant & digital payment solutions company in Lagos, has been nominated for the Association of MBAs (AMBA) Entrepreneurship Venture Award (Private Sector) 2020. Egunjobi is a seasoned digital payment professional with vast experience across technology solutions and products development, sales and business development and high-level people management skills. He started his career as the debit card product manager, First City Monument Bank in Nigeria, after his postgraduate degree from University of Bedfordshire. Business School Luton in 2004. Having developed the debit card product, he was head-hunted to BankPHB to develop the Virtual Digital Channels for BankPHB and was promoted head the Digital Virtual-Channels of BankPHB. He spent some time in Stanbic IBTC as the manager, Self-Service Digital Chan-

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nels before taking up a role as general manager, product & sales of iPartners (a Cisco Gold Partner); senior account manager for Resourcery Plc, where he acquired enormous experience in building and selling IT/E-business solution businesses. He left Resourcery for Enterprise Bank where he led as the head of E-Channels & Mobile Money for Enterprise Bank Plc, spearheading the development of digital electronic channels as alternative channels for delivery of banking services through ATM, PoS, mobile, internet banking. He has a Bsc in Computer Science from University of Ado Ekiti- Ado Ekiti, Ekiti State Nigeria and M.Sc E-Business Management from the Luton Business School, England. He had acquired experience before going back to build a digital payment solutions & consumable manufacturing company to impact the e-business digital payment sphere by providing lasting solutions that would deliver efficiency in IT/E-business digital products and it’s enabling consumables needed as transactional receipts for digital payment channels. @Businessdayng

He is a well-rounded business professional with technical background and vast business management skills e-g: product and project management, Cisco sales expert with commercial acumen, P& L management. Presently finished an Executive MBA in the Prestigious Lagos Business School and bagged the ‘Entrepreneur Award of the Year for the set: EMBA 22, 2019’ with distinctions in marketing, international business management, strategy, organisation behaviour, and strategy in emerging markets and his final year project which eventually turned to life implemented thermal paper business with clients spread in Nigeria & West Africa. Some of his previous awards and recognitions include: Entrepreneur Award of the Year 2018-Executive MBA 22 Set, Lagos Business School. Nigeria, $35,000.00 MSME Grant : Growth & Empowerment Programme Grant for MSME by World Bank & Ministry of Trade & Investment Nigeria, driven by PWC-Nigeria 2019 for the best business plan around light manufacturing sector in Nigeria.

Monday 18 November 2019

BUSINESS DAY

FEATURE Budget of Awakening: In quest for a greater Lagos In his first appearance before the 9th Lagos State House of Assembly, governor of Lagos, BABAJIDE SANWO-OLU unveils an audacious trillion naira plan for the state with new opportunities and challenges ahead, writes SEGUN ADAMS.

hen Babajide Sanwo-Olu, the executive governor of Lagos state made his first budget presentation to state lawmakers on Friday, November 8, the message was clear: Lagos must awaken to take advantage of unprecedented opportunities-and confront challenges- it now faces. Sa n w o - O l u p ro p o s e d a n N1.168trn 2020 spending plan christened “Budget of Awakening”, to be funded 92 percent by a projected Internally Generated Revenue (IGR) that would see the budget deficit at N97.53bn. The gap will be financed by both internal and external loans “This budget seeks to aggressively invest in and develop our education, health and other physical infrastructure sectors,” SanwoOlu told state legislators. Specifically, the objectives of the 2020 budget proposal stated include creating an enabling environment to attract private investments to Lagos; aggressively develop, upgrade and maintain infrastructure, and investment in human capital development, i.e. education and healthcare. Facilitating sustainable social investment and enterprise, and improving capacity to collect due revenues as efficiently as possible, are its other objectives, as well as improving civic participation in governance, and automating public services and engagement; building impactful partnerships with the Federal Government, other States, development partners and civil society; and improving the quality of the environment and public spaces. The proposed budget, which is 37 percent higher than the former governor Akinwunmi Ambode suggested for 2019, is also in line with Sanwo-Olu’s broad framework for development captured by the acronym ‘T.H.E.M.E.S’ (Traffic Management & Transportation, Health & Environment, Education & Technology, Making Lagos a 21st Century Economy, Entertainment & Tourism, and Security & Governance). “We have to rethink our wellbeing. We have to move from glib statements about Lagos as a centre of excellence,” Sanwo-Olu said. “Lagos has to be truly excellent at something. Something positive, remarkable and admirable. In other words, a Greater Lagos.” In the budget, the amount earmarked for capital expenditure in the budget amounts to N723.75bn while the recurrent expenditure is N444.81bn giving a 62:38 capital to recurrent ratio. The proposed capital expenditure is 62 higher than in 2019, while recurrent expenditure is 38 percent of the 2019 budget. Health The health budget was raised by 57 percent to N33bn, in the pro-

Governor Sanwo-Olu

posal. Lagos will be focusing on the primary health care needs of the population, and increasing partnerships with the private sector in promoting health services. Also, the budget will cater for a health insurance scheme for 2.5 million people aimed at reducing the burden on the state residents by providing affordable healthcare. Sanwo-Olu had earlier in the year said for health to be completely affordable and accessible, people must subscribe to the Health Insurance Scheme, where coverage in terms of registration needs to increase. “This is how developed countries are able to tackle their health financing and access,” he said. Education According to the National Bureau of Statistics (NBS), 96.3 percent of Lagosians can read and write- the second-best record Nationwide, and 0.13 percent points lower than in Imo state. The Sanwo-Olu administration in a bid to double-down efforts on education in the state proposes a significantly increased capital budgetary allocation of N48bn for Education. Education spending will be 60 percent over the 2019 provision of N30bn. “We must improve the standard and relevance of our education outcomes to our industries,” Sanwo-Olu said. The executive governor emwww.businessday.ng

phasized plans to work together with local governments to strengthen early childhood education and teachers’ training/ administration, leveraging technology. Infrastructure As one of the fastest-growing cities in the world, Lagos hosts slightly more than a tenth of Nigeria’s estimated 200 million populations on less than 0.4 percent of Nigeria’s entire landmass. The need to constantly improve as metropolitan cities around the world upgrade their infrastructure and the population surge in the state informed Sanwo-Olu’s decision to allocate N115bn for capital spend on works and infrastructure in 2020, almost 50 percent of the 2019 budget proposal. We have to rethink infrastructural development and our transport systems, Sanwo-Olu said, reiterating the need for optimizing the development of relevant infrastructure, including power, transport, drainages and other physical infrastructure. Among other things, the budget will cover building a broadband metro fibre around Lagos which is about 3,000 km long and has 6 ducts. The state will look at getting dedicated funding to complete the Lagos light rail Blue line, a 27 km railroad with thirteen stations from Okokomaiko to Marina. Lagos will prioritise existing

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projects in the new budget. The state government said it has so far in 2019 completed and opened the Maternal and Child Care Centers (MCC) in Eti-Osa and Alimosho LGAs, completed and commissioned 492 housing units at the Lateef Jakande Estate in Igando. It has also donated security vehicles and equipment to our security operatives, launched the Blue Box waste recycling Program, and is almost completing some other projects including 31 roads in Ojokoro/Ijaiye/Ifako Local Government Area, a High Court and Magistrates Court complex in Eti-Osa Local Government Area, and a Police Command Complex in Ojo Local Government Area. Other projects in view include Public School Infrastructure Rehabilitation Program to transform 300 public schools across the State; construction and completion of Maternal and Child Care Centers (MCCs) in Badagry, Epe and Ojo; desilting of major drain systems across the State; and construction of new ones, and provision of Security and Emergency Equipment. In the mix also are Road Infrastructure Projects: Lagos – Badagry Expressway; Agege – Pen Cinema Overhead Bridge; Agric – Isawo Road; Bola Ahmed Tinubu; Ikoyi-Victoria Island CBD reconstruction projects – Igbogbo Road, and our Zero Tolerance for Potholes program; Rail/Civil infrastructure works. Environment The pivotal role Lagos plays in the national economy notwithstanding, the metropolis has its challenges it must address, including the infrastructural deficit, climate change, and high levels of unchecked rural-urban migration which has implication for the environment. “Our dear Lagos faces an existential threat, arising from the interplay of demographic and climate change,” said Sanwo-Olu. To tackle recurrent flooding, the government tripled its capital budget provision N3bn in 2019 to N9bn in 2020. Social impact and economic growth The economy of Lagos state, said to be between the 5th or 7th largest economy in Africa, surpassing the national economies of Ghana and Kenya, attracts immigrants from around the country and beyond. To enhance social and economic welfare, Lagos will be embarking on a number of impact schemes next year and has set aside N11.8bn for that purpose. The state, which has placed an increased focus on wealth creation, will be taking “deliberate steps in courting a partnership between our people and various development institutions,” it said. In addition, “we have made @Businessdayng

provisions for N7.1bn this year, to provide for industrial hubs, parks, graduate internship programs and virtual markets for artisans.” This fund will be to support Micro, Small and Medium Enterprises (MSMEs) which are the engines for both economic and employment growth. There 2020 budget includes a personnel cost or wage bill of N167bn and it incorporates the new minimum wage. Other focus areas for the budget would be security, open government, and human capacity building. Fiscal soundness of budget Lagos State generated the biggest Internally Generated Revenue (IGR) of N382.18bn, 33 percent of total revenue generated by all 36 states including Abuja in 2018 according to National Bureau of Statistics (NBS) data. To t a l av a i l a b l e r e v e n u e (FAAC+IGR) for the year was a little more than half-a-trillion considering a net FAAC allocation of N119.02bn. In half-year 2019 Lagos has generated N205.16 billion with total revenue available at N263.25bn. So far state Ministries, Departments and Agencies (MDAs) have generated N17.36bn. Lagos would see likely see revenue close to N600bn in 2019, which means the revenue target of N1.071trn would be more within reach although requiring efforts from the state. “Since revenue generation is the spine of any budget, this budget supports investment in our revenue-generating agencies,” Sanwo-Olu said. Sanwo-Olu said Lagos is driving MDAs that generate revenues to be optimal, and the budget aligns with revenue capacity with the deficit expected to be around 9 percent of the total budget. As at September 2019 revenue performance of the 2019 budget was N468bn or 69 percent of the budget. Total budget performance for recurrent expenditure was 78 percent, while capital expenditure had a budget performance of N217bn or 61 percent. To push the performance of the 2019 budget to between 80 and 90 percent by this year-end, the government will raise N250bn; N150bn internal loans from banks, while N100bn will be from bonds. “Despite these loans, our sustainability ratio of total debt service to total revenue remains good at 29 percent and we still intend to achieve a capital to the recurrent expense ratio of 55:45 by the end of 2019,” said Sanwo-Olu, emphasizing that all new borrowing would be done under the most responsible fiscal terms possible. When signed into law, Lagos would have a new budget surpassing a record-high of N1.046trn Ambode signed into law in 2018, and it would be 34 percent more than the current budget.

Monday 18 November 2019

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Banks’ sound financial health hints no dividend cut in horizon BALA AUGIE

or the time being, big banks dividend health score- a proprietary model of profitability, cash flow leverage metricsshould assure investors that there is no dividend cut in the horizon. They have been rewarding shareholders from distributable profit even during volatile market conditions or economic downturns. Bank stocks provide investors with good source of income as evidenced in a high dividend yield, which means investors are getting high cash benefits from investing in the shares. High dividend yield provides a buying opportunity for investors in a time of falling yields on fixed income securities, as market participants search for alpha.

The average dividend yield of the five largest banks is 9 percent, according to BusinessDay calculations. At 14.85 percent, Zenith Bank has the highest yield among the largest companies in Nigeria. GTBnk and

United Bank for Africa (UBA)’s yield of 9.70 and 11.41 beat the industry average. The high dividend yield of these stocks is not because of profit growth alone but declining share price in recent past. Since 2017, stocks of the largest lenders have gone nowhere in tandem with a sluggish economy, while investors have continued to dump shares as government policies have failed to reinvigorate their appetite. The banking index has declined 8 percent YTD. Guaranty Trust Bank (GTBank) was trading at N54.71 as of Jauuary 19 2019, but it closed at N29 as on Friday in Lagos. Zenith Bank traded at N33 as of January 19, 2018, but it closed trading at N18.85 as of close of trading in Lagos. Access Bank’s shares hit an alltime high of N13.30 as of March 2, 2018, but it traded at N10.50 on Friday. UBA traded N12.45 as of March 2, 2018, but closed at N7.40 Friday. “Bank stocks have liquidity, and you can easily get willing buyers compared to other sectors,” said Yinka Ademuwagun , research analyst at United Capital PlC. The five largest banks have paid a combined interim dividend of N43.30 billion for the 2019 financial

year. Also, they paid a total dividend of N191.06 in 2018, a slight increase from the previous year. Banks are cautious of amount they pay to their owners out of distributable profit as they must maintain capital buffers to fend off macroeconomic headwinds. Investment in electronic banking, a reduction in impairment charges, and investment in government securities, are the major drivers of profit in the last four years. The cumulative net income of GTBank, Zenith Bank, Access bank, UBA, and FBN Holdings increased by 14.65 percent to N521.91 billion in September 2019 from N455.95 billion the previous year. However, the new directive by regulator that lenders should maintain a minimum Loans to Deposits ratio (LDR) of 65 percent by December 2019 could result in deteriorating assets quality, a double whammy for an industry recovering from a sudden crash in crude oil price that prevented valued customers from servicing interest on money borrowed. Analysts expect a rally in banks stocks as the continuous drop in treasury bills (T-bills) would force investors to find high yielding assets. A move by the central bank to limit participation in high yielding OMO bills sent real returns on treasury bills below zero, forcing domestic investors to seek out equities. “The money market returns would also reflect the current rates in the medium term and new inflows and matured investments will be invested at current rates in the money market fund, which will drag down the performance of the fund,” Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo The Nigerian Stock Exchange All Share Index (NSEASI) gained 2 percent last week touching at a psychological point of 26,851.58 points, but it has a year to date of (-14.57 percent).

Nigerian mutual funds industry grows by 42% in 10 months IFEANYI JOHN

he Nigerian economy may be struggling to grow but fund managers appear to be enjoying a growth spurt so far this year. In the first 10 months of the year, total net asset under management grew by 42 percent as fund managers added almost N260billion to their mutual funds according to data compiled from the Securities and Exchange Commission (SEC).

As at the start of November, the total asset under management for Nigerian fund managers reached N881 billion, rising from N621.6 billion at the beginning of the year. The rapid growth in the mutual funds industry was skewed towards the money market and fixed income funds with both low risk funds accounting for up to 96 percent of the growth in the industry. Money market funds which makes up 75 percent of the mutual funds industry in Nigeria saw

its segment grow by 39 percent so far this year, as investors poured up to N181.3 billion into money market funds which have enjoyed double digit returns for years. By the start of November, money market funds had grown to N646 billion, which was more than the size of the entire mutual industry at the beginning of the year. Local investors’ interest in low risk investment opportunities showed even more in the fixed income segment as the total fixed

income funds more than doubled since the beginning of the year. Analysts attributed the renewed interest in long dated debt securities to the declines witnessed in the stock market so far this year which have pushed them to invest in safer financial instruments. Equity funds have declined by 15 percent so far this year. Fixed income mutual funds grew by 117 percent, adding N66.4 billion in assets under management which

P.E

SHORT TAKES 7.04% The stock market Thursday gained the most since late May as big domestic investors who are facing limited investment options returned, pushing the banking index to highest daily gain since January 2016. The banking index rose 7.04 percent, while the main equity gauge advanced 1.91 percent as attractively priced banking stocks returned much-needed liquidity to one of the worst performing stock markets globally. The market-frenzy follows a move by the CBN to limit participation in high-yielding OMO market which sent real returns on T-bills below zero, forcing big domestic investors back to equities. The move to restrict the OMO market to banks and foreign investors have left big domestic investors, mostly pension funds and insurance companies, with idle funds and caused heavy demand at a primary market NTBills auction on Wednesday. However banking stock fell 1.68 percent Friday.

$1bn Last week, US-based global retail electronic network, Visa, announced a strategic partnership with Interswitch to acquire a significant minority equity stake in the Nigerian-based paymentsprocessing company, valuing Interswitch at $1 billion. Visa agreed to pay $20 million for a 20 percent stake in Interswitch, said to be planning a London Stock Exchange (LSE) debut next year. The investment makes Interswitch Nigeria’s first home-grown unicorn (a startup valued at $1bn or more) and one of few in Africa

N3bn C&I Leasing Plc last week notified its shareholders, stakeholders, the Nigerian Stock Exchange (NSE) and the general public, that the Company has obtained an approval from the Securities Exchange Commission (SEC) to conduct the signing ceremony with regards to the proposed Rights Issue of 539,003,333 ordinary shares of 50kobo each at N6 per share.

Continues on page 41

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

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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Monday 18 November 2019

BUSINESS DAY

MARKETS INTELLIGENCE Seplat, Oando’s low price to cash flow ratio signals attractive valuations BAL AUAGIE

nvestors are willing to pay more for the operating cash flow of the two dominant listed upstream oil and gas companies, which means the stocks are cheap and attractive. Seplat Petroleum Development Company has a price-to-cash flow (P/CF) ratio of 3.44 percent, this means that the company’s investors are willing to pay N3.44 for every Naira of cash flow, or that the firm’s market value covers its operating cash flow 3 times. Oando Nigeria Plc, another bellwether company in the industry has a (P/CF)

of 0.90 percent, which means its market value cover its operating cash flow 0.99 times. The price-to-cash flow (P/CF) ratio is a stock valu-

ation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share. The ratio uses operating

cash flow which adds back non-cash expenses such as depreciation and amortization to net income. The price-to-cash flow

Nigeria’s inflation premium declines to negative territory, as OMO ban impacts yield curve Ifeanyi John

or the first time in over 3 years, inflation premium on treasury bills has declined to negative territory as more than N2trillion of maturing OMO bills trigger excess liquidity and lower yields in the Nigerian money market. Some analysts predicted that the decision to ban individuals and non-bank institutions from accessing OMO auctions could have significant impact on yields in the treasury market. Just about 2 weeks later, the impact is already being felt as treasury yields have now declined to just 9% from 12% earlier in the week. Although the yield curve remains normal, some analysts are already expressing

concerns of how destabilizing negative real yields could be to the debt market. “I think yields this low are unsustainable. The CBN is trying to force yields down by pushing investors out of the OMO market and suppressing yields in the treasury market. There is nothing natural about having inflation at 11.2% and treasury yields at 9%. The maths just won’t add up for investment community whom the CBN is expecting to be investing at negative real returns,” said Obinna Uzoma, Chief Economist at EUA Intelligence. “I think investors will switch to longer dated FGN bonds to get yields above inflation which will then drive short term yields back higher. That’s the normal response I think we will see in the market in the coming weeks. This just isn’t normal!” Uzoma added.

Maju Eldad, Lecturer in Economics at Federal University Kashere, Gombe told BusinessDay that he expects the government to immediately take advantage of the current low yields to issue more debt to fund the budget deficits. “Lower yields may not be good news for investors, but it certainly is excellent news for borrowers with the Federal Government being the biggest borrower. If the Federal government can raise up to N2 trillion in single digit here in Nigeria to fund its budget, that could cut the debt servicing cost in the country significantly, possibly taking it below N2 trillion. This should give a breather to Nigeria’s public finances where debt servicing cost to revenue is about 70%,” Eldad added. The ability to raise up to N2 trillion at single digit now seems a possibility in Nigeria

for the first time since 2015. Treasury yields rose sharply in 2016 after a stagflation caused inflation to jump to more than 16%, pushing treasury yields above 19% as investors demanded higher inflation premium. “Today, lower yields are expected to keep investors less hungry for government notes at a time that the government is funding a record deficit. Last year, Nigeria’s actual government budget deficit was over N3 trillion. Next year, we expect it to surpass N5 trillion. If the yield curve doesn’t adequately compensate short term investors, the government will struggle to use its treasury bills to adequately fund its budget. The menace of negative inflation premium far outweighs any benefit the CBN is trying to achieve here,” Uzoma concluded.

Central bank trades prompted rival FX traders to share info Rohan Ramchandani tribunal hears central banks were ‘unprofessional’ Caroline Binham, FT

urrency traders at rival banks traded information in an attempt to counter “unprofessional” behaviour from central banks that would “spray the market” with orders, a London tribunal was told on Friday. The “vicious” trading from central banks was one of the reasons senior managers at

Citigroup “most definitely knew and implicitly approved” currency dealers messaging counterparts at rival banks about deal flow in the foreign exchange market, Carly Hosler, a former Citi employee, told a London employment tribunal. She was testifying at an unfair-dismissal claim against Citi filed by one of its former star currency traders, Rohan Ramchandani. Mr Ramchandani, who was head of European spot foreign-exchange trading at Citi, was acquitted of forex rigging by www.businessday.ng

a New York jury last year. Ms Hosler, a former colleague of Mr Ramchandani, alleged in evidence that the Wall Street bank’s sales team would “routinely” flout clientconfidentiality rules, with no complaints from senior managers or clients. They would inform hedge fund clients of large central-bank orders in an attempt to win favour, sometimes over private mobile phones rather than Citi’s recorded lines, she claimed in a witness statement made

available on Friday. “Central banks and hedge funds are particularly active and aggressive spot market participants. Whilst the latter generally [ . . .] have quite a sinister reputation for their predatory trading methods and behaviour, it may be quite surprising for the ordinary public that the former can and often do operate in a completely unprofessional and vicious manner,” Ms Hosler, who was previously known as McWilliams, said.

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ratio measures how much cash a company generates relative to its stock price, rather than what it records in earnings relative to its stock price, as measured by the price-earnings ratio. The price-to-cash flow ratio is said to be a better investment valuation indicator than the price-earnings ratio, due to the fact that cash flows cannot be manipulated as easily as earnings, which are affected by depreciation and other non-cash items. The analysis shows investors are willing to pay more for operating cash of Seplat because they have confidence in the company’s growth potentials, while its expansion plans are expect-

ed to deliver a higher return to shareholders in form of higher dividend and share appreciation. By and large, Seplat and O a n d o h av e c o m b i n e d cash from operating activities of N134.45 billion, but the free cash flow could be slim depending on the capital expenditure in their budgets. A breakdown of the figures shows Seplat has cash flow from operating activities of N94 billion, this compares with Oando’s N40.0 billion. Upstream companies struggled recently with lower realized prices, as global crude oil prices declined on the back of geopolitical risks and trade tensions.

Nigerian mutual funds ... Continued from Page 40 took the fixed income funds to N123.3 billion. Bond funds grew by 89 percent during the same period, adding N12.7 billion as investors’ appetite for bonds grew exponentially during the year. As at the start of November, the total bond funds under management in the industry was N27 billion. With treasury and bond yields now declining, analysts now forecast a slowdown in

the growth of money market and fixed income yields and more attraction to equity funds as a source for high returns. “I think the mutual funds industry will continue to grow strongly over the next few months. We may not see large growth coming from money market or fixed income funds anymore due to the low yields now in the market. But I think the industry could easily add another N200billion,” said an asset manager.

Chilango auditor declines to sign off accounts after bond raising Mexican chain hires restructuring advisers RSM to conduct full review of options Tabby Kinder and Robert Smith, FT

hilango’s auditor has declined to sign off its accounts six months after the fast-food chain raised £3.7m by selling controversial “burrito bonds” to hundreds of small investors. Chilango has hired restructuring advisers RSM to conduct a full review of its options. It is considering a range of options including raising new capital or a sale as part of a pre-pack administration, according to one person with knowledge of the situation. RSM said it had been engaged to “assist on long-term planning, options and strategy”. C h i l a n g o’s a u d i t o r, Grant Thornton, is “not willing” to sign off the accounts of the Mexican food @Businessdayng

chain’s funding entity — due to be filed six weeks ago — because of a “risk related to going concern”, according to one person close to the matter. The restaurant group, which is headquartered in north London, has 12 sites in the UK. It was founded in 2007 by Eric Partaker and Dan Houghton. Mr Partaker, chief executive, said the company was working with its auditors to publish the accounts “as soon as possible”. Chilango was a pioneer of “crowd-funded” mini-bonds — investments that offer regular returns by lending to companies, but which have few of the legal protections of large-scale institutional bonds. It first tapped up its customers for more than £2.1m funding five years ago, with investors relying on colourful marketing documents that were light on financial detail.

Monday 18 November 2019

BUSINESS DAY

INTERVIEW ‘Government can leverage trustee business in the area of trust fund, projects’ YINKA ADEGBOLA is the managing director of PAC Trustees Limited, with close to two decades’ experience covering legal advisory, company secretarial services and trusteeship. In this interview with IFEOMA OKEKE, he speaks on services delivered by PAC Trustees and reasons why corporate and government organisations should partner with trustees in their day-to-day operations.

ould you tell us briefly about PAC Trustees Limited? PAC Trustees Limited is a member of PanAfrica Capital Holdings, a proprietary investment company with special focus on key sectors across emerging and frontier markets in Africa including financial services, hospitality and entertainment, real estate and infrastructure, agro-allied and FMCG, healthcare and ICT and media. We have been in the system in the last 13 years and for me, I have been in the industry for close to two decades and I have pioneered some trust companies in Nigeria. How would you explain the concept of trustees? Trust concept started in the 11th century and that was when there was the 11th century crusade between the Western Asia and Europe. Then when people went to war, they were not sure of their return, so there was a need for them to tidy up their house. So, what they did was to appoint friends who would oversee their estate in case they didn’t return. This was what led to the concept of trustees. Now take it down to modern day concept. Specifically, what a Trust company does is to hold assets in trust for the benefits of some beneficiaries. For instance, if you look at it in the corporate world, you see someone wants to borrow money from the bank; he gives assets to trustee to hold in trust for the benefit of the bank. So that if the person defaults, the trustee can sell off the assets and pay off the bank. So, trustees are like middlemen between the deficit end and the surplus end. So, we manage these assets for the benefit of some set of people. The person that sets up a trust is called a settlor, while the trustees are trustees and the beneficiaries are those for whom the assets are set up. So, you see us play in commercial transactions ranging from syndication, to debentures, to state government bonds and mutual funds amongst others. The trustees protect the interest of the beneficiaries as stated by the settlor in the instrument setting up the trust. How has it been for you since you resumed as managing director? For us in PAC Group, our major

person aligned with the firm’s vision to achieve its goals and objectives? The industry is as old as 50 years in Nigeria. So, our major vision is to transform the position of the company from where we are to be the top five in the industry. We intend to do this by delivering exceptional and value-added services. We also hope to tailor trust solutions to some of our clients’ needs.

vision is to deliver exceptional services to our clients. My role is to make sure I drive my team to deliver those exceptional services to our clients. So, my main goal is to be able to harness the resources of PAC Trustees towards delivering exceptional services to our clients and stakeholders by extension. Could you share some success stories you have recorded since the company started operations? PAC Trustees happen to be one of the babies in the group. We commenced operations last year and since then, we have been able to secure major transactions and mandates in the area of corporate bond, State government bond and private trust services. We have had strategic alliances with some private trust companies off-shore, such that if you have transactions to execute off-shore, we have partners who can do that. We have strategic alliances across borders for our inter-jurisdictional transactions. We have been able to also deliver a lot of trust products for Nigerians in diaspora and the entertainment industry in Nigeria because we know it is a fast growing industry in Nigeria. We also keep looking at other sectors to deliver products to suit the Nigerian market. One other area we are looking at is to have a branch in Abuja and this is almost consummated. We take training seriously because we can’t give to the public what we don’t have and that starts from

our content. Having covered legal advisory, company secretarial services and trusteeship, what have been the challenges? Typically, in Nigeria’s trust industry, there are some major challenges which have been there. In the area of public awareness, many people don’t know what Trust industry is about and interestingly, this is one of the major areas that can be used to drive the Nigeria economy. For instance, in the area of private trust, a lot of people die without wage. If you have trustees, they can hold your asset in trust for the benefit of your children such that what you have laboured for does not go in vain. A lot of assets have depreciated over a period because people did not plan. We also have a challenge of capacity. The capacity in the industry is evolving and the Association of Corporate Trustees has been trying to do a lot of trainings for our colleagues that are just entering the market. One other area of challenge is the area of fees. Our fees are regulated by Securities and Exchange Commission (SEC), so we cannot charge beyond SEC has stipulated. In the area of private trust, typically, clients are not willing to pay. The last challenge is the area of regulation. There is a need to review the laws guiding trust business in Nigeria. Some of the laws are obsolete. How has your vision as a

PanAfrican Capital Holdings is a proprietary investment company with focus on various sectors across emerging and frontier markets. How is the firm able to achieve objectives of all these sectors? If you look at the structure of PanAfrican Capital Holdings, it is a propriety investment company with special interest in several areas. In the area of financial services, we are looking at how trustees come in to add value in balancing the surplus and deficit end. For instance, if you want to borrow money to develop agriculture sector, there will be a need for trustees because you must get collateral. When you get collateral, trustees hold the collateral in trust for the syndicate of banks. At PAC Trustees, we are playing a role in agriculture as well. Hospitality is also growing fast and most of them require loans from bank. So, we are positioned to play a part in the fast-growing sectors of Nigerian economy. Which sector among the several sectors does PanAfrican Trustees concentrate its efforts on? All the sectors give us return on investment. As a businessman, you want to maximise the benefit of your investment but most importantly, we create value and deliver exceptional services. Nigeria’s hospitality and non-governmental organisation sector seems to be growing exponentially. How well are you playing in this sector to reap its huge untapped benefits? Hospitality business is fast growing and you see several NGOs springing up on a daily basis. For instance, if you start an NGO, focusing on empowerment, you are not expected to put in all your resources into the

NGO. The role of Trustee is to give credibility to your NGO. If you want to access funds both nationally and internationally, what those concerned look out for is the structure you have. For you to be given fund, they want to see that you have a trustee that will help monitor the NGO. So, they won’t just give you money directly, they will rather route the money through a trustee and trustee will hold the asset in trust for the beneficiaries. Trustees give credibility to NGOs, foundations and endowment schemes. So, we are positioned at PAC Trustees to partner with NGO towards bringing credibility to NGO such that they can access funding locally and internationally. It also works the same way with the hospitality sector. So, trustees protect the interest of the investor and the lending company, so the money must be accounted for. And trustees are like watchdog. One of the areas that the Nigerian government can leverage trustee business is in the area of trust fund and projects that are being set up. I expect that all those funding that federal government put in the business must be protected. They need to involve corporate trustees in some of these transactions. You are not supposed to disburse funds directly to the end users, they must be channelled through the trustees, so the funds are used for the purpose they were designed for. What would you say are the qualities the organisation looks for in choosing trustees? The organisation must be one rooted in integrity. Trustees must have professionalism, experience, good structures, internal processes and transparent approval processes amongst others. For us as PAC Trustees, we have very strong internal processes approval, such that even I as the MD do not have the final say. We brainstorm, before the approval is finally given. Where do you see PAC Trustees in the next five years? In the next five years, we want to be the top five in the industry and that is why we are looking at how to deliver exceptional services, such that when you think of exceptional services and innovations, you think of PAC Trustees.

Monday 18 November 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper Joshua Chaffin and James Politi

tephen Schwarzman, the Blackstone founder and Wall Street powerhouse, was not ready to predict victory for Michael Bloomberg in next year’s presidential election — let alone the Democratic primary race. But with the rumblings last week that Mr Bloomberg, a fellow New York billionaire, was preparing to enter the race, he thrilled to the idea that a candidate was at last rallying to the capitalist cause in a contest he worries has drifted dangerously to the left. “I think this was a very bad day for Elizabeth Warren and Bernie Sanders because Mike’s understanding of the real economy is such that I don’t see how some of the policies of those other people can survive,” Mr Schwarzman told columnist Thomas Friedman during an interview at the 92nd Street Y in New York. “I think he will dent their momentum by force of logic and reason.” Kyle Bass, the hedge fund manager, was similarly effusive. “I love what he did with New York as mayor,” Mr Bass, founder of Hayman Capital, told the Financial Times. “Bloomberg is rational and a centrist and a competent businessman. He would make great decisions for our country.” Since then, Mr Schwarzman and Mr Bass have been given another business-friendly option: Deval Patrick, the former Massachusetts governor and Bain Capital partner who tossed his own cap into the ring this week.

Wall Street thrills to idea of Michael Bloomberg presidency New York establishment encourages billionaire former mayor to take on Trump

Michael Bloomberg, pictured with then-Republican presidential nominee Donald Trump, at a 2016 commemoration of the 9/11 terrorist attacks © AFP via Getty Images

The late stirrings — less than three months before the voting begins in Iowa and New Hampshire — reflect the desperation among some Democrats, particularly on Wall Street and inside the Washington Beltway — for a white knight to save them from an otherwise unsatisfying crop of candidates.

Kingdom curtails roadshow to focus on domestic investors and sovereign funds

Chizhov remarks set to further anger critics who say French leader risks undermining bloc

ussia’s top EU envoy has applauded Emmanuel Macron’s opposition to enlargement of the union, in a sign of how the Kremlin has seized on the French president’s “disruptive diplomacy” to highlight divisions among European allies. Vladimir Chizhov, the Kremlin’s veteran ambassador to the European bloc, said Mr Macron “has a point” when he argues the EU needs to deal with tensions between its members before starting talks for North Macedonia and Albania to join. Mr Macron’s trenchant comments on subjects ranging from EU expansion to the “brain death” of the Nato military alliance have triggered strong criticism from some allies for making Europe appear weak, while other commentators have praised him for confronting fundamental problems. “President Macron has a point saying that the EU should deal with its own internal matters first before enlarging,” Mr Chizhov, who has been in post since 2005, said in an interview. “And of course objectively speaking, to say that both North Macedonia, and particularly Albania, are ready for membership would be a gross exaggeration — with all due respect to those two countries.” Russia is one of several rival powers vying for sway in North Macedonia, Albania and four other western Balkan territories that are surrounded

by EU countries and aspire to join the bloc. France alone last month opposed starting accession talks with Skopje and joined the Netherlands and Denmark in blocking Tirana’s bid. Critics say Paris’s position harms EU influence in the region and fails to reward big steps such as North Macedonia changing its name to end a decades-old dispute with neighbouring Greece. Mr Chizhov said he would not comment on the “exact wording” of a separate claim by Mr Macron last week that 29-member Nato was suffering “brain death” because of disagreements and a lack of coordination between allies. But he said the French president “as I understand . . . expressed some concerns that many people in Nato member states have”. “Nato . . . in the light of President Macron’s statement, has a lot to discuss in close format” at a summit in London next month, the ambassador said. He added: “We all know what [US] President [Donald] Trump had to say about Nato at different stages of his presidency.” Many Nato country diplomats worry about the impact of tensions over Turkey’s military incursion into northern Syria and between Mr Trump and European allies. The US president branded the alliance “obsolete” on the election campaign trail and has since lambasted European allies publicly for failing to spend more on their militaries. www.businessday.ng

Democrats feel like a second Trump term would be apocalyptic, this worries people.” Assuming it goes forward, a Bloomberg campaign would not be designed to lend succour to the US financial industry but to offer pragmatic solutions to issues such as gun control and climate change on which

Saudi Aramco pares back IPO on weak foreign demand

Russian envoy praises Macron stance on EU enlargement Michael Peel and Sam Fleming

“Establishment Democrats look at the top four and they are worried that they are either too left [Elizabeth Warren and Bernie Sanders], too old [Joe Biden] or too young [Pete Buttigieg],” said Ken Baer, a former Obama administration official and founder of the Crosscut Strategies consultancy. “In a world where most

the former mayor has a long record — and to dislodge a president he views as a grave threat. Still, by virtue of his background, he offers unique comfort to Wall Street. The former Salomon Brothers trader built his fortune with the invention of a machine that has become the fabric of the financial industry, linking traders across Wall Street and allowing them to both easily communicate and access reams of data. As mayor, he helped rebuild New York after the September 11 terror attacks left many doubtful of its future. Mr Bloomberg’s success is such that he is a mogul whom other moguls look up to. (Another reason financiers may like him, an observer quipped, is because he is the only candidate who won’t have to ask them for money.) “He’s very well liked on Wall Street. He built his fortune understanding Wall Street,” one admirer said. Their ardour for Mr Bloomberg may be even more intense at a time when Jamie Dimon, the JPMorgan Chase chief executive, and other industry leaders complain about being vilified by politicians for their success.

Simeon Kerr, Anjli Raval and Arash Massoudi

audi Arabia has sharply scaled back the initial public offering of its state oil company after international investors gave its ambitious plans a lukewarm response. Based on a price range set on Sunday, Saudi Aramco will aim to sell shares at a valuation of $1.6$1.7tn, which would make it the world’s largest publicly traded company by market capitalisation — a record currently held by Apple. The kingdom will offer a 1.5 per cent stake to investors via a listing on its Riyadh’s Tadawul exchange, which it aims to complete as early as next month. Mohammed bin Salman, the kingdom’s heir apparent, had initially sought to sell 5 per cent of the company, raising up to $100bn. In recent months, this was scaled back to 1-3 per cent. The issuance will seek to raise $24bn-$25.6bn for the government. The lower end of this range would amount to a smaller deal than the $25bn raised by Chinese ecommerce giant Alibaba’s record IPO in 2014. Saudi Aramco announced new details for its planned IPO on Sunday as it kicked off its international roadshow and began

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talking orders from investors. The price range of 30-32 riyal per share suggests the kingdom has bowed to investor concerns about the $2tn valuation sought by Prince Mohammed. An inability to secure this target for the country’s largest revenue earner has dogged the company for the best part of four years, leading to a series of delays to the IPO. But the announcement of a price range is the furthest the kingdom has gone in its pursuit of a stock market listing. If all goes to plan, Saudi Aramco could have non-government shareholders for the first time in nearly four decades by next month. Initial meetings with international investors revealed scepticism about the high valuation sought for the company, according to people briefed on the discussions. Advisers this week informed Saudi officials about a big gap in demand between domestic retail investors and foreign institutions, according to two people familiar with the process. “The issuer expressed high levels of dissatisfaction with what they were hearing,” said one of them. Even as the company seeks investment from top-name foreign institutions, Saudi Aramco is scaling back its overseas road@Businessdayng

shows. The kingdom believes it can achieve a $1.7tn valuation by banking heavily on demand from retail investors domestically as well as Saudi and other state funds, said one person close to the company. Banks appointed to manage the offering have issued research with a wide range of about $1.1tn$2.5tn, underscoring the difficulties of coming up with a valuation that would placate investors and Saudi authorities. Overseas institutions suggested a $1.2tn-$1.5tn valuation would be more realistic for the company, which made $111bn in net profit last year, according to bankers familiar with the process. Saudi officials have visited China and Russia in recent weeks in a bid to underpin demand for the IPO from countries that have been keen to deepen ties with the oil-rich kingdom. Saudi bankers report plentiful domestic demand for the issuance, with pressure on large families and institutions to apply for allocations of shares at the higher end of the valuation. A wave of retail investment, sweetened with the issuance of bonus shares to Saudi nationals and ample bank lending for allocations, is also expected for the 0.5 per cent of shares earmarked for Saudis.

BUSINESS DAY

Monday 18 November 2019

NATIONAL NEWS

Will the Federal Reserve confirm a pause in its rate-cutting cycle? Market Questions is the FT’s guide to the week ahead

ill the Fed confirm a pause in its rate-cutting cycle? On Wednesday, minutes from the Federal Reserve’s October meeting on monetary policy will be released, giving investors a better sense of the central bank’s appetite for additional interest rate cuts later this year. When Fed chair Jay Powell announced the central bank was trimming its benchmark interest rate for the third time in as many meetings last month, he made a point of signalling that the threshold for additional easing would be high, barring a noticeable deterioration in the economic data or a sharp escalation in the US-China trade war. He reiterated this message last week during his testimony to US lawmakers, saying the current stance of monetary policy would remain appropriate “as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labour market, and inflation near our symmetric 2 per cent objective”. The Fed’s recalibration comes amid nascent signs of progress on the trade war front between the US and China, and the release of further data pointing to a tight labour market and a relatively robust US consumer. While business investment has fared worse — with the most recent reading of gross domestic product indicating it dropped by the most in nearly four years — even the most bullish members of the Fed’s rating-setting committee appear to have embraced a pause. In October, James Bullard of the Federal Bank of St Louis did not dissent in favour of a more aggressive cut, as he had in September. Investors have so far taken the Fed’s signalling to heart. Expectations of another quarter-point cut in December are low at just 8 per cent, according to futures prices compiled by Bloomberg. Colby Smith Will South Africa cut its main lending rate again? On Thursday the South African Reserve Bank will announce the outcome of its first monetary policy committee meeting since

rating agency Moody’s offered the government a reprieve by keeping the nation’s sovereign debt in investment-grade territory. It is a close call as to whether or not the central bank will decide to cut its main lending rate, following a cut in July. It opted to keep the rate on hold at its last meeting in September. Some think it is unlikely the bank will cut rates further, particularly as it can do little to stimulate the economy when so many of the nation’s problems are structural, such as the unemployment rate. Moody’s decision on November 1 not to downgrade South Africa’s sovereign debt to junk was hardly a vote of confidence in Africa’s secondbiggest economy. The agency cut its outlook for the debt from “stable” to “negative”, citing a material risk that the government would be unable to repair its finances. The government now has three months to demonstrate a tangible change of course ahead of its budget in February, or a downgrade is inevitable, according to Luis Costa, lead strategist at Citi. South Africa’s national debt, currently about R3tn (about $200bn), is set to balloon to R4.5tn during the next three years without drastic action, said Tito Mboweni, finance minister, in an address to parliament in October while presenting his midterm budget. Anna Gross Which way will oil prices go? Hopes for a trade deal between the US and China have kept crude prices hovering around $62 a barrel, and oil traders will be keenly looking out for any suggestions in the coming week that the world’s two largest economies might roll tariffs back. Signs of a thaw in the trade war early last week led Brent crude to rise 1.5 per cent to $62.60 a barrel. But prices soon slipped after US president Donald Trump offered scant details on timing and stoked fears of negative consequences if a deal failed to be hammered out. Huge uncertainty lingers and oil markets will continue to hang on Mr Trump’s every word and tweet for more details on a possible easing of trade tensions.

An oil rig in Sekondi waters, Ghana. The west African country expects to be producing about 250,000 barrels of oil a day by next year © AFP via Getty Images

Independent African energy company finds oil off Ghana coast

Springfield Group set to reveal deepwater discoveries it says will be bigger than Jubilee field David Pilling

Ghanaian company says it has made history by becoming the first independent African energy group to discover oil in deep water after its drilling revealed significant quantities of oil off the coast of Ghana. The Springfield Group, which has no history of oil exploration, will in the next few days announce it has made two discoveries totalling 1.2bn barrels of crude in a block that it says will be bigger than the Jubilee field, Ghana’s biggest. The Jubilee field, operated by the UK’s Tullow Oil, is one of Africa’s largest recent finds and propelled Texas-based Kosmos Energy, which discovered it in 2007, to a New York and subsequent London listing. Ghana expects to be producing about 250,000 barrels of oil a day by next year, which would make it the fourth-largest producer in sub-Saharan Africa. If Springfield’s claims are confirmed, the new discovery could significantly boost production in the west African country. “We are the first African company to drill in deep water and to find oil,” said Kevin Okyere,

Springfield’s chief executive and a former telecoms entrepreneur. “Nigeria has had oil for a long time and no indigenous company there has ever done this.” Mr Okyere said Nana AkufoAddo, Ghana’s president, would join a ceremony to announce the find. Ghana’s government has an 18 per cent stake in the block. “It has become a matter of national pride now,” Mr Okyere said. A senior official in the finance ministry confirmed the government had been informed about the discovery. Springfield said it had drilled two wells in the past 40 days and hit oil in both. Of the 1.2bn in proven reserves, it said, 30-35 per cent would be recoverable. There were also commercially viable quantities of gas, it said. “These numbers are still very early days,” said Lennert Koch, principal sub-Saharan analyst at Wood Mackenzie, an energy consultant. “But if it is in that range, it is what we would call a significant discovery.” Mr Koch said Springfield would need partners to help with both finance and technical development of the field. He doubted whether Ghana had the capacity to use more gas. Springfield was given the block,

known as West Cape Three Points Block 2, by Ghana’s government in 2016 after it was relinquished by Kosmos. The US company, which had drilled the block without finding oil, had returned it to Ghana following a protracted dispute with the government. Springfield was awarded the block for free, but said it had invested well over $100m in exploration and drilling. Mr Okyere acknowledged there might be scepticism about how a small, inexperienced Ghanaian company had found oil in a block abandoned by Kosmos, a group known for its discovery capabilities. “A little African company says there’s oil when Kosmos said there’s no oil,” he said, conceding that prospective partners would demand independent verification. Brandishing a small jar of the “extremely light” crude, Mr Okyere said it had been discovered at a depth of 3,323m in waters about 1,000m deep. Although that is deep, it is within modern drilling capabilities. Springfield said it had already been in talks with potential partners, and did not rule out an initial public offering in either London or New York as a way of raising funds to develop the field.

Conflicts of interest in target-date funds catch SEC’s eye

The big proportion of US workers channelled in the retirement portfolios has increased the review urgency Siobhan Riding

Yet critics fear target-date funds could be an accident waiting to happen, warning that concentration and competition issues are putting investors at risk. “Target-date funds have very much been under the radar,” says Chris Brown, founder and principal of Sway Research, a consultancy focused on fund distribution within 401(k) plans. “This has allowed the big captive providers to get bigger and bigger.” The target-date market is controlled by a small number of asset managers. The top three providers — Vanguard, Fidelity Investments and T Rowe Price — manage 63 per cent of the total asset pool, according to Sway Research. In addition, the vast majority of target-date managers exclusively invest in their own in-house funds, with just one provider in the top 10 — Principal www.businessday.ng

— outsourcing the portfolios to external managers. One reason for the closed nature of the market is downward pressure on management fees. The average fee for target-date funds fell to an all-time low of 0.62 per cent in 2018, down from 1.03 per cent in 2009, according to Morningstar. The squeeze has forced target-date providers to prioritise in-house funds over external managers to save money. “Ten years ago if you had a wellconstructed ‘best of breed’ multimanager fund, you had an advantage,” says Jim McCaughan, former chief executive of Principal Global Investors. “Now that’s less the case because of the intense focus on price.” The conflicts of interest inherent in this model are rising up the US Securities and Exchange Commission’s agenda. The agency’s com-

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pliance inspections and examinations unit this month issued a rare warning following a one-off review of target-date funds, criticising managers for failing to properly disclose conflicts resulting from the use of in-house funds. This issue has taken on particular urgency given the increasing proportion of US workers being channelled into target-date funds as default investment choices. Since the landmark Pension Protection Act was introduced in 2006, US employees are automatically enrolled in 401(k) plans if they are available. The rise of target-date funds was sparked by the change of legislation, as the products responded to a need for default investment options. “The stamp of approval that came with the Pension Protection Act really opened the floodgates for target-date funds,” says Jeff Holt, di@Businessdayng

rector of multi-asset and alternative strategies for Morningstar. Morningstar’s research shows that target-date funds have more than quintupled their assets under management over the past decade, during which they have regularly recorded double-digit annual growth. “The fact that so many retirement investors are relying on them is what has brought them to the SEC’s attention,” says Mr Holt . Investors’ hands-off approach to target-date funds — designed as simple, “set it and forget it” investments — gives specific impetus to investor protection concerns. “The assumption is that those investors don’t dig into portfolios or look at what they are invested in,” says Mr Holt. “Because of that it is much more important that investors aren’t misled as to what they’re getting.”

Monday 18 November 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

India’s third wave of tech development will produce a titan As trade wars mount amid fierce US-China hostility, the opportunity is stark Nandan Nilekani

ill India give the world a technology titan like America’s Google, Facebook and Amazon or China’s Baidu, Alibaba and Tencent? With all the smart, entrepreneurial talent available — very often the same talent the rest of the world relies on to imagine and nurture its own tech companies — it is reasonable to ask what is taking us so long. The first wave of technology development in India gained momentum in the 1990s, with companies such as the one I co-founded, Infosys, riding a tide of global outsourcing and consulting. India’s export revenues in information technology and IT-enabled services grew from less than half a billion to $40.4bn, between 1994 and 2008. A growing number of multinational enterprises were turning to technology to solve their toughest problems. High bandwidth fibreoptic connectivity, the momentum of globalisation, and the quality of talent in India, were making it easier for them to find the answers. From the mid 2000s, the second wave of tech companies began. The rise of mobile internet, the cloud, and the ubiquity of smartphones and big data were unstoppable. What differentiated these start-ups was their acute focus on addressing the aspirations of consumers in the domestic market. Along came Flipkart, a leader in ecommerce, subsequently acquired by Walmart; Ola, a worthy ride-hailing competitor to Uber; Paytm, which pioneered payments; Swiggy for food delivery; and Oyo, a new world hotel chain. Founded by young ambitious entrepreneurs and fuelled by the liquidity unleashed after the 2008 financial crisis, these upstarts were fired by seemingly unending optimism. Inspired by the belief in “winner-takes-all” markets, where speed to scale and dominance is of the essence, they were encouraged by funders to spend their way to growth, even if it meant huge cash burn and no profits for a long while. Having honed their busi-

ness models in India, several have ventured aboard. Ola launched ride-hailing services in Australia, New Zealand and the UK. Paytm is offering payments in Japan in collaboration with SoftBank and Yahoo. Oyo is scaling up its hotel business in China and the US. All this disruption has not been without its sobering moments. The implosion of WeWork and the hurdles faced by Uber and Lyft after their public listings tempered the view that growth, no matter what the cost, is the way to go. The good news for India is that the collective attention of both the entrepreneurs and their financial backers is now being brought back to the basics of building a sustainable business. Leaders from an earlier generation of tech companies have shown the merits of focusing on sound values, such as being well-managed, making profits, generating cash and remaining debt-free. In a world where American companies are shut out of China and Chinese companies are struggling to operate in the US, the contrast that India presents is stark. The presence of both American and Chinese digital giants in India along with dynamic entrepreneurship and access to large-scale capital, is a heady brew that has created some unicorns. India now has dozens such companies worth more than a $1bn. The country is also unique in that it has invested in populationscale digital infrastructure for identity, payments and data sharing. Google, WhatsApp, Paytm, PhonePe (a Flipkart-Walmart company) and Amazon Pay are now competing in India’s payments sector in partnership with domestic banks. If a truly global new Indian tech company is to emerge, it will require the coming together of the hunger and ambition of India’s young companies with the discipline of old-fashioned business building. Surely in the next decade, a couple of these promising companies will get that mix right, and achieve both global scale and profitability.

Christine Lagarde must resist pressure on the ECB’s inflation target The new president should ensure governments grasp the interaction of fiscal and monetary policy Wolfgang Münchau

nhappy colleagues know that the best chance they will ever have to influence the new boss is right at the start. I am not surprised, therefore, to read that national central bankers in the eurozone see a unique opportunity to influence Christine Lagarde. Her predecessor as president of the European Central Bank, Mario Draghi, resisted doing what she has promised to do: undertake a full review of the ECB’s monetary strategy. He had other priorities. There is, of course, a strong case for such a review. But beware of the traps. What speaks in favour is that the ECB persistently failed to meet its inflation target of close to, but below 2 per cent. The inherent asymmetry of the target is one of the reasons why the central bank prematurely raised interest rates in 2008 and 2011, decisions that contributed to the eurozone crisis later. The reason Mr Draghi avoided that review was in order not to have the discussion we are having now: whether the ECB should lower the target inflation rate to the actual rate, moving the goalposts to where the ball is.

The debate on inflation targets in the eurozone has a long history. Before the introduction of the euro, the governors of the ECB were divided between two different strategies, one focused mostly on monetary analysis and another based on model-based economic analysis. They agreed on a fudge: to have two pillars, a monetary and an economic one, and an inflation target that meant different things to different people. Mr Draghi interpreted it as a symmetrical target — where deviation on the downside and the upside are equally undesirable. German central bankers never really accepted that inflation could ever be too low as long as it is firmly positive. But they reluctantly supported this compromise, not expecting that we would ever reach the point where the agreed fudge would become a problem. A near-decade of financial and economic crises has thrown the eurozone economy so far off course that the relationship between output, interest rates and prices has broken down. We do not know whether this is permanent or temporary. The very concept of inflation targeting depends on a stable relationship between those variables. Before the 1990s direct inflation targeting was unknown. Central

banks used different targets in those days — fixed exchange rates, monetary targets or even pure discretion. The global adoption of inflation targeting was the result of a shift in economic thinking in the 1980s that produced the current economic framework. If that framework is broken, so is the notion of an inflation target. So instead of meddling with the numbers, the ECB should reflect upon whether it has a deep understanding of the inflation process. The current discussion is not driven by any such considerations, but by vested interests. The business model of German and French savings banks and insurance companies makes them critically dependent on positive nominal interest rates. The fight about inflation targets is in part about the future of national financial systems. Ms Lagarde should resist this pressure and focus her strategic review on the shifting underlying dynamics. The ECB has been too optimistic in its forecasts for inflation and growth. There is a case for a rethink, but not for a return to the 1990s. And certainly not a return to discretionary policies or, worse, a situation where central bankers act as lobbyists for their domestic banking and insurance companies.

material for nuclear bombs. Britain also provided for this obligation in the most expensive manner possible. Rather than create a sinking fund to pay for the clean-up, it left the tab for future taxpayers to meet. Future decommissioning will be done more rationally. The switch from idiosyncratic early reactor designs to widely used ones makes the facilities more dismantlable. The UK’s next planned reactors — at Hinkley Point in Somerset — will have a sinking fund from day one to provide for the clean-up — a job its owner, French state-backed energy utility EDF, estimates can be done for about 3 per cent of revenues (£2 to £3 per MWh) over their 60-year life.

Sceptics may quibble that we can’t know that this can actually be done. But a glance at the US (where 14 plants have now been decommissioned) suggests it is not unreasonable. Despite collecting between just $1 to $2 per MWh — less than the Hinkley number — utilities have assembled two-thirds of the sum needed to decommission the entire US fleet over the next two to three decades. An industry has sprung up competing to pull down old reactors. In a recent deal, a decommissioning company, Holtec, took over a plant at Oyster Creek, New Jersey, lock stock and barrel, on the basis that the accumulated fund would pay for the job.

Nuclear liabilities need to be put in clearer perspective Clean-up and waste storage are not the barriers they sometimes seem Jonathan Ford

“

veryone knows that midday desert sun can be harmful if you live in it without protection,” wrote David MacKay, the late scientific adviser to the UK energy department, “And everyone knows that moonlight is essentially harmless.” Yet moonlight and sunshine are made up of the same photons. The former is simply harmless because it is 400,000 times less bright than sunshine. “Nuclear radiation can be like sunlight, and it can be like moonlight,” Prof MacKay noted. “There are levels of radiation that are lethal, and levels of radiation that are essentially harm-

less.” The key lies in discerning which is which. This may seem uncontroversial; a mere recital of well-worn scientific fact. But you won’t find much trace of it in the public debate about nuclear power. Here, radiation is always “harmful” or “toxic”, and the risks and liabilities associated with handling such material seen as prone to balloon without control. Hence the gnawing worries about the back-end costs of dismantling old facilities and the risks associated with storing spent fuel for substantial periods. These threaten to stifle future investment in nuclear technology. But how realistic are these fears? Let’s start with the costs of cleaning www.businessday.ng

up old facilities. Admittedly, Britain’s record in this area is poor. The estimated cost of decommissioning the first generation of facilities — a task far from complete — stands at about £120bn. That is a pretty vast bill when you think the Magnox stations only generated about a tenth of the UK’s electricity in those early years. But it is worth also looking at where this number comes from. About three-quarters relates to the experimental and military facilities constructed at Sellafield in Cumbria in the 1940s and 1950s. These used processes that left big nuclear messes and were built without much thought to how they would ever be dismantled. The priority was manufacturing fissile

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Monday 18 November 2019

BUSINESS DAY

news FG protectionist policies leave investors... Continued from page 1

in the economy, with investors unsure of Nigeria’s economic direction and government’s next policy pronouncement. Protectionism refers to policies that restrict or restrain international trade for the benefit of a single domestic economy, according to Investopedia.

The Central Bank of Nigeria in September stopped providing foreign exchange for the importation of cassava, starch, ethanol and other derivatives into Nigeria. The bank took this decision despite the local production capacity for ethanol products being lower than demand. For the records, annual local production of ethanol, which serves as raw material for several industries from pharmaceuticals to breweries, is less than 30 million litres while national demand is over 400 million, leaving local production at just 7 percent, according to data from the Federal Ministry of Industry, Trade and Investment. In Nigeria, the biggest producers of a special type of ethanol called food-grade ethanol are Lagos-based Nosak Distilleries and Unikem Industries Limited. These firms, like sugar manufacturers, import raw ethanol and process it into super fine ethanol for use by other manufacturers. When BusinessDay contacted Osaro Omogiade, managing director, Nosak Distilleries, he said there is a huge gap, acknowledging that local production is just 7 to 10 percent. “I hope people won’t try to smuggle it due to the FX restriction,” Omogiade said. “For us, there is a plan. We are setting up a backward integration project in Benin. We are working with some technical experts from the United States.” BusinessDay gathered that the industry is in chaos now as ethanol processors and end users are playing a wait-andsee game. “Does this government know that it takes over N10 billion to set up an ethanol processing plant of 100,000 litres alone? If the government is aware, it would, perhaps, like they did for the cement industry, give a timeline. They are just disrupting the economy,” a senior manager of a company in the ethanol value chain told BusinessDay. Ethanol is not the only victim of government’s protectionist policies. Forty-three items are already ineligible for FX ranging from palm oil to roofing sheets. Annealed cold-rolled steel, a raw material used by wheelbarrow and aluminium drum makers, is on CBN’s list of items not eligible for foreign exchange despite the fact that no firm currently produces it. Due to banks’ reluctance to provide Form M for willing importers of annealed cold-rolled steel, many manufacturers of wheelbarrows have exited the

market. Grif, Federated Steel and Universal Steel – all wheelbarrow and aluminium drum manufacturers – have suspended production. Wahum Industries told BusinessDay that it is struggling and may exit the market soon. The bug of protectionism seems to have caught Olamilekan Adegbite, minister for mines and steel, who recently said, during official visit to Kamwire Industry Limited in Ilorin, Kwara State, that the government would consider total ban on steel importation to encourage local steel manufacturers. He, however, hedged his bets by adding that before the government does that, it will ensure local manufacturers are able to satisfy local consumption and export. However, facts on ground show that the minister should have no business at the moment talking about a steel ban. Eighteen of the 30 functional steel firms in Nigeria produce about 2.2 million tonnes a year with scraps and billets imported mainly from China. Total demand is above 7 million. Nigeria spends $3 billion on import of steel, according to data from Adegbite’s ministry. Oluyinka Kufile, chairman of Qualitek Industries, a roofing sheet maker, told BusinessDay that most manufacturers of steel barely exist today owing to a cacophony of wrong policies. Milk is also restricted from accessing FX. According to the Lagos Chamber of Commerce and Industry, research shows Nigeria does not have many dairy cows like India, Botswana, and the US. Findings show that the dominant milk producing system in Nigeria is the Fulani nomadic system whose cows have a milk yield of a litre per day. But the average milk yield per day from exotic/crossbred cows in India, United States, the Netherlands, Turkey, China and India is between 30 litres and 90 litres per cow per day, statistics show. Nigeria produces 700,000 metric tons (MT) of dairy products annually but demand stands at 1.3 million MT, according to the Federal Ministry of Agriculture and Rural Development. This means there is a shortfall of 600,000 MT. “It is just about protectionism,” Ike Ibeabuchi, managing director of MD Services Limited, said. “It is not helping investors to plan. Who knows the next item they will ban?” The Federal Government has shut borders to halt smuggling of rice and petrol. But price of rice has risen astronomically to N25,000. Buhari’s policies since 2015 have not led to high growth rates as Nigeria became the world poverty capital under his watch, according to the World Poverty Clock. The country slipped into recession in 2016, the first in 25 years. Inflation is at 11.02 percent, while unemployment is at 23.1 percent. www.businessday.ng

L-R: Mirian Kachikwu, general counsel, Seplat Petroleum Development Company plc; Austin Avuru, CEO, Seplat Petroleum; Babatunde Irukera, director-general, Federal Competition and Consumer Protection Commission (FCCPC), and Audrey JoeEzigbo, president, Nigerian Gas Association/co-founder of Falcon Corporation Limited, at a stakeholder engagement forum on the impact of the FCCP Act organised by Seplat, Olaniwun Ajayi LP and White & Case LLP, in Lagos.

Emefiele buys time for Buhari as OMO policy stimulates... Continued from page 1

ing high-yielding central bank bonds has sent treasury yields tumbling while breathing new life into one of the world’s worst-performing stock markets.

The stop rate on Treasurybills at a primary auction last week fell to a three-year low of 10 percent for the one-year bill while stocks closed 0.03 percent higher at the end of trading on Friday. Lower treasury yields and an improving stock market do three favours for President Buhari, who is currently on a private visit to the UK. First, the stock market could be set for a rally that turns the fortunes of listed companies around and positively impacts the economy. Second is that lower treasury yields would help reduce the Federal Government’s high debt service cost, which has eaten into revenues and hindered capital spending. Third is that a lower yield environment means companies are no longer excessively crowded out by the government and can now borrow at cheaper rates. All three outcomes that should have been achieved by fiscal reforms are now being enforced through unorthodox monetary policies. Fiscal reforms from deregulating the downstream petroleum sector to adopting a market-reflective electricity tariff would have been enough to turn around the negative investor sentiments that punished stocks, analysts say. To achieve lower borrowing costs for government and corporates, prioritising equity over debt would have sufficed as it helps the government cut borrowing and dodge expensive interest payments to creditors. Equity can be raised through the privatisation of redundant government assets and opening up of new sectors for private sector participation would have reduced government borrowing, thereby cutting down debt service costs. Since his re-election, President Buhari has somehow managed to trudge along without any real impetus to imple-

ment tough reforms in his second term, critics say. That has left the economy, which continues to expand below population growth, exposed with the CBN now trying to fill a gaping void created by the absence of fiscal reforms. A senior banking source who spoke to BusinessDay fears something could go terribly wrong if monetary policy is relied on for longer to fix the economy. “If oil prices tumble, Emefiele will be constrained and whatever gains his unorthodox policies have delivered will be tested,” the source, who did not want to be quoted so as to speak freely, said. For Nigeria, the problem with using monetary policies to fix fiscal challenges is that it often backfires, as Emefiele found in 2016 when the CBN held on to a currency peg. Emefiele tried to defend the currency by burning through the CBN’s external reserves. His efforts were, however, futile as it became clear that Nigeria’s dependence on crude oil exports as the sole foreign exchange earner for the government was always going to make aspirations for a stronger naira impossible. He soon retraced his steps and unveiled a market-driven window to meet the dollar needs of investors and exporters. It worked. The naira stabilised and has been rock solid for two years now. “Emefiele is always keen to play the role of saviour of last resort for the government,” a former deputy governor of the CBN told BusinessDay. “His latest move to restrict purchasing of OMO bills does have some gains but it is artificial; the outcomes become natural when no one is forcing the banks to lend and the CBN doesn’t have to play the role of market maker in the fixed income market,” the former deputy governor said. According to him, the CBN has destroyed the OMO market byofferingitselfasamarketmaker. “Investors are not likely to gain any confidence from that,” he said. Emefiele had asked commercial banks in July to boost

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lending or face stiff penalties. The target was first for banks to lend at least 60 percent of deposits to small businesses before the bar was raised higher to 65 percent. The driving force behind the order was to discourage banks piling cash into highyielding government securities. The order pushed banks to start lending more, with retail customers the biggest beneficiaries. The big banks from Guaranty Trust to Zenith have all gone after retail wallets to grow their loan books. Perhaps, the relative success attained by the policy gave the CBN extra motivation to bring forth another gambit by restricting the purchase of OMOs to banks and foreign investors. With OMO out of the picture and treasury bills offering yields lower than inflation, pension funds and other large institutional investors unable to purchase OMO bills have headed to the stock market to take advantage of a big dividend play. The dividend yields of a number of big banks have crossed the return on one year T-bills, spurring a bank rally along the way. Zenith Bank boasts the highest dividend yield among big banks at around 14.8 percent, some 700 basis points above the 10 percent stop rate for one-year treasury bills at last Wednesday’s primary auction. Zenith’s superior returns have certainly caught the eye of investors who bought a record N5.9 billion worth of the tier-one lender’s shares last Wednesday alone, the most in the last seven trading days at least. Between Tuesday and Thursday, a total of 591 million Zenith Bank shares valued at N10.6 billion were traded. The lender’s share price gained 8 percent in that period closing at N19.15 on Thursday, according to NSE (Nigerian Stock Exchange) data. That’s the highest price it has traded at since July 2019. There would be more to come in terms of demand for Zenith Bank as local non-bank institutional investors now banned from purchasing highyielding CBN securities, otherwise known as Open Market @Businessdayng

Operations (OMO), pile into the bank’s stocks. “Zenith has been on a tear since yields on treasury bills started collapsing and is showing no signs of slowing,” one trader told BusinessDay. “It presents a compelling case for dividend yield play at a time when yields in the fixed income market are fast falling below inflation rate,” the trader said. The yields on one year TBills offer investors a negative return of 1 percent, considering that inflation printed 11.23 percent at the last check in September. Expectations that yields in the fixed income market are heading to single-digits and with inflation tipped to rise in the coming months means stocks with double-digit dividend yields are likely to see increased demand. Zenith is not the only big bank with dividend yields above the one-year government debt. United Bank for Africa has a dividend yield of 10.9 percent. Again, investors are noticing. A record 67 million shares worth N501 million were traded Thursday alone, the most in the last seven trading days at least. UBA’s share price has jumped to N7.40, the highest since April 2019. Guaranty Trust Bank also comes slightly under one-year treasury bills with a dividend yield of 9.39 percent. Investors traded a record 37 million units of GTB stocks worth N1.1 billion on Wednesday alone. The increased demand has pushed the lender’s share price to N29, the highest since September. “It’s good that the CBN’s policy is rubbing off well on the stock market but as an economist I am worried that the problems Nigeria faces as an economy largely remain,” a chief economist at a global consulting firm told BusinessDay on condition of anonymity as he wasn’t authorised to speak publicly on monetary policy. Third-quarter GDP numbers are due for release by the National Bureau of Statistics this month, with analysts predicting that the country’s August 21 land border closure may have taken a toll on trade which contributes some 17 percent to GDP, and by extension the economy.

Monday 18 November 2019

BUSINESS DAY

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Reps passes bill to establish FCT Primary Health Insurance Scheme James Kwen, Abuja

Romeo Ode, African representative of Norland Industrial Groups (second left) during the presentation of vehicles to the distributors of Norland Industrial Groups Products in Abuja.

Traffic Management: Road Safety releases 20 patrol vehicles, heavy duty, others in FCT James Kwen, Abuja

s part of efforts to ensure effective traffic management and avoid incessant road crashes, the Federal Road Safety Corps has released 20 patrol vehicles, 13 motorbikes, three ambulances, and a heavy duty truck in the Federal Capital Territory (FCT). Boboye Oyeyemi, Corps Marshall of the Federal Road Safety Corps who announced this during the launching of the Vehicles in Abuja said the vehicles are different from those to be used for patrol by FCT Command of the Corps. He noted that there was

high increase of vehicles in the nation’s capital and the Corps was collaborating with relevant stakeholders to ensure effective traffic management and to enforce traffic laws to reduce the number of avoidable deaths via road crashes. “We have the competence, we have the courage to make Abuja a city to be respected and for the people to be endeared to. Every month from the Directorate of transportation we have average of 25, 000 and 30,00 applications for number plates. It shows the number of vehicles coming in Abuja”, stated. In his remarks, FCT M i n i s t e r, Mu h a m m a d

FG to issue executive order on open defecation Cynthia Egboboh, Abuja

he Federal government has announced its plans to issue an executive order to deepen effort towards ensuring total eradication of open defecation as it target open defecation free society by 2025. Suleiman Adamu, Minister of Water who disclosed this on at a press briefing in Abuja stated that addressing the issues of open defecation should be a concern for everyone as it affects the health of individuals. “Eradicating open defecation has remained an issue for us and we must tackle it. In the WASH action plan we launched there is provision for legislative actions and also there will be an executive order to

compel people to carry out hygiene practices”. The Minister said that Nigeria has adopted the the Chinese sanitation model which brought them out from being the highest among countries that practices open defecation, adding that it is welcoming to know that most states have adopted the WASH action plan to promote sanitation at the state level. Adamu further stressed on the need for behavioral change among Nigerians as it the first step in ensuring an open defecation free society. “We want individual to have behavioral change towards sanitation matters, lets everyone build and use toilets in their homes while the government build toilets in public place. www.businessday.ng

Bello said the FCT Administration is doing its very best to provide additional high capacity buses and is also making much easier the process of registration of companies or persons that want to provide taxi services, as long as the vehicle meets the minimum standard that is required by law. Bello stated that FCTA is working very closely with the Federal Road Safety Corps and all relevant gagencies to produce and implement an efficient traffic management system for the city and the surrounding satellite towns with the objective to save lives. “And how can we do

that? We have to make sure that all traffic regulations are adhered to and the advantage we have is that all these is covered by law and we are going to use the provisions of the Nigerian constitution, the laws of the highway code, the FCT Transport Regulations, the National Road Traffic Regulations and other traffic laws and regulations and we are going to back that with a robust support from the judiciary so that all those that violate traffic regulations and protocols are made to pay for it because that is the only way we can guarantee the safety of lives of our people”, he added.

Experts advocate increased STEM programmes in schools Cynthia Egboboh, Abuja

ducation experts have advocated the need for an increased Science, Technology, Engineering and Mathematics (STEM) programmes in schools across Nigeria. Sowete Margeret, Deputy Director, Secondary school board, Ministry of Education speaking at Vision 2020 Youth empowerment and restoration initiative workshop in Abuja said the importance of promoting Science, technology, engineering and mathematics programs in schools cannot be overemphasized as it produces the required skill critical to promote productivity in all sector. She said that the best way to prepare for the desired productivity in work places is to promote training programs

that would boost the creative skills of the Nigeria students. “Over the years STEM has improved in schools nd this is the right way to go as the knowledge derived from the STEM programs are required to ensure productivity in every sector today. STEM learning promotes careers, empowers students to solve problems and prepares them to compete globally”, she said. Ibilola Amao, Principal consultant, LONADEK Inc, in her remark said that the Vision 2020 youth empowerment and restoration initiative (YERI) is aimed at promoting positive transformation through identifying, developing and engaging STEM talent in the various sectors which include energy, power, infrastructure , manufacturing, mining, ICT , oil and gas as well as agroallied industries.

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he House of Representatives has passed the bill to establish Federal Capital Territor y (FCT) Health Insurance Scheme to provide comprehensive, quality and affordable health care services for all residents in the Territory. The three components of the scheme as stipulated in Part IV Section 14 of the bill, are: FCT Equity Health Plan (EHS) for the vulnerable groups; Informal Health Plan (IHP) for all FCT residents employed or engaged in the informal sector and Formal Health Plan (FHP) for all public and organised private formal sector employees wherein the employer and employees shall make contributions as determined by the Board. Section 7 (c – e) also empowers the Agency to ensure compulsory payment of contributions by employers and employees, determine the number of contributions to be paid by each employee; compulsory payment of contributions by self-employed persons and other persons and rates of such contributions. The bill also provides for health coverage for the

vulnerable group including pregnant women, children under age 5, the disabled, poor and others in need of special care, support or protection because of health status, age, disability, socioeconomic status or risk of abuse or neglect. Part II (5 b – g) of the bill empowers the Agency to ensure that residents of the FCT have financial protection, physical access to quality and affordable health care services; regulate the cost of health care services provided under the scheme; ensure equitable distribution of health care costs across all residents of FCT; maintain high standard of healthcare delivery services within the scheme and ensure efficiency in healthcare service delivery as well as improve and harness private sector participation in the provision of healthcare services.” To ensure effective access to healthcare services, section 29 of the bill provides that: “Any person who is proven to be indigent in the FCT and is not insured with the Agency, but has a pre-existing critical medical condition which he cannot pay for, shall have access to the Fund of the Agency.”

Jukun crisis: Students sue for peace among parents Nathaniel Gbaoron, Jalingo

h e p re s i d e nt o f Community of Tiv students (CTS), Modibo Adama University of Technology (MAUTECH), Yola chapter, Theophilus Kondom and the President Community of Jukun students (CJS) Maximilian Nobinu have appealed to their parents to find lasting solution to the crisis between the Tivs and Jukuns of Taraba state that has lingered for over six months. The students associations stated this in Yola on the occasion of 2019 Tiv Day celebration organised by the CTS MAUTECH chapter, during which two Tiv sons; Isaac Anyiin and Terngu Atindiga were also given awards at the occasion in recognition of their valuable service and commitment to the CTS. The students leaders said it is only peace that can bring dialogue which will in turn highten development in the community and urged the two tribes to lay down their arms. While presenting the award to Anyiin and Atindiga which is geared towards rec@Businessdayng

ognizing excellent individuals and organisations that have distinguished themselves in their contribution to the growth and development of Tiv students The Chapter President Kodum described both recipients as ‘dynamic Tiv sons whose exposure and experience have brought a new lease of life to the CTS in MAUTECH while Anyiin described the honour ‘as humbling experience’ which will spour him to do more for the Tiv students. He commended the organizers of the event for finding him worthy of recognition, he said, ‘I am dedicating this award to the Worthy young men world wide( Igum Ishagba Sha Tar cii) and my boss governor Darius Ishaku. Terngu Atindiga while appreciating CTS for the honour done him and pledged to always answer their call, said “I urge all Tiv sons and daughters to rise up and get their job done so that the community can have stronger furture leaders. Therefore it behoves on us to continue to contribute very positively to the business of CTS”.

Monday 18 November 2019

BUSINESS DAY

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BUSINESS DAY

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ADB Group becomes shareholder in Africa Finance Corporation ENDURANCE OKAFOR

frica Finance Corporation (AFC), a leading infrastructure solutions provider in Africa, has announced that the African Development Bank Group (AfDB), Africa’s highest investment-grade rated (AAA) supranational finance institution, has invested $50 million in the equity of AFC. AfDB’s investment in AFC will enable both institutions accelerate infrastructure development and delivery on the continent by deepening cofinancing opportunities, joint implementation, knowledge transfer and capacity development for the benefit of Africa. The addition of AfDB as a shareholder and DFI member of AFC complements AFC’s strategy of addressing Africa’s infrastructure deficit with AfDB’s stated mission to help reduce poverty, improve living conditions for Africans and mobilise resources for the continent’s economic and social development. The equity investment in AFC further broadens AFC’s shareholder base, and follows recent equity investments in AFC from African Re-Insurance Corporation and the Republic of Ghana. As part of the equity investment, AfDB

will have representation on the AFC Board of Directors. Samaila Zubairu, president/CEO of AFC, commented on the completion of the equity investment by AfDB: “AFC welcomes AfDB as a shareholder and strategic partner, with whom we would continue our collaboration journey to address Africa’s infrastructure deficit and challenging business environment. AFC’s mandate is a strategic fit for AfDB’s objective to integrate, energize and industrialise Africa.” Akinwumi Adesina, president of AfDB, also commented on the announcement: “AfDB shares AFC’s vision of developing Africa-led responses to the Continent’s socio-economic development. To date, we have already worked jointly to deliver transformational projects with tangible impact over the years. “In becoming a shareholder, this development is therefore a natural evolution in our partnership, which in turn will result in delivering solutions to Africa’s infrastructure challenges at a faster pace. These solutions will adopt the highest standards, generate value to stakeholders, and foster sustainable development and economic growth across the African continent.”

NBCC inaugurates Falowo as 16th president

…pledges to revive Nigeria-UK trade BUNMI BAILEY

he Nigerian-British Chamber of Commerce (NBCC), the foremost bilateral Chamber in Nigeria, in Lagos on Friday inaugurated Kayode Falowo as its 16th president. Falowo, who is also the CEO of Greenwish Trust Limited, a foremost investment banking firm in Nigeria, said the chamber intends to revive the British business to Nigeria. The annual presidential dinner is the premier event of the NBCC which is held to celebrate excellence in the Nigerian business sector and to promote Anglo-Nigerian business relationships. Amongst the distinguished and notable personalities at the event were Otunba Adebayo, minister of industry, trade and investment, Martin Sorrell, chairman, S4 Capital, Oba Adeyeye Enitan Ogunwusi, the Ooni of Ile-Ife, Aliko Dangote, president, Dangote Group, among others. “I am quite pleased to inform you of my acceptance of the mandate to serve as the 16th president of the NBCC. One of our intentions is to attract new British businesses into the Nigerian economy. And on the social front, we also want to revive the British business to Nigeria,” Falowo said. Africa represents 2 percent of British trade activity, with Nigeria accounting for a tenth of that, according to the trade

ministry. Adebayo said the Ministry of Industry, Trade and Investment has commeced discussions on partnering with the NBCC and its members to create a platform that will help revive trade between Nigeria and the UK. “As a ministry, we are available to work with the chamber to improve the level of trade between Africa and Britain. Ladies and gentlemen, Nigeria is open for business with Britain,” Adebayo said. Speaking on Falowo’s appointment, Oba Ogunwusi described him as a man who is very intelligent, articulate and focus-driven.

DLM Advisory Partners lists N16.5bn BRT tickets receivables securitisation for Primero Transport SEGUN ADAMS

LM Advisory Partners, a subsidiary of the DLM Capital Group and the leader in the provision of securitisation financing solutions in the Nigerian Capital Market, successfully executed its second future flow securitisation transaction, on behalf of its client, Primero Transport Services Limited. To commemorate this milestone, a listing ceremony of N16.5 billion Series 1 7-year fixed 17% rate bonds, under the N100 billion Medium Term Note Programme sponsored by Primero TSL was held at FMDQ Security Exchange plc office in Lagos State, last week. The ceremony had in attendance top executives of Primero TSL, DLM Capital Group and FMDQ OTC Exchange. The Series 1 Bond was issued by Primero BRT securitisation SPV plc (PBSP), a special purpose company set up as a separate and

distinct entity from the Sponsor to purchase the Bus Rapid Transit System ticket receivables generated under the BRT scheme of the sponsor. Primero TSL plays the role of servicer under this transaction and has a goal to become a major player in Lagos State’s transportation sector, with a view to continuously increase its number of buses to meet the teeming population of Nigeria’s commercial city. Speaking at the bond listing ceremony, Fola Tinubu, managing director, Primero Transport Services Limited, explained, “Primero was stuck in a quagmire of short-term financing and high-interest rates. Luckily for us, we came across DLM who were able to solve the issue by taking us into the bond market to raise N16.5bn by securitising our ticket receivables. The bond market community has really made a dramatic difference in the lives of Lagosians through the provision of the buses and we want to thank them.

“For the first time in our operating history, we have been able to put 300 buses on the road and this will continue to increase. Primero will not relent in its efforts. We will ensure that we provide world-class bus service for Lagosians and once the bond market community sees the outcome, they will be happy that their money has been used judiciously.” Also commenting on this development, Sonnie Ayere, CEO, DLM Capital Group, stated, “With the listing of N16.5Billion of the Series 1 Bonds under the N100 billion Medium Term Note Programme, Primero Transport Services Limited and DLM Capital Group are working to bridge the transportation infrastructure gap in Africa’s busiest city”. He further explained, “With the current value of future flow securitised transactions in the Nigerian debt capital markets at N33.06 billion, the appetite for structured debt instruments

appear to be on the rise with more professional institutional investors looking to participate in new offers. Going forward, market expansion will be on the rise as companies will search for more economically viable funding options for capital expansion and other business development objectives.” Securitisation is a new financing technique in the Nigerian market, and can only be executed by specialised financial institutions with the in-depth expertise. DLM Capital Group, the parent company of DLM Advisory Partners, is a developmental investment bank that supports economic and social development, with the aim of driving GDP growth and impacting everyday lives. The Group has committed to continue concentrating on creating markets, products and long-term financing solutions to key sectors of the Nigerian economy, thereby improving everyday lives.

Bayelsa, Kogi Election Results: APC urges Members to remain calm, peaceful James Kwen, Abuja

he All Progressives Congress (APC) has called on its supporters to remain calm and peaceful as the collation of results continues for the Bayelsa and Kogi governorship elections, Kogi West Senatorial rerun and Brass 1 supplementary elections. Lanre Issa- Onilu, APC National Publicity Secretary, who made this call in a statement Sunday night, hailed security agencies for the security arrangements put in place for Saturday polls in both States. Issa- Onilu said APC was aware of several hoodlums brought into Kogi State from Osun and Oyo States a few days before the elections, just as it monitored the grand preparation to unleash violence in Bayelsa State. According to him, the party was delighted that the forces of darkness had failed as the subterfuge deployed by the People’s Democratic Party (PDP) to rig the election in both states, including the Kogi West senatorial rerun election, was thwarted. He declared that in Kogi and Bayelsa states, APC was certain

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...Hails security Agencies on election security of securing the majority votes for the two governorship seats and the Kogi West senatorial seat, the reason it ensured a peaceful atmosphere for voters to

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freely turn out and exercise their franchise. “As expected, not being in the tradition of PDP to thrive under orderly and credible electoral

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process, they did their best to discredit the process. We are glad that the voting processes came to a successful end in Kogi and Bayelsa states.

Monday 18 November 2019

BUSINESS DAY

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BUSINESS DAY

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Commercial real estate market going green, transparent amid weak demand CHUKA UROKO

s the Nigerian economy continues to struggle, demand for prime office space has also continued to weaken, leading to landlords’ flexibility and differentiation of products on offer. Despite the weak demand, commercial real estate generally is going green and becoming transparent in terms of transaction. It is such that developers, investors and professionals are now willing, more than ever before, to share transaction details and to operate more transparently. Most prime office developments that have been delivered in recent years or expected to come on stream are going green. Northcourt Real Estate’s recent market report lists some of the developments in Nigeria that have green features. These projects which have attained energy efficiency certifications, according to the report, include Heritage Place, which obtained the LEED Silver certification, and Cornerstone Tower, which is EDGE-certified. Nestoil Tower and The Wings Towers are other instances of energy-efficient buildings. For its economy and

sustainability coupled with growing population and fastpaced urbanisation, experts have identified green buildings as the future of modern housing. Green buildings, residential or commercial, are those buildings that incorporate design techniques, technologies, and materials that reduce dependence on fossil fuels and negative environmental impact. Such buildings have become important because they reduce costs of energy, water and materials by as much as 20 percent and design considerations now go beyond space comfort and convenience alone. “Buildings account for about 40 percent of energy use globally and 19 percent of greenhouse gas emissions. By 2050, the built environment is expected to double due to high population growth and urbanisation trends,” said Shaninomi Eribo, Edge expert and founder/ CEO, GreenSquareMetre. Population growth and urbanisation trends are expected to occur most in emerging markets, particularly in middle and low income countries as could be found in the sub-Saharan African region of which Nigeria is part.

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Imminent shutdown of power looms as All On, Nextier bring funding windows, GENCOS decry N1trn debt by Bulk trader off-grid opportunities to Niger Delta HARRISON EDEH, Abuja eneration companies of Nigeria (GENCOS) have raised an alarm over an imminent shutdown of power generation across the country, following the indebtedness the Nigeria Bulk Electricity Trader (NBET). Joy Ogaji, Executive Secretary of the Association of Gas Generation Companies of Nigeria put the debt at over a trillion naira. Ogaji, while addressing a press conference on Sunday in Abuja informed newsmen that apart from the rising debts which have forced about three gas generating companies to shut down, gas supply to power turbines across the country, the harsh economic environment in the country was also compounding the generation companies’ woes. According to the Executive Secretary, “Some of the Gas Suppliers are no more supplying gas. Some of you have noticed the epileptic power supply in recent times. If you check the market invoice of the Discos, July was about 15 percent. From that 15 percent we pay gas suppliers so what is left? A typical gas-generating company needs up to 30% of payment to enable its operation.” “So when you are given 15% instead of 30%, and you have to pay gas suppliers, then tell me what is left.”

She noted further that, “As you have seen we heard the news that the federal government is working on releasing the N600bn power sector intervention fund. From that time, it is still news. If NBET’s excesses are not checked and this N600bn not released in time, whether we deliberately shut down or not, the machine will definitely shut down by itself.” She pointed out further that the organisation had not got any response from the regulator, the Nigerian Electricity Regulatory Commission on the 0.75 charge which the NBET demanded from the GENCOS as administrative charge for the payment of gas invoice on their behalf, six weeks after sending a letter to that effect. Ogaji expressed worry that the power sector was still suckling post-privatisation, arguing that the market could move forward with his development which has not seen the sector independently operate without all manner of interventions. She described these interventions as a knee jerk approach to the development of the sector. “From the first of February 2015 that NBET took over the bulk trader role till date, no GENCO has received 100 percent of the payment. So the question is: why are we still with NBET? This marriage has to be dissolved,” she further stated.

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Ignatius Chukwu, Port Harcourt

alks have opened in the Niger Delta about the abundant funding windows and opportunities to the oil region. This is part of policy strategies and talks already going in some other parts of the country but which All On, a firm in off-grid investments, said had been lacking in the Niger Delta. All On’s Policy & Partnership Associate, Jadesola Rawa, told BusinessDay at the Nextier Power Roundtable in Port Harcourt last Friday, November 14, 2019, that the firm noticed that policy conversations were going on mostly in Abuja and other parts of the country. She said the focus of All On and that of Nextier seemed to coincide, hence the decision to partner and bring conversations to the Niger Delta. Rawa however made it clear that the Port Harcourt Roundatble was not only to create awareness but to open the eyes of the youths of the region to abundant opportunities opening up in the power sector. She said: “We try to create an enabling environment for businesses in the off-grid sector so they can thrive pretty much. We decided to help Nextier Power because they hold conversions on power sector. This has been going on in Abuja since 2017 and we

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decided to partner with them to hold the conversations in the Niger Delta and raise awareness on what the prospects are in the off-grid. This is to show there is an alternative in the off-grid sector. “We give support to make sure the sector thrives an survives. There are interests in funds within the off-grid sector. We do impact investments. “Financing is a huge thing in Nigeria for any sector. What we doistrytolookatthestart-upsand see how we can give them initial grants to grow and be viable.” The CEO of Nextier, Patrick Okigbo, son of the great poet, said the event in Port Harcourt was to look at mini-grids and solar home systems and see how they would help Nigeria especially the Niger Delta. “The conversation centred on whether technically, these systems are viable, whether they can work as well as the financial possibilities. Can it be the answer to the power challenge we have in Nigeria. “We had a rich panel of people who have done a huge work in the off-grid systems. The young man from Green Village Electricity (GVE) was strong. GVE has done a lot of work in rural communities where they have used this system and have had uninterrupted power system for years.

Monday 18 November 2019

BUSINESS DAY

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Monday 18 November 2019

BUSINESS DAY

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Commercial real estate market going green, transparent amid weak demand CHUKA UROKO

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Ignatius Chukwu, Port Harcourt

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Monday 18 November 2019

BUSINESS DAY

news

Air Peace signs firm order for three additional Embraer jets IFEOMA OKEKE

igeria and West Africa’s largest airline, Air Peace, on Sunday signed a contract for three additional E195-E2s, confirming purchase rights from the original contract, signed in April this year. With the new signing at the Dubai Airshow, Air Peace has made total firm order of 13 E195-E2s with 17 purchase rights for the same model, which delivery will begin in May next year. These new E195-E2s will be included in Embraer’s 2019 fourth-quarter backlog and have a value of $212.6 million, based on Embraer’s current list prices. The April signing made Air Peace the first launch customer of the new brand of E-jets in Africa and launch customer of the brand of business class configuration for its ordered airplanes worldwide. The e195-E2s ordered by Air

Peace will have dual configurations with 12-seater business class and 102-seater in the economy class. The aircraft also comes in single configuration of all-economy class of 144 seats. Ejiroghene Eghagha, Air Peace Chief of Finance and Administration, who signed the new deal on behalf of the airline said, “The E195-E2 is the perfect aircraft to expand our domestic and regional operations and the new deliveries will ease our subsidiary fleet in the Air Peace Hopper to actualise our ‘nocity-left-behind initiative which we shall continue to execute. “We are receiving impressive data about the aircraft’s economics when in revenue service, and this was a driver to place this new firm order with Embraer. We look forward to receiving our first aircraft, which will enhance connectivity in Nigeria and the African region. The new order will gradually replace our existing fleet, which will make us the airline with the

youngest fleet in the world. “It is our plan to connect the whole Nigerian cities that have airports and burst the triangular routs by connecting flights to direct destinations. Air Peace is looking forward to serving Nigerians with these brand new airplanes and adding more routes to the existing ones for the overall development of our country,” Eghagha said. Air Peace also disclosed that with the delivery of the new jets, it would connect more cities in its domestic operations by developing new routes and connecting people to business hubs at different parts of the country. “We will like to develop new routes to enhance the nation’s economy. We will like to connect Owerri to Kano, Benin to Port Harcourt, Ibadan to some destinations in the northern part of the country. We will also like to connect Sokoto to Maiduguri, Lagos to Gombe. We would connect these cities without stops in Lagos or Abuja.

Business leaders call for collaboration to expand trade and investment within African nations Jumoke Akiyode-Lawanson, Accra

usiness leaders from various sectors across Africa have urged their counterparts to embrace business collaboration in order to boost multilateral trade and investment in African countries. Experts who spoke at the Africa Netpreneur conference organised by the Alibaba Foundation and Jack Ma Foundation, held in Accra, Ghana at the weekend, said that determination to foster multilateral trade between countries in the continent and globally would help grow small businesses and greatly improve Africa’s economy. Ban Ki-moon, the 8th Secretary General of the United Nations said: “The greatest opportunities are found in the challenges that we face now as global citizens. We should leverage global partnerships, as we cannot do it alone, not a single individual or a single nation can be successful unless we are all united”. Speaking on the aims of the

United Nations Sustainable Development Goals, Moon said: “The SDGs are to make sure that no nation is left behind whether you are rich or poor in this world. Entrepreneurs and the youth are the mostcriticalinachievingtheSDGs.” “Africa will develop its own models as well as its own solutions which I believe will be better than what exists in the world today. We are positioned better with the opportunities available to leverage technology in building the continent. This ecosystem needs to be constructed and interconnected across Africa so that the continent can gain a competitive advantage by working together rather than in competition. So many more African business heroes will be created in the coming years. Too much competition for completion sake can kill a thriving ecosystem,” he said. During the panel discussion, Martin Simela, founder and CEO of Brastorne Enterprises and Alibaba eFounder fellow, said: We need a more connected

Africa with ease of doing business across borders. We need smart regulation that is more beneficial.” “Things like urbanisation and population growth are expected to happen and that is why we need to think and invest in digital tools and technology for every industry. Education, agriculture, energy, and smart logistics are highly important,” he said. In a number of African countries, the number of unemployed is about 17 percent but the underemployed are almost half of the population. These are people that are working for virtually nothing. This is a situation that industry analysts say collaboration to promote businesses across border will easily address. According to James Mwangi, executive director, Dalberg Group Africa, needs to unite and come to the aid of each other. “Most of the funds in Africa are provided by foreign investors. We need to start having more African funding,” he said.

Border closure bites Niger Delta businesses, exporters – Trade expert Ignatius Chukwu, Port Harcourt

ninternationaltradeexpert, OfonUdofia,haspointedto the hardship building up on businesses in the south-south. This is as Ghana has pulled out of the Port Harcourt International Trade Fair on account of lack of access to Nigeria. Udofia, who works with Institute of Export Operations and Management, and is a member of the trade group of the Port Harcourt Chamber of Commerce, told BusinessDay that the border closure affects the south-south region seriously. The expert who is also a member of the Nigerian Economic Summit Group (NESG), made it clear that Seme is not the only border town in Nigeria, citing Ikaun and other Cameroun axis. Udofia said the FG should have looked at it very critically. “It has taken longer time than ex-

pected. The international treaties Nigeria signed (such as Bamako Convention and World Trade Organization) stipulate when border can be closed and how long. It is having negative effects. We too export. It is very big issue. If nothing is done, it will bounce back.” He said; “The government says its because of rice smuggling, don’t we have the Customs to do their work? The Customs should be put in order and not to close the border totally. The citizens are suffering, prices are going up. There is evidence we are not selfsufficient in a number of things especially rice. “Iaminsupportofstrengthening local production like empowering the farmers, but not to close the border totally. The ECOWAS Trade Liberalisation Treaty could be in a mess and we are the leader of the ECOWAS and we are not showing good example. www.businessday.ng

“If the presidency says other countries are violating the treaties, we are also guilty. If you go to Seme,youfindtensofcheckpoints on the route. Even in Nigeria, you find 27 checkpoints from Seme to Mile 2 in Lagos. We have more checkpoints on our route than from Seme to Burkina Faso. “We have trade relationship with West African countries. You can work with them to resolve issues instead of closing the borders. Dangote has trucks and cement companies in neighouring countries. We are not an island onto ourselves. We must trade with others.” ThePHCCIMAtradefaircommittee chairman, Mike Elechi, disclosed that Ghana has pulled outoftheeventbecauseoftheborder closure. He said Ghana could not cross to participate in the just concluded Lagos International Trade Fair and thus saw no need to participate in the PH event. https://www.facebook.com/businessdayng

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Monday 18 November 2019

BUSINESS DAY

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Suppliers, buyers take centre stage as Fairs World Seplat, stakeholders harp on critical success gathers stakeholders for TBL Expo factors for Protection Act in oil, gas industry CHUKA UROKO

roduct suppliers and buyers will take centre stage when a trade and product exhibition tagged ‘TBL Expo Nigeria 2020’ opens in Nigeria as planned by Fairs World Middle East, the organiser. Fairs World Middle East is an international trade fair organiser headquartered in Dubai with a successful portfolio of highly focused exhibitions and events such as Ceramic Expo Middle East, Additive Manufacturing Middle East, Ports and Maritime, and Park Tech, which create opportunities for buyers and sellers across the globe. The Expo will be offering suppliers opportunity to showcase the entire line of products and, for the buyers, the event promises to be so convenient as it will be happening in their own country meaning that they don’t have to travel to interact with the manufacturers who are otherwise difficult to access. The fair, which has the support of Nigerian government stakeholders - including Fed-

eral Ministry of Transport, Federal Road Safety Corps (FRSC), and Standards Organisation of Nigeria (SON), will be focusing on tyres, batteries, lubricants and workshop equipment. It is also supported by Raw Material Research Development Council (RMRDC) as well as launch partners, including Infinity Group, Milan Group, MRF Tyres, C.Woermann, Apollo Tyres, and Liqui Moly and is expected to bring together buyers, suppliers, transport operators, government officials and other stakeholders involved in the mobility arena. “TBL Expo is being positioned as West Africa’s largest industry gathering by occupying 3,500 square metres of exhibition space, featuring more than 100 exhibitors, over 20 speakers, numerous panels and keynotes, as well as the West African Tyre Symposium,” notes Vineet Mathur, executive director at Infinity Group. Continuing, Mathur says, “TBL Expo will allow suppliers to showcase the entire line of products and, for the buyers, it is so convenient as the event is happening in their own country

and they don’t have to travel to interact with the manufacturers who are otherwise difficult to access. “There are very few professional automotive exhibitions happening in Nigeria; so TBL Expo will be a critical platform for all stakeholders.” He recalls that, in 2018, the National Bureau of Statistics (NBS) data showed that Nigeria had a total of 11.7 million vehicles, with commercial vehicles accounting for 6.8 million, noting that, currently, 80 percent of Nigeria’s goods, passengers and petroleum products are transported by road. Osita Aboloma, directorgeneral/CEO, SON, says the organisation considers tyres, battery and lubricants used in the automotive industry as strategically important to Nigeria, noting that “TBL Expo is the right step in the right direction at the right time.” Similarly, Anthonia A. Ekpa, director of Road Transport and Mass Transit Administration at the Federal Ministry of Transport, notes that TBL Expo is integral to raising road safety standards in Nigeria.

SEGUN ADAMS

igerian independent oil and gas company, Seplat Petroleum Development Company plc (Seplat), in partnership with legal firms, Olaniwun Ajayi LP and London-based, White & Case Law LLP, have drawn attention to critical factors necessary for the successful implementation of the Federal Competition and Consumer Protection Act (FCCPA) in the oil and gas industry. The Act, which is a codified set of rules signed into law in January 2019, established the Federal Competition and Consumer Protection Commission and the Competition and Consumer Protection Tribunal. It was enacted for the promotion of competition in the Nigerian markets at all levels to eliminate monopolies, prohibit abuse of a dominant market position and to penalise other unethical restrictive trade and business practices. Delivering the opening address in a policy advocacy dialogue organised by Seplat,

the company CEO, Austin Avuru, stressed Seplat’s strong regard for compliance and strict adherence to Corporate Governance ethos in the industry. According to Avuru, Seplat remains very concerned about its current and future business environment in Nigeria and will continue to collaborate relevant stakeholders to advocate for good laws that will positively impact businesses, especially in the oil and gas industry. Avuru said: “As an organisation, Seplat is at the forefront of understanding, practicing and advocating proper compliance and corporate governance principles. In these areas, we lead from the front line. We have put together this event to draw attention to the gaps in this Act, with a view to getting stakeholders to accommodate the peculiarities of the oil and gas industry in future reviews of the Act.” The general counsel at Seplat, Mirian Kachikwu, expressed optimism that continuous engagement with relevant stakeholders would not only address grey areas

in the FCCPA, but also inform possible amendments as might be relevant for businesses in Nigeria, especially in the oil and gas space. Speaking on why the event was put together, Kachikwu said: “Seplat organised this policy dialogue to create ample awareness and enlighten key stakeholders in the oil and gas sector about the challenges that the new law could have on the smooth operation of the industry. The goal is to work with the regulator and government to shed light on grey areas.” In his keynote address, Babatunde Irukera, directorgeneral/CEO, Federal Competition and Consumer Protection Commission, noted, “The oil and gas industry in Nigeria is peculiar in many respects, both in terms of the legal and regulatory framework. The industry is particularly sensitive therefore if players in the industry notify of the need to make changes to a clause in the Federal Competition and Consumer Protection Act, it is the responsibility of all stakeholders to work together to effect the necessary change.”

Kwale Industrial Park to drive industrialisation agenda in Delta Mercy Enoch, Asaba

here is high hope for the teaming unemployed youths of Delta State as the state government is working towards the establishment of Kwale Industrial Park. Governor Ifeanyi Okowa during the presentation of the state’s budget for the 2020 fiscal year to the Delta State House of Assembly said the Kwale Industrial Park would drive the industrial agenda of his administration and provide immense employment opportunities for the people of the state. The park is designed to profit from the competitive advantage of the state on the gas and energy sector, he said. Located along the UghelliAsaba Road, the park is envisaged to be one of Nigeria’s biggest location for gas and energy intensive manufacturing, encompassing ceramics, rubber, methanol, pulp and paper, he said. It is a mix-use industrial/business location featuring industrial, commercial, administrative and residential sections in the park, he said, adding that heavy and light manufacturing activities would be in the industrial sector while schools, shopping centres, banking halls and recreation facilities would be concentrated in the commercial sector. Okowa said, “I just returned from China where we held a Road Show for the proposed Kwale Industrial Park. It afforded the state government delegation the opportunity to market the park and our state to the Chinese business community willing to establish glass factory, ceramics factory and agro-industrial industry for soya beans.” Continuing, he said, “In a meeting with another group

of investors in Nanjing, Jiangsu Province, a company with 400-metric tonne capacity methanol plant indicated its readiness to immediately set up a plant at the park. “It was agreed that a team from the state would visit their factory within the next month while officials of the company are to come for a site visit immediately thereafter. The company is hopeful of moving their operations to Kwale Industrial Park within the first half of 2020.” He also spoke on the AgroIndustrial Park located in AbohOgwashi-Uku part of the state, saying, “In line with the agricultural transformation and wealth creation objectives of this administration, the state government is implementing a public-private partnership for the establishment with Mirai Technology Limited as technical partner and anchor investor, and Norsworthy Investments Limited as participating investor.” The governor presented a budget proposal of N389,190,799,362 for the 2020 fiscal to the state House of Assembly. The budget estimate is made up of recurrent expenditure of N171,549,384,415 while the provision for capital expenditure is N217,641,415,047. The ministry of works would get the largest chunk of the budget, as N84.54 billion would be provided for it for the improvement of roads and physical Infrastructure. Justifying this, the governor stated, “We must continue with significant investments in this sector to connect our communities, renew our urban centres, boost commerce and provide a more civilised environment for our people”. www.businessday.ng

L-R: Precious Aludo, team member, iStore, Nigeria; Kolapo Arogundade, team member, iStore, Nigeria; Dami Adediwura, team member, iStore, Nigeria; Sachin Verma, country manager, iStore, Nigeria; Kolapo Agunloye, team member, iStore, Nigeria, and Williams Ogoke, at the iPhone 11 launch.

Medview resumes service to old routes, few weeks after suspending operations IFEOMA OKEKE

ed-View Airline will this week recommence flight o p e rat i o n s t o some of its old routes, few weeks after it suspended services. One of its aircraft, a Boeing 737-500 with registration number: 5N-BQM on Sunday, arrived the Murtala Muhammed Airport Two (MMA2), Lagos from Abuja Airport via the Kaduna International Airport. Sources close to the airline said on Sunday that the aircraft’s engine was last week replaced in Abuja by a company in Tokyo. The aircraft, which departed Kaduna International Airport, touched down at the Murtala Muhammed Airport

(MMA), Lagos at 5pm on Sunday. With the arrival of the new engine and subsequent fixing, it was gathered that the airline would resume flight operations this week. It would be recalled that Michael Ajigbotoso, the Chief Operating Officer (COO), Med-View Airline had about two weeks ago reiterated the plans of the airline to return to flight services in the next few weeks. Ajigbotoso said in Lagos that the airline, which remains the only carrier listed on the Nigeria Stock Exchange (NSE) had temporarily suspended operations due to lack of equipment, but assured that the management had perfected plans to return to some of its old routes in the country. He also declared that the

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airline was in compliance with the Nigeria Civil Aviation Regulations (Nig.CARs) 9.1.1.12 (A), stressing that the Nigerian Civil Aviation Authority (NCAA) was aware of its current status. The COO emphasised that some of its aircraft, which went for maintenance checks, would return to service very soon. He insisted that the airline would return to service stronger despite the recent challenge in operations, assuring that the safety and comfort of its passengers were still paramount to its operations. He also commended the staff of the organisation for their commitment and sustained belief in the airline despite the recent operational challenges. He further commended @Businessdayng

the staff and committed clients would stand by it in this period, stressing that the airline would not fail them. He had said: “We appreciate the staff for their commitment in spite of the little operational challenges, which we believe are the hallmark of any business. Businesses have their high and low moments and I can tell you we are surmounting the challenges. We are coming back soon bigger and better. “Also, to our numerous customers, we want to tell you that the best is yet to come. We have done it before, making the nation proud at the domestic, regional and international fronts. We have been consistent with our hajj operations in the past 14 years. We remain the only carrier to have done that successfully.

Monday 18 November 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper Joshua Chaffin and James Politi

Wall Street thrills to idea of Michael Bloomberg presidency New York establishment encourages billionaire former mayor to take on Trump

Michael Bloomberg, pictured with then-Republican presidential nominee Donald Trump, at a 2016 commemoration of the 9/11 terrorist attacks © AFP via Getty Images

Kingdom curtails roadshow to focus on domestic investors and sovereign funds

Chizhov remarks set to further anger critics who say French leader risks undermining bloc

Saudi Aramco pares back IPO on weak foreign demand

Russian envoy praises Macron stance on EU enlargement Michael Peel and Sam Fleming

Simeon Kerr, Anjli Raval and Arash Massoudi

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BUSINESS DAY

Monday 18 November 2019

NATIONAL NEWS

Will the Federal Reserve confirm a pause in its rate-cutting cycle? Market Questions is the FT’s guide to the week ahead

An oil rig in Sekondi waters, Ghana. The west African country expects to be producing about 250,000 barrels of oil a day by next year © AFP via Getty Images

Independent African energy company finds oil off Ghana coast

Springfield Group set to reveal deepwater discoveries it says will be bigger than Jubilee field David Pilling

Conflicts of interest in target-date funds catch SEC’s eye

The big proportion of US workers channelled in the retirement portfolios has increased the review urgency Siobhan Riding

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Monday 18 November 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

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India’s third wave of tech development will produce a titan As trade wars mount amid fierce US-China hostility, the opportunity is stark Nandan Nilekani

Christine Lagarde must resist pressure on the ECB’s inflation target The new president should ensure governments grasp the interaction of fiscal and monetary policy Wolfgang Münchau

Nuclear liabilities need to be put in clearer perspective Clean-up and waste storage are not the barriers they sometimes seem Jonathan Ford

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Monday 18 November 2019

BUSINESS DAY

ANALYSIS

Conflicts of interest in target-date funds catch SEC’s eye The big proportion of US workers channelled in the retirement portfolios has increased the review urgency Siobhan Riding

rom lawsuits for high fees to regulatory probes into the way funds are sold, the US asset management industry has been attacked on multiple fronts in recent years. But one area that has largely escaped unscathed up until now is the $1.7tn target-date fund market, which has experienced runaway growth and is a central plank of the US defined contribution retirement system. Target-date funds — retirement portfolios that rebalance automatically according to the investor’s age and target retirement date — account for almost a third of assets held in US employee retirement plans, according to Callan Associates, a consultancy. Yet critics fear target-date funds could be an accident waiting to happen, warning that concentration and competition issues are putting investors at risk. “Target-date funds have very much been under the radar,” says Chris Brown, founder and principal of Sway Research, a consultancy focused on fund distribution within 401(k) plans. “This has allowed the big captive providers to get bigger and bigger.” The target-date market is controlled by a small number of asset managers. The top three providers — Vanguard, Fidelity Investments and T Rowe Price — manage 63 per cent of the total asset pool, according to Sway Research. In addition, the vast majority of target-date managers exclusively

invest in their own in-house funds, with just one provider in the top 10 — Principal — outsourcing the portfolios to external managers. One reason for the closed nature of the market is downward pressure on management fees. The average fee for target-date funds fell to an all-time low of 0.62 per cent in 2018, down from 1.03 per cent in 2009, according to Morningstar. The squeeze has forced target-date providers to prioritise inhouse funds over external managers to save money. “Ten years ago if you had a wellconstructed ‘best of breed’ multimanager fund, you had an advantage,” says Jim McCaughan, former chief executive of Principal Global Investors. “Now that’s less the case because of the intense focus on price.” The conflicts of interest inherent in this model are rising up the US Securities and Exchange Commission’s agenda. The agency’s compliance inspections and examinations unit this month issued a rare warning following a one-off review of target-date funds, criticising managers for failing to properly disclose conflicts resulting from the use of in-house funds. This issue has taken on particular urgency given the increasing proportion of US workers being channelled into target-date funds as default investment choices. Since the landmark Pension Protection Act was introduced in 2006, US employees are automatically enrolled in 401(k) plans if they are available. The rise of target-date funds was sparked by the change of legislation, as the products responded to a need for default investment options.

British Steel faces uncertain future despite Scunthorpe rescue UK industry needs radical reform to end crippling cycle of boom and bust Peggy Hollinger, Andrew Bounds and Nikou Asgari

our years ago Tony Gosling marched to demand tariffs on the cheap Chinese steel imports that were threatening the viability of the UK industry in which his family has worked for four generations. Within weeks he may be employed by a Chinese steelmaker. Mr Gosling, 54, is one of about 4,000 workers at British Steel’s Scunthorpe plant, which is being sold to Chinese producer Jingye after the UK’s second biggest steelmaker collapsed in May. Jingye will be the fourth owner in 20 years of a business that has been locked in a crippling cycle of boom and bust for decades. He welcomed the deal, saying it brought much needed stability. “We have been keeping that plant going. Some of the kit is ancient. It needs investment,” he said. But amid the relief among workers over the sale announced last week, questions are being asked yet again about whether there is a future for steelmakers in the UK. The answer appears to be no unless Jingye and the rest of the industry invest in radical reform, and UK politicians commit to a steel strategy that looks beyond an election cycle — even if it means job losses in the near term. Over the past 25 years the industry has suffered a series of crises that have resulted in the demise of renowned steelworks at Ravenscraig

in Scotland, Redcar in Teeside and the break-up of the old British Steel under the ownership of Tata Steel. “The problem is that making liquid steel in the UK flies in the face of economic sense,” said Andrzej Kotas, managing director of Metals Consulting International. “We have no iron ore, no coal and very high energy costs. So to pretend we can make competitive liquid steel is complete nonsense.” Rod Beddows, a consultant at natural resources corporate finance boutique HCF, said that the UK had “an economically irrational structure”. “It is the result of a sequence of largely poorly planned rationalisations and developments going back at least to the 1970s driven . . . by political imperatives.” Britain’s two biggest steelmakers — Tata Steel’s operation at Port Talbot in south Wales, which makes flat steel, and British Steel’s Scunthorpe plant, which produces long products such as girders and rails — rely on inflexible, highly polluting blast furnace technology. Blast furnaces have to run continuously, so adjusting production to demand or pricing cycles is difficult. Moreover, production and processing are scattered across various sites, particularly in Port Talbot’s case. This complexity weighs on steelmakers that are already burdened by global overcapacity and UK energy prices that are much higher than continental rivals. The industry estimates that British steel producers pay 62 per cent more for electricity than competitors in Germany and 80 per cent more than in France. www.businessday.ng

‘Their house is on fire’: the pension crisis sweeping the world The plunge in interest rates since the financial crisis is wreaking havoc on fundsand bond market weakness could add to the pain Josephine Cumbo and Robin Wigglesworth

an-Pieter Jansan, a 77-year-old retiree from the Netherlands, had high hopes for a worryfree retirement after having saved diligently into a pension during his working life. But Mr Jansan, a former manager in the metal industry, has been forced to reappraise his plans after receiving notice from his retirement scheme, one of the Netherland’s biggest industry-sector funds, of plans to cut his pension by up to 10 per cent. Understandably, the news has hit like a sledgehammer. “This is causing me a lot of stress,” says Mr Jansan, who retired 17 years ago and hoped to use his pension pot to treat his grandchildren and afford good hotels on holidays. “The cuts to my pension will mean thousands of euros less that I can spend on the family, and the holidays we like. I’m very angry that this is happening after I saved for so long.” Mr Jansan is not alone in experiencing pension pain. Tens of millions more pensioners and savers around the world are facing the same retirement insecurity as Mr Jansan as plunging interest rates since the financial crisis wreak havoc on the funding of schemes. Pensions have become a defining political issue in countries as diverse as Russia, Japan and Brazil. General Electric, the US industrial conglomerate, recently announced that it is joining a growing list of companies that are ending guaranteed “final salary” style pension schemes, affecting around 20,000 of its employees. In the UK, tens of thousands of university academics are preparing to take strike action over steep rises in their pension contributions. A common factor in this global pension upheaval has been suppressed bond yields. Bonds have historically provided a simple match for the cash flows needed to be paid out to the members of retirement schemes such as Mr Jansan’s. But decades of declining bond yields have made it far harder for pension funds to buy an income for their members, pushing them more into equities and other riskier, untraded investments, such as real estate and private equity. Buoyant financial markets have so far ensured robust investment gains for pension plans on their ex-

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isting holdings. Yet given their longterm liabilities, the dimming outlook for future gains is causing anguish. A graphic with no description “Their house is on fire,” says Alex Veroude, chief investment officer for the US at Insight Investment, which manages money on behalf of many pension funds. “And rates can and probably will go lower from here. Even if the house is on fire, it’s still only the first floor. We think it can hit the second and third floor as well.” This is not merely a danger to individuals like Mr Jansan who may see their pensions cut — it could also have a wider impact on the economy. If people set aside more money for retirement, it may hamper economic growth by reducing consumption — the opposite of the intention of central banks when they cut rates. The Swedish Riksbank hinted obliquely at this when it recently signalled it would lift interest rates back to zero by the end of the year, saying that “if negative nominal interest rates are perceived as a more permanent state, the behaviour of agents may change and negative effects may arise.” There may even be more systemic consequences. Last month the IMF warned in its annual report on global financial stability that the rush by pension funds into “illiquid” assets will hamstring “the traditional role they play in stabilising markets during periods of stress”, as they will have less money available to scoop up bargains. The push into more unorthodox investment strategies is worrying some in the industry, who warn that they could exacerbate market downturns. “We’re seeing some really unusual behaviour, and we’ll see some payback,” says Con Michalakis, chief investment officer of Statewide, an Australian pension plan. “The trillion dollar question is when? I’ve been doing this for long enough not to want to predict when it will happen.” When Christopher Ailman studied for a degree in business economics at the University of California in the late 1970s, Federal Reserve chairman Paul Volcker was ratcheting up interest rates, sending bond yields spiralling higher. Soon after he graduated in 1980 the 10-year Treasury yield hit a record of nearly 16 per cent — and the concept of sub-zero yields seemed preposterous. “At school my textbooks said @Businessdayng

that there was no such thing as negative interest rates,” says Mr Ailman, now chief investment officer at Calstrs, the $238bn Californian teachers’ pension plan. “But here we are.” In the wake of the financial crisis, many central banks deployed unconventional new tools to reinvigorate the global economy once interest rates hit zero. At first this primarily meant massive, multitrillion dollar bond-buying programmes, but in 2009 Sweden became the first central bank to experiment with negative interest rates. It was later followed by Japan and the rest of Europe, with the desperate scramble for bonds pushing yields lower. Growing concerns over the health of the global economy, a subdued inflation outlook and expectations of even easier monetary policy have now pushed the pile of negativeyielding debt to more than $13tn. Pension plans invest in a broad array of asset classes, but with many stock markets at or near record highs, the prospect of gains are dimming across the board. AQR Capital Management estimates that the classic 60-40 balanced equity-bond fund might return as little as 2.9 per cent on average a year after inflation over the next decade, compared with an average of 5 per cent since 1900. “Higher prices are simply pulling forward ever more future return to the present,” says Andrew Sheets, a strategist at Morgan Stanley. “That’s great for today’s asset owners, especially those close to retirement. It is much less good for anyone trying to save, invest or manage well into the future, who face an increasingly barren return landscape.” The tumble in bond yields is particularly problematic for “defined benefit” pension plans, which promise members a specific payout. They use high-grade bond yields to calculate the value of their future liabilities, and every small move downwards deepens their funding challenges. A one percentage point fall in long-term interest rates will increase liabilities of a typical pension scheme by around 20 per cent, but the value of their assets would only go up by about 10 per cent, estimates Ros Altmann, a former UK pensions minister. “Clearly, then, scheme funding will deteriorate and employers will need to increase funding,” she adds.

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Monday 18 November 2019

BUSINESS DAY

COVER

economics

Ten stocks to watch this week on NSE

VAT now applies to services by Nigerianbased firms for related non-resident companies

Key takeaways from Saudi Aramco’s IPO

Did you hear about last week’s stock market rally and wonder what happened after months of consecutive losses, or perhaps why you didn’t invest beforehand to join the league of investors smiling to the bank?

The Tax Appeal Tribunal sitting in Lagos has ruled that the services rendered by a company in Nigeria for a related firm outside the country are subject to Value Added Tax (VAT).

After several years of delays and postponement, the prospectus for the world’s most profitable company, Aramco’s Initial Public Offering (IPO) was eventually released this week.

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Monday 18 November 2019

BUSINESS DAY

Monday 18 November 2019

BUSINESS DAY

Cover Story

Economics

Ten stocks to watch this week on NSE OLUWASEGUN OLAKOYENIKAN

id you hear about last week’s stock market rally and wonder what happened after months of consecutive losses, or perhaps why you didn’t invest beforehand to join the league of investors smiling to the bank? Well, you haven’t missed so much. Santa Claus probably came a bit early this year and it’s almost unlikely it would leave immediately. So, let’s get to the details. The holiday-shortened week was a remarkable one for stocks listed on the Nigerian Stock Exchange (NSE), particularly those trading in the banking sector. Some investors whose wealth had been chopped off by negative market sentiments since the year began heaved a sigh of relief as main equity gauge jumped 2.04 percent on a week-on-week basis to sustain gains recorded in the preceding week. The impressive performance was largely driven by some OMO maturities owned by local big investors – mostly pension fund managers and insurance companies – which could not find their way back to the OMO market following CBN’s restrictive policy. Consequently, these local investors who were scavenging for alternative investment outlets piled into the treasury bills primary market auction, a move that sent the real returns on the shortterm government debt instruments to the negative zone – lower than Nigeria’s 11.24 percent inflation rate in September. However, with Nigerian stocks trading at more than 16 percent below its value when the year kicked off, investors shrugged off equity risk to take advantage of high dividend yield stocks in the banking segment of the market, leading to Santa’s early arrival. The sustainability of this, at least in the short term, depends on a number of factors which include inflows from OMO maturities which can’t be reinvested, treasury bills and bond auctions, as well as high dividend yield in fundamentally sound stocks. The OMO market is expected to wit-

ness six more maturities amounting to N3.32 trillion before the year runs out, according to Lagos-based investment house, ChapelHill Denham. This implies with holdings of domestic corporates and individuals in the market which is estimated at about 25 percent of outstanding OMO bills equal to about N829.25 billion would have to seek for investment opportunities in bonds, treasury bills, equities among others. The Debt Management Office (DMO) will auction two more FGN Bonds before the end of the year, according to the FGN bonds issuance calendar for the fourth quarter of 2019. The federal government plans to raise N300 billion from the bonds, indicating foreign portfolio investors and banks which account for a larger share of the market would leave less than N150 billion for the local nonbanks and individuals. Consequently, it is estimated that N680 billion worth of liquidity would be left for investment placement in either treasury bills, equities or other assets. However, the CBN indicated it would still conduct an NTBills auction this month to rollover about N150.6 billion worth of maturing papers on November 28. While demand for the issuance may become weak given the lower rate environment

on TBills which crashed to single digits at the last primary market auction, BusinessDay estimates if local non-banks and individuals account for half of the successful bids at the auction, at least N605 billion will be hunting for investable instruments aside OMO, NTBills and Bonds. This creates an opportunity for equities to remain bullish in the short term, even though fundamentally sound stocks with high dividend yield will most likely be the greatest beneficiaries. This and other factors were considered in the compilation of this watchlist. While this stock watchlist is not a BUY, SELL or HOLD signal, it gives a list of equities that you can put on their radar to make more informed investment decisions. It is wise to consult your financial advisor before making any investment-related decision. Investors should understand that equity investment in a company will not automatically guarantee good returns. While you could gain so much money, you also stand the chance to lose all your capital. So, it requires having good knowledge of the industry the company operates, its corporate disclosures, micro and macro-economics, your risk tolerance, as well as the ability to understand financial statements among others. Among the stocks to monitor this week based or recent developments in the market are tierone lenders Zenith Bank, United Bank for Africa

(UBA) and GTBank. These banks currently have the highest dividend yields of 14.85 percent, 11.49 percent and 9.48 percent in the sector, respectively. These stocks correspondingly delivered 12.12 percent, 11.66 percent, and 4.55 percent worth of returns to investors in the past week on the Nigerian Stock Exchange (NSE). Wema Bank, Access and Fidelity Bank trailed for being the best-performing stocks at the local bourse last week. Wema Bank gained 18.64 percent to close at 70 kobo, Access Bank jumped 17.39 percent to N10.80, while Fidelity surged 12.57 percent to settle at N2.06. Conversely, Ikeja Hotel, Total Nigeria, and PZ Nigeria made this watchlist for being the worst-performing stocks last week. Ikeja Hotels lost 10.31 percent of its market value to close at 87 kobo, Total Nigeria dropped 9.98 percent to N110.90, while PZ Nigeria fell 9.91 percent to N5. Finally, with the decision of Red Star Express to raise additional capital of N1.34 billion through a rights issue between November 11 and December 18, the stock had a place among the list of stocks to keep an eye on. The stock remained unchanged last week at N4.45.

VAT now applies to services by Nigerian-based firms for related non-resident companies OLUWASEGUN OLAKOYENIKAN

he Tax Appeal Tribunal sitting in Lagos has ruled that the services rendered by a company in Nigeria for a related firm outside the country are subject to Value Added Tax (VAT). The tribunal delivered the judgement on Wednesday in a case filed by Allan Gray Investment Management Nigeria Limited against the Federal Inland Revenue Service (FIRS). The appellant had sought to determine whether or not the services it rendered to its non-resident parent company qualified as “exported services” under the VAT Act, Cap. V1, Laws of the Federation of Nigeria, 2004 (“VAT Act”) and, therefore, exempted from VAT. The VAT Act defines “exported services” as services performed by a Nigerian resident or a Nigerian company to a person outside Nigeria, and subsequently exempts the services from VAT. Allan Gray Investment Management Nigeria Limited had executed a market-

ing and distribution agreement with its parent, Allan Gray International (Pty) Limited (AGI), an investment management company incorporated and resident

in South Africa. The agreement required the appellant to market and distribute AGI’s African Equity Funds in Nigeria for a fee which it consid-

ered as exported services and should be exempted from VAT. Having considered arguments of both parties, the TAT held that AGI is effectively carrying on business in Nigeria based on its appointment of the appellant as the sole and exclusive local representative of its African Funds in Nigeria. The tribunal also pointed out that even though AGI was not physically present in Nigeria, it is legally present through the appointment of the appellant as an agent to market and distribute its services in the country. Consequently, the court ruled that the services performed by the appellant in Nigeria on behalf of its related non-resident parent company do not qualify as exported services and are, therefore, liable to VAT in Nigeria. Meanwhile, Wole Obayomi, Partner and Lead Tax, Regulatory and Service at KPMG, said the judgement raises fundamental questions on when a non-resident company will be characterized as legally present or doing business in Nigeria and what will qualify a service performed by a Nigerian company for a non-resident company as an exported service for VAT purposes.

Key takeaways from Saudi Aramco’s IPO OLUFIKAYO OWOEYE

fter several years of delays and postponement, the prospectus for the world’s most profitable company, Aramco’s Initial Public Offering (IPO) was eventually released this week. An IPO prospectus is a formal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public. Companies that wish to offer stock or bonds for sale to the public must file a prospectus as part of the registration process with the SEC. Aramco is the world’s leading producer of crude oil and condensate. In the first six months of 2019, it produced 13.2 million barrels per day of oil equivalent, including 10.0 million barrels per day of crude oil (including blended condensate) 1. For the six months ended 30 June 2019, Aramco generated SAR 196.7 billion ($52.5 www.businessday.ng

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billion) in net cash provided by operating activities and SAR 142.4 billion ($38.0 billion) of Free Cash Flow. For the year ended 31 December 2018G, the Company generated SAR 453.7 billion ($121.0 billion) in net cash provided by operating activities and SAR 321.9 billion ($85.8 billion) of Free Cash Flow 2. A plethora of financial advisors including Goldman Sachs, JP Morgan, Citigroup, and HSBC worked on the IPO. The 658-page contains forward-looking statements with respect to the company’s financial position, results of operations and business and business risks which investors must consider before locking into the shares of the company when it becomes public on Saudi Arabia’s Tadawul Exchange. 3. According to Aramco, the first risk is the return on the shareholder’s investment with the oil-giant assuring shareholders that it would give at least $75billion in annual profits from 2020-2024. “The Board intends to declare dividends quarterly and, based on the annual amount, www.businessday.ng

the ordinary cash dividend per share with respect to each calendar quarter from 2020G to 2024G is expected to be at least $0.09375 (based 200,000,000,000 Shares outstanding),” Aramco said in its Prospectus. 4. Located in the Middle East, North African region (MENA) Aramco’s operation is exposed to political and social instability and unrest and actual or potential armed conflicts in the MENA region as some of the company’s facilities are located within the borders of countries that have been affected by the middle-east unrest. “There is no guarantee that Aramco shares will not be affected by these accidents,” the company said. Two Aramco facilities were forced to cut production after September 14 drone attacks paralysed the company’s production facility. 5. The risks from global warming and climate change are increasingly beginning to dictate policy and regulations for oil companies could likely become more stringent and restrictive in the future. This could lead to the devaluation of large oil companies that do not

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invest heavily in gas and renewable energy. The rise of new technologies and renewable energy shows that the future of investing in oil is uncertain. “Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital,” 6. The company’s prospectus included an industry assessment from consulting firm IHS Markit, which showed oil demand starting to contract as soon as 2035, though, Aramco didn’t specifically endorse the findings, their inclusion points to a major hurdle down the road. 7. A second projection which takes a faster move to renewables into account suggests peak oil demand will arrive in the late 2020s. Such a deadline would give Aramco less than a decade to diversify its revenue stream and move away from hydrocarbon fuels. Due to its vast financial resources, Aramco has deep financial pockets and has invested in refinery projects in major energy-consuming countries, such as India and China.

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Monday 18 November 2019

BUSINESS DAY

Data

Federal government Eurobond Yields on Eurobonds rose 0.023 percent point week on week from an average of 6.3 percent last week to 6.32 percent this Friday following slight sell-off in Nigeria’s Sovereign Eurobonds.

Corporate Eurobond Yields on corporate Eurobonds rose 0.035 percent points across all tickers from 5.26 last week to 5.298 percent.

Week Ahead Ahead (Monday, November 18 – November 22, 2019) Week

Chart of the week

Sub-zero real returns on short-term debt sends bank stocks rallying

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

Oil: Crude oil prices gained on Friday after an American official hinted that the U.S. and China are close to locking down a partial trade deal, offsetting rising global oil supplies. Brent crude rose jumped 1.99 percent to $63.52 per barrel at 7:00 PM Nigerian time, while U.S. West Texas Intermediate (WTI) crude rose 1.9 percent to $57.85 a barrel. Stock The Nigerian equities market sustained its bullish trend last week as the All Share Index rose 2.04 percent on a week-on-week basis to close at 26,851.68 points. The holiday-shortened week was a remarkable one for stocks listed on the NSE, particularly those trading in the banking sector. Analysts say the positive performance might continue in the short term as more OMO maturities – owned by local non-banks and individuals which can’t be reinvested in the OMO market - hit the market before the end of the year. For this week, analysts at Afrinvest Securities said they “expect to see gains in fundamentally sound stocks as investors’ sentiment towards the equities market improves. Nonetheless, we maintain that this might be short-lived as economic buffers are still absent.” Currency The exchange rate was relatively stable across all market segments. It traded flat at N360/$ at the parallel market. At the interbank market, the currency hovered around N306 to a dollar, and at N362.58 per dollar on the Investor and Exporter window. Going forward, the naira is expected maintain stability across all windows given CBN’s continuous intervention in the currency market. Economy The National Bureau of Statistics (NBS) is expected to release the inflation report for October 2019 today. Analysts at Meristem Securities Limited projected that the headline inflation will advance by 8 basis points to 11.32 percent. Also, the statistics bureau is expected to release the Premium Motor Spirit (Petrol) Price Watch and National Household Kerosine Price Watch for October 2019 later in the week. Fixed Income The Central Bank of Nigeria conducted a treasury bills auction last Wednesday which was largely oversubscribed. Stop rates on the short-term government debt instruments crashed to the lowest level in 3 years as big domestic investors who majorly pension fund managers and insurance companies piled into the country’s T-Bills auction following CBN’s OMO restrictive policy on domestic non-bank investors. www.businessday.ng

The stock market Thursday gained the most since late May as big domestic investors who are facing limited investment options returned, pushing the banking index to highest daily gain since January 2016. The banking index rose 7.04 percent, while the main equity gauge advanced 1.91 percent as attractively priced banking stocks returned much-needed liquidity to one of the worst performing stock markets globally. The market-frenzy follows a move by the CBN to limit participation in high-yielding OMO market which sent real returns on T-bills below zero, forcing big domestic investors back to equities. The move to restrict the OMO market to banks and foreign investors have left big domestic investors, mostly pension funds and insurance companies, with idle funds and caused heavy demand at a primary market NTBills auction on Wednesday. However banking stock fell 1.68 percent Friday.

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Monday 18 November 2019

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 15 November 2019 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 373,224.87 10.50 -2.78 555 158,784,221 UNITED BANK FOR AFRICA PLC 253,075.72 7.40 -0.68 618 41,875,309 ZENITH BANK PLC 591,823.91 18.85 -1.57 859 71,034,520 2,032 271,694,050 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 245,882.76 6.85 9.60 475 41,493,394 475 41,493,394 2,507 313,187,444 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,462,896.08 121.00 -0.74 69 3,456,378 69 3,456,378 69 3,456,378 BUILDING MATERIALS DANGOTE CEMENT PLC 2,469,169.52 144.90 -0.07 103 2,536,435 LAFARGE AFRICA PLC. 240,006.15 14.90 0.68 111 1,863,378 214 4,399,813 214 4,399,813 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 323,467.98 549.70 - 15 44,035 15 44,035 15 44,035 2,805 321,087,670 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 11,873.80 4.45 - 4 46,001 4 46,001 4 46,001 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 4 46,001 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 50,509.53 52.95 - 20 125,216 OKOMU OIL PALM PLC. PRESCO PLC 34,600.00 34.60 - 12 9,949 32 135,165 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,560.00 0.52 8.33 20 1,536,683 20 1,536,683 52 1,671,848 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 794.19 0.30 - 0 0 JOHN HOLT PLC. 217.92 0.56 - 5 7,038 S C O A NIG. PLC. 1,903.99 2.93 - 2 728 TRANSNATIONAL CORPORATION OF NIGERIA PLC 44,306.31 1.09 -2.75 127 23,296,159 U A C N PLC. 19,016.56 6.60 - 43 656,159 177 23,960,084 177 23,960,084 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 24,486.00 18.55 - 6 70,677 ROADS NIG PLC. 165.00 6.60 - 0 0 6 70,677 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,520.44 0.97 - 5 23,645 5 23,645 11 94,322 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 7,751.20 0.99 10.00 3 181,000 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 62,644.95 28.60 10.00 48 327,077 INTERNATIONAL BREWERIES PLC. 80,801.10 9.40 - 13 72,371 NIGERIAN BREW. PLC. 387,849.75 48.50 2.11 55 859,567 119 1,440,015 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 111,250.00 22.25 - 0 0 DANGOTE SUGAR REFINERY PLC 140,400.00 11.70 7.34 206 6,861,807 FLOUR MILLS NIG. PLC. 66,631.17 16.25 6.91 31 5,216,561 HONEYWELL FLOUR MILL PLC 7,930.20 1.00 - 26 580,957 MULTI-TREX INTEGRATED FOODS PLC 1,340.10 0.36 - 0 0 N NIG. FLOUR MILLS PLC. 766.26 4.30 - 0 0 NASCON ALLIED INDUSTRIES PLC 39,344.16 14.85 - 16 193,151 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 279 12,852,476 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 16,903.82 9.00 - 23 103,588 NESTLE NIGERIA PLC. 911,554.69 1,150.00 - 33 26,571 56 130,159 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 4,640.63 3.71 -0.27 17 240,667 17 240,667 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 21,242.05 5.35 7.00 34 697,558 UNILEVER NIGERIA PLC. 106,282.60 18.50 - 66 466,948 100 1,164,506 571 15,827,823 BANKING ECOBANK TRANSNATIONAL INCORPORATED 137,621.63 7.50 - 81 1,553,573 FIDELITY BANK PLC 57,949.59 2.00 -2.91 245 23,569,234 GUARANTY TRUST BANK PLC. 853,504.20 29.00 -3.01 366 16,038,838 JAIZ BANK PLC 20,919.62 0.71 9.23 53 4,668,049 STERLING BANK PLC. 64,202.63 2.23 - 20 560,126 UNION BANK NIG.PLC. 203,845.27 7.00 - 22 276,531 UNITY BANK PLC 7,831.86 0.67 9.84 36 3,213,087 WEMA BANK PLC. 29,316.59 0.76 8.57 68 4,671,047 891 54,550,485 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 5,266.96 0.76 -2.56 36 4,188,867 AXAMANSARD INSURANCE PLC 17,325.00 1.65 - 7 182,500 CONSOLIDATED HALLMARK INSURANCE PLC 3,170.70 0.39 - 1 10,000 CONTINENTAL REINSURANCE PLC 23,442.40 2.26 -5.83 11 577,251 CORNERSTONE INSURANCE PLC 9,132.29 0.62 6.90 10 655,199 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. 2,123.80 0.29 -6.90 5 624,500 LAW UNION AND ROCK INS. PLC. 2,362.98 0.55 - 1 1,298 LINKAGE ASSURANCE PLC 4,080.00 0.51 - 3 61,000 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 11 2,867,240 NEM INSURANCE PLC 10,561.01 2.00 - 8 136,983 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,745.10 0.51 - 0 0 REGENCY ASSURANCE PLC 1,400.44 0.21 - 1 7,000 SOVEREIGN TRUST INSURANCE PLC 1,668.16 0.20 - 0 0 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 0 0 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,550.13 0.34 3.03 15 1,270,810 109 10,582,648

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MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,515.30 1.10 - 3 522,000 3 522,000 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,200.00 1.00 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 2,265.95 0.20 - 0 0 RESORT SAVINGS & LOANS PLC UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 8,440.00 4.22 5.76 58 1,115,171 CUSTODIAN INVESTMENT PLC 32,350.25 5.50 - 9 136,002 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 39,605.42 2.00 2.04 221 18,343,633 1,029.07 0.20 - 0 0 ROYAL EXCHANGE PLC. STANBIC IBTC HOLDINGS PLC 397,991.17 38.00 - 49 3,977,223 13,680.00 2.28 0.44 201 8,806,776 UNITED CAPITAL PLC 538 32,378,805 1,541 98,033,938 HEALTHCARE PROVIDERS EKOCORP PLC. 1,844.82 3.70 - 1 1 852.75 0.24 - 1 24,000 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 2 24,001 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 2 14,620 2 14,620 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 7,302.26 3.50 - 6 58,500 GLAXO SMITHKLINE CONSUMER NIG. PLC. 7,534.02 6.30 - 20 437,400 MAY & BAKER NIGERIA PLC. 3,381.46 1.96 - 3 6,700 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 759.66 0.40 - 3 17,944 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 32 520,544 36 559,165 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 816.96 0.23 - 7 644,344 7 644,344 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 486.00 4.50 - 0 0 TRIPPLE GEE AND COMPANY PLC. 316.77 0.64 - 0 0 0 0 PROCESSING SYSTEMS CHAMS PLC 1,267.94 0.27 8.00 15 2,160,523 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 0 0 15 2,160,523 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,157,510.66 308.00 - 7 1,023 7 1,023 29 2,805,890 BUILDING MATERIALS BERGER PAINTS PLC 2,173.68 7.50 - 5 57,750 CAP PLC 17,010.00 24.30 - 29 137,707 CEMENT CO. OF NORTH.NIG. PLC 262,870.02 20.00 5.26 41 650,368 MEYER PLC. 313.43 0.59 - 0 0 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,769.32 2.23 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 75 845,825 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 1 87 CUTIX PLC. 2,395.40 1.36 0.74 22 602,201 23 602,288 PACKAGING/CONTAINERS BETA GLASS PLC. 26,898.49 53.80 - 7 8,450 GREIF NIGERIA PLC 388.02 9.10 - 0 0 7 8,450 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 2 10 2 10 107 1,456,573 CHEMICALS B.O.C. GASES PLC. 2,547.42 6.12 - 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 - 1 22,200 1 22,200 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 83.60 0.38 - 0 0 0 0 1 22,200 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 0 0 0 0 INTEGRATED OIL AND GAS SERVICES OANDO PLC 44,753.08 3.60 3.15 69 1,690,996 69 1,690,996 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 53,332.04 147.90 - 14 43,184 CONOIL PLC 10,686.86 15.40 - 26 329,879 ETERNA PLC. 3,651.61 2.80 - 5 24,528 FORTE OIL PLC. 20,709.45 15.90 - 37 172,850 MRS OIL NIGERIA PLC. 4,663.23 15.30 - 1 200 TOTAL NIGERIA PLC. 37,652.97 110.90 - 21 19,994 104 590,635 173 2,281,631 ADVERTISING AFROMEDIA PLC 1,642.45 0.37 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 17,551.17 1.80 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 270.56 0.23 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,623.26 4.45 - 5 60,000 TRANS-NATIONWIDE EXPRESS PLC. 398.52 0.85 - 0 0 5 60,000 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 IKEJA HOTEL PLC 1,974.86 0.95 9.20 5 303,000 7,862.53 3.50 - 0 0 TOURIST COMPANY OF NIGERIA PLC. TRANSCORP HOTELS PLC 41,042.18 5.40 - 4 15,197 9 318,197 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 205.63 0.34 - 2 8,000 LEARN AFRICA PLC 817.74 1.06 -9.40 11 522,306 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 616.92 1.43 - 11 36,750 24 567,056 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 745.97 0.45 - 1 10,000

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Company IN FOCUS

BUSINESS DAY Monday 18 November 2019 www.businessday.ng

How a University of Benin graduate built Nigeria’s first home-grown unicorn LOLADE AKINMURELE & SEGUN ADAMS

Major funding rounds by Africa-focused fintech start-ups since ‘18

switch. TA Associates bought an undisclosed equity stake in 2017 and Visa is the latest, according to selected equity financing history shared by FT Partners. “The journey of a thousand miles begins with a step. We started this journey in 2002. From N200m to N360bn,” Lawal wrote. He also shared that Interswitch has grown from staff strength of 22 to over 800 staff across four countries, from two customers-First Bank of Nigeria and United Bank for Africa-to tens of thousands in almost 30 countries, and from four strategic partners to well over a hundred. Interswitch’s reach today extends to millions of users in 23 African countries including Kenya, Uganda and Gambia, and it has presence offshore. This underscores the growth potential in the fast-growing but underserviced digital market in Africa; In 2018, electronic payments in Africa accounted for only 12 percent of transactions by volume, compared to 54 percent in Europe

and 79 percent in North America. More specifically, Sub-Saharan Africa is the fastest-growing digital payments market in the world, with electronic payment volume expected to grow at a CAGR of approximately 35 percent from 2018 to 2023 in the region (excluding South Africa) on the back of improvement in payment infrastructure, population and urbanisation growth, increasing adoption of mobile phones and internet, economic growth, as well as supportive regulatory landscape for electronic payments and financial inclusion. The opportunity in Africa, and the Middle East has seen global payments & technology companies like Mastercard and Visa invest millions in high-potential local tech companies that can provide access to the market. Earlier in the year Mastercard invested $300 million in Dubaibased Network International, the largest payments processor in the Middle East and Africa, ahead of its London IPO. Following the announcement of

the $200m, Andrew Torre, regional president CEMEA, Visa, said Africa remained a priority region and Visa continually seeks strategic partnerships with local players to further strengthen our leadership position and enhance the payments ecosystem across the continent. “This partnership aligns with our global strategy to work with and invest in innovative partners, and we look forward to working with Interswitch to provide new consumer and merchant experiences and support the rapid growth of digital commerce across Africa,” he said. Interswitch’s core market, Nigeria, is the largest economy in Africa with a rapidly growing electronic payments market. Point of Sale (“POS”) and ATM transactions per adult grew at a CAGR of 94 percent and 59 percent from 2013 to 2018, respectively. In Nigeria, there were only 11 card transactions per adult per annum in 2018 compared to 92 in markets like South Africa, 126 in Brazil and 465 in the UK. Despite this market under-penetration, POS card transactions in

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ast week, US-based global retail electronic network, Visa, announced a strategic partnership with Interswitch to acquire a significant minority equity stake in the Nigerian-based paymentsprocessing company, valuing Interswitch at $1 billion. Visa agreed to pay $20 million for a 20 percent stake in Interswitch, said to be planning a London Stock Exchange (LSE) debut next year. The investment makes Interswitch Nigeria’s first home-grown unicorn (a startup valued at $1bn or more) and one of few in Africa. “Sub-Saharan Africa is the fastest-growing payments market in the world, with growth driven by a young and dynamic population, rapidly evolving consumer behaviour, and an increasing desire for payment solutions that can be accepted across the continent and abroad,” Mitchell Elegbe, founder and chief executive of Interswitch, said. “I am delighted that Interswitch has formed a partnership with Visa, with whom we plan to drive the next phase of transformation in the African payments landscape.” Visa joins Helios Investment Partners, the majority shareholder, TA Associates and IFC as shareholders in Interswitch. The transaction, which has FT partners as advisers to Interswitch, is subject to the relevant regulatory approvals and is expected to close by first quarter next year. Growing...growing...growing Interswitch is headquartered in Lagos and was founded in 2002 by Mitchell Elegbe, who formerly worked as Group Head for Business Development at TELNET, and Wireline Engineer at Schlumberger. Elegbe is a graduate of Electrical and Electronics Engineering from the University of Benin. Interswitch, which was an early bird in Nigeria’s fintech space, has so far disrupted the traditional cash-based payments value chain in Nigeria by introducing electronic payments processing and switching services. Today, Interswitch is a leading player in Nigeria’s developing financial ecosystem with omnichannel capabilities across the payments value chain, processing over 500 million transactions per month in May 2019. Information shared on Linkedin by Akeem Lawal, Divisional CEO Payment Processing at Interswitch Group suggests Interswitch has grown astronomically by some 16,363 percent based on N200m valuation in 2002 to N360bn ($1bn) today. In 2011 Aldevo Capital; Helios Investment Partners; and the International Finance Corporation injected $110m equity into Inter-

I am delighted that Interswitch has formed a partnership with Visa, with whom we plan to drive the next phase of transformation in the African payments landscape

Nigeria are expected to grow at a CAGR of 63 percent between 2018 and 2023. In addition to its switching and processing services, Interswitch owns Verve, the largest domestic debit card scheme in Africa with more than 19 million cards activated on its network as of May 2019. The business also operates Quickteller, a leading multichannel consumer payments platform, driving financial inclusion across Nigeria with over 270,000 access points, as of 2018, from which consumers can initiate peer-to-peer transfers, bill payments, airtime purchases, and other e-commerce transactions, processing over 42 million transactions monthly as of 31 July 2019 (equivalent to over NGN560 billion (US$1.5 billion) through direct, indirect and Paypoint channels). Interswitch recently acquired 60 percent stake in eClat, a health startup and has a stake in some other tech companies. An IPO in the offing? The news of Visa’s equity purchase was accompanied by unconfirmed talks of a London IPO next year. It is believed that Visa wants to position as a cornerstone investor ahead of Interswitch’s LSE debut. Interswitch had stalled the planned IPO (via dual listing) in 2016 when the domestic economy plunged into a recession following a downturn in the global oil market. Earlier this year, Bloomberg reported that sources said the duallisting would be concluded before the end of 2019. In response, the company told Techcrunch it does not comment on “market speculation”. A possible target for 2020 would make about a half-decade since Interswitch had announced going public. Experts believe various listings on NSE and LSE in 2019 including the dual listing of Airtel might have inspired the reconsideration to go public if it the news is true. Company Overview The payments-processing company has its business across three segments which are Transaction Processing & Enablement, Card Network, and Consumer Financial Services. As a Transaction Processor and Enabler, Interswitch operates as a leading third-party payments processor providing the infrastructure for facilitating payment processing, card acceptance, collection and disbursement across a broad range of online and offline payment channels. The company’s card scheme, Verve, has more than 19 million active cards which are the largest domestic card network in Africa. Also, Interswitch’s Quickteller is the technology through which it participates in the financial inclusion segment.

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