BusinessDay 19 Aug 2019

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news you can trust I **MONDAY 19 AUGUST 2019 I vol. 19, no 374 I N300

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Nigeria’s food insecurity to worsen on Buhari’s actions pronouncement on FX contradicts official food security policy

CALEB OJEWALE

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aize, banana, tomatoes, wheat, fish and almost every other primary food item one can think of are all brought into Nigeria and captured either officially or unofficially. In the latter case, the food items are said to be “smuggled”, and smuggling is done in massive quantities to meet the needs of a rapidly growing population estimated at 190 million.

The importation of food into Nigeria is not done as a matter of luxury or show-off but because there is acute food shortage,

Continues on page 45

According to the National Bureau of Statistics, in the first quarter of 2019, in terms of imports, agric products were valued at N236.33bn or 6.4% of total imports during the period.

190 million

Agriculture Promotion Policy 2016 figures

Required: 200 MILLION Produced: 140 MILLION 13.9M CHILDREN have stunted growth, 3.4M ‘wasted’ due to poor nutrition Required: 4.7MILLION MT Produced: 60,000 MT

Gas dispute: Creditors may go after Nigeria’s Eurobond custodian …FG urged to set up response team comprising CBN, NNPC, finance ministry, justice ministry …How former AGF’s inactions may cost Nigeria $9bn DIPO OLADEHINDE

No strategic food reserves for EMERGENCY

Required: 2.2 MMT Produced: 800,000 MT

Required: 2.7 MMT; Produced: 800,000MT BUSINESS DAY

Infographic: David Ibemere

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he Federal Government has been urged to set up a high-level crisis response team made up of Central Bank of Nigeria (CBN), Nigeria National

Continues on page 4

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news NNPC announces winners of its 2019/2020 DSDP arrangement ISAAC ANYAOGU

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he Nigerian National Petroleum Corporation (NNPC) has announced winners of its 2019/2020 Direct Sale of Crude Oil and Direct Purchase of Petroleum Products (DSDP) arrangement, whereby crude oil is swapped for petroleum products using middlemen.

The announcement, according to a release by Ndu Ughamadu, NNPC’s group general manager, Group Public Affairs Division, came after the completion of the 2019/2020 DSDP tender exercise, wherein 15 consortia/ companies made up of local and international companies emerged to undertake the 2019/2020 DSDP arrangement.

Some of the companies include BP Oil International Ltd/AYM Shafa Ltd; Vitol SA/ Calson-Hyson; TOTSA Total Oil Trading SA/Total Nig Plc; Gunvor International B.V/ AY Maikifi Oil & Gas Co Ltd; Trafigura PTE Ltd/A.A. Rano

Nig. Ltd; Cepsa S.A.U/Oando Plc, and Mocoh SA/Mocoh Nig Ltd. Others are Litasco SA/Brittania-U Nig. Ltd/ Freepoint Commodities; MRS Oil & Gas Company Ltd; Sahara Energy Resources; Bono Energy Ltd/Eterna Plc/ Arkleen Oil & Gas Ltd/Amazon Energy; Matrix Energy Ltd/Petratlantic Energy Ltd/ UTM offshore Ltd/Levene Energy Development Ltd; Mercuria Energy Trading SA/ Barbedos Oil & Gas Services Ltd/Rainoil Ltd/Petrogas Energy; Asian Oil & Gas PTE Ltd/Eyrie Energy Ltd/Masters Energy Oil & Gas Ltd/ Casiva Ltd, and Duke Oil L-R: Oluwatoyin Adegbite-Moore, executive director, West Africa; Yemi Cardoso, former Lagos State commissioner for physical planning; Kayode Fayemi, governor, Ekiti State ; Adeyemi Dipeolu, special adviser to the president on economic matters , and Company Incorporated.

Christian Jahn, executive director, Inclusive Business Action Network (IBAN), at the African Policy Road Show, themed, building “Under the DSDP ar- Robust Policies for Increased Social Investment and Inclusive Business in Lagos. Pic by Pius Okeosisi rangement,” the release said, the listed 15 “consortia/companies shall over the contract period offtake crude oil and in return, deliver corresponding petroleum products of equivalent value Analysts attribute the revinto the already squeezed percent. The broad market is LOLADE AKINMURELE to NNPC, subject to the terms enue pressure to weak conprofit margins of the consumer down 13 percent. of the agreement.”

The sector’s woes reflect sumer spending, occasioned goods companies,” said Ayoisted consumer weak company fundamentals by rising cost of living, pressure deji Ebo, managing director •Continues online at goods firms in Niat investment bank, Afrinvest on intensifying market com- on wages due to currency dewww.businessday.ng geria are feeling the petition and weak consumer preciation, increasing unemSecurities. heat of President “Some of their inputs are discretionary income. That has ployment, diminishing middle Muhammadu Buimported, so the FX ban would affected revenue growth even income and rising low income. hari’s directive to the central Whilst there is a fast-growmake it more expensive for as the weak economy looms bank (CBN) to freeze dollar ing market for consumer goods large over the sector. them to import raw materials, sales to food importers.

Nigeria’s population has in line with population growth, thereby raising production Since the curious directive costs for importers of items like grown at an annual average the implied price sensitivity of interest rates,” analysts at La- became public knowledge last wheat, barley, sorghum, and rate of 2.6 percent over the consumers has resulted to an gos-based investment house week Tuesday, an index on the we are not food-sufficient in last five years, but this has not increased preference for more Chapel Hill Denham said Nigerian Stock Exchange (NSE) these areas,” Ebo, who advises translated to similar revenue affordable substitute products. in a note to clients. “CBN’s which tracks listed consumer In response to this, some growth for consumer goods clients on stocks to buy, said. balance sheet policy will goods firms showed a 6 percent “Their stocks are selling off companies, with economic companies have introduced likely tighten to compensate decline to 510.63 points from because investors are preemp- growth also struggling to keep smaller product units at lower for higher risk premium and 545 points the week before, the tively worried over the negative pace with population growth. retail prices to better cater for lowest since December 2009, encourage foreign portfolio Save for Nestle, which re- the value segment. impact of higher production investors (FPIs) to roll over with big multinationals leading Aggressive competition costs on profitability and return corded an inflation-adjusted the slump.

The index was down maturing bills.” (domestic and imported) has revenue growth (CAGR) of 2.3 on equity, so it may fall further An estimated $16.4 billion 5 percent on Friday alone. percent from 2014 till date, the also continued to pressure in the coming weeks,” he said.

Nestle plc, the largest comThe downside of the di- other consumer names have prices across the brewery, pany on the index, was down rective by President Buhari recorded negative inflation- food, and home and personal 10 percent as at 2:30pm to (which three Senior Advocates adjusted revenue growth over care (HPC) markets. worth of OMO bills would N1,143 per share, Friday, from Buhari’s FX directive to the of Nigeria or SANs told Busi- the same period. mature between August and N1,270 the week before the CBN has been met with critiNigerian Breweries’ revnessDay was probably illegal) November. The four months directive. is the last thing consumer enue growth in that period cism. Lawyers say the 76-yearwould see the maturity of Unilever plc and Guinness was negative at -9.2 percent, old doesn’t have the constitugoods firms need at this time. debts above the annual aver- were also down 10 percent, The consumer goods sector Guinness saw a contraction tional right to issue orders to age of $3.1bn from July 2019 Friday, while UAC fell by as has had a year to forget in 2019 of 8.8 percent, while Unilever the CBN governor. to mid-year 2020, according much as 9 percent.

Analysts have also picked and was the worst performing and Flour Mills posted revenue “The FX directive from Buto Chapel Hill Denham anacontractions of 4 percent and index in the first half of the year, lysts. First Securities Discount hari, if implemented by the with a year-to-date loss of 16 1.4 percent, respectively.

Continues on page 45 House (FSDH) places matur- CBN, threatens to dip hands ing bills at over N9.6 trillion.

As of May, 37 percent of the bills are held by foreign investors.

“Only the portion of the reThe challenge for Africa’s Modestus Anaesoronye and Bala Augie shareholders’ fund will have merger and/or acquisition to to complement each other for scale through. tained earnings that qualified biggest economy, according Explaining components as distributable profit can be to analysts at Chapel Hill Denith the recent successful capitalisation.

The implication, there- of the new minimum capital capitalised,” Agbola said. circular released ham, lies in the large OMO The insurance market at by the National fore, is that while the very top requirement, Pius Agbola, maturities and anticipated Insurance Com- players with huge retained director, policy & regulation, the moment is immersed capital outflows, a build-up in crude oil inventory pressur- mission (NAICOM) detailing earnings may not necessarily NAICOM, said the paid-up in confusion as to what the ing price, and rising imports components of the new mini- shop for fresh capital, they will share capital and sharehold- actual status of various firms of goods and services which mum capital requirement for have to convert the qualifying ers’ fund have to comple- are, even as they prepare to part of their retained earnings ment each other, adding that submit their recapitalisation would affect current account insurance companies, top insurers earlier predicted to to paid-up shares to meet the a company could be okay in plan to NAICOM, having been balance. new capital requirement. shareholders’ fund and not given August 20 as deadline for Current account balance have scaled through the hurdle For mid-level and small okay in paid-up capital. In submission. as at Q1 2019, adjusted for may still not be there yet as they insurance companies, how- that case, the company would Chapel Hill Denham Limwill have to restructure part one-offs, was the lowest since ever, they have no option but ited, in a recent report, tabulathave to issue new shares and 2016 despite improvements in of their capital to be certified to raise additional capital can capitalise the realisable ed the capital components of successful. oil price and Nigeria’s producBusinessDay analysis of the through their shareholders, or part of the retained earnings insurance companies accordtion levels. regulator’s benchmark shows fresh investors, convert some for the purpose of meeting the ing to their line of businesses.

•Continues online at that qualifying capital and properties to cash or consider requirement.

•Continues online at

Consumer goods stocks slump to lowest since 2009

…as investors fear the worst over Buhari’s FX ban on food imports

Large maturing debts set to test CBN’s pro-growth resolve SEGUN ADAMS & ISRAEL ODUBOLA

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igeria’s Central Bank (CBN) has been forthcoming with its intention to boost the economy by encouraging credit creation and manufacturers to source raw materials locally, but the apex bank’s resolve will face its most stringent test over the next few months.

Large maturing open market operation (OMO) bills up until February next year present the central bank with two options: settle maturing bills or roll them over.

Godwin Emefiele, CBN governor, said in London last week that the bank would offer more OMO auctions to counter upcoming maturities

by September/October, but it remains to be seen how the pro-growth agenda would fit in the scheme of things.

The choice the bank makes has far-reaching implications as a significant chunk of maturing debts is held by foreign investors.

A run-off of maturing bills would impact external reserves and exchange rate stability.

On the other hand, the bank could risk jeopardising its efforts so far at stimulating economic growth if it raises rate higher to keep scarce dollars within the country.

“We think we (Nigeria) are already at an inflection point in terms of direction of

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ANALYSIS

Insurers seek capital restructuring to meet new NAICOM requirements

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news Gas dispute: Creditors may go after Nigeria’s...

Continued from page 1

Petroleum Corporation and Ministry of Justice in response to Nigeria’s major loss at a British court on Friday over $9 billion damages for failing to honour a contract.

According to stakeholders familiar with Nigeria’s economic situation, the aim of the high-level response team is to calm the nerves of foreign investors, as Process and Industrial Development Limited (P&ID), which won the judgment in London, might resort to going after Nigeria’s Eurobond custodian, a development which could deal a devastating blow to the credit rating of the country, derail the 2019 budget and plunge the economy back into recession.

According to sources, government agencies such as CBN, NNPC and Ministry of Justice need to speak with one voice and calm foreign investors who are currently jittery about the current development and also reassure them they are taking the right steps to resolve the matter as $9 billion is still under the government’s control with respect to Nigeria’s total assets.

Sources tell BusinessDay that the situation in Nigeria is not new as it is similar to what happened in the Republic of Congo in 2017.

Congo had a sovereign debt default after the latest coupon payment on its $363 million Eurobond was frozen amid a decades-old legal dispute over a $1 billion debt to a local construction company.

Stakeholders believe it was also foolish for Nigeria’s Solicitor General, Dayo Apata, to claim the current government inherited the situation from previous administrations because government is a going concern.

They add that the statement is making Nigeria a laughing stock among international community.

Foreign investors see the response from the permanent secretary, Federal Ministry of Justice, as “suicidal and unintelligently arrogant”.

Investors were quite surprised about government’s silence and denial of the matter since the issues first began only to start responding after the court had given its judgment.

Lawyers representing Nigeria, Africa’s largest economy, had argued that the arbitration award should not be enforced because it was “manifestly excessive and penal”, and that the UK

was not the right jurisdiction for the case.

Justice Butcher rejected the government’s arguments.

The Nigerian government has yet to make any payment, and “has not applied to set it aside in any jurisdiction”, according to the ruling.

Sources say the immediate past Attorney General of the Federation and Minister of Justice, Abubakar Malami’s uncharacteristic handling of the case may be why Nigeria has lost a $9 billion judgment.

BusinessDay recalls that P&ID had in 2013 won a $6.6bn arbitration case but that figure rose to $9bn when the estimate of what the company could have earned over the course of the 20-year agreement was calculated.

According to sources, portfolio managers all over the world are now in crisis/ emergency mode wondering how to manage imminent Nigerian default on Bonds and other debts service obligations.

Other sources believe the London court decision is expected to raise concerns among foreign investors and could deal a devastating blow to the credit rating of the country, which has in the last three years plus relied heavily on borrowing to sustain its annual budgets.

Already, under Buhari, Nigeria has grown its debt portfolio to $25.6 billion, statistics available from the Debt Management Office (DMO) show. In essence, the nation’s debt is about where it was in 2005-06, just before Nigeria benefitted from massive debt relief as part of a programme coordinated by the Paris Club, IMF, World Bank and the African Development Bank under the Olusegun Obasanjo administration.

Compounding Nigeria’s debt problem are its Nigeria’s significant contingent liabilities, such as the recent P&ID judgment, which have exposed the government to billions of dollars of liability.

“Perhaps most worryingly of all, the damage being done by a range of investor disputes where basic property and contractual rights are being violated seems to be on the increase,” said Shanker Singham, CEO of The Competere Group, a legal and trade advisory firm in London. “The erosion of Nigeria’s commitment to the rule of law is highly worrying, both from a political and an economic perspective.”

Singham estimates that www.businessday.ng

President Muhammadu Buhari (m); Gabriel Olonisakin (4th r), chief of defence staff; Tukur Buratai (4th l), chief of army staff; Sadique Abubakar (3rd r), chief of air staff, and other senior military officers, during a Sallah homage to the President in Daura, Kastina State.

the P&ID dispute will cause “a significant threat to investor confidence” if not settled.

“Is there the political will in a new Buhari government? It might just be more of the same,” said Singham.

Ayodele Oni, partner at Bloomfield Law Practice and a doctorate degree holder in Energy Security, said the implementation of the London ruling will depend on the contractual regime as many countries have sovereign immunity, so it’s difficult to take assets.

“However, if the contract Federal Government signed with the P&ID says the contract outweighs its sovereign immunity, then P&ID can take Nigeria assets,” Oni said.

Oni explained that in cases like this, the affected parties would like to take Nigeria’s assets in foreign land. However, he is sure government would be able to negotiate with P&ID and find a commercial position on this matter.

“Nigeria’s chances are very weak,” an experienced lawyer close to the proceedings told BusinessDay. Lawyers representing the Nigerian government argued the award should not be enforced because England was not the correct place for the case, and even if it were, the amount awarded was “manifestly excessive”.

Justice Butcher, the Judge of London Court rejected these arguments and said he would “receive submissions from the parties as to the precise form of order appropriate”.

“The London judgment means a lot of investors dealing with Nigeria will start to internationalise their contracts, and make it beneficial under international bilateral treaties,” Oni told BusinessDay. Another court case against FG Another court case Malami’s lackadaisical attitude is costing Nigeria is the

Mambilla power project in Taraba State. The Federal Government is at risk of a $2.3 billion fine in arbitration over an alleged breach of contract for the $5.8 billion Mambilla power project with Sunrise Power and Transmission Company Limited (SPTCL).

The project, a 3,050-megawatt hydropower facility, stalled owing to legal and funding crises. SPTCL, which claimed to have been awarded the Build, Operate and Transfer (BOT) contract in 2003, has dragged the Federal Government and its partners before the International Chamber of Commerce (ICC) in Paris, France.

Although the fines emanated from the contractual actions of three previous administrations – the Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan regimes – so far, these two disputes alone have easily led to more than $11 billion in international legal awards against the Buhari government.

“The last four years, Malami constituted himself as the ‘barrier-in-chief’ to the President’s corruption campaign, failing to provide much-needed leadership, frustrating several highprofile corruption cases, blocking requests for international cooperation for the prosecution of high-profile cases and frustrating civil society’s effort to elicit compliance with the Freedom of Information legislation,” said a coalition of 11 civil society groups called SAY NO CAMPAIGN NIGERIA. The coalition of 11 civil society organisations expressed utter disappointment in the nomination of Abubakar Malami for a ministerial position in President Buhari’s second-term administration.

“We are convinced that with Malami as minister, in whatever capacity, the fight against corruption is doomed,” the group said.

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A settlement ignored According to sources, Nigeria could have paid less than 10 percent of the $8.9 billion award if the present administration had acted in line with the recommendation passed to it by the former President Goodluck Jonathan.

Sources familiar with the case said a government negotiation team constituted by former President Jonathan successfully negotiated an out-of-tribunal settlement with P&ID and got the company to accept an $850 million payment, about 9.6 percent of the $8.9 billion award.

At the end of negotiations on November 20 and 21, 2014, a government team recommended the payment of $1.5 billion to P&ID. However, former President Jonathan asked the team to press for re duction of the settlement amount. The team then achieved a further concession to about $1.1 billion to allow for taxes, salaries and other remunerations to P&ID workers if the contract agreement had been executed.

On April 29, 2015, P&ID agreed to the government’s final proposal to pay $850 million to settle the matter once and for all. Although the government expressed discomfort over the $850 million settlement, wishing it was about $500 million or less, a payment schedule was agreed. Initial payment of $100 million was to be made immediately after the Deed of Settlement is signed by the two parties.

However, the present administration ignored that settlement and rather asked its lawyers to return to the tribunal to further contest the engineering firm’s claims.

“President Jonathan reasoned that since his administration was already a few days away from its exit on May 29, 2015, it was proper not to approve the payment @Businessdayng

of $850 million to avoid unnecessary suspicion,” one lawyer who was close to the case said, asking not to be named because of the sensitivity of the matter.

Arguments of P&ID In January 2010, P&ID submits that it entered a gas supply and processing agreement with Nigeria’s Ministry of Petroleum Resources to build a gas processing plant in Calabar, Cross River State. Pursuant to the agreement, P&ID claims that it would build the necessary facilities and then refine natural gas into non-associated natural gas for a period of 20 years.

The natural gas would be used by Nigeria to power its electrical grid. Nigeria was to supply P&ID with all necessary pipelines, related infrastructure and agreed-upon quantities of wet gas, at first 150 million, and eventually, 400 million standard cubic feet (SCF) per day for a 20-year period at no cost.

P&ID alleges that Nigeria failed to secure the agreedupon quantity of gas and failed to complete the construction of the infrastructure and as a result suffered a loss of 20 years’ worth of profits from the potential sale of natural gas liquids.

After series of failed negotiation attempts, P&ID commenced arbitration against Nigeria and the Ministry of Petroleum Resources in London.

Nigerian government’s reaction to the ruling Dayo Apata, Solicitor General of the Federation and permanent secretary, Federal Ministry of Justice, said the Federal Government’s counsel has been instructed to pursue an appeal on the judgment of the English Court dated 16 August, 2019 and at the same time seek for a ‘stay of execution’ of the said judgment.

“In view of the above, please be informed that the Federal Government of Nigeria is making vigorous efforts to defend its interest in this matter and would not relent in exploring every viable option in doing so,” Apata said in a statement.

Malami, then Nigeria’s Attorney General (AGF), had said in May that P&ID never began the construction of the project facility, although the company claims it incurred about $40 million in preliminary expenses.

“It is entirely proper for Nigeria to raise and to strongly assert all available and proper defences to the claims brought by P&ID,” Malami said in May 2019.

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news Innovation seen to boost 41.5m MSMEs as demography offers opportunity …Unity Bank wants MSMEs to see opportunity in challenges Gbemi Faminu

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xperts want 41.5 million micro, small and medium enterprises (MSMEs) to leverage technology and innovation to grow their margins.

They say the country offers opportunity for growth, with a population of 200 million, 60 percent of whom are young and tech-savvy people aged below 17.

At the maiden edition of SME quarterly clinic organised by BusinessDay to support MSMEs, weekend, experts advised entrepreneurs to incorporate innovative strategies to keep up with the various form of competitions in business.

“To leverage opportunity, you need technology and innovation,” said Edmond Idokoko, chief marketing officer at Microsoft MEA Emerging

Markets (West Africa).

“You have to put your businesses in the light of problems people have,” he added, while speaking on theme, ‘Branding and marketing a strategic tool for business success.’

The event was held in conjunction with Microsoft Corporation, Unity Bank, and Signal Alliance.

He explained that there are distractions in the busi-

ness environment that affect entrepreneurs, advising entrepreneurs to focus on a particular thing and achieve feats with it.

“We need to redefine our business by examining what we sell,” he said.

“AirBnB sells choice, and Uber sells convenience.

What then do entrepreneurs sell?” he queried.

He noted that MSMEs need to redefine their busi-

nesses and competition, while ensuring they know their audience and be ready to work towards achieving their goals in the business environment.

He said the major problems of entrepreneurs are not funds but the ideas and the determination to keep up with the business.

He advised entrepreneurs to leverage available platforms provided by vari-

ous companies to achieve their goals.

Opeyemi Ojesina, head, personal &SME banking, Unity Bank, said SMEs are economic catalysts who contribute to the growth and development of the economy as they constitute 96 percent of the business community and provide 84 percent of employable jobs.

Ojesina said that every entrepreneur should have the mindset of solving problems before establish-

MeDrive trains journalists on sensitive and conflict reporting SEGUN ADAMS

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eDrive, an organization that offers training on storytelling and the use of technology to advance media advocacy, has trained Nigerian journalists and media practitioners on sensitive and conflict reporting.

The training which held on Thursday, August 15, in Lagos, focused on the need for fact-based and responsible reporting whilst equipping participants with relevant skills for telling impactful stories.

The public places trust on the media to report factual news and tends to accept the stories that are told by journalists and reporters. According to Wemimo Adewuni, founder of MeDrive, there is, therefore, a burden on the media to tell stories in an objective and non-divisive way.

The need for a careful approach to reporting sensitive news and conflictbased events is crucial especially in Nigeria where crisis usually have their root in ethnic and religious matters.

At the one-day training, media practitioners across different outlets and states were engaged in a practical session where step-by-step approaches to fact-checking reports and identifying fake news was taught. www.businessday.ng

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ing a business, adding that beyond the passion for establishing enterprises, they must solve problems and be competent enough to handle challenges.

“Before becoming an entrepreneur, ask yourself, why are you establishing the business? Are you competent enough to handle it? Furthermore, you have to develop your expertise, make effective planning, study the trend and move with it.”

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EDITORIAL The trouble with revolutions 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 GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai COPY SALES MANAGER Florence Kadiri DIGITAL SALES MANAGER Linda Ochugbua

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udan’s revolution, like many others before it, seems to have been brutally halted by a rapacious military industrial complex that will not allow democracy to take root or thrive.

After the overthrow of long-term dictator, Omar alBashir, the military stepped in, and by using brute force, wide-scale murder, diplomacy and deception, cajoled civilian leaders to agree to a three year transitional government beginning from September 1 to 2022 when elections will be conducted.

Although the formal agreement says it is a joint civilian and military council, in reality, the military remains firmly in charge. Like a leader of the revolution lamented, “We still have not achieved what we are fighting for... Al-Bashir is not there, but the regime itself is still there. Objective one has not been achieved. Objective two has not been achieved, which is a civilian government. It’s

like having a diversion in the middle of your journey.”

It is not surprising that Sudan’s military was able to arrest and reverse the country’s revolution. Its ability to suffocate the country’s democratic movement is taken from the playbook of intransigent militaries that have ensured and overcome revolutions the world over. But even in Africa, it has many examples to learn from.

Since 2010, Africa has witness a spate of social uprising or revolutions as some would call them. But in virtually all the places where those revolutions have taken place, bar Tunisia, the revolutions have come full circle with the military’s thwarting the revolution and stepping in to reassert control. Egypt is a classic example.

Haven successfully overthrown long-term ruler, Hosni Mubarak and elected a civilian ruler, Muhammed Morsi.

Egyptians thought they had successfully caged the military-industrial complex that had ruled the country from in-

ception. Although Morsi took care to retire the top echelon of the military that may threaten his rule and the country’s democracy, and promoted a relatively junior officer, Abdel Fattah El-Sisi to army chief, it did not take long for the military industrial complex to rear its head again.

At the earliest opportunity, El-Sisi threw Morsi out and re-established control of the military. This time, the military made sure it gave no room for dissent and dealt with dissenters summarily.

Morsi’s Moslem Brotherhood that had existed in operated on the fringes of Egyptian society from time has been outlawed, its leaders and key members killed or imprisoned. Sadly, Morsi died in detention some months back. Ditto with Algeria.

The Sudanese protesters hoped theirs may not go the way of Egypt or Algeria, but it seems the military is having its way.

Nigeria used to have such military industrial complex where the military sees itself as

guardians of the nation not just in security terms, but in the Platonic sense of being entitled to rule. Nigeria owes a debt of gratitude to former President Olusegun Obasanjo, a former military dictator himself, for retiring hundreds of serving but politically exposed military personnel. In one stroke of the pen he exorcised that complex out of the Nigerian military that has somewhat curbed the penchant for coup d’état. It has allowed Nigeria to enjoy over 20 years of uninterrupted democracy.

Perhaps, the reason why revolutions in Africa are easily reversed is because they are not driven by any ideology other than discontent with the government in power.

Revolutions that succeed are inevitably driven by a strong ideology that binds revolutionaries together and make them forge ahead even in the face of mortal danger, until their goals are achieved.

For now, after the deaths of hundreds or even thousands in the hands of killer soldiers, Sudan is back to where it started.

GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan

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

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At the mercy of thieves, bandits and incompetents (1)

BASHORUN J.K RANDLE

M

rs Christine Lagarde, the Managing Director of International Monetary Fund is an amazon not only on account of her excellent grasp of complex economic and financial matters (even though she trained as a lawyer but nevertheless served as Minister of Finance in her native France) but also for her down to earth attitude. She has no false airs whatever. Regardless of the male dominated environment in which she operates, she confidently holds her head up amongst Royalty, Presidents, Prime Ministers, the Pope, Archbishops, Chief Imam, etc.

Regarding the avalanche of petitions she has been receiving from Zimboda, she has adopted a very cool and calm poise (and posture).

The first salvo was launched by the irrepressible and cerebral Otunba Lateef Owoyemi, Past President of the Institute of Chartered Accountants of Nigeria.

Owoyemi delivered the following pungent audit report, “What Professor Wole Soyinka is saying is that people should rise up and upturn their oppressors and pillagers of their common wealth. Unfortunately, we are already seeing uncommon times (and signs) of revolt against the established order. I agree that we each have different perspectives of the challenges facing Nigeria. All I see coming is a massive people’s revolution, north,

south, west and east of Nigeria unless all those in privileged positions in Nigeria quickly change their ways.”

In acknowledgement of her terrific sense of humour, the Ambassador for Zimboda sent her the following cartoon, “When I die, I will hold the Nigerian flag so that Jesus will know that I have passed through hell already. I don’t need to go to hell again.”

However, it was French President Emmanuel Macron who fired the following missile, “With a family that has seven, eight children in Africa, even if you invest billions, nothing will change, because the challenge of Africa is civilizational.”

This provoked a huge atomic bomb from the Guinean sociologist, a professor at the Ahmadou-Dieng University of Conakry, “Africans do not need your debauched civilization. Because with your civilization: a man can sleep with a man; a woman can sleep with a woman; a single president can have two mistresses at a time; a woman can sleep with her dog; a child can insult his father and mother without problem; a child can imprison his parents.

With your civilization, when parents are getting older, they are taken to the retirement home, and finally, with your civilization, a young man can live with a woman who is his mother’s age or his grandma without problem. Your case is a perfect illustration that Africans have no civilization lesson to receive from people like you!”

Christine Lagarde subscribes to Nelson Mandela’s prescription for leadership, “Lead from the back and let others believe they are in front.”

She is so confident and self-effacing that almost on a daily basis she walks from her home in Washington DC to her office which is close by at 700 19th Street, N.W., Washington,

DC 20431. She always says “hello” in return to all who come across her path right up (or down) to junior staff of her organisation. She does a hell of a lot of travelling all over the world but she is always impeccably turned out and her poise is flawless.

Regardless of whatever part of the world she is, Christine Lagarde is always in touch with her office. She got a severe jolt when the following report landed on her desk from the front page of The Guardian newspaper of June 19, 2019: UK WARNS AGAINST TRAVEL TO 21 STATES IN NIGERIA. The story read, “The Foreign and Commonwealth Office (FCO) of the United Kingdom has cautioned British nationals against travelling to 21 states in Nigeria. In a statement on its website “updated June 17, 2019” and “still current at June 18, 2019,” the FCO listed the states as Borno, Yobe, Adamawa, and Gombe, “riverine areas of Delta, Bayelsa, Rivers, Akwa Ibom and Cross River states, and within 20 kilometres of the border with Niger in Zamfara state.

“The FCO advises against all but essential travel to: Bauchi State, Zamfara State, Kano State, Kaduna State, Jigawa State, Katsina State, Kogi State, within 20 kilometres of the border with Niger in Sokoto and Kebbi States, non-riverine areas of Delta, Bayelsa, Rivers State and Abia state.”

It stated further: “Terrorists are very likely to try to carry out attacks in Nigeria. Most attacks occur in the north east, particularly in Borno (including central Maiduguri and along access routes connecting the city to other major towns and along the Niger border, including in Damasak), Yobe, including the eastern LGAs bordering Borno State both north and south of the Damaturu road), and Adamawa states.

There have also been significant

‘

…dozens of women in black dresses protested against the killings of their husbands and children yesterday in Jalingo. Some of the women who spoke to The Guardian questioned why the federal and state governments were taking so long to restore sanity

attacks in Gombe, Kano, Kaduna, Jos and Bauchi states and in the Federal Capital, Abuja. The terrorist threat across eastern Yobe and Borno State is high, with frequent recent attacks.

Terrorist groups carried out attacks in north east Nigeria during the February 2019 election period, and further attacks are likely. We continue to advice against all travel to Borno and Yobe States.”

Meanwhile, persons posted to Taraba State for the National Youth Service Corps (NYSC) programme yesterday expressed fear over the wave of violence ravaging parts of the state.

Participants in the scheme had been expected to report to camps nationwide latest midnight yesterday.

But in Jalingo, the Taraba state capital, the location – barely a kilometre from the troubled communities – violence is sending shivers down the spine of many of the youths.

Thirteen persons were reportedly killed during fresh attacks in ArdoKola and Donga Local Government Areas of the state on Monday night.

Houses and cars were also razed during the onslaught blamed on herdsmen.

A curfew is currently in place as the state swoons under the burden of ethnic conflicts and raids by armed herders. This was as dozens of women in black dresses protested against the killings of their husbands and children yesterday in Jalingo. Some of the women who spoke to The Guardian questioned why the federal and state governments were taking so long to restore sanity.

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Corporate Governance Evaluation – Principle 15 of the Nigerian Code of Corporate Governance

I

n addition to the performance evaluation of the Board, the Nigerian Code of Corporate Governance, 2018 recommends an annual corporate governance evaluation.

Essentially an audit of the Company’s governance standards, practices and processes that will review and attest to compliance or otherwise with the provisions of the Code.

The Code recommends that this be undertaken annually and at least every three years by an external consultant. The annual review can be undertaken internally by the Company Secretary. However, to ensure that the independence of the in-house Company Secretary is not compromised by an assessment of the Board to which he/she reports, using an external consultant to undertake the audit along with the annual Board evaluation may be expedient.

A summary of the report of the evaluation is to be included in the Company’s annual report and on the investors’ portal.

The Corporate governance evaluation or audit is a robust assessment of the effectiveness of the Company’s governance structure benchmarked against best practice as enunciated in the Code. The review will encompass Board and Committee oversight as well as a review of executive management to evaluate leadership effectiveness. The review will seek to ascertain to what extent the behavior of executive Management aligns with or reinforces governance principles agreed at Board-level

(Deloitte – Auditing Governance).

The scope of the corporate governance evaluation will include an assessment of the Company’s legal entity structure, governance framework, roles and responsibilities of those within the governance framework, leadership, culture, strategy, risk management, separation of power, clarity of reporting lines, delegation of authority policies, internal control, remuneration, communication with regulators, etc. To ensure that the audit is effective, the approach should be one of assessing impact and output of the adopted practices, policies and procedure.

In terms of methodology, similar, to the Board performance evaluation, the Corporate Governance Audit will entail a review of documents, administration of surveys, observation and benchmarking. Policies on risk management, whistleblowing, internal audit, insider trading, conflict of interest, remuneration and communication often demonstrate how the Company has implemented code provisions. However, observing the proceedings of a Board meeting for example will provide clearer insight on how the Board handles conflict of interest issues.

Governance is important for the sustainability of value creation. The evaluation process measures the effectiveness of governance by auditing not only financial performance, but other lead indicators like www.businessday.ng

compliance, risk appetite, the tone at the top, middle and bottom, etc. An outstanding financial performance could sometimes be linked to excessive risk-taking, resulting in superlative performance during a particular period which may not be sustainable and may indeed be eroded over time. A robust evaluation of the Company’s governance ensures that the appropriate oversight designed to ensure long term sustainability is indeed in place and functional.

The Nigerian Code of Corporate Governance adopts a principle-based approach in specifying minimum standards of practice that companies should adopt. Thus, the philosophy is one of ‘Apply and Explain’ which requires the application of the principles and an explanation as to how the principles have been applied, given the peculiarity of each entity. Practices recommended in the Code are scalable to suit the type, size and growth phase of each company while achieving the outcomes envisaged by the principles.

Hence, corporate governance evaluation must be conducted within the context of the peculiarities of each Company and a “one size fits all” approach. To be effective, the consultant must have a clear understanding of the industry and recognize what “good governance” looks like.

Corporate governance is the system by which organisations are directed and con-

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BISI ADEYEMI trolled. It encompasses the relationship between the Board of Directors, Management, shareholders and other stakeholders, and the effects on corporate strategy and performance. Corporate governance is important because it looks at how these decision makers act, how they can or should be monitored, and how they can be held to account for their decisions and actions. It is thus imperative that a periodic soundcheck is undertaken to ensure that the system continues to function as intended, that gaps are identified and bridged as required and that higher standards are set and attained in the long-term interest of the enterprise.

Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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The yawning gap in Dangote Industries Limited

PATRICK ATUANYA

D

angote Industries Limited (DIL) is the largest industrial conglomerate in Nigeria, by far. A holding company controlled by Africa’s richest man, Aliko Dangote, DIL has operations across every major segment of Nigeria’s $440 billion economy.

DIL’s businesses include Cement manufacturing, Sugar refining, Salt refining and seasoning, Flour and Semolina (about to be acquired by Olam for N120 billion), Pasta processing, Packaging, Real Estate, Port operations, Beverages (bottled water and juice production), Transportation and logistics/ haulage, refining and petrochemicals, Fertilizer, Agriculture, Infrastructure construction, Automotive assembly and oil and gas pipeline infrastructure.

Dangote Cement (DANGCEM) which is listed on the Nigerian Stock Exchange (NSE), with a market capitalisation of $8 billion (N2.93 trillion) is the current jewel in the crown of DILs industrial empire.

However DANGCEM, which boasts of assets such as the 13.3 million metric ton per-annum (mmtpa) capacity Obajana cement plant, the largest in Africa, will soon begin to play second

fiddle to a new mega project by DIL. Set to be completed in 2020, on more than 6,700 acres of former swampland in the Lekki axis of Lagos, which needed to be extensively sand filled, DIL is constructing a Fertilizer plant capable of producing up to 2.8 million metric tons of urea a year and petrochemical complex valued at $5 billion, plus a 650,000 barrel per day oil refinery at a cost of $12 billion.

The projects are set to be highly transformative for Dangote Industries’ (and by extension Nigeria), and would catapult DIL’s annual revenue to $30 billion, from about $4 billion, or roughly 6.8 percent of Nigeria’s gross domestic product (GDP).

However there remains a yawning gap in the industrial conglomerate, which Dangote and DIL would need to fill for the sake of the future growth of the company and perhaps Nigeria.

DIL has to be prepare to be a part of the knowledge-based future where new technology, cloud computing, big data, artificial intelligence, driverless cars, nano technology and quantum computing will change the face of industry globally and disrupt firms unwilling to adapt.

The move to a digital world has led to the emergence of large and dominant Tech companies or FAANGs (Facebook, Apple, Amazon, Netfilx, and Google) that continue to grow at a rapid pace.

At the same time, big industrials (General Electric, Caterpillar) are struggling to grow.

18 years ago in the year 2001, the top 5 largest publicly traded companies in the world were: 1)

General Electric ($406bn), 2) Microsoft ($365bn), 3) Exxon ($272bn), 4) Citigroup ($261bn), 5) Walmart ($260bn).

Then you had an industrial conglomerate (just like DIL), in GE topping the list, one tech company, an oil and gas firm, a financial and a retailer.

Today (2019), the largest companies in the world are Microsoft ($1.03 trillion), Apple ($932.7 billion), Amazon ($889 billion) Google ($819.2 billion), and Facebook ($523 billion).

As can be seen they are all Technology firms and all American (but that is a story for another day).

Globally most com­panies don’t invest enough in cutting-edge research and development or technology to compete with the rest of the world.

This is a particularly acute problem in Africa, especially Nigeria, where Research & Development expenditure was equivalent to just 0.2 percent of GDP in 2018 or $1.37 billion, compared to South Africa’s 0.8 percent of GDP and expenditure of $5.48 billion.

The little R & D spending in Nigeria is done mostly by Government and Universities, according to data from the UNESCO institute for Statistics.

In South Africa, Businesses account for 45 percent of R&D spending at $2.4 billion.

As Dangote sets out to expand DIL’s empire from its humble food and beverage and cement beginnings, one advantage he has is that he can keep re-investing profits and

‘

Globally most com­panies don’t invest enough in cutting-edge research and development or technology to compete with the rest of the world

pumping money back into businesses owned by DIL or buying new ones.

This is where a ramp up in R&D spending on Technology and the innovations that will shape our world in the coming decades would be of immense benefit to DIL, as well as Nigeria.

DIL may also consider acquiring cutting edge Technology firms in which it can fund research into new products.

Dangote could achieve this by embedding a Technology or innovation division the parent company, similar to googles X Labs or the Koch Industries Koch Disruptive Technologies, whose mandate often is to come up with (or acquire) technologies that will disrupt large sectors in the coming future, rather than satisfy the short-term demands of shareholders.

In a recent interview Dangote acknowledged the heavy weight on his shoulders as he seeks to industrialise Africa’s most populous nation, and the continent “Nobody can actually sit in Dangote Group and take the kind of risk that I can, because I’m the owner. My real job is to see how do I transform Nigeria and Africa and to take this kind of risk.”

It is perhaps time to also consider investing a tiny bit of the huge free cash flow that DIL generates annually by betting on innovations and Technologies that will define the next 100 years for Africans and mankind as a whole.

Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

Are we a post-oil state?

W

e all know the Nigeria government revenue story. Back in the days regional governments had a diverse revenue mix with the governments mostly dependent on customs and trade taxes and broader taxes on agriculture. In the 1970s crude oil income grew rapidly to dominate all other sources of government revenue. In 1989 crude oil revenues accounted for almost 85 percent of all federally collected revenues.

However, it wasn’t just that crude oil revenues rose rapidly, but the crude oil industry dominated all other economic activity. Between 1973 and 1979 the oil rents from the crude oil industry rose from 1.6 percent of GDP to 38.55 percent of GDP, the highest it has been in Nigerian history.

And of course, the oil industry is peculiar because the government directly captures a large part of the value compared to say agriculture or services. In that historical scenario the political question was not how to collect taxes but how to share this newfound wealth. Just like that the Nigerian Petro-state was born. In 1989 federally collected revenues amounted to 25.3 percent of GDP, most of it from crude oil income; a strong Petro-state, at least as far as finances were concerned.

Unfortunately, or maybe fortunately, things have changed since then. And the changes should not have been too surpris-

ing. On the one hand crude oil production has remained mostly fixed at around two million barrels per day. There have been price swings that have had impacts on actual revenue but in general Nigerians were sharing roughly two million barrels per day in 1980 and are still sharing roughly two million barrels per day today.

On the other hand, the country hasn’t stopped growing. Population has grown leaps and bounds since the 1970s. In 1980 we had an estimated population of 73 million people. The estimated population in 2018 was about 195 million. So, we have more than doubled, but are still sharing two million barrels of oil.

The economy has grown as well. In 1980 we had a GDP of about $64bn while in 2018 we had a GDP of $397bn, with the growth driven mostly by other activity besides crude oil. The implication has been that the share of crude oil rents to overall economic activity has been getting smaller and smaller. In 2017 it was only just over six percent of GDP. So, what has happened to the political Petro-state whose previous concern was to share oil rents?

Sarah Burns and Olly Owen, both at the Oxford Department of International Development, try to get at that question in a new working paper published recently.

From a public finance perspective, the question is how well the government www.businessday.ng

has done in transitioning from crude oil revenues to other revenues. This question is complicated since beyond the federal government, there is sparse information on what the other levels of government collect in taxes. State government revenues are now more readily available but local government internally generated revenues are still largely a black box.

Still, they find that the transition is well underway. In 2015, for the first time since the 1970s, the federal government actually raised more revenue from non-oil sources, and as at 2016 oil income only accounted for 47 percent of its revenue; you probably have to consider the impact of the negative oil price shocks and the disruptions to oil production which happened during that period. Regardless, in terms of government revenue, crude oil is becoming less and less relevant.

Unfortunately, as crude oil has become less relevant, the Nigerian government has become less relevant as well. At least if we define relevance as the amount of taxes it collects relative to the size of the economy.

Since the start of the new millennium, the federal government’s tax-to-GDP ratio has been slowly declining albeit with a few blips along the way.

In 2016 it was just over six percent of GDP. That would make it one of the weakest central governments in the world. If

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you include state revenues the tax to GDP number rises by about two percentage points but it is still very low. The trend is also still declining with the governments getting weaker and weaker relative to the size of the economy.

The trajectory is clear. The Nigerian economy is less and less of an oil economy in terms of its structure, but the government is lagging behind, the political economy of oil rent sharing behind even further. How will we transition to a new non-oil tax driven political economy? That question is yet to be answered. You can read the full paper titled “Nigeria: No longer and oil state” online. It is free to read.

Dr. Nonso Obikili is Chief Economist at Business Day.

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Is Buhari a socialist or just a ‘pro-poor’ demagogue?

T

here is an interesting debate about whether or not President Muhammadu Buhari is a socialist. In a recent article in this newspaper, Gregory Kronsten questioned the description of the president as a socialist. “Where is the progressive taxation regime that marks socialism?” he asked. “Where is the social safety net that such a regime funds?”

While conceding that Buhari’s economic approach “is not free market”, Kronsten posited that the rationale for his administration’s statist programmes such as the oil subsidies “is less socialist than ‘pro-poor’”. This is fascinating, and, as someone who has often called Buhari a socialist, I would like to join the debate: Is Buhari a socialist or not?

But before coming to that, allow me to slay some shibboleths about socialism. Contrary to Kronsten’s assertion, progressive taxation and welfare spending do not quintessentially define socialism. What does is the stifling of free market. According to the Encyclopaedia Britannica, “socialism is a doctrine that calls for public rather than private ownership or control of property and natural resources”. Thus, socialists want to own, control and

regulate economic resources rather than allow markets to allocate them.

Of course, a high-tax, high-spend regime can also indicate socialism.

But progressive taxation and social spending are not totems of socialism. If they are, then the Scandinavian countries, such as Sweden and Denmark, would be socialist. Tax revenue and social spending as shares of GDP are relatively high in the Nordic countries; for instance, they are 46 percent and 28 percent, respectively, in Denmark, compared with 27 percent and 20.7 percent in the US, according to the OECD. What about the UK? It has a large welfare budget and spends heavily on public services, particularly the National Health Service, NHS, which is free at the point of use. The last Conservative government under Theresa May budgeted £34bn for the NHS, and the current Tory government under Boris Johnson has announced additional £1.8bn!

Yet, Denmark and Britain would vehemently reject any suggestion that they are socialist countries. Indeed, in 2015, the then Danish Prime Minister, Lars Rasmussen, a right-of-centre politician, said bluntly that Denmark was not a socialist state. “The Nordic model is an expanded welfare state which provides a high level of security to its citizens”, he said, adding: “but it is also a successful market economy.”

And Boris Johnson recently said: “Like every penny of public spending, NHS funding derives from a strong and dynamic market economy”. Continuing, he said: “The Conservatives understand the balance and symmetry at the heart of the UK: between wealthcreating forces of the free market on the one hand and great public services on

the other.”

So, here is the point. Most governments recognise the need to tackle poverty and inequality with more spending on social safety net and public services, but the question is: What’s best way to generate prosperity in a society? Is it through a competitive market economy or through social control of resources?

Well, socialist governments believe strongly in social justice, in tackling poverty and inequality, but not with the same passion in economic efficiency.

They prefer statist or government-led approach rather than trusting freemarket competition to generate growth and prosperity. They are happy, for instance, to create public sector jobs rather than engendering the environment for increased private sector growth and jobs.

By contrast, in a market economy, the fundamental premise, as Rasmussen and Johnson said, is that a strong and dynamic economy is the goose that lays the golden eggs. It is economic growth, propelled by a robust and flourishing private sector that creates the jobs and generates the taxes which enable a government to spend money on social safety nets and public services. So, what defines socialism is not necessarily progressive taxation or social spending, but a government’s attitude to free market, to individual freedom.

Thus, for instance, while Denmark generates high tax revenues and spends a lot on social welfare, it does very well on measures of market regulation and state control. According to the latest OECD data, Denmark’s score on market regulation is 1.2, where 0 is least regulated and 4 is most regulated. On

‘

Is Buhari socialist or not? Of course, he is! As a military head of state in the mid-1980s, he pursued unremittingly socialist policies…

[He is] an infrastructure socialist, favouring debt-fuelled infrastructure projects

state control, its score is 1.9, where 0 is least control and 4 is most. Furthermore, Denmark’s business freedom score is 92.5 percent, while its property rights score is 84.8 percent, according to the World Bank.

So, what about Nigeria? Well, let’s start with taxation and spending.

Surely, with government revenue at 6 percent of GDP in 2017, the lowest in Africa and with government spending at 8 percent of GDP, extremely low by world standards, Nigeria is certainly not a high-tax, high-spend country. But does that make it less a socialist country? No. It simply means that it lacks the capacity to generate taxes and, thus, the wherewithal to spend on basic services.

I mean, take taxation. Wouldn’t it be better if Nigeria could raise more taxes from the wealthy billionaires who made their money through crony capitalism but pay miniscule taxes? What about spending? For a start, the $2bn spent annually on the fuel subsidies could be better spent on public services, such as schools and hospitals. But that won’t even be enough. Wouldn’t it be great if no Nigerian ever dies because he or she can’t afford the hospital bill? And if no Nigerian child is denied a good education because his or her parents can’t pay a school fee? Sadly, Nigerians are denied even basic amenities.

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng

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

Nigeria’s insurance sector and the quest for recapitalisation

T

he National Insurance Commission (NAICOM), the regulator of Nigeria’s insurance industry, in a 20 May 2019 circular reviewed upwards the capital requirement of insurance companies in Nigeria. The Insurance Act empowers NAICOM to increase the minimum paid-up share capital of insurance and reinsurance companies from time to time. Although this recent upward review does not affect Islamic insurance (takaful) and micro-insurance companies, it covers the four major classes of mainstream insurance companies in Nigeria which include; life, general, composite and reinsurance.

Life, General, Composite and Reinsurance companies with previous minimum capital requirements of N2bn, N3bn, N5bn and N10bn were reviewed upwards to N8bn, N10bn, N18bn and N20bn marking percentage increments of 300 percent, 233 percent, 260 percent and 100 percent respectively.

As per the guidelines in the circular, existing insurance and reinsurance companies, have until 30 June 2020 to comply with the new capital requirement while new applications will be evaluated based on the new capital requirement.

Typically, increment in capital requirements are met in any of three ways: mergers, acquisition or direct injection of funds and each of these methods come with their own set of challenges. Hence, the onus is on the insurance companies to critically evaluate the feasibility of each of the option in order to determine their most viable action step.

In a follow-up circular of 23 July 2019, NAICOM directed all the affected insurance and

reinsurance companies to submit details of their recapitalization plan to the commission for review on or before 20 August 2019. Their submissions are to include, amongst others, board resolution on how to comply with the directives, detailed plan on how the funds for the recapitalization are to be sourced with timelines and deliverables, etc.

This certainly adds a bit of complexity as insurance companies that are yet to formulate how they intend to boost their share capital now have less than one month to decide on their recapitalization strategy.

This hike in the required minimum share capital is arguably an attempt to mirror the success of the upward review of the capital requirement of commercial banks in 2004, from N2bn to N25bn, which led to the mergers of banks and ultimately resulted in the stabilization of Nigeria’s banking sector.

However, this is not the first time that a recapitalization of the insurance sector has been proposed. In August 2018, NAICOM sought to increase the minimum share capital for life, non-life and composite insurance companies via its Tier Based Solvency Capital Policy (TBSCP). The policy was withdrawn after some shareholders of the insurance companies filed a suit against NAICOM for its insistence on implementing the policy.

On 16 April 2019, the lawsuit was struck out by the court after the plaintiff (the shareholders) applied to withdraw the suit on the basis that it had been overtaken by events and this was not opposed by the defendants (NAICOM). Hence, the new policy is not in breach of the injunction as the case has been voluntarily dismissed. www.businessday.ng

On announcement of the new capital requirements, some shareholders of the insurance companies have once again kicked against this new hike, the proposed implementation deadline, is too short, they argue.

According to the Chairman Emeritus of the Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, “anywhere in the world, 18 months is the most recognised timeframe for recapitalization exercise.” This is further compounded with the new directive to submit recapitalization plans on or before 20 August for the commission’s evaluation.

Issuing new shares to raise the capital may impractical given the perceived lack of enthusiasm of new investors in the industry.

The low returns on investments earned by current shareholders of insurance companies may be one reason. .

For instance, as at 2018, out of the 26 insurance stocks listed on the NSE, 50 percent had not paid dividends in over a decade.

Many factors have been identified as being responsible for this poor return on investments some of which include; huge fines by regulatory bodies for avoidable offences, high cost of management expenses, prevalence of negative reserves as well as alleged multiple taxation. Hence, the path of mergers and acquisition may be the most viable option for these companies.

For instance, all but four (83 percent) of the final twenty-four banks that emerged from the 2014 recapitalization were through mergers and acquisition. Where the M&A option is explored, potential merging companies will also seek to conduct relevant due diligence exercises on their proposed targets to ensure

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JOSHUA UZU there are no hidden pitfalls that would affect the new entity post-merger/acquisition.

Some mergers may fall through based on findings of the due diligence exercises or failure of the merging entities to come to terms. Hence, the specific details of the recapitalization plan may eventually not be strictly adhered to as. Will affected insurance companies be allowed to resubmit their recapitalization strategy or will such revised plans be subject to fines and penalties upon resubmission? Presently, there are no specific clarifications available for such possible scenarios. Hence, the proposed implementation procedure and timeline by NAICOM may need to be modified to address these concerns and possibilities.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Uzu is a senior tax consultant at KPMG Nigeria

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In Association With

Under attack

The trade war is leading some firms to crimp investment Much depends on whether hostilities between America and China intensify

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HERE’S TARIFFS on games and tariffs on toys—try explaining tariffs to your little boy. Santa’s workshop is struggling, you’ll find yourself saying. I think the reindeer are backed up with their sleighing.”

Wendy Lazar, who runs a company called I Heart Guts, submitted this peeved poem to the United States Trade Representative (USTR) in June. As an importer of children’s toys from China, she was complaining about how the trade war could squeeze her firm.

She is not alone. In boardrooms across America, business people are scrambling to assess the impact of the latest escalation in the commercial confrontation between the two superpowers. For most firms the easy bit is calculating the immediate financial impact of more tariffs on demand, prices and costs.

That can be done in a spreadsheet.

Far harder is working out how to rejig your strategy and long-term investment plans to adapt to a new world of enduring trade tensions.

Fund managers and Wall Street traders have begun to reach their own conclusion—that investment may slump, possibly triggering a recession. Hence the violent moves in markets since the first week of August, with a rush towards safe bonds and a sell-off in equities (see article).

That sell-off picked up pace on August 1st when President Donald Trump’s administration announced the imposition of tariffs on $300bn of Chinese goods, at a rate of 10%, starting on September 1st. On August 13th the USTR announced a delay covering about two-thirds of the goods in question, including mobile phones, smartwatches and toys, which would be subject to duties starting on December 15th. As Mr Trump explained later that day, the move would allow American shoppers to splurge in the run-up to Christmas.

The press release announcing the delay arrived at 9.43am; between 9.40 and 9.45 shares in Apple rose by 3%, and the S&P 500 share index jumped by 1%. But by the following day the stockmarket—and the iPhone-maker’s share price— slumped again as investors fretted

A Balkan betrayal Charlemagne

Eurocrats know Boris Johnson well, making no-deal Brexit more likely Familiarity breeds contempt

T

that a global downturn might soon be on the cards.

America’s expansion may be cooling as it enters its second decade, but GDP still grew at a respectable pace of 2.1% in the second quarter of 2019, and the unemployment rate is a brag-worthy 3.7%. The direct effect of the tariffs should be small: in 2017, before hostilities began, goods trade with China amounted to just 3.2% of GDP. Even including the additional levies planned for December, they represent a tax rise offsetting only a fifth of the cuts introduced by the Tax Cuts and Jobs Act of 2017.

What really matters, though, is the wider effects of the uncertainty created by the trade war on corporate behaviour. Most companies make plans over a five- to ten-year horizon and invest in assets with a life of 10-20 years. But with each new tariff announcement, the rules for trading their products become less stable. And the scope of the trade war has expanded beyond goods to technology and currencies. Perhaps the international banking system, shipping companies or foreign joint ventures could be next. The most sophisticated firms try to gauge such risks.

The high level of uncertainty is measurable. A study from 2016

by Scott Baker of Northwestern University, Nick Bloom of Stanford University and Steven Davis of the University of Chicago quantified policy uncertainty in America using newspaper reports. Their index of trade-policy uncertainty has soared in recent months (see chart). And such increases in uncertainty tend to have real effects. The researchers found that increases in their index were associated with dampened investment and slower hiring. More recently, Ryan Sweet of Moody’s Analytics, a financial firm, finds that changes in business confidence and economic-policy uncertainty appear to predict changes in managers’ capital spending.

Given all this, how is investment in America holding up? In the second quarter non-residential business investment shrank at an annualised rate of 0.6%. The question is to what extent the trade war is the culprit, rather than industryspecific factors, domestic economic trends or the global manufacturing cycle. To get a sense of this The Economist has analysed around 2,400 listed American companies in 42 sectors, taking into account both their investment levels and how dependent their sector is on Chinese inputs.

Firms with a higher degree of Sino-reliance do seem to have scaled back investment. The 20 sectors most exposed to inputs from China accounted for a third of total investment by the 2,400 firms. In total these sectors saw aggregate capital spending drop by 1% in the past four quarters compared with the prior year.

Meanwhile the other 22 sectors, which are less exposed to China, saw investment rise by 14%. The analysis is simple: other factors may well have played a role.

But business executives too report an effect on investment. A survey compiled by the Federal Reserve Bank of Atlanta in January found that trade tensions had crimped investment by 1.2%. Tariffs were mentioned in a quarter of all earnings calls among companies in the S&P 500 index in the second quarter of 2019, according to figures from FactSet, a data-analytics firm. One of the sectors most exposed to China is chemicals. In July Jim Fitterling, chief executive of Dow, a big producer, told investors on an earnings call that he would keep capital spending “tight” until he got “better visibility”, adding that he thought a trade deal was needed to “get some confidence back in this market”.

HE LAST time continental Europeans felt they were dealing with an easily readable, straightforward British prime minister was in the late 1990s.

Tony Blair charmed his continental colleagues. He wooed the French in their own language, led fellow heads of government on a bike ride through Amsterdam during a Dutch-led summit and made common cause with fellow “third way” social democrats like Gerhard Schröder, Germany’s then chancellor. Set against the backdrop of the “Cool Britannia” popularity of British music and fashion, this all suggested that Britain had finally cast off its conflicted postimperial garb and was embracing a modern, European identity.

The glow faded when the Iraq war sundered Mr Blair from the French and the Germans. Then came Gordon Brown, David Cam-

eron and Theresa May, who were all harder to place. All three made nice at European summits but flirted with the Eurosceptic tabloids at home. Mrs May took office in July 2016 after the country had voted for Brexit. But who was she?

She ruled out a second referendum—then considered the most likely outcome in some continental capitals—but did not seem to be “of ” the Brexiteers. At times she posed as a Thatcher-style Iron Lady; at others as a sensible Christian democrat. Buffeted by events, she was hard to define and left little lasting impression.

Boris Johnson is a different matter. Unlike his predecessors, Britain’s new prime minister is a familiar personality on the continent. Many in Brussels know him, by reputation or in person, from his time as a reporter there in the 1990s, when he spun highly Continues on page 19

Monday 19 August 2019

BUSINESS DAY

19

In Association With

Not again

Zimbabwe faces its worst economic crisis in a decade Corruption and a command economy are crippling the country

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T HIS PENTECOSTAL church in Harare, Zimbabwe’s capital, Bishop Never Muparutsa sighs at the empty pews. In recent weeks, as the economy has deteriorated, his congregation has shrunk from 400 to 120. Mr Muparutsa sends Bible verses via WhatsApp to those too poor to travel. He tries to keep sermons upbeat. But he is worried about his formerly ebullient flock.

“The joy I used to see is gone,” he says. “They might as well be Anglicans.”

Zimbabwe is facing its worst economic crisis in a decade.

Electricity is available for just six hours a day. Clean tap water runs once a week. Petrol stations either have no fuel or long queues.

About 7.5m people, roughly half the country, will struggle to eat one meal a day by early next year, says the World Food Programme, a UN agency. Annual inflation is running at about 500%, reckons Msasa Capital, a local advisory firm. “I can’t see the light at the end of the tunnel,” says one businessman. “Just the light from an incoming train.”

The government blames the weather. Cyclone Idai, which hit southern Africa in March, and a regional drought have contributed to a poor harvest. Scant rainfall has cut the supply of water to Lake Kariba, on the border of Zambia and Zimbabwe, and thus to an adjacent hydropower plant.

Though the climate has been cruel to Zimbabwe, the mess is mostly man-made.

Power shortages were avoidable. Low water levels at Kariba have been predicted for almost a year. A coal-fired power station in the west of the country ought to help fill the gap, but it is plagued by faults. Extra power could be bought from Eskom, but Zimbabwe has struggled to pay its debts to South Africa’s state-run utility.

A lack of power is crippling what is left of Zimbabwean industry. Many factories open only for a brief night shift. The informal economy is struggling, too. Obey Mapupa, who makes tombstones in Mbare, a poor suburb of Harare, says that business should be good: more people are dying. But without power he cannot etch epitaphs.

The shortage of water also

stems from inept governance.

Harare’s reservoirs are leaky. The chemicals used to clean them have not been imported because of a lack of foreign currency. Zimbabweans must instead queue at wells. At one in Chitungwiza, a dormitory town outside Harare, Gaudencia Maputi, 66, says she has been waiting for more than a day. She needs to wash and feed her 83-year-old brother, who has cancer. “I cannot do anything because there is no water,” she says.

Looming hunger reflects state failings as well. The Grain Marketing Board (GMB), the pillar of Zimbabwe’s command economy in agriculture, once kept plentiful stores of maize. But today there may be just six weeks’ worth, reckons Eddie Cross, an opposition MP. He blames corruption.

The board is racking up huge losses. It sells maize at $240 per tonne and buys it at $390, so it is easy for crooked insiders to drive from one depot to another, making $150 a time. (Assuming they can find petrol.)

The food, water and power crises are part of a broader economic catastrophe. This can be traced back to the end of Robert Mugabe’s kleptocracy. In the years before he was toppled in a coup in November 2017, Mr Mugabe’s regime created money out of thin air to finance graft and profligacy.

Unlike in 2008-09, when Zimbabwe printed bank notes with ever more zeroes on them, this time the government used a keyboard. It credited banks’ books with electronic “Real-Time Gross Settlement” (RTGS) dollars, which

it said were equivalent to real dollars. But these electronic notes, or “zollars”, had no backing. It became hard, then impossible, to withdraw cash. On the black market zollars traded at various fractions of a greenback.

After Emmerson Mnangagwa replaced Mr Mugabe, the regime initially kept claiming that a zollar was worth a dollar. But from October 2018, as black-market prices spiked, it seemed to give up the fiction. It first ring-fenced real dollar deposits, an admission that zollars were, in fact, a new currency. In February it went a step further, allowing banks to trade between the two. Mthuli Ncube, the finance minister, has also taken steps to balance the budget by cutting spending and raising taxes.

In theory this all made sense.

Zimbabwe was living beyond its means. In practice the reforms clashed with the instincts of the ruling Zanu-PF party: command, control, steal. Despite the government’s efforts to prop up the zollar, it lost 90% of its value versus the dollar from February to June. Civil servants and soldiers, who are paid in zollars, saw their earnings evaporate.

Fearing protests from state employees who wanted to be paid in dollars, the government announced on June 24th that foreign currencies “shall no longer be legal tender”. As ever, though, it soon undermined its own policy.

Exceptions to the ban have been granted to some businesses.

Zimbabwe is locked in a downward spiral, fears Derek Matyszak of the Institute for Security Stud-

ies, a think-tank. The regime relies on exporters for its supply of dollars. But there will be few exports without raw materials and power.

Tobacco farmers, for example, are already planning on planting fewer seeds next year.

Helping countries hit with balance-of-payments crises is the job of the International Monetary Fund (IMF). But the IMF cannot lend to Zimbabwe until it clears its arrears to other international institutions, such as the World Bank. Zimbabwe will struggle to do that without another loan.

Yet Western governments, led

by America, are clear that political reform must precede economic assistance. Here Mr Mnangagwa has dragged his feet. The West has suggested that he remove two repressive laws as a starting point. Mr Mnangagwa has repeatedly promised to repeal them, but has not done so. His security services, meanwhile, keep shooting, abducting and beating his opponents with impunity.

This terror has cowed civil society. But such is the anger among ordinary Zimbabweans that calls for further protests have grown. The opposition MDC Alliance will stage a rally in Harare on August 16th.

Some Zimbabweans are protesting in a different way. By leaving. A decade ago economic crisis forced hundreds of thousands to flee. So far the new outflow is much smaller. But it has begun, reckons Bishop Muparutsa. He brings up the latest Bible verse he has distributed on WhatsApp. It is a passage from the Book of Exodus.

Eurocrats know Boris Johnson well, making...

Continued from page 18

exaggerated stories about the EU and helped pioneer the outraged Eurosceptic style in the British press. Continentals also know him from the London Olympics in 2012, when his performances as the capital’s buffoonish, zip-wireriding cheerleader-in-chief caught the attention of the foreign press.

Most of all they know him as the villain of the Brexit campaign; the man with a lie about the cost of EU membership on the side of his big red campaign bus who achieved the sort of victory of which nationalist populists on the mainland could only dream.

Mr Johnson is familiar in other ways. Mr Cameron and Mrs May, the previous two Tory prime ministers, bumbled respectively into the Brexit referendum and through the Brexit negotiations, both treating the subject as fundamentally technocratic. By contrast the new prime minister deals in stories and emotions, styling Brexit as a test of the country’s mettle, an Odyssean quest, a heroic battle against the monsters of bureaucratic overreach, federalism and national stagnation.

Continental commentators and policymakers view him, it is true, in a different narrative role—as the dastardly embodiment of the post-imperial nostalgia and chauvinism that Mr Blair seemed to have vanquished—but both his self-presentation and the countertale make it possible to orient him. Unlike his predecessors Mr Johnson fits neatly into the story his would-be negotiating partners tell themselves about Britain.

Many Eurocrats were raised on British cultural staples such as Harry Potter, Midsomer Murders, Downton Abbey, James Bond and Monty Python. Mr Johnson would not look out of place in any of these imaginary worlds. He is a gift to those continentals who love the familiar clichés; who imagine Britain as an old-fashioned, quasi-Victorian society of rigid class differences, lipcurling toffs and shabby proletarians, absurd social rituals, public-school humour and eccentric colonial adventurers. Mr Blair was simple, initially at least, in that he seemed to show that Britain had changed.

20

Monday 19 August 2019

BUSINESS DAY

In Association With

Ebola

Two treatments for Ebola emerge from a clinical trial in Africa Both rely on special antibodies

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EWS ABOUT Ebola, a viral disease that kills up to 90% of those it infects, is usually grim.

The latest outbreak, in the Democratic Republic of Congo (DRC), has thus far killed nearly 1,900 people and rages on. But on August 12th the grimness lifted somewhat with the announcement that two anti-Ebola treatments being tested in the country have proved effective. If administered when the first signs of infection appear, they boost survival rates to about 90%.

The treatments in question employ antibodies. These are special protein molecules made by the immune system in response to infection. They work by locking onto specific parts of invading pathogens, or of body cells infected by those pathogens—either gumming the target up and disabling it or marking it for destruction by other parts of the immune-system. It is possible, however, to give the immune system a helping hand by identifying suitable antibodies in advance, manufacturing them in bulk, and then injecting them into those infected by the target organism.

One of the successful treatments, code-named REGN-EB3, is a cocktail of three such antibodies, mixed by

Regeneron, an American biotechnology firm. The other, mAb114, is a single antibody developed by America’s National Institute for Allergies and Infectious Diseases. REGNEB3 and mAb114 were among four experimental treatments tested in a randomised trial at clinics in the DRC. Based on preliminary results

from 500 patients, an oversight committee led by the World Health Organisation concluded that the trial should be stopped immediately, in order that the two successful treatments could be made available to everyone.

Prompt use after infection is vital. Overall, 29% of those receiv-

ing REGN-EB3 died. But of people treated when their viral loads were still low only 6% succumbed. For mAb114 the numbers were 34% and 11% respectively—superficially worse, but actually indistinguishable, statistically speaking, from the results for REGN-EB3. Two other candidates had significantly worse

figures than these, and were therefore rejected by the overseers.

Both REGN-EB3 and mAb114 have histories. Regeneron developed the former in 2016, in response to an Ebola epidemicinWestAfricainwhich11,000 people died. But that outbreak came to anendbeforethetreatmentcouldmake its way into clinics, and until now there has been no opportunity to test it. The storyofmAb114goesbackevenfurther.

Itspertinentantibodywasisolatedfrom asurvivorofanepidemicofEbolainthe DRC in 1995.

Both treatments will now be deployed in the field—but, given the smallish size of the trial that approved them, doctors will be looking closely at their relative efficacies to determine whether, in light of more data, one is actually better than the other.

Regardless of that, effective treatment will surely help break the epidemic directly, by stopping those cured passing on the virus. And it may help indirectly, too. At the moment, those who have become infected, seeing others go into clinics alive only to leave in coffins, are understandably reluctant to follow suit. That means they remain in their homes and spread the illness to others. The prospect of going to a clinic for a cure will change this, and thus help also to break the chain of transmission.

An area of darkness

In its struggle to subdue Kashmir, India is stripping it of liberties Days after losing its largely nominal autonomy, the region is still in lockdown

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N INFORMATION BLACKOUT has obscured the northernmost tip of India.

Since it scrapped Jammu & Kashmir’s largely nominal autonomy on August 5th and carved the state into two territories, the central government has maintained a curfew in the region. Internet and telephone services have been suspended. Travel has been restricted.

A young academic in Delhi says the lockdown made it impossible for him to celebrate the Muslim festival of Eid with his family in rural Kashmir. The territory has “disappeared”, he says, leaving people like him only able to guess what might be happening there.

Official statements from the central government do not shine much light. They assert that no violent protests have taken place since the change of Jammu & Kashmir’s status. But that seems unlikely. On August 9th Al Jazeera and the BBC aired footage of a large angry crowd in the Muslim-dominated part that is known as the Kashmir valley. At first the home ministry insisted that no gatherings of more than 20 people had taken place. It also claimed that no shots were fired by police, despite the sound of gunfire in the videos. It was only after four days that it reversed course and acknowledged the protest (a separate one is pictured). A day

The prime minister, Narendra Modi, is crowing. In an interview with IANS, an Indian news agency, he said revoking Kashmir’s special status would “only empower democracy even more”. That sounds implausible. For now, the academic in Delhi fears for his family’s safety.

He hopes to hear news from a friend who has just flown to Srinagar (if he can leave again). “Darkness is not a happy situation,” he says.

later it admitted the police had used shotguns.

Police vans in the Kashmir valley have been cruising the streets with their loudspeakers blaring orders that people must stay at home. But the government disputes that there is a curfew in place at all. “Curfew” is a technical term, it says. There has been no formal imposition of one.

The government has also failed to explain its legal basis for locking up many Kashmiri politicians, including ones who are relatively moderate, during the clampdown.

Reports by Indian and foreign me-

dia say that between 200 and 500 people are being held in makeshift detention facilities in Srinagar, the main city in Kashmir. A senior official was asked by reporters whether there was a legal justification. “Yes,” he said simply, “but I cannot say what.” Shah Faesal, a civil servantturned-politician, tweeted on August 12th that Kashmir needed a “non-violent political mass movement” to restore citizens’ rights.

On August 14th he was detained at Delhi’s airport and put under house arrest.

Mr Faesal is being held under

the Public Safety Act. This gives police the discretion to place almost anyone under administrative detention for up to two years. It is one of many such laws that have long been in force—the Armed Forces Special Powers Act being the most notorious. They give the authorities sweeping rights to imprison or even shoot people they regard as troublemakers. The Supreme Court has taken an indulgent line on the curfew. “When the situation is such, we must have a real picture before we take a call on this,” said Arun Mishra, one of its judges.

Monday 19 August 2019

BUSINESS DAY

COMPANIES & MARKETS

21

COMPANY NEWS ANALYSIS INSIGHT

BREWING

Nigerian Brewers suffer selloff as industry fundamentals weaken

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he ever party-loving Nigerians may account for Africa’s biggest alcohol market but investors in the Nigerian market now see alcohol beverage companies as toxic to their portfolio. As the industry profit margins decline to record low levels, so also has the stock price of publicly listed brewers declined in response.

Data compiled by Lagosbased investment research firm, EUA Intelligence shows that industry profit margin declined from 13 percent in 2014 to as low as 4 percent in 2018 as the industry giants have battled rapidly rising expenditure and slowly expanding revenue for the last 5 years. A deeper look at return on equity which is an important gauge in analysing the financial performance of the company using shareholder’s funds shows that the industry’s return on equity has dipped from around 22 percent in 2014 to 14 percent during the recession in 2016 and has now worsened to 7% in 2018.

Worried investors have

proceeded to rapidly dump brewery shares as industry performance continues to worsen over the years. A look at the stock performance of the big four brewers as at market close on Friday showed that Nigerian Breweries had declined -28.35 percent year-to-date, international breweries returned -51.43 percent YTD, Guinness

returned -36.11 percent YTD and Champion declined only about -8.15 percent YTD. Investors who have been keeping an eye on the profitability of the four industry giants saw Nigerian Breweries profit decline from N42.5 billion in 2014 to N19.4 billion in 2018, Guinness declined from N7.8 billion to N6.7 billion, International Breweries

declined from N2.1 billion in 2014 to a loss position of -N3.8 billion in 2018 while Champion Breweries declined from -N754 million in 2014 to -N244.8 million in 2018 to cap a dark five year period in the industry.

As profits dropped, stock prices declined even faster. A deeper look at the historical performance of the brewery

industry tells a more bitter tale for investors and further explains the massive selloffs observed in the past year.

Based on data compiled from EUA end-of-day market analysis, Champion which is the best performing stock in the brewery industry so far this year has declined roughly about -83.38 percent in the last 5 years. Share prices in Guinness returned -76.71 percent, Nigerian Breweries declined -68.48% and International Breweries returned -45.45 percent as these companies have now lost hundreds of billions in market capitalization in the past half-decade.

The terrible market performance cost Nigerian Breweries its place in the exclusive trillion Naira market cap club last year as the company has now lost almost half of its market capitalization in the last one year. NB returned -46.88 percent in the past year.

The prognosis does not seem great for the sector as weaker consumer spending triggered by a slow economic

growth and double-digit inflation fails to brighten the market outlook for these brewers.

“No smart investor is looking at taking any serious positions in the brewery industry despite the steep declines because there are honestly no bargains there. Valuations remain very high for the Brewers which is caused by a sharp decline in the profitability of these companies.

Using equal weights, average price to earnings ratio in the brewery industry as at market close on Friday was 54.99 which is miles above the EUA 80 average PE of about 10.85 (EUA 80 is the largest 80 most capitalized stock on the Nigerian Stock Exchange).

This means brewery stocks are still 5 times more expensive than the average stock in the local bourse. Therefore, we forecast further declines in the brewery companies share prices until industry fundamentals begin to improve,” said a research analyst from EUA Intelligence.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: Samuel Iduh

22

Monday 19 August 2019

BUSINESS DAY

COMPANIES&MARKETS

Business Event

INSURANCE

Leadway meets new minimum capital requirement-Chapel Hill Denham BALA AUGIE

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nalysis by Chapel Hill Denham Limited shows leadway Assurance Limited topped the list of insurance companies to meet the new minimum capital requirement by the regulator.

Other companies mentioned by the investment bank to scale the hurdles are: Custodian and Allied, Zenith General, First Bank Insurance, and Wapic General.

Analysts at Chapel Hill Denham said they used share capital (plus premium) and retained earnings as qualifying capital in their analysis, but they added that if shareholders’ funds were used, 10 insurers (including Prudential Zenith Life, Custodian Life,Nem, Linkage Assurance and Axa Mansard) would have met the new minimum capital.

“We expect these companies to comply with the regulatory minimum relatively seamlessly via capital injections from significant shareholders or strategic investors,” said analysts at Chapel Hill Denham.

“We believe the insurers that are able to meet the capital requirement well ahead of the deadline will be the winners in the recapitalisation exercise,” said the analysts.

Expert say it is unsurprising that Leadway Assurance top the list of companies to effortlessly scale the hurdle as the insurer has the capacity or

financial strength to absorb smaller players in the industry.

For instance, Leadway’s shareholders’ fund of N46.49 billion as at December 2018 is 22.56 percent of the cumulative (N206.15 billion) figure of 15 companies compiled by BusinessDay. Its gross premium income of N84.13 billion as at December 2018 is 25.01 percnt of the cumulative figure of N315.08 billion revenues raked in by firms under the coverage of BusinessDay. LeadyWay’s combined ratio of 57.47 percent, which less than the 100 percent threshold, is the lowest in the industry; this means it is the most efficient insurer in Africa’s largest economy.

National Insurance Commission (NAICOM) has jerked up the capital bases of insurer so that they can take on more risk and accelerate contribution to the economy.

The new capital requirement took effect on 20 May 2019 with existing insurance and reinsurance companies expected to fully comply by 30 June 2020.

In a July 23 circular, the regulator mandated operators to submittheirrecapitalisationplan on or before 20 August 2019.

The Insurance Act 2003 stipulates the consequences of not meeting up with the minimum paid up capital and actions to be taken by NAICOM. These are: (i) Cancellation of the registration of any insurer or reinsurer that fails to satisfy the capital provisions

as it relates to the category of operations of such insurer or reinsurer. (ii) Publication of a list of insurers and reinsurers that comply with the capital provisions. Such list may be published not more than 30 days after the deadline stipulated by NAICOM, which is 30 days after 30 June 2020 if the date is not shifted for the new capital policy.

Insurers in Africa’s largest economy have begun a race to recapitalize ahead of the NAICOM deadline.

Wapic Insurance Plc seeking funds via capital injection from majority shareholders, but its General Business is well capitalized, while Life segment needs more money.

“The regulator could withdraw the operating licence of companies that fail to recapitalize,” said Seyi Olusi, Chief Finance Officer of Wapic insurance.

Ganiu Safiu, Actuarial Scientist at Cornerstone Insurance Plc said his company is trying to restructure from within and that they are planning of raising capital via the stock market.

Some insurance companies had been proactive as they had opted for equity capital raising.

Mutual Benefits raised N1.59 billion via rights issue in 2018 (79.5 percent of the N2bn offered) while Sovereign Trust Insurance also recently conducted a rights issue of 4.2 billion ordinary shares at 50kobo/ share (1 for 2) to raise N2.1bn.

L-R: Dare Osama, Ide Chukwuemeka Mamah, Lamin Manjang, CEO, Standard Chartered Bank Nigeria Limited (SCB); Hermant Parikh, and David Idoru, head, retail banking (SCB), at an event organized by the Bank recently.

L-R: Jade Niboro, chairman, Magodo Residents Association; Stephen Owojori, chairman, Magodo Residents Board of Trustees; Folake Soetan, chief operating officer, and Babatunde Osadare, head, legal and regulatory, both of Ikeja Electric, at the signing of the Premium Power agreement at the Magodo Town Hall, Lagos.

BANKING

GTB stocks still a good buy, analysts say DAVID IBIDAPO

T

he bearish stock price movement of Nigeria’s most capitalised deposit money bank on the equity market amid a wave of market pessimism was relieved as investors compensated the bank for its performance in the first half of the year 2019.

GTB on Friday gained 0.97 percent in stock price, exiting a 1-year lowest price of N25.75 to settle at N26 at the end of trading, gaining N7.35 billion for its investors as at the end of trading.

Insight into the bank’s financials released on the Nigerian stock exchange (NSE) market in the early hours of Friday revealed a growth by 4 percent in GTB’s net income amid a marginal decline in bank’s net interest income for the period H1 2019.

During period under review, the bank recorded a net income of N99.13 billion against N95.58 billion in the corresponding period of 2018.

This was driven by jump by 29 percent in fee and commission income, likewise 13 percent in bank’s other income.

This was also coupled with net impairment gains on other financial assets of N108.44 million in H1 2019.

This therefore resulted in a 6 percent growth in profit before tax of N115.78 billion against N109.63 billion in the first half of 2018.

In a bid to compensate shareholders, GTB announced an interim dividend in the sum of 30 kobo per ordinary share of 50 kobo, however subject to appropriate withholding tax deduction and approval.

The stock performance of GTB being one of the most capitalised firms has mirrored since inception of the year 2019, bearish trend of the Nigerian All Share Index (ASI) as negative market sentiment prevails.

Year to date analysis of the bank shows a negative return by 24.53 percent to investors grossly underperforming the ASI which is down 13.90 percent.

1 year return of the lender also reveals a negative return of 32.33, also under performing the ASI with a negative 1-year return of 21.82 percent.

However, BusinessDay analysis revealed there exist

opportunity for growth investors in GTB as well as some deposit money banks.

“You never can tell how low some of these stocks can go but anyone buying a GTB or Zenith is getting a good bargain,” said Paul Uzum a broker on the floor of the Nigerian Stock Exchange (NSE) told BusinessDay. Regulatory concerns, however, especially in the light of recent policies by the Central Bank of Nigeria in increasing credit flows, has resulted in surprising valuations of lenders.

GTB trades on 3.88x PE, 1.2458x PB while offering 10.62 percent dividend yield. Zenith Bank trades on 0.6768x price to book, and offers 17.07 percent dividend yield and UBA trades on 2.36x PE, 0.3639x PB and offers 15.18 percent dividend yield, data from Bloomberg show.

According to BusinessDay report, the policies of the apex bank governor have seen the country’s foreign exchange somewhat stabilize and the reverse situation can cover much of the outflow risks but the price is a restrictive monetary policy and juicy fixed income returns that limit demand for equity.

www.businessday.ng

L-R: Folarin Falana (Falz), Trophy brand ambassador; Johan Gouws, Breweries operations director; Jumoke Okikiolu, consumer connections manager; Tony Agah, gateway plant manager, all of International Breweries, at the commemoration of Brand Day at the Gateway Brewery Plant in Sagamu, Ogun State

L-R: Teju Abisoye, acting executive secretary, Lagos State Employment Trust Fund (LSETF), and George Ashiru, chief strategist, Global Performance Index International (GPI), at the Memorandum of Understanding (MoU) signing ceremony between LSETF and International Technology and Innovative Solutions Limited (INTECH) to provide innovative solutions for tech-driven startups in Lagos.

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Monday 19 August 2019

COMPANIES&MARKETS

BUSINESS DAY

23

Business Event

Ogah bows out as Masters Energy Group repositions for excellence

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he board of Masters Energy Group has constituted a new management following the resignation of Uchechukwu Samson Ogah from the board.

This follows Ogah’s appointment as minister-designate to represent Abia State

by President Muhammadu Buhari.

The ministerial appointment follows Ogah’s several grand achievements in business and his myriad contributions to the nation and Abia State in particular.

The board had nominated Dappa as acting managing director/CEO following the resignation of Ogah, who accepted the invitation to contest for the Abia State governorship seat in 2019 on the platform of the All Progressives Congress (APC).

Ogah had announced his decision to step down as the president of his business

enterprise, Masters Energy, while proceeding to contest in accordance with the laws of the country that require any person aspiring to public office to step down from whatever enterprise he/she was engaged in the public/ private sector before assumption of public office.

Masters Energy Group, which is a conglomerate with subsidiaries and interests across a variety of industries, will now be led by the new management.

“The appointment of Dappa as acting group managing director/CEO is part of the repositioning programme approved by the board,” the company said in a press statement.

Despite the successful growth and transformation of Masters Energy Group, Ogah had since taken a backseat in the group’s affairs since his foray into politics some years ago.

Reacting to her appointment as acting GMD/CEO, Dappa said it shows the board recognises hard work.

“I will build on the success story of Dr Ogah so that the company he left behind will stand out as a benchmark in his service to the nation as a public official,” she said.

Other appointments made by the group conglomerate are executive vice chairman, Vincent U. K. Ajala; group executive director, Ngozi Sabina Ogah; vice president/group executive director, Chukwuemeka Ogah, and executive directors, Felix Eribo, Ogbonnaya Onu and Ugochukwu Nwofor.

Ogah’s exit from the Group will leave big shoes to be filled. However, his unique dynamism and intellect will be an enormous asset to the nation as his exemplary service in private enterprise has shown, the company said.

L-R: Femi Williams, director; Adetomi Aladekomo, director; Dumebi Obodo, MD; Demola Aladekomo, director; Chikwe Ochiaga, director, and Funke Alomooluwa, director, all of ChamsAccess Limited, at the company’s 2nd annual general meeting in Lagos.

APPOINTMENTS

Dipo Faulkner elected president, American Business Council

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ipo Faulkner, Country General Manager of IBM West Africa has been elected President of the American Business Council and Chairman of the Board of Directors for the Council in Nigeria effective 1st of August 2019.

The American Business Council is the voice of the United States (US) businesses in Nigeria and the affiliate of the US Chamber of Commerce. It seeks to promote the development of commerce and investments between the United States of America and Nigeria. Since its inception in February, 2007, the ABC has focused on 4 broad areas where it hopes its impact would be felt in the medium to long term development of Nigeria: Education, Regulatory Reforms, Infrastructure and Capacity Building.

Dipo holds a Bachelors’ Degree in Mechanical Engineering from the University of Lagos, and an Advanced Management Program Certificate from Institute de Empressa (IE), Madrid, Spain.

“Dipo Faulkner’s election fits perfectly into the overall aim of the Council given that IBM is at the forefront of capacity building and providing digital infrastructure to businesses across all sectors of the Nigerian Economy,” the organisation said in a release.

After his election, Dipo Fau l k n e r t ha n ke d h i s peers for nominating him and assured members that he will continue with the laudable achievements of his predecessor, working alongside members of the Council, the US Embassy and partners in taking the Council to the next phase.

Akinsowon Dawodu, the country CEO of Citibank Nigeria was elected Vice President.

ABC works with US mission and other partners to drive trade and investment opportunities between Nigeria and the United States of America. It is involved in the on-going US- Nigeria Commercial Investment Dialogue which is envisioned to deepen trade investment ties between the U.S. and Nigeria, and designed to foster sustained www.businessday.ng

engagement between both governments on concrete issues of importance to the private sector. The areas in focus are infrastructure, agriculture, digital economy, investment and regulatory reforms.

Dipo is responsible for IBM’s overall business in West Africa with a focus on deploying IBM’s advanced technology capabilities in cognitive, cloud computing, big data and analytics, and mobile security to solve current and future needs of institutions in key economic sectors across the country.

He provides leadership for IBM’s relationships and corporate social initiatives in civil society, ICT and academic communities. With over 25 years of work experience, he was previously IBM’s Global Business Services lead for Central & West Africa, where he was responsible for driving IBM’s Consulting Services Business within the region since joining IBM in 2013, Prior to joining IBM, he was a director at Accenture’s Nigeria Financial Service Operating Group.

Samson Aliga, production maven, Tech Entrepreneur; Peace Itimi, head of marketing, Korapay; Tomi Wale, creative director, GetUpInc, and Priya Amarnani, head, business development, OminiBiz, after a panel session, at the BusnessDay SME Clinic 1.0 a focused workshop for SMEs in partnership with Unity Bank.

Pic by David Apara

L-R: Solomon Daniel, national president, Nigerian Association of Small Scale Industrialists (NASSI); Ibrahim Mamanga, acting MD/editor-in-chief, News Agency of Nigeria (NAN), and Chukwudi Ekezie, managing editor, NAN, at the visit of NASSI delegation to NAN headquarters in Abuja at the weekend. NAN

L-R: Victoria Okakwu, director of planning, research and statistics, National Youth Service Corps (NYSC); Shuaibu Ibrahim, director-general of the NYSC, and Adenike Adeyemi, director of press and Public Relations, at the NYSC media parley in Abuja.

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Monday 19 August 2019

BUSINESS DAY

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LAYI FATONA

CEOINTERVIEW

Managing Director, ND Western Limited

Interview with Private Sector Leaders

‘In 2019 Nigeria has no plan for energy independence’

Layi Fatona is the current managing director of ND Western Limited having retired from Niger Delta Exploration & production Plc after several years of meritorious service to the company. He is a Petroleum Geologist with over thirty-five years of practice, commencing with a seven year stint in with Shell Petroleum Development Company (SPDC). Fatona is a staunch believer in the ability of indigenous minds to control the narrative of the Nigerian oil and gas industry. In this interview with OLUSOLA BELLO, FRANK UZUEGBUNAM and DIPO OLADEHNDE, he explains the challenges he encountered in building Nigeria first indigenous oil and gas firm.Excerpt:

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t’s very rare for somebody who has secured Job in a place like Shell to resign and join a consultancy job.

What did you see then that others were not seeing?

It looked planned but the fact that I was oblivious of the consequences of failure when I walked out of Shell made it easier to take the decision.

I was very lucky and privilege because Shell have invested so much in me and practically given me everything I needed to succeed. I think the earlier recognition of what Shell have done to me intuitively more or less push the phenomenon of living Shell. Also my wife made it a lot easier for me as well.

From consulting company you nosedive into Niger-Delta Western Limited.

How did that company come about?

When I left Shell I went into consulting and I was privileged to be with very knowledgeable professionals and sophisticated experts and principal owners at Geotrex Systems Limited who were proven oil finders in the world.

At Geotrex, we built the first successful consulting Exploration and Production Company (E& P) in Africa, we were so proud of our achievement because at the peak of the company we have well over 60 young graduates. We did extraordinarily well for IOC’s so when thought as to what next came about we were very clear on the vision. We wanted to create Nigeria’s first oil company that is not owned by Army generals or Bankers. We just wanted a successful oil company that can be taken to compare with anyone in the world; we had a collection of people of diverse personality which was an awesome team. We were driven by our passion for what we wanted to achieve which led to the creation of a good Nigerian oil company.

How did you secure the fields or assets you are currently operating on?

In the late 1980’s we knew Nigeria had many small discovered oil and gas fields about 360 of them which nobody was doing anything about. Those fields were own by the major IOC’s, so we knew that the only way is to seek a means were those big oil companies can allow local entities like ours to have access to those fields which automatically remove the exploration risks.

The idea was very common in United States but not very common in Europe. So we had to approach American companies because we feel they were most likely going

Our refinery have been built in such a way that about 20 percent of our daily production of 11,000 bpd will be Jet A4.

This will be the first time that category of fuel will be produce locally. We have taken all the prequisite and all the pre conditions necessary to ensure that this category of product would be world best standard to listen and have engagements with us more than European companies. So we selected Chevron, then Gulf ,Texaco and Mobil. But we did recognize that Chevron or Gulf companies have varieties of land swamp or offshore assets of that category. So it made common sense for us to start from terrain where we could handle which in this case was land. So Chevron was the easy target that we recognize. Chevron told us it was a good idea but it has never been done in this country, and there is no law that allows them to do it, so they asked us to get the express permission of the regulatory authorities. We went back to Nigeria National Petroleum Corporation (NNPC), National Petroleum Investment Management Services (NAPIMS) and Department of Petroleum Resources (DPR) which took a very long time to get their consent.

Over the next one and the half years we got the approval of appropriate regulatory agencies that allow Chevron to start a conversation with us thereafter we negotiated an Non Disclosure Agreement (NDA) which allow Gulf to share information under very strict www.businessday.ng

who gave us a $6 million loan at an interest rate of 27 percent in Naira term which was enough to wipe out the company, however we took the chance paid all our loans in one year, oil price also increased from $18 to $52.

How did you navigate your ways through the Niger delta in those days of Militancy in terms operations?

First you must recognise that we are Nigerians with some native intelligence, as a company , a little bit of native intelligence has helped our survival.

We knew that the problem that was tearing of the Niger – Delta apart was for one fundamental thing that the people from whose back yard oil is extracted from their background are not members of the business. For us it makes common sense for us to figure out that, that their anger was because they feel they are not part of the business. We needed to look for ways on how to make them be part of our business. We knew they had no money or technology or employable skills which was why we created a Niger- Delta host Communities Development Trust. We pledge 15 percent of which 5 percent would be given to them as profit. This are communities that the local government don’t even recognise their existence. That host communities development philosophy have demonstrated our cleanness of heart and commitment to support communities we are operating in till today. Since 2005 when we started oil production we have not had one day of host communities shut down, till today.

confidentiality terms. It took almost another 2 years to negotiate a two page NDA because these things have never been done before.

After series of negotiations Chevron actually offered us 12 Marginal fields we then decided that 12 marginal fields was a lot because we actually applied for one. I was very suspicious of the 12 fields because I felt it might be a Greek gift. So I suggested to my team we pick the best two and returned the remaining 10 fields back to them. It was a very naïve decision but I think I was being driven by the fact that between us and Chevron we have built mutual trust and respect.

How did you fund the fields?

Then we didn’t have money to develop the two fields at the same time so we decided to focus and develop just one of them; am happy to announce that we have actually

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started developing the second field now. We just spotted the oil well few weeks ago. So you can imagine the time space between then and now.

To raise money we literally went to the street begging for funds because we really felt the only way we could build a Nigeria company was to extend the ownership to a very wide shareholders.

Today, there are about 1700 shareholders in the Niger Delta Western. The largest shareholder is Africa Capital alliance who owns just 15.6 percent.

Tell us the various phases you went through to form a formidable oil and gas company?

The most important thing we needed to put in place was finding a team. In the early 1990’s Nigeria petroleum sector was already very mature.

There was availability of well trained professional so we had a very small and excellent technical team that came from Geotrex.

So we knew where to find people. This was one big challenge we were fortunate enough we

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got right. We also had a very formidable board of the company which supported the management tremendously well.

In the history of Niger Delta we just had three boards. We had an incredible board that allowed and supported the management. So the trust and respect of the technical management team from the board and shareholders was excellent.

Internally, we were also very financially discipline and very prudent too. We were also lucky to have a team of extremely very young people that are professionals in their own right.

We also had very difficult times because finding money was difficult. This is because nobody believe that Nigeria was good investment destination. Over many years we raised $6million from everybody and not in one go but pay as you go.

At the time we wanted to drill our first well no bank would give us money except the then Intercontinental Bank under Erastus Akingbola

You now operate in midstream through the construction of your modular refinery which can now refine beyond 10,000bpd, so we can’t call it modular refinery anymore. Can you share more information about the refinery or other phases of your project?

The refinery is almost ready to go. Seven years ago we built a 1,000 capacity refinery and we started upgrading the refinery roughly two and the half years ago so the total capacity of the refinery is going from 1,000bpd to 11,000bpd. Our expectations is that it will be up and running anytime in August this year if we got the permission of DPR to introduce crude into the facility after their expectations which will take two week.

When the refinery is commission we will be producing Diesel, Marine Diesel, Jet fuel, Heavy Fuel Oil (HFO)and PMS. So in effect there will be no rejection to what we are www.businessday.ng

converting the crude to.

Once the refinery is commissioned, you will be seeing less of me in the company because it’s my last show. As for N D Western, it’s a smaller company which we use to purchase one of the assets Shell divested.

In addition to the refinery we have also built a gas plant. We are the first indigenous company that eliminated gas flaring from our daily production. The gas plant can process all the associated and non-associated gas that we produce and put in a pipeline that goes to Bonny LNLG. Today, we are the only indigenous company that is delivering gas to Bonny LNLG. Where do you intend to sell your products and where do you see yourself playing with the coming of Dangote refinery?

The products are gone already. Today Nigeria, imports $30 billion worth of refine products every year which was revealed by the Bureau of Public Enterprise (BPE). It doesn’t matter what we produce I can assure you we can never be in short of demand. Our products don’t come to Lagos it disappears to the eastern part of Nigeria. Roughly about 20 to 24 million litres of our products disappear into local economy of south eastern states legitimately; everything we produce is just import substitution. We are certainly not in any competition with Dangote refinery, because the market is too large for Dangote

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alone to operating in, so we not under any threat or in any competition at all.

Tell us more about your Jet A4?

Our refinery have been built in such a way that about 20 percent of our daily production of 11,000 bpd will be Jet A4. This will be the first time that category of fuel will be produce locally. We have taken all the prequisite and all the pre conditions necessary to ensure that this category of product would be world best standard.

What lesson will you pass to the up and coming young ones in the petroleum industry?

My message to young people is to be more creative, believe in themselves that they can do something and work more with teams.

What is your advice for government so that the industry can pick up again?

In 2019, am very worried Nigeria has no plan for Energy independence, Nigeria has to be energy independence. This present syndrome of producing crude, exporting only to import refine product back just has to stop. We need a deliberate policy on energy independence.

Nigeria has no business importing crude they have to just shut their eyes completely to the phenomenon of fuel importation.

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Monday 19 August 2019

BUSINESS DAY

cityfile Sanwo-Olu to build on legacies of retired heads of service JOSHUA BASSEY

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Participants at a Town hall meeting on Strengthening Citizens Resistance Against Prevalence of Corruption (SCRAPC), in Kaduna. NAN

Ex-banker bags 10 years for stealing depositors’ funds REMI FEYISIPO, Ibadan

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n Ekiti State Hi g h C o u r t has convicted a former cashier with Fidelity Bank, in Ado Ekiti, Michael Adedayo Ihinolurinjon, and sentenced him to ten years in prison for stealing money from the bank’s vault and diverting customers’ deposits to personal use.

Ihinolurinjon was convicted by Justice Abiodun Adesodun on August 15, 2019, after he was found guilty of a two-count charge of stealing in a criminal case filed against him by the Economic and Financial Crimes Commission, (EFCC) Ibadan

zonal office.

According to the charge sheet, the offence is contrary to Section 390 (g) of the Criminal Code Laws Cap 16, Laws of Ekiti State, 2012.

The bank had written a petition to the EFCC alleging that while still a staff, Ihinolurinjon stole a sum of N8.891 million from its vault, and also failed to remit a total of N7.252 million he collected from customers to the bank’s account.

“Our preliminary review showed that Michael fraudulently diverted the sums of N8.891 million and N7.252 million of the branch’s vault and customers’ cash respectively.

The cash deposit received by Michael from

various customers between September 1 and 19, 2016 were neither posted to their respective accounts nor the cash accounted for,” the bank stated in its petitioned dated October 17, 2016.

The bank also accused Ihinolurinjon of absconding from duty upon sighting one of the customers whose cash he had fraudulently diverted’.

Following the petition, the EFCC went into a full scale investigation after which the accused was originally charged with obtaining through false pretence in a one-count charge filed in 2017.

The charge was later amended to a two-count, bordering on stealing, upon which he was re-ar-

raigned on June 24, 2019.

While prosecuting the case, the EFCC, through its lawyer, Abdulresheed Lanre Suleman, called nine witnesses and also tendered several exhibits.

After listening to arguments on both sides, Justice Adesodun found the defendant guilty as charged, and sentenced him to five years imprisonment on each of the two counts. The sentencing, he held, would run concurrently.

The court, however, gave the convict an option of fine of N100,000 on each of the counts.

He was also ordered to pay a sum of N7 million as restitution to Fidelity Bank Plc, the petitioner in the case.

Kwara lifts NYSC camp with new equipment Razaq Ayinla, Abeokuta

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n what is aimed at making the Kwara camp liveable for graduates deployed for the national service, the Kwara State government has delivered four hundred new mattresses, two hundred double trunk beds, ninety wooden benches and other consumables for Youth Corps members at Yikpata Camp of the National Youths Service Corps (NYSC).

Recall that the state governor, Abdulfahman Abdulrazaq recently paid

an unscheduled visit to the camp in Edu local government area where he described it as a “penitentiary not fit for human living”. Abdulrazaq had then pledged to urgently rehabilitate the camp to make the corps members more comfortable.

The governor had also apologised to the NYSC members and said the condition at the camp represented the general breakdown of basic infrastructure in the state. He said the visit to the camp was a challenge for him to make things better.

Akanbi Abdulquadry www.businessday.ng

Shuaib, permanent secretary, Ministry of Sports and Youths Development, who represented the governor at the official handing over of the materials, said the development underscores the administration’s commitment to the welfare of people.

Akanbi explained that the provision of the items will make the camp more comfortable for the occupants, calling on the NYSC members to consider the gesture as an incentive to be more patriotic.

The governor is a man of his words. What we are seeing here today is a fulfillment of pledges made

just over a month ago. We are therefore celebrating a harvest from a governor who is concerned about the welfare of the people,” said Akanbi.

Esther Kupolati, the state coordinator of the NYSC, commended Abdulrazaq for the gesture which she said portrayed the governor as a responsive and reliable leader who cares for basic needs of the people.

“This gesture will go a long way in making the camp comfortable for the corps members and we promise to ensure that they are properly utilised and maintained.”

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overnor Babajide Sanwo-Olu says his administration will continue to build on the legacies instituted by past heads of service of Lagos State.

Sanwo-Olu gave the promise when members of board of trustees and executive committee of the Association of Lagos State Retired Heads of Service and Permanent Secretaries (ALARHOSPS) visited him at Alausa, weekend, saying the retired civil servants were assets to the state “All of you have spent good part of your active life to build our state at the civil service level. I am sure you will always feel fulfilled when you look back to see all the thoughts, ideas and energies you contributed to build the most vibrant civil service in Nigeria. The culture you have left behind is what we are building on.

“I want to assure you that we will not keep it at where you have stopped. We are going to keep the flame burning and build on all you have passed on to us in making the most dynamic civil service earn its pride of place.”

The governor noted that the future generation would ever be grateful to the group for their efforts in building a society that the black race was proud of.

According to the governor, the state would continue to draw from their wealth of experience just as

he observed that the establishment of ALARHOSPS as an advisory body to the government was an indication of the group’s passion for the development of Lagos.

“The future generation would remain indebted to you for your contributions to our state. Today, Lagos is the centrepiece, which every Nigerian and the black race look to as a source of pride. Your sleepless nights, labour and contributions led to this success story.”

ALARHOSPS president, Mohammed Ajibola-Olagbaye, who spoke on behalf of the retirees, lauded the governor for appointing a member of the group, Folashade Jaji, as secretary to the state government.

Ajibola-Olagbaye noted that the association was created in 2013 as a think tank to help government strengthen the capacity of the civil service and other workforce in the employment of the state for sustained prosperity.

He used the occasion to articulate some of the challenges facing members of the association, including disparity in monthly pension scheme, which affected some ALARHOSPS’ members that retired before May 29, 1999 when the fourth republic took off.

Ajibola-Olagbaye also sought the governor’s support in building a permanent secretariat for the association’s activities, and also for the forthcoming conference to be hosted by the association.

Flood: Edo distributes relief materials to victims

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do State government has distributed relief materials to victims of recent flood disaster that affected three communities in Orhionmwon local government area of the state.

Special adviser to the Governor Godwin Obaseki on special duties, Yakubu Gowon, presented the materials to the chairman of the council, Sylvester Okoro, for onward distribution to victims, on Friday.

Gowon said assessment of the property destroyed, which included a school building and borehole, had been done in the three communities- Umughum-zuagbor, Obazaigbor-nugu and Evbonogbon.

He said the school building had been renovated while the solar powered @Businessdayng

borehole was being run by a generator set to ensure the victims have access to potable water. He listed the relief materials being distributed to include 20 bags of rice, 20 bags of beans, 20 gallons of red oil, 20 gallons of vegetable oil and 105 bundles of roofing sheets.

Others were 42 bags of 3 inches nails, 42 bags of 4 inches nails and 42 packs of zinc nails.

“The governor has approved that we give these relief materials to the victims of the recent flood disaster that happened in Orhionmwon council, which is the usual way the governor gives relief to victims of disasters in the state.

“We want to provide succour to them and ensure that the materials get to the people affected,” he said.

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E-mail: insurancetoday@businessdayonline.com

Insurers approach shareholders, new investors on capital requirement Modestus Anaesoronye

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nsurance companies in the bid to meet new capital requirement requested of players in the industry are approaching their shareholders for approvals for capital rising, while others are discussing with dip pocket investors to inject funds.

Across the companies, activities are currently ongoing to accomplish fist line efforts to up capital status before further plans can be made.

Some of the listed companies have written to their shareholders to intimate them of their plans, held Extra Ordinary Meetings (EGM’s) to get shareholders approvals; currently in right issues at the exchange, while some are discussing with local and foreign equity investors.

The Nigerian insurance regulator, NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion, to N20 billion.

According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insur-

Sunday Thomas, acting commissioner for Insurance

ance and reinsurance companies shall be required to fully comply not later than 30th June 2020.

Insurance regulator, the National Insurance Commission (NAICOM) is positive that the ongoing recapitalization exercise in the industry will help boost retention capacity.

According to the commission, a lot of the risks emanating from the country were being insured abroad as result of low capacity of insurance in Nigeria.

The Commission had said that the recapitalization exercise will strengthen

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the operating companies and enhance their capacity to absorb more risks.

“The ongoing recapitalisation exercise will allow local insurers to retain huge risks in the country, thereby, avoiding premium flight, and in the long run increase the profitability of the sector and its impact on the nation’s economic growth and development, insurance commissioner noted.

Sunday Thomas, acting commissioner for Insurance, said the recapitalisation will enable the sector retain insurance businesses instead of ceding them

outside the country; turn the image of the market, strengthen financial base of the companies, increase the sector’s contributions to gross domestic product (GDP), and a host of other benefits.

Thomas said: “We have the mandate to ensure that the recapitalisation throws up more solid companies.

Our hands are open to welcome old and new investors into the industry.”

He emphasized that NAICOM targets having companies and an insurance sector that will support the government to build a viable economy.

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ON THE MONEY

5 ways to teach your children about saving this summer

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aving money is one of the most important aspects of building wealth and having a secure financial foundation.

Yet many of us have learnt the importance of saving money through trial and error, and more importantly, experience.

As adults, it is important to inculcate the culture of saving into our young ones so that the habit will stick with them as they grow; and there is no better time to do this than this summer because this is when we’ll be spending more time with them. If you are a parent or a guardian, here are 5 ways to teach children about saving money.

1. Start with a Piggybank A piggy bank can be a great way to teach your kids the importance of saving while giving them an easy way to do it. Tell your kids that the goal is to fill up the piggy bank with some Naira notes until there is no room. Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow.

2. Open a bank account Once the piggy bank is full, take your child to the bank to open a savings account for them. There are commercial banks in the country that have accounts specially designed for children. So, have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest.

It can provide a great source of motivation for your kids if they understand that their money will grow over time if they don’t touch it.

3. Use savings jars When your kids really want the latest toy or a new action figure, let them know they will have to save up for it. Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.

To encourage saving up for

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their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.

4. Lead by example Children learn by example, so the best way to teach your child about saving money is to save money yourself. Have your own jar of money that you put funds in regularly. When you’re out shopping, show your children how to discern between various prices and explain why buying one item makes better sense than another.

5. Start a conversation One of the most important things you can do is to start a conversation about money and the importance of saving. Money doesn’t have to be scary or a taboo. Use financial discussions as teachable moments. An innocent question such as “Are we rich?” can be answered in a way that emphasizes family values, such as hard work and responsible spending.

Let your children know they can have an allowance, but it’s up to them to save up for things they really want. In addition, illustrate how much their money can grow over time if they save.

Teaching kids how to save money may seem like a tough task. It has even been said that parents are more likely to talk to their children about sex than about money. But using these tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge which truly pays the best interest.

For more financial tips, you can call Old Mutual on 01 271 9393 to arrange a free financial education session for your team, group or organization. Our Financial Advisers can help you with the right kind of financial and insurance advice. For more information, visit your nearest Old Mutual branch or go to www.oldmutual.com.ng or follow our social media pages @ oldmutualng on Facebook and Instagram and @oldmutual_ ng on Twitter. We look forward to helping you with your money matters.

Monday 19 August 2019

BUSINESS DAY

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Lessons for Nigeria as Kenyan insurers redouble interest on insuretech to deepen penetration …needs NAICOM to open up market Stories by Modestus Anaesoronye

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enya insurers at the end of 2018 achieved a market penetration of 2.88 percent as against 2.77 percent in 2017, dwarfing Nigeria’s 0.4 percent penetration, and plans are underway for the East Africa industry to embrace insuretech to increase its penetration.

Insurance penetration is the measure of premium generated against the GDP of the country.

Nigerian operator’s frustration in embracing insuretech many operators and analysts have said was the difficulty in getting approvals from the regulator, National Insurance Commission (NAICOM) for products relating to application of technologies.

This they have said were part of the frustrations why partnerships with telecommunications companies that had hitherto opened the market for increased policy uptake was suspended.

Whatever the regulator can do to fast track embrace of insuretech, either directly or working with other regulators including Nigerian Communication’s Commission (NCC) and Central Bank of Nigeria (CBN) must be taken seriously for the growth of the Nigerian insurance industry, an operator who did not want to be men-

tioned pleaded.

Experts in finance and management, EY in its recent report said tomorrow’s insurance leaders must prepare for the adoption of blockchain and big data, the growing challenges of cybersecurity and more They note that dramatic changes are reshaping the insurance industry and forward-looking insurers aren’t just watching it happen. They are taking action and making investments that will help them become more customer-centric, improve their pricing and create operational efficiencies.

Meanwhile, local underwriters in Kenya were said to have been tipped to adopt insurance-focused technology known as “insurtech” to double coverage of underserved populations from the current near three percent, according to local media in Kenya.

The industry it notes is under pressure to innovate and outpace existing traditional brick-and-mortar systems.

Insurers including about 60 insurance tech startups heard at a conference in Nairobi that players must utilise technology to make products relevant to customers and create new opportunities or their traditional business models will be extinct.

“East Africa’s mobile penetration gives great opportunities for disruptions in the insurance sector,” said market minds founder, Sebastian De Zulueta, one

of the organisers of the recent conference.

Kenya’s mobile penetration hit 100 per cent for the first time as active customer subscription touched 46.6 million, last December, official data show.

But challenges including a lack of awareness among customers and high cost of premiums have locked many Kenyans from accessing insurance, according to several studies. Kenya’s penetration is estimated at 2.93 percent, the report said.

Globally, technology is redefining the way business is done and the insurance industry is not left out of this disruptive change especially with the growth of InsurTech companies leveraging on best-in-class

technologies to simplify the product life cycle for consumers.

Africa Re, a leading reinsurer in Africa is driving the initiative in the continent with the launching of InsurTech Challenge, an initiative which aims at identifying, promoting and rewarding technology companies especially start-ups owned by Africans or built by individuals resident in Africa that are solving some of the identified challenges in the insurance value chain.

At the global market, InsurTech start-up Lemonade recently signed a $300 million Series D funding round led by SoftBank Group, with participation from Allianz, General Catalyst, GV, Our

Crowd, and Thrive Capital.

Lemonade is one of the most high-profile companies to emerge from the insurance technology wave with aims to digitising the entire insurance process; the company claims to collect 100 times more data than traditional carriers.

Lemonade says it plans to use the funds to accelerate it’s US and European expansion in 2019, and explore new product lines.

According to Africa Re, InsurTech Challenge is a new category of its African Insurance Awards. It is targeted at non-insurers that are collaborating with insurers to improve their customer service delivery, product development and overall innovation all around Africa.

The grand finale of its award held at the annual conference of the African Insurance Organization (AIO) in Johannesburg South Africa on 10 June 2019, shortlisted three companies with a platform to meet the insurance industry where the winner got a cash prize of $20,000.

“In less than three years, Lemonade has expanded across the US, given back to dozens of charities chosen by our community, and fundamentally changed how a new generation of consumers interacts with insurance,” said Daniel Schreiber, chief executive officer and cofounder, Lemonade.

“Looking forward, we aspire to create the 21st century incarnation of the successful insurance company: a loved global brand that can endure for generations; an organization built on a digital substrate, enabling ever faster and more efficient operations, and ever more delighted consumers.”

This significant funding round comes off the back of an active year for InsurTech investment. Analysts at Deutsche Bank found recently that volumes had increased by more than 60 percent between 2017 and 2018.

Data also showed that InsurTech investments (across all stages) totaled $2.6 billion during the first three quarters of 2018, compared with $1.6 billion for the same period in the previous year.

events in different parts of the world.

Described as secondary perils, thunderstorms, torrential rains and snowmelt caused the highest losses through both wind and water damage in H1 2019 in many regions, including the U.S., Canada, Europe, Australia, China, and Iran.

According to Swiss Re, overall economic losses from these events totalled $32 bil-

lion, which is roughly 73 percent of the total economic loss figure. While the insured loss total for these events is estimated at $13 billion, which is 68 percent of the overall insured loss figure.

Head of Catastrophe Perils at Swiss Re, Martin Bertogg, said: “The experience of the first half of this year has once again exposed the existing protection gap issues in emerging countries.

For example, cyclone Idai showed just how fragile African coastal communities are. And in India, cyclone Fani inflicted widespread damage and large uninsured losses. Similarly, the nature and location of the events underline the theme of secondary perils taking a larger share of the overall loss burden, as we analyzed in more detail in our last catastrophe sigma.”

Catastrophe losses hit $15bn in H1 2019

G

lobal reinsurance giant Swiss Re has estimated that natural catastrophe events in the first-half of 2019 resulted in insured losses of $15 billion, down from the $21 billion recorded in the first-half of 2018.

Overall, insured losses from catastrophes amounted to $19 billion in H1 2019, with $15 billion, or 79 percent caused by natural catas-

trophes, and the remaining $4 billion being from manmade disasters.

Overall, catastrophe events in the period resulted in economic losses of $44 billion, with natural catastrophes accounting for $40 billion of this total. According to Swiss Re, this is far below the $109 billion average first-half economic losses for the past ten years, and also lowers than the $51 bilwww.businessday.ng

lion recorded in H1 2018.

Roughly 42 percent of global economic losses in the first-half of the year were covered by insurance, and Swiss Re highlights the fact that many of the high loss events occurred in places with low insurance penetration.

Swiss Re notes that the main driver of insured losses in the first-half of 2019 were thunderstorms and flooding

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Monday 19 August 2019

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Monday 19 August 2019

BUSINESS DAY

START-UP DIGEST

33

In association with

From engineering to manufacturing: The entrepreneurship journey of Chigozie Bashua ODINAKA ANUDU

C

higozie Bashua is an example of how far grit and passion can take a young

Nigerian.

A graduate of Electrical/ Electronics Engineering from Nnamdi Azikiwe University, Bashua started her career as an IT support staff member. She had a stint in the telecommunications industry, working as a radio frequency drive test engineer for two years.

An IT expert, Bashua registered The Nut Place on the 20th of December 2013 after seeing an opportunity in nut-based food products industry. Full operations began on the 26th of July 2016.

The Nut Place processes edible nuts into healthy food products. All of its products are gluten-free and are used by people who have gluten issues, on a weight management journey or need special diets. Some of its products are nut flours, nut flakes, pastes and bars.

Apart from being the CEO of The Nut Place, Bashua helps businesses

to plan, enabling them to access funding by taking them through simplified and proven processes of business planning via an online course. She likewise develops and reviews business continuity management plans and policies for companies.

What motivated the en-

trepreneur to set up the nut processing firm?

“In 2013, I recognised several needs, which were narrowed down to two points. One is heavy dependence on imported nut-based food products which led to increased food prices,” she says.

“Next is lack of food al-

ternatives for healthy living.

It boiled down to lack of food processing facilities, but we decided to carve a niche by processing raw edible nuts into healthy products that could be used as snacks, for cooking, baking, as additives, thickeners and in making beverage drinks,” she explains.

She did not always have it easy, having started at a corner of her mother’s kitchen—at a three-bedroom factory in Surulere area of Lagos.

Though Bashua began with processing tiger nut flour, she currently has five employees, four products in the market, and supplies to 10 stores.

Nigeria has 200 million mouths that must be fed.

The majority of them are young people below 18.

Bashua believes that this holds an enormous opportunity for her and the food industry, especially as it concerns using technology to make food distribution within Nigeria more accessible.

Unlike many young Nigerians who want external funding before starting, Bashua raised her own start-up fund from personal savings before getting

grants for her business.

She raised money from the Growth and Employment Scheme, an initiative of the World Bank. She also accessed a grant from Tony Elumelu Foundation, which has supported hundreds of entrepreneurs across Africa.

The entrepreneur is a Tony Elumelu Foundation and a British Council Alumnus.

Recently, she was selected to join the second cohort of the African Women Entrepreneurship Cooperative (AWEC), a brain child of the Center for Global Entreprise (CGE) in the United States of America.

She is now a mentor at the Tony Elumelu Foundation, which shows how much she has grown.

“Our vision is to become the largest producer and exporter of edible nuts and healthy food products processed from nuts,” she says.

“We hope to get our products into other African countries soon,” Bashua adds.

She advises entrepreneurs to be patient when dealing with regulatory bodies, especially the National Agency for Food and Drug Administration and Control (NAFDAC).

Like other entrepreneurs in the country, she faces challenges of poor infrastructure.

“Lack of electricity and cumbersome regulatory processes are key problems for us,” she notes.

“I believe that our licensing processes can be made easier and we can have automated means of getting these things done,” she recommends.

She wants upcoming entrepreneurs to understand that business success requires planning.

“Business requires a lot of planning and you have to consistently show up even when you haven’t made it,” she says “There is nothing called ‘overnight success’. If it’s legitimate, it was not made overnight. You will have times when you will be frustrated, want to give up, but you need to keep moving,” she further says.

“Also, if you have a 9-5, you can use your salary to raise personal funds to start your business. Get a business plan before you start and put structure on ground even as a small business.

Your business shouldn’t die when you are not around,” she adds.

Ford Foundation redeems $100,000 pledge to 3 start-ups in Aba GODFREY OFURUM

F

o rd Fo u n d at i o n , a US-based international development organisation, has redeemed the $100,00) prize money for the maiden edition of the Madein-Aba Hackathon Challenge.

The Aba Hackathon Challenge, an Information technology (IT) and idea development-based competition, was organised by TBWA Concept, a public relations outfit and sponsored by the Ford Foundation, in continuation of the ‘Proudly Madein Aba campaign’, geared towards promoting goods made in Aba. Aba Hackathon is also aimed at pushing young minds to hack and pitch ideas that can solve real problems.

Footwear Academy, a footwear training firm, won the challenge with a solution to upgrade the skills of Aba shoemakers

to enable them to improve the quality of their products, using modern equipment and technology.

Bentley Chukwuemeka, co-founder, Footwear Academy, stated that their plan is to introduce Aba shoemakers to modern technology to enable them speed up production as well as reduce apprentice period from five years to six months.

For their effort, which was considered to be the best by panel of judges, made up of seasoned entrepreneurs and professionals, Footwear Academy won a sum of $50,000.

Clintonel Technology came 2nd and won a cash prize of $30,000 with a solution to digitalise and automate the metal fabrication process in Aba, through Computer Aided Design (CAD) and Computer Aided Manufacturing (CAM).

The technology, according to Tochukwu Chukwueke, co-founder, www.businessday.ng

Clintonel Technology, would help shoe manufacturers and metal fabricators in Aba to reduce production cost, increase speed, multiply volumes, while improving finishing to generate more revenue.

The 3rd prize went to Ogwugo Technologies, an online marketing platform designed to handle trade activities between buyers and sellers in broad categories. They undertake delivery of foods, gas, clothes retailing and shoes, among others.

C h i ma Ab a f o r, c o founder, Ogwogo.com, explained that the firm is offering a dynamic platform built from scratch to adapt to modern e-commerce technology, as well as e-commerce problems.

The Three-day event was organised to enable young minds to hack and pitch ideas that can solve real problems faced daily by entrepreneurs in Aba, the commercial hub of Abia State.

Daniel Chinagozi, founder/chief operating officer, Innovation Growth Hub (ighub), told BusinessDay, that the three firms have made a lot of progress since the programme, noting that Footware Academy team has completed a footware production training in Italy, where some staff went to enhance their skills.

He said that Clintonel has received modern machines to boost its operations, while Ogwugo.com has opened three new hubs.

“They’ve got the last tranche of their funding.

Footware Academy got $50,000, Clintonel Technology got $30,000, while Ogwugo got $20,000. They have all received their funding as of today,” he said.

Paul Nwulu, programme manager, West African office of Ford Foundation, explained that the Hackathon Challenge was organised to

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find ways of using technology and innovative ideas to help influence the lives of shoemakers, fabricators and garment makers in Aba. He explained that they received 400 entries, out of which 10 best ideas were selected for the final, from which the judges further picked the best three as winners.

Nwulu, a professor, stated that the Ford Foundation was committed to supporting the ideas to bring them to life.

In his words, “So for the best idea, we are going to invest up to $50,000 to bring it to reality. For the second best idea, we are going to invest up to $30,000, while the 3rd best idea will get a support of $20,000.”

“So we have invested $100,000 to make sure that the ideas selected today will come to reality.

“The people that have the ideas own the ideas.

The Ford Foundation is @Businessdayng

not seeking ownership of their ideas. It is for the originators to keep their ideas. Whatever commercial setting it becomes, it is yours to keep.”

Kelechi Nwosu, managing director, TBWA Concepts, revealed that the ‘Proudly Made in Aba Campaign’ has increased patronage to Aba artisans.

According to him, “We have heard host of people viewing the campaign from all over the world, but very importantly, we have feedback from the finished leather and garment clusters that they’ve heard increased patronage.

“For us we think that ‘Proudly Made in Aba’ has been off to a good start, but it needs to still travel. It needs a longer term plan for us to get there and that is why this Hackathon Challenge is extremely important, like we say, “Ideas meet with business”.

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Monday 19 August 2019

BUSINESS DAY

START-UP DIGEST

Akomolafe Bankole: Using innovation to redefine real estate business JOSEPHINE OKOJIE

A

komolafe Henrich Bankole is one of the most successful under-30 entrepreneurs in Nigeria.

He is the managing director of Akotex Group, a conglomerate of four businesses across several industries, including real estate/ construction, technology, escalator, elevator fitness and wellness.

He was listed as one of the Forbes Africa 120 game changers in 2019. At 26, Bankole has made a considerable impact on the Nigerian business space as he constantly seeks to disrupt industries with technology through Akotex Group.

Given his meteoric rise over the past years, there is a chance that the business could become a top brand in the country and Africa at large within the shortest possible time.

“As an entrepreneur with a drive for continuous improvement and innovation, I am keen on developing myself and remaining focused in order to leave an indelible footprint on the global business world,” he says.

His determination to succeed in life and be innovative inspired the establishment of Akotex Nigeria Limited – his first arm of business— in 2016.

The engineer-turned-entrepreneur had very little to start with, but the fusion of skills and

ideas was able to generate the needed capital for him to kickstart the business.

With the support from family members, Bankole was able to raise his initial start-up capital.

“Really there was no large sum initial start-up capital,” he says.

“The business idea was pres-

ent, and the skills were also in hand. So, generating the start-up capital was a fusion of skills with idea – this is what entrepreneurship is about –using value as a skill in order to generate value as a commodity,” he explains.

Since starting, the young entrepreneur has grown very fast

as his business has expanded despite slow economic growth.

Key to this is innovation.

“In the last couple of years, this growth has been remarkable when juxtaposed with previous years,” he admits “There has been expansion amid periods of market decline,” he further says.

“Our main strategy has been constant innovation in our business model,” he notes.

“Also, our competitive advantage has been greatly advanced by putting into maximum consideration other factors such as keeping a good customer relationship, adding values to our firm and partners, as well as leveraging and extending our valuable capabilities and resources,” he further explains.

His firm has earned the trust of customers and also delivers critical services.

The entrepreneur says he plans to establish an elevator factory in the country in the long run and expands the real estate arm through provision of affordable housing for younger Nigerians.

Similarly, he has designed his fitness and wellness business to disrupt the industry using technology.

“The fitness and wellness industry is growing and to disrupt that space using information technology, we have created fit and curves which should be launched soon into the Nigerian

market as we are still in the test phase to find a scalable business model that will suit the Nigerian market,” he adds.

It has not all been rosy for Bankole as he surmounts numerous challenges to scale his business.

He tells Start-Up-Digest that finding the right skills from the available pool of manpower in the country remains the major hurdle confronting his business.

He identifies inadequate infrastructure, high cost of interest rate and insecurity in the country as other major factors limiting his plans.

He urges the Federal Government to enact economic policies that will drive growth and development, while calling for the provision of vital infrastructure to enable young entrepreneurs to succeed.

In evaluating the Nigerian real estate industry, he says the sector is taking its strides and that a huge transformation has taken place in the last couple of years.

He adds that the country’s real estate industry is growing at a fast rate and the opportunities in the industry still abound.

On his advice to other entrepreneurs, Bankole says, “My advice is to make good use of the opportunity to influence your community, beginning from your work space. And of course, be focused.”

Business Opportunity

Experts call for MSME bank, 5-year tax holiday for startups

How to tap opportunity in recycling

…LCCI canvasses stable policies

Z

eugnis International Limited will expose opportunities in waste recycling in Lagos on August 24. Venue is the Lagos Chamber of Commerce and Industry, Ikeja.

The firm promises to reveal secrets in making wealth from waste.

Handled by Luther Kington Nwobodo, a PhD student and CEO of Zeugnis International Limited, the training will teach participants how to recycle waste nylons, PET bottles and other plastics to bricks and interlocking stones, the firm said. It will also enable Nigerians to learn opportunities in waste, including how to improve the environment through recycling it added.

“On daily basis, Nigerians consume lots of pure water and soft drinks in PET plastic bottles which are thrown away to litter our environment,” Nwobodo said.

He added that adopting this recycling process in Nigeria would not only reduce the amount of waste in the environment but create jobs to reduce high unemployment situation estimated at 23.1 percent.

It would also reduce the huge cost of construction— that is government spending on construction

of roads and other major projects that require bricks.

In the forthcoming training next month, Nwobodo and his team would be discussing recycling processes and conversion stages, including acceptable outcome of recycled wastes such flakes, and pellets, the firm said.

“A detailed process of converting waste plastics into interlocking stones and blocks will be unveiled, including machine sourcing and sources of raw materials,” he said.

He explained that return on investment is over 100 percent and participants will be introduced to partners.

“Anyone who wants to go into this business needs this training because it will reduce unnecessary waste of resources in machine sourcing and enable them to understand the difference in PET materials and be able to produce standard PET flakes,” he said.

He further encouraged those seeking lucrative businesses to invest in to give the training a try and learn the secrets of making money from waste. Interested investors are advised to contact the organisers on 08032810868

ODINAKA ANUDU

E

xperts have canvassed the establishment of Entrepreneurship and Start-Up Bank to increase lending to start-ups and small businesses.

Sunday Abayomi Adebisi, associate professor and acting director, University of Lagos Entrepreneurship and Skills Development Center (ESDC), said such a bank will fund innovative ideas from young Nigerians.

Adebisi, who spoke at the Lagos Chamber of Commerce and Industry (LCCI)’s annual Entrepreneurship Summit held on Thursday in Lagos, called for a five-year tax holiday for start-ups to enable them navigate rough terrains in the economy.

“The government should set up what I call an entrepreneurship and start-up bank. They must also look at a situation where the multinationals that have taken so much from this nation should contribute 0.5 percent of their profit into a pool, whereby such a pool is seen as an entrepreneurship start-up fund that will be used to develop ideas in the country,” he said.

“Such pool will have mentors that will evaluate these ideas to identify bankable projects,” he said.

Adebisi said such a move has become necessary owing to high unemployment rate, which is 23.1 percent at the moment.

“It is very important for us to know that the unemployment rate in the country is a bubble and it is at a point of bursting,” he warned.

“With a youth population of 60 percent,, which is age 17 to 35, it will shock everyone that we have about 120 million youths in this nation and there is a statistics that says that 38.9 percent of them are unemployed.

That amounts to about 43 million people not employed. This is twice the capacity of Ghana and Sierra Leone. This is shocking and we must rise up to this occasion.

He disclosed that his centre patented 11 ideas last year and 15 businesses are being lined up to be registered for students of Unilag free of charge.

Babatunde Ruwase, president of the LCCI, said creation of a modern, flexible and knowledgebased economy requires the Attachments area

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growth of entrepreneurial firms, adding that Nigerians are among the most entrepreneurial people on earth.

“Good and stable government policies, provision of adequate infrastructural facilities like electricity, water, road network, and communication system, among others, are what entrepreneurs need to succeed,” he said.

“What government can do is to do more in areas of intervention funding. They can make more money available to banks to support sectors that are critical while also making the conditions for borrowing these funds relaxed,” he added.

Damilola Oloruntade, COO of A-Mobile Limited, a sanitation and event firm, said she started with N25,000 when she returned to Nigeria 12 years ago, but has grown in a way that underscores the opportunity in the country.

“You cannot be an entrepreneur if you are not innovative and creative,” she said.

Temitope Ogunsemo of Krystal Digital Solutions, explained that there is a need to move away from manual processes to digital to eliminate wastes.

Monday 19 August 2019

BUSINESS DAY

35

Live @ The Exchanges Market Statistics as at Friday 16 August 2019

Top Gainers/Losers as at Friday 16 August 2019 LOSERS

GAINERS Company

Company

Closing

Change

N1270

N1143

-127

OKOMUOIL

N52

N49

-3

0.55

NASCON

N14

N12.6

-1.4

VOLUME (Numbers)

N6

0.4

STANBIC

N34.3

N33

-1.3

VALUE (N billion)

N16.6

0.35

N28.8

N27.9

-0.9

MARKET CAP (N Trn)

Closing

Change

DANGCEM

N162

N164

2

ESTLE

FLOURMILL

N12.8

N13.8

1

BOCGAS

N5.57

N6.12

N5.6 N16.25

CUSTODIAN ZENITHBANK

ASI (Points)

Opening

Opening

UNILEVER

DEALS (Numbers)

26,925.29 4,662.00 258,290,159.00 3.531 13.121

Conoil assures shareholders of improved returns …gets their approval to pay N1.4bn dividend Stories by Iheanyi Nwachukwu

S

hareholders of Conoil Plc have cause to cheer as the major oil marketing company has expressed optimism about juicy returns on investment, in linewith its tradition of delivering increasing dividend.

In his address to the shareholders at the 49th Annual General Meeting of the company at the weekend in Uyo, Akwa Ibom State, the Chairman, Mike Adenuga, stated that despite the challenges of a tough operating environment in the downstream petroleum sector, Conoil continued to record progress towards delivering superior shareholder value.

“Every segment of our business will continue to receive the desired attention with a view to maintaining world class levels of operating and capital discipline. We believe that the future holds a lot of promise for our shareholders, the company will surely reward them for their steadfastness and unwavering faith in its prospects,” Adenuga said.

For the financial period ended December 31, 2018, Conoil profit before tax rose by 11.4percent to N2.566billion from N2.304billion posted in

L – R: Kayode Falowo, group managing director/CEO, Greenwich Trust Limited; Oscar N. Onyema, chief executive officer, The Nigerian Stock Exchange (NSE); His Excellency, Olukayode Fayemi, CON, Otunba Abimbola Ogunbanjo, executive governor of Ekiti State; Erelu Angela Adebayo, national council president, The Nigerian Stock Exchange (NSE); Abubakar Balarabe Mahmoud, SAN, OON, national council member, NSE; during the Closing Gong Ceremony in commemoration of the Facts Behind the State Economy presentation at the Exchange in Lagos.

2017, while profit after tax soared to N1.796billion from N1.578billion or 13.8percent increase.

Turnover rose by 5.8percent to N122.213billion from N115.513billion.

At the meeting, shareholders ratified a total dividend cash payment of N1.4 billion, which translates to 200kobo for every 50kobo share held.Adenuga attributed Conoil’s achievement in the financial year under review to the commitment of the Board and management of the company to deliver solid financial results, in spite of the enormous challenges that confronted operators in the down-

stream oil sector, including the prohibitive cost of procuring petroleum products.

He said: “We managed the challenges properly and ended the year creditably.

We embarked on strategic cost reduction, while ensuring that the future growth potential of our business was not sacrificed.”He assured that the company would not relent in its efforts to maintain its leading position in the downstream petroleum sector, “through new initiatives in product development, service delivery and best practices, while delivering value to all our stakeholders.”

Commenting on the

company’s performance, the shareholders expressed satisfaction with the overall performance and the growth path which the Board and management have charted for sustained profitability.

They were pleased that the company sustained its tradition of paying dividends even in the face of daunting industry challenges“I must commend the Board and Management of Conoil for sustaining profitability and also able to pay dividend to its shareholders notwithstanding the very tough operating environment during the financial year in review.

GTBank proposes 30kobo interim dividend ...as H1 PBT rises to N115.7bn

N

igeria’s tierlender, Guaranty Trust Bank Plc proposes to pay its shareholders an interim dividend of 30kobo per share for the half year (H1) period ended June 30, 2019.

Snapshot of the Group’s operating results for the period under review shows its profit before tax (PBT) increased to N115.7bn as against N109.6bn recorded in the corresponding H1 period of 2018.

The group’s H1’19 results released on the Nigerian

Stock Exchange (NSE) on Friday August 16, showed gross earnings dropped slightly to N221.86bn against N226.6bn in H1’18.

As at June 30, 2019, the Group had eight (8) international banking subsidiaries and two (2) sub-subsidiaries.

The operations and management of these subsidiaries are monitored and controlled by GTBank Plc Profit after tax (PAT) increased to N99.13billion from N95.58billion in H1’18. The bank’s earnings www.businessday.ng

per share rose to 350kobo from 338kobo in H1 of 2018.

On Wednesday September 11, the interim dividend will be paid to shareholders whose names appear in the Register of members as at close of business on Monday September 2, for ordinary shareholders and on August 26, for holders of the bank’s Global Depository Receipts (GDR).

The Register of members will be closed on Tuesday September 3, while for that

of GDR holders it will be closed on August 27.

GTBank said in the pursuit to deliver greater shareholder value, it continues to subject its operations to the highest standards of corporate governance, which is an essential foundation for sustainable corporate success.

“We believe good corporate governance enhances the confidence placed in the bank by shareholders, business partners, employees and the financial markets in which we operate.

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Global market indicators FTSE 100 Index 7,117.15GBP +50.14+0.71% S&P 500 Index 2,886.28USD +38.68+1.36% Generic 1st ‘DM’ Future 25,812.00USD +237.00+0.93%

Deutsche Boerse AG German Stock Index DAX 11,562.74EUR +150.07+1.31% Nikkei 225 20,418.81JPY +13.16+0.06% Shanghai Stock Exchange Composite Index 2,823.82CNY +8.03+0.28%

SEC holds Q2 CMC meeting

T

he Securities and Exchange Commission (SEC) has said that the second Capital Market Committee (CMC) meeting in 2019 will hold from Thursday August 22 to Friday August 23, 2019 at the Eko Hotels and Suites, Victoria Island, Lagos.

While the key stakeholders in the capital market will meet on August 22, members of the media would be briefed on August 23 on the outcome of the CMC meeting.

However, the SEC has advised that admission into the venue would be upon presentation of the CMC Identity Card and strictly by invitation.

According to the SEC, “Attendance to both events is strictly by invitation. Invited participants are expected to come with their identity cards to be admitted into the venue and all invited participants are expected to be seated by 9.45am,” The CMC was mainly established to serve as a medium for exchange of ideas among market stakeholders as well as

the market and help double its size over time and grow the economy was unveiled November 2014.

Recall that the Commission has vigorously implemented some initiatives in the Master Plan with the aim of attracting more investors to the market.

Some of the initiatives, include direct cash settlement, regularisation of multiple subscription, dematerialization and e-Dividend Registration, as they promote transparency, protect and enhance investors’ confidence in the capital market.

The SEC therefore enjoins all shareholders to take advantage of the initiatives introduced in the capital market aimed, primarily, at strengthening the market and accelerating economic development.

This, SEC said is in consonance with the present administration’s economic strategy focused on deepening the capital market as a vehicle for encouraging a private sectorled economy with enhanced productivity.

Those who have been in-

for feedback to SEC on how to continuously improve the market activities and regulation.

It is an industry-wide committee comprising members of the commission, representatives of capital market operators and trade groups and other stakeholders. The CMC meets every quarter to deliberate on various issues affecting the market and other policy matters.

During the meeting, issues bordering on implementation of the Ten Year Capital Market Master Plan as well as others relating to the capital market, Fintech Roadmap and the economy would be discussed and the outcome made known to the media.

The ten-year master plan for the Nigerian capital market which is expected to refocus

vited to attend the expanded session are Chief Executive Officers (CEOs) of all registered capital market firms (that is Broker Dealer, Capital Market Solicitors, Custodians, Fund Managers, Issuing Houses, Rating Agencies, Registrars, Reporting Accountants, Trustees, and Consultants, etc.); Others are Chief Executive Officers of The Nigerian Stock Exchange (NSE), National Association of Securities Dealers (NASD), The Financial Markets Dealers Quotations (FMDQ), Africa Exchange Holdings (AFEX), Nigeria Commodity Exchange (NCX), Central Securities Clearing System (CSCS), Chartered Institute of Stockbrokers (CIS); as well as representatives of relevant Financial Services’ Agencies, among others.

@Businessdayng

36

Monday 19 August 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Lasting legacy: How to transfer your wisdom, values to next generation The Solid Wealth Messenger

Grace Agada

S

ince the dawn of humanity, human beings have attempted to memorialize their beliefs, values, life lessons and their achievements. The challenge they all face is that their lives is restrained by time. However, business leaders, and wealth creators must find a way to transfer the valuable wisdom they have gained over the years to the next generation. To do this, they require an immortalized transfer vehicle to bind this information together in an organized fashion. These vehicles which include things like paintings, songs, poetry, films, audio files or written text will open the lines of communication between them and their generations unborn.

There is something really fascinating about cementing one’s legacy and bringing back to life the echoes of the past. Rockefeller remains one of the world’s richest men in history and his wealth has transcended generations long after his death. However, even though he is no longer alive, six generations later, we still know everything that we need to know about his values, his life’s journey, his business strategy and his wealth because it was accurately preserved and documented in books, articles, movies and audio files.

There is a reason why after 1000 years the Bible still exists and is still a story we love to tell our children. Creating a lasting legacy that is beyond financial inheritance is a great way to preserve wealth and the human capital of your family. Without a well-crafted story of your values, wisdom and beliefs, vision can be lost, traditions can become diluted, mistakes can get repeated and your great grandchildren will be left with only very little knowledge about you.

Writing a meaningful legacy that communicates your values, wisdom, and beliefs to the next generation holds more benefit to your children and the world than it does for you.

A good legacy story is not a boring chronology of everything you have gone through in life, a self-acclaimed preaching manual or an ethical wills which is inherently limited in scope. It is also not a platform to simply document only your success stories.

A great legacy story is engaging, educating and inspirational.

It contains purposeful and organized content with a clear objective and message that is relatable, relevant, and beneficial for the next generation.

The following are the three key components of a great legacy story that will be of great benefit to the next generation.

It Must Tell Your True Story The most dangerous thing to do to yourself especially if you are a person of means is to leave your story for others to tell. A quick way to know how damaging a biased narrative can be is to Google your own name and see the different version of stories that come up about you. This can be damaging to your great grandchildren who will not have the privilege of meeting you and will be at a loss on what to believe.

Telling your own story also gives the next generation a better understanding of who you are and the forces that shape the values you are trying to transfer.

Future generations will have a complete picture not only of your life as a parent but also your life as a child, an adolescent, an entrepreneur, an adventurer, a goal getter and ultimately someone who struggled to make his or her way in life. It will help them understand their background, know the children of whom there are, and appreciate the sacrifice you made to give them a good life.

It Must Combine A Healthy Mix Of Adversity And Heroic Conquest – The most boring story in the world is an all-success story. Many parents who brag about their uninspiring straight “A” stories are guilty of this. When

Objectives • Solid Wealth Creation • Solid Wealth Preservation www.businessday.ng

people read great stories, they are looking for one thing: How will this story help them navigate their own life’s journey. A great story give direction and guidance, is vulnerable and displays the different twists of how someone moved from a disadvantaged position or a disempowering position to an empowering one. It is the grinding of the process and the series of relatable obstacles that one surmount that makes the story interesting and impactful for the reader.

It Must Inspire Great Lessons In The Next Generation – The way you tell your story is important for the reader. A great story helps the reader experience the writer’s own journey, understand how the story applies to their own life and is inspired to use it in making critical decisions. There is no gain in allowing subsequent generations repeat the mistakes of their fathers. Great stories leave clues behind that will guide the next generation. By modeling the act of telling your own story, you are teaching the next generation the importance of creating and preserving their own legacy. This way, the family develops an attitude of passing across important lesson that is beneficial for the success of the family’s human capital.

If the family is to thrive across multiple generations, the lessons learned by its members must be preserved.

That is the essence of creating

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your own story book. It will be your presence on paper, guiding your descendants and helping them navigate life’s many challenges. You will be that secret friend they can run to for advice when they hit a crossroad.

The challenge, however, is putting together this kind of story in such a way that is beneficial, meaningful, relevant, and valuable to the next generation. That’s where we come in.

We specialize in helping people create this kind of stories through our “180 days Legacy Diary Program”. We call it a diary because everyone wants to read the content of a diary. Within 180 days, we will capture your important life lessons, organize it in a relatable manner and put it together in what we call your Lasting Legacy Diary Package. This package will comprise a published book and an Audio CD file for those who will prefer to listen to your story.

To learn more about the 180 days Legacy Diary Program and how you can create your own lasting legacy kindly Text “Lasting Legacy” to 08101860042 Do not die with your lesson library still in your head.

‘

There is no gain in allowing subsequent generations repeat the mistakes of their fathers.

Great stories leave clues behind that will guide the next generation

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer.

Email: info@createsolidwealth.com Tel: 08101860042

@Businessdayng

Monday 19 August 2019

BUSINESS DAY

37

Access Bank Rateswatch Market Analysis and Outlook: August 16– August 23, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

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

Broad Money Supply (N’ trillion)

34.89

Decreased by 0.77% in May’ 2019 from N35.17 trillion in Apr’ 2019

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

24.86 2.11

Decreased by 0.13% in May’ 2019 from N24.89 trillion in Apr’ 2019 Decreased by 2.22% in May’ 2019 from N2.16 trillion in Apr’ 2019

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

11.08

Decreased to 11.08% in July 2019 from 11.22% in June 2019

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

13.5 13.5 (+2/-5)

Adjusted to 13.5% in March 2019 from 14% Lending rate changed to 15.5% & Deposit rate 8.5%

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

44.45 56.73 1.786

August 14, 2019 figure — a decrease of 0.94% from August start August 16, 2019 figure— a decrease of 3.09% from the previous wk July 2019 figure — a decrease of 1.21% from June 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday

Friday

16/08/19

9/08/19

NSE ASI Market Cap(N’tr)

26,925.29 13.12

27,306.81 13.31

Volume (bn)

0.26

0.22

Value (N’bn)

3.53

4.48

MONEY MARKET NIBOR Tenor

Friday Rate (%)

Friday Rate (%)

Change(%)

Indicators

16/08/19

1-week Change

YTD Change

(%) Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 16.98 Agriculture Cocoa ($/MT) (21.14) Coffee ($/lb.)

Cotton ($/lb.)

Sugar ($/lb.)

Wheat ($/bu.)

Metals Gold ($/t oz.)

Change Silver ($/t oz.)

(Basis Point) Copper ($/lb.)

(1.40) (1.40)

(%)

56.73 2.19

(3.09) 4.29

(11.99) (28.34)

2182.00 97.75 60.00 11.63 476.50

(3.07) 0.77 1.45 1.04 (5.08)

12.71 (24.92) (22.58) (24.14) 9.92

1513.50 17.17 259.55

0.75 1.00 (0.12)

14.87 (0.12) (20.82)

16/08/19

9/08/19

OBB

18.0000

12.1400

586

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

19.5700 17.6875 14.7472

12.8600 12.4375 13.1487

671 525 160

Tenor

90 Days

13.8061

12.9501

86

1 Mnth 3 Mnths

13.76 12.08

10.95 11.22

281 86

Friday

1 Month

(N/$)

Rate (N/$)

6 Mnths 9 Mnths 12 Mnths

14.27 14.27 13.78

12.44 12.70 13.09

183 157 69

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

16/08/19

9/08/19

16/07/19

Official (N) Inter-Bank (N)

306.90 363.42

306.90 363.31

306.95 361.25

BDC (N) Parallel (N)

0.00 360.00

0.00 360.00

0.00 360.00

Friday

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

AVERAGE YIELDS

Friday

(%) 16/08/19

(%)

Change (Basis Point)

9/08/19

3-Year 5-Year

0.00 14.25

0.00 13.08

0 117

7-Year 10-Year 20-Year

14.04 14.31 14.30

14.04 13.92 14.14

0 39 16

30-Year

14.55

14.20

35

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

Change

(%)

16/08/19 Friday

(Basis Point)

9/08/19

(%)

Friday

Change

(%)

16/08/19

BOND MARKET Tenor

Friday

(%)

(Basis Point)

9/08/19

Index

2,974.23

2,990.56

(0.55)

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

9.01 5.71

9.06 5.78

(0.55) (1.19)

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

21.08 -34.71

21.74 -34.04

(0.66) (0.67)

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

Date

91 Day 182 Day

5,849.03 26,600.00

9.74 10.75

17-July-2019 17-July-2019

364 Day

74,598.13

11.139

17-July-2019

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

Global Economy In China, the Caixin Composite PMI (which includes both the manufacturing and services sectors) increased marginally to 50.9 in July from 50.6 in June. This implies that business activity continued to expand at the beginning of the third quarter. The uptick was driven by a stabilisation in manufacturing output after a decline in June. In contrast, the services PMI declined to 51.6 from 52 previously. This marks the lowest reading in five months and may indicate that the impact of the trade war is now also spilling over to the services sector.

In a separate development, UK GDP contracted for the first time in almost 7 years in Q2 2019. According to the Office for National Statistics (ONS), the economy shrank by 0.2% quarter-on-quarter (q-o-q) following an expansion of 0.5% in Q1. The contraction was largely driven by a sharp drop in manufacturing output. This can partly be attributed to sharply lower car production as vehicle manufacturers were unable to reverse closures planned to coincide with Britain's expected departure from the EU at the end of March. Many vehicle manufacturers had planned temporary shutdowns in April, anticipating trade disruptions around the original Brexit date. Elsewhere, the Bank of Japan (BoJ) left its main interest rate unchanged and reiterated its commitment to keep rates “extremely low” until at least early 2020.

The bank also added a line in its policy statement saying that “it will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost”.

Domestic Economy The inflation rate for July 2019 declined to 11.08% year-on-year from 11.22% in June 2019. This represents a 0.14% drop in the rate compared to the prior month. Core inflation dropped to 8.80% from 8.84% in the previous month and food inflation fell to 13.39% from 13.56% in June 2019. Food items that saw the highest increases were bread & cereals, fish, meat, tubers and fats & oils. Food inflation on a year-on-year basis was highest in Kebbi state (17.75%) and lowest in Kogi state (10.36%). In a separate development, the President of the Federal Republic of Nigeria directed the Central Bank of Nigeria (CBN) to stop providing FX for food importation. This he said would improve agricultural production and help the country in attaining food security. He also mentioned that the foreign reserve should be used strictly for the diversification of the economy.

Stock Market Activities at the local bourse remained bearish as first half earnings scorecards failed to excite traders and investors. Minor selloffs were observed among high cap stocks at the close of the week.

Accordingly, the All Share Index (ASI) dipped marginally by 1.40% to 26,925.29 points from 27,306.81 points the preceding week.

Market capitalization also contracted by the same percentage to N13.12 trillion from N13.31 trillion the prior week. This week, we envisage the mixed performance will remain as selloffs persists in the absence of positive news and economic stimulus.

Money Market Money market rates closed higher in the week ended August 16, 2019 due to the bi-weekly Retail Secondary Market Intervention Sales (SMIS) FX auction.

Consequently, short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates rose to 18% and 19.57% from 12.14% and 12.86% respectively last week. The 90-day NIBOR also advanced to close the week at 13.81% from 12.95% the previous week. In this new week, rates are expected to ease slightly due to expected Open Market Operation (OMO) maturity scheduled to be paid on Thursday.

Foreign Exchange Market The local currency remained largely stable at the FX market in the week ended August 16, 2019. At the official window and the parallel market, the naira remained unchanged at N306.90/$ and N360/$ respectively from the previous week.

However, the naira at the Investors' and Exporters (I&E) window depreciated albeit marginally by 11 kobo to settle at N363.42/$ from N363.31/$ the previous week. This week, we foresee the local currency trading at prevailing levels.

Bond Market The bearish sentiment witnessed in the bond market a fortnight ago prevailed in the market last week. Thus, sell-offs were recorded across most maturities. Yields on the five-, seven-, ten-, twenty- and thirty- year debt papers trended upwards to settle at 14.25%, 14.31%, 14.30% and 14.55% from 13.08%, 13.92%, 14.14% and 14.20% respectively. The Access Bank Bond index declined by 16.33 points to 2974.23 points from 2990.56 points the previous week. This week, we expect the current trend to persist given the continuous drive to sell securities by market participants.

Commodities The price of Nigeria's crude oil benchmark, bonny light, moved lower last week, recording a 1.81% decline to $56.73 per barrel compared to $58.54 the previous week. Prices were weighed down as US crude inventories unexpectedly rose, fears of recession mounted and economic data out of China and Europe disappointed. In contrast, precious metals prices climbed, buoyed by safe-haven. The increase in safehaven demand comes as both actual GDP prints for Q2 2019 continue to disappoint and concerns over future growth on the back of deteriorating trade dynamics take centre stage. Gold breached the $1,500 per ounce last week, settling at $1,513.50 per ounce, while silver ended up 1% at $17.17 per ounce. This week, we anticipate oil prices will remain pressured by fears of recession and ongoing US-China trade dispute. For precious metals, a combination of dovish monetary policy and trade tensions will support safe-haven buying, exerting an upside on prices.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Sept’19

Oct’19

361

361

361

Inflation Rate (%)

11.15

11.2

11.2

Crude Oil Price (US$/Barrel)

65

67

67

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

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Nov’19

Exchange Rate (Interbank) (N/$)

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38

Monday 19 August 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Leading change in a company that’s historically poor at it RON CARUCCI

T

oday, managing continual disruption is a skill required of most leaders. Change management is the new management, which makes doing it effectively that much more difficult.

Change fatigue is one of the most common reasons for failure. It typically occurs when multiple changes are implemented at once and fail simultaneously as a result.

To rebuild resilience and win back confidence, leaders need to take three important steps at the outset of any initiative.

ACKNOWLEDGE THE

PAIN OF THE PAST. Too many leaders charge ahead, trying to inspire people without acknowl-

edging the pain of the past. Without realizing it, they’re erasing the very real frustrations of their

employees. The reality is that every organization has some track record of failure. That’s why it’s

better to start with the assumption that people don’t trust your intentions or approach and are expecting you to fail as well.

GROUND YOUR PLAN IN EVIDENCE. Knowing that past efforts have failed is helpful, but knowing why they failed can strengthen your credibility. Every organization does things to undermine change; figuring out what those are can help you avoid them.

It’s important to present your team with a detailed diagnosis of what has gone wrong in the past, and why.

REGULARLY ASK HOW YOUR PLAN FOR CHANGE FEELS DIFFERENT FROM PAST EF-

FORTS. In order to avoid the failures of the past, you should ask people to tell you if and how your plan for change feels different. Then use those insights to stay on track.

Your organization undoubtedly has weathered past failures, some of which may even have been yours. That’s all the more reason for you to take responsibility for, and learn from, them.

Begin your next change effort with an apology for past failures, whether they are yours or not, and then use the steps above to avoid repeating them.

• Ron Carucci is cofounder and managing partner at Navalent.

Why companies need a ‘price vocabulary’ UTPAL M. DHOLAKIA

T

he next time you visit a Costco, take a close look at the warehouse store’s price tags. They encode unique information. The endings of prices, such as .99 or .97, convey special meanings to the subset of shoppers who are literate in Costco’s “price vocabulary.”

For example, when a product’s price ends with .99, these shoppers know that they’re paying the regular price — that this isn’t a limited-time promotion.

On the other hand, they know that prices ending with .97 only appear on clearance items that have been marked down. And there are other specific connotations for prices ending with .88 and .00.

A price vocabulary is a

unique and consistent set of prices — particularly price endings, plus other symbols such as glyphs and colored sales tags — that a retailer can use to convey

information to consumers.

In the words of a Costco employee , “It’s not really a code, more just a set of rules that we follow to track pricing and be consistent

throughout the region.”

When planned and communicated to customers with care, a price vocabulary can deliver powerful marketing benefits. Here

are three significant benefits that retailers should consider: — PRICE VOCABULARIES CREATE SUSTAINABLE DIFFERENTIATION. A consistent price vocabulary can differentiate brands from their competitors. What’s more, such differentiation can be durable: As the vocabulary develops a history with shoppers, it becomes associated with the brand, improving the shopping experience for core customers.

— THEY INCREASE CUSTOMER ENGAGEMENT. When I’ve talked about the price vocabulary concept and described Costco’s system, I invariably get an audience member or two who will say, “I’ve been a Costco member for many years, but I never knew about this until just now.” This reaction is

(C) (2017) Harvard Business Review. Distributed by New York Times Syndicate

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usually followed by a sense of excitement at being able to engage with a trusted brand in a new way.

— THEY REWARD LOYAL CUSTOMERS. Because of the direct link between the information communicated by the price vocabulary and the customer’s buying behavior, a well-designed vocabulary can effectively function as a loyalty rewards program.

Implementing a price vocabulary is relatively inexpensive to do, although it may take some time to catch on if your company hasn’t used one before. It may even save your company money by introducing structure and consistency into the process of setting and changing prices.

• Utpal M. Dholakia is a professor at Rice University.

Monday 19 August 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

39

In association with

Using algorithms to understand the biases in your organisation JENNIFER M. LOGG

A

lgorithms have taken a lot of heat recently for producing biased decisions. For example, people were outraged over an Amazon.com recruiting algorithm that overlooked female applicants.

Should we be alarmed by these biases? Yes, of course. But, ultimately, it’s the ways organizations respond to their own algorithms that will determine whether they make strides in de-biasing their decisions.

So far, the typical response when these biases surface is for the media to scapegoat the algorithm while the company reverts to human decisionmaking. But this is the wrong approach to addressing bias.

Rather, organizations should use statistical algorithms for the magnifying glasses they are: Algorithms aggregate individual data points in order to unearth patterns that people have dif-

ficulty detecting on their own.

When algorithms surface biases, companies should seize on these “failures” as opportunities to learn when and how bias occurs. If they do, they’ll be better equipped to de-bias their practices and improve their overall decision-making.

When algorithms surface biases, companies learn about their past decision processes, what drives biases and which

irrelevant information distracts the organization from useful information. Companies can apply this magnifying glass strategy to any important decision process that involves predictions, from hiring to promotions.

Leveraging algorithms as magnifying glasses can also save organizations time. For instance, if a department hires two people each year, it may

take a while before the organization realizes that this department of 10 consistently only includes one woman.

An algorithm analyzing such infrequent decision-making could figure this out much faster. Making their biases glaringly obvious gives organizations the opportunity to address the problems behind them. The alternative is continuing with business as usual,

letting bias seep into virtually every hiring and promotion decision.

Once biases are detected, organizations can correct biased decisions in three main ways.

The first may be the most difficult. It involves creating better input data for the algorithm, which starts with changing hiring practices. Second, organizations can continue to use the same historical data but create new rules for the algorithm, such as including a variable that specifies diversity. Third, organizations can examine how existing input variables may introduce bias or consider new, more appropriate input variables.

In the end, algorithms are tools. People build them, determine if their output is accurate and decide when and how to act on that output. Data can provide insights, but people are responsible for the decisions made based on them.

• Jennifer M. Logg is an assistant professor at Georgetown University​.

To win support for your idea, think like a marketer ness people need “influencers” too, ideally from different parts of the organization.

DEVELOP AD CAMPAIGNS, NOT PRESENTATIONS. Try comparing your plan to a successful, historic business development that your boss tends to reference. Use compelling metaphors that evoke images of success. When there’s a match between the cues you provide and those that already exist in the mind of the decision-maker, you’re more likely to make the sale.

LESLIE ZANE

I

f you want to get the green light for a project, you can’t just put tog ether a presentation and rely on your ability to make a rational argument. You need to think like a marketer. And that means appealing to the subconscious minds of the decision-makers you’re presenting to.

For more than 25 years, I’ve worked with Fortune 100 brands to get them to rethink their marketing strategies. We teach marketing leaders to influence the hidden drivers that dictate purchase behavior. As Harvard professor Gerald Zaltman has argued, 95% of consumers’ purchasing decisions take place in their subconscious minds. This is because inside the mental shortcuts that people use to make quick decisions lies an ecosystem of accumulated associations and memories that have become glued to certain brands over time.

So how can employees leverage what we’ve come to understand about effective brand

•Leslie Zane is the founder and president of Triggers Growth Strategy.

building? To maximize your chances of getting your ideas approved, follow these three rules: START EARLY. The sooner brands begin building positive associations in the subconscious minds of customers, the

better. In the workplace, the “first-mover advantage” is just as valuable. The more time you spend accumulating positive associations around your idea, the larger its brand matrix will be by the time the decision is made.

CREATE POSITIVE BUZZ. When a brand aggressively promotes itself, customers can grow skeptical. But when someone else endorses the brand, positive associations grow in the subconscious minds of prospective customers. Busi-

Brought to you courtesy of First Bank Nigeria

40

Monday 19 August 2019

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Dangote Flour Mills is worth N143.23 bn based on Enterprise Value

D

T

he inversion of the US yield curve for the first time since 2007 coupled with the trade tensions with China has signalled the possibility of a decline in global growth which could lead to slower global demand for crude oil and thus lower oil prices.

The United States economy had been signalling the world for an impending recession with analysts and economists airing opinions that the world should brace up for the next global recession, but the low concern levels hit a tipping point on Wednesday, August 14th after the yield curve inverted.

3.2%

$60 Tiger Brands, a South African firm had in 2012 bought a 63 per cent stake in Dangote Flour and pasta maker, but few years down the line the Dangote Group bought back the company after the new owner’s sustained losses repeatedly on its operations.

Dangote Flour Mills and other consumer goods firms are feeling the pains of a harsh and unpredictable macroeconomic environment as a high inflationary environment, decrepit infrastructure, double taxation and weak consumer spending continues to

squeeze margins.

Low growth and high unemployment has further dampened consumer purchasing power, which is showing up in lower sales volumes for consumer firms.

The country’s GDP expanded by 2.01 percent in the three months through March 2019, from a year earlier; that compares with 2.4 percent expansion in the fourth quarter.

While inflation figure for the month of July fell to a 12 months low of 11.08 percent, the figure, however, falls below the central

bank’s target range of 6 percent and 9 percent.

Over eighty percent of Chief Executive Officers surveyed by a polling agency say the gridlock at the Apapa Port is responsible for poor performance and their goods get trapped for an indeterminate period of time. Such delays causes disruption on the production floor and it also distorts the inventory cycle.

Dangote Flour has a price to earnings ratios of 9.64 times, and a market capitalization of N104 billion as at August 16.

Heightened US recession fears could lead to crude oil price decline IFEANYI JOHN

SHORT TAKES The International Monetary Fund (IMF), in its July World Economic Outlook Report, revised downwards its global growth forecast for 2019 to 3.2%, from 3.3% in April, citing trade tensions between China and United States, Brexit uncertainties and rising geo-political tensions as major threats to global economy.

BALA AUGIE

angote Flour Mills’ enterprise value, which is seen by investors as a better measure of the market value of a firm, is N143.23 billion, according to BusinessDay’s calculation.

The enterprise value (EV) including equity (money that belongs to shareholders) and debt (obligations to creditors and financial institution), is the theoretical takeover price of a firm if it were bought.

EV is calculated as market capitalization (total number of ordinary shares multiplied by market price per share) plus total debt (both long and short term) minus cash and cash equivalent in the balance.

Because the value of a firm’s debt will have to be paid off by a buyer when taking over a firm, the EV is a more accurate takeover valuation.

Olam International Limited, a Singaporean agro-allied company, had offered to acquire Dangote Flour for a consideration of N120 billion, an amount that is N23.23 billion less than the millers’ EV. .

This means Dangote Flour is about to be bought at an amount below its true worth, but the deal has not been consummated.

Olam International will have to assume Dangote Flour’s total debt of N55.39 billion as at June 2019, while the miller has cash and cash equivalent of N16.15 billion in the same period under review.

P.E

In the last 7 recession years in the United States, an inverted yield curve has been one of the final signs of a recession as empirical studies have shown that a high correlation exists between the inversion of the yield curve and a decline in economic growth for two consecutive quarters.

Since 1980, the average time lag between the yield curve inverting and the economy falling into recession is 21 months, according to analysts at Deutsche Bank, but it can take almost three years.

If history is anything to go by, Nigerian policy makers should be on the lookout for how this inversion affects the country.

Obinna Uzoma, Chief Economist at EUA Intelligence explained that

“the inversion of the US yield curve on Wednesday could lead to a global recession next year and the Nigerian policy makers must be prepared for a downturn in oil prices. When there is slower demand for crude oil in the US coupled with slower growth of the Chinese economy, oil prices are bound to suffer and thus, oil dependent nations, who have failed to do their homework, suffer.”

In the last Great Recession in the US, which spanned from December 2007 to June 2009, Brent spot price hit a low of $43.32 per barrel five months before the end of the recession coming from $92.41 dollar per barrel in November 2007.

Prior to that, in the Early 2000s recession which started in March 2001 and lasted for 8 months, oil

prices hit a low of $18.8 per barrel dropping from almost twice its value 4 months before the start of the recession.

An inverted yield curve is a warning sign precisely because it tells investors about expectations for the future and not necessarily about the state of things right now. There are concerns that the economic sugar rush provided to American consumers by tax cuts last year are wearing off, while there is little sign of trade tensions abating.

The inversion of the yield curve occurred before each of the last seven recessions. The inversion has been coming for some time now, as the spread has been shrinking over the last several months.

The Federal Government, in its 2019 budget, benchmarked oil price at $60 per barrel, and crude production at 2.3 million barrels. Other assumptions of the budget include 9.9% inflation rate, 3.01% GDP growth rate and N305/$ exchange rate.

2.01% The Nigerian economy slowed by 2.01% in the first quarter of 2019 from 2.38% in the preceding quarter.

The economy’s expansion is sluggish and noninclusive as it is below country’s population growth of 2.7%. Analysts expect growth to further soften by 1.9% in the second quarter of 2019.

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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MARKETS INTELLIGENCE Global recession signal fuels Gold Rush as investors seek safe havens SEGUN ADAMS

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he price of gold has been rising as a global bond rally and protracted trade war between the United States and China, combined with a slow growing economy in Europe, are spending a chill down the spine of investors.

In times of economic uncertainties and challenging market environment, investors tend to move their investment from risker assets to safe heaven like Gold and bonds, but bonds yields, which move inversely with prices, have been turning negative.

Such gyrations are a boon for the glittering commodity as the prices of gold have rallied 19 percent so far this year to $1,519.60 although the bullion was down 0.45 percent in the spot market as at 9 am

GMT+1 Friday. Investors see the precious metal as another haven when equities, some currencies, or other assets feel risky.

Like oil, the price of gold reacts to movement in dollars, and the price of the precious metal go up or spikes whenever the dollar weakens.

The global macroeconomic uncertainties could push the price of the commodity to around $1,700.

Around 15 trillion of global government debt now trades with negative yields, and what this means is that government is going to be paid for borrowing. Germany, which is used to have the most

Bond funds outperform other asset classes, AUM up 68% year-to-date Israel Odubola

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ond funds are the best performer among other collective investment schemes, with 68 percent jump in portfolio value since January triggered by strong investor appetite for low risk securities.

This asset class appreciated N9.9 billion to N24.5 billion for the week ending to August 2, from N14.6 billion as at January 4, according to latest mutual funds data published

by Securities and Exchange Commission (SEC).

The steady increase in total AUM which is majorly driven by demand for less risky instruments such as bond funds, money market funds and fixed income funds portrays the conservative nature of foreign and local investors packing their cash to Nigerian mutual funds.

Total asset under management

(AUM) of Nigeria’s 84 registered mutual funds trended upwards to N798 billion, up 24 percent year to date, with annualized return of over 40 percent higher than the current inflation figure of 11.08 percent.

Fund managers in recent times have been aggressive in marketing their debt and money market funds even now when equities are red, another contributory factor to the positive returns delivered by low risk collective investment schemes, analysts say.

Moreover, growing investment consciousness of Nigerian populace coupled with attractive products introduced by fund managers has equally bolstered mutual fund market. On year-to-date basis, fixed income and money market funds, which account for a combined 79 percent share, took the second and third spot, with AUM up 50 and 25 percent respectively.

These three less risky funds were trailed by real estate funds (4.65%), mixed funds (-3.3%), with equity-

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based funds bottoming with 10.9 percent losses since January.

Nigerian stocks are one of the world’s worst performing equities with year losses heading to 15 percent, and the rout might persist until fiscal authorities comes out with bold policy reforms to spur investor sentiment.

The local debt market is currently on a bearish note as market participants are responding to the increasing selloffs by foreign investors in the Treasury bill market.

Yields on 10-year benchmark government bond and one of the most sensitive to market trends remained almost unchanged at 14.2 percent on Thursday. Analysts say selloffs in the market are largely driven by weakening global economic fundamentals and recessionary fears. There are currently nine bond funds registered with SEC, in which United Capital Euro Bond Fund managed by United Capital Asset Mgt Limited holds the highest share of 44 percent.

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attractive yields among Europen countries, has fallen into the negative territory.

To further stoke investor fear is a recent announcement by President Donald Trump that there will be additional tariff on Chinese goods. And China retaliated by weakening its currency. President Trump accused Beijing of currency manipulation.

According to the World Gold Council, central banks purchased nearly 70 percent more gold during the first quarter of the year than they did during the previous year’s corresponding period.

That’s the most they bought since the first quarter of 2013.

For EuroSun’s Rovina Valley project in Romania--the largest in-development gold mine in Europe--the de-dollarization drive will been a boon for the 10 million ounces of gold equivalent they’re hoping to get out of the ground in

the simple geography of Romania’s prolific Tethyan Gold Belt.

Bank of America Merrill Lynch, on the other hand, expects bullion price to near $2,000 within two years, beating the all-time high of $1,921.17 established in 2011.

“We’re now going from trade wars almost into currency wars,” Whitney George, president of Sprott Inc., a precious metals-focused fund told Bloomberg. “Gold is a currency, but it’s nobody’s obligation, so it will stand tallest when everyone else is trying to debase their currency to be competitive globally.”

Slowing global growth has set countries on the edge as governments are trying to devalue their currencies and cut rates to stimulate economic growth.

Bloomberg survey shows 69 percent of traders and analysts are bullish on gold.

CCNN loses its wings as stock price halves in one year Ifeanyi John

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hareholders of Cement Company of Northern Nigeria (CCNN) were jolly all through last year as the stock was the top performer of 2018. Fast forward eight months, half of the value created has been wiped off due to the market rout and the bearish trend of stocks in 2019.

In 2018, CCNN returned 104.21

percent for the calendar year and won the price of the best performing stock outperforming Unity Bank, Sterling Bank, NEM Insurance among others. The news of the expansion with Kalambiana cement by the way of a merger pushed the stock up and closed the 2018 calendar year at N19.40 as compared to the beginning of the year when the stock was valued at N9.5 per share.

As at close of Customs Street on Friday, CCNN was priced at N14.50 posting a negative one-year return of 47.83 percent from its N30.9 price this time last year. Half of its market value has been wiped out in one year and investors who bought into the CCNN wave have seen red in their various portfolios.

Cement Company of Northern Nigeria (CCNN) half year result showed that the Sokoto based company continued to leverage on its expanded capacity over the last one year, its dominance in the North and @Businessdayng

geographical proximity to neighbouring countries to ramp up production.

The financial results for H1:2019 showed that revenue was propelled by the aforementioned factors to reach NGN32.15bn from NGN12.08bn in H1:2018. From the analysis of Meristem Research, the company maintained 80 percent capacity utilization while prices were heavily discounted, as part of the industry wide competition.

Production cost-to-sale ratio

increased marginally to 55.24 percent (vs.54.77 percent in H1:2018) on the back of higher depreciation charge of larger fixed asset base. As such, gross margin settled at 44.76 percent (NGN14.39bn) compared to 45.23 percent (NGN5.47bn) in H1:2018. In actual, other key common-sized components of direct cost to gross revenue trended downward with focus on energy cost which declined from 45.68 percent to 28.42 percent.

Obinna Uzoma, Chief Economist at EUA Intelligence explained that “the company is in way better shape than it was this time last year and thus in efficient markets, the company should command a higher value.

However, there was a bandwagon effect last year after the announcement of the merger with Kalambiana Cement. The share price leaped to a point where valuations were unreliable and thus corrected towards the end of the year.”

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REAL SECTOR WATCH Analysis

Why Buhari’s FX order is bad news for manufacturers Stories by ODINAKA ANUDU

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resident Muhammadu recently told the Central Bank of Nigeria (CBN) not to provide foreign exchange to importers of any form of food.

Buhari gave the orders because, as he put it, Nigeria has achieved food sufficiency.

“Don’t give a cent to anybody to import food into the country,” Buhari was quoted by Garba Shehu, his spokesman, as saying in a statement.

The 76-year-old president said it was in line with efforts to bring about a steady improvement in agricultural production, and attainment of full food security.

“The foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills,” the statement said.

For the man in the street and even manufacturers, any form of ban or restriction usually leads to high local productivity. Hence it is construed that such an order would increase the patronage of locally-produced goods. However, the road to hell is paved with good intentions.

The first challenge is that manufacturers use a number of food items as raw materials. Imagine what becomes of Olam, Flour Mills of Nigeria, Honeywell, and Charghoury, among others, if they are unable to import wheat flour.

Many manufacturers do not use cassava or yam flour in manufacturing but wheat. The onslaught of Boko Haram insurgency has sacked many wheat farmers in the north who were not even pro-

L-R: Yewande Falugba, permanent secretary, Lagos State Ministry of Women Affairs and Poverty Alleviation; Toke Mabogunje, deputy president, Lagos Chamber of Commerce and Industry (LCCI); Babatunde Ruwase, president, LCCI; Michael Olawale-Cole, vice president, LCCI; Damilola Oloruntade, chief operating officer, A-Mobile Limited, and Uchechukwu Ojiegbe, deputy manager, Bank of Industry (BoI), during the maiden edition of LCCI Annual Entrepreneurship Summit in Lagos last Thursday

ducing enough for consumption and for inputs. For starters, wheat flour is used in making essential products such as bread.

The Food and Agricultural Organisation (FOA), quoting FAS Lagos, predicts that Nigeria’s wheat imports in 2019/20 is 5.6 million metric tons (MT), up almost four percent when compared to the 2018/19 figure. The rise is based on growing food, seed and industrial (FSI) usage.

Meanwhile, production is projected to reach 60,000 MT within the 2019/20 period. This means that within the same period, there will be about 5.54 million MT supply gap already.

“Flour millers favour imports, indicating that local wheat has a higher protein content, lower moisture, and lower gluten; citing characteristics not well suited for bread production,” FOA said, in its latest report in June 2019.

To the economist, any form of

restriction on wheat means scarcity, which in turn leads to high prices for the manufacturers and ultimately the consumers.

“To the smart businessman, it is an opportunity to smuggle and make money,” an industry player, who did not want his name on print, said.

“If you ban wheat and prices rise, our production cost skyrockets. We will transfer it to the consumers who are already squeezed.

What you end up causing will be staglation, meaning high inflation and unemployment rates,” the wheat flour player said.

Imagine, for a moment, a ban on raw sugar. Currently, raw sugar, which is also classified as food, is imported in huge quantity.

Sugar production rose from 10,843 MT in 2012 to 30,000MT in 2018, according to the National Sugar Development Council (NSDC). Raw sugar import was 1.098 million MT in 2012, but rose

to 1.216 million MT in 2018.

The NSDC data show that importing 1.216 million MT of sugar last year cost Nigeria $337.312 million.

“You will put Dangote, Golden Sugar, BUA, Confluence and a number of others out of business if there is a restriction,” an industry source said.

The major challenge with sugar, wheat and other products is that banks could soon stop issuing Form M on the food items once the pronouncement comes into play.

Sadiq Usman, head corporate business development, Flour Mills, parent company of Golden Sugar Company, said in a telephone interview that various factors are hindering sugar production in the country.

“Documentation, planting issues, weak infrastructures and land rights pose big problems for us and these factors have continued to slow the pace of our development in boosting sugar production,” Usman said.

He disclosed that Flour Mills lost 75 percent of its sugarcane plantation owing to 2018 floods that ravaged the farmland.

“Last year, the floods wiped away a significant proportion of our sugarcane production. It affected close to 2,000 hectares of the 3,000 hectares we planted and now we are replanting again.”

Aliko Dangote, president of Dangote Group, recently complained that smuggling is hurting margins of sugar refiners in the country.

The argument for milk restriction is still on. The country currently has 600,000 MT gap but the CBN said it would stop selling FX to importers.

Though this could lead to backward integration projects across

the country, it has its own downside risks.

“We currently do not have dairy cows in the country,” the Lagos Chamber of Commerce and Industry (LCCI), said in a recent statement.

“The dominant milk producing system in Nigeria is the Fulani Nomadic System whose cows have a milk yield of less than two litres a day, whereas a good dairy cow will produce an average of 28 litres of milk per day over ten months.

During peak lactation, a high yielding dairy cow can produce as high as 60 litres of milk per day,” the chamber said.

Babatunde Ruwase, president of LCCI, told BusinessDay that any restriction of FX on food items will cause scarcity and disruptions.

Nigeria is world’s poverty capital. Brookings Institute said in 2018 that 87 million Nigerians, or around half of the country’s population, were extremely poor or lived on less than $1.90 a day.

Just recently, the United Nations Development Programme (UNDP), said slightly over 98 million Nigerians are living in multidimensional poverty.

Unemployment rate is 23 percent, according to the NBS, which adds that consumption expenditure of households has been declining at varying pace since it rose by 1.5 per cent in 2015.

Final consumption of households has declined by 8 percent from N43.1 trillion in 2014 to N39.66 trillion in 2018. This has far-reaching implications for manufacturers.

Analysts believe restriction could worsen poverty levels which will further weaken the purchasing power of consumers, which manufacturers rely for survival.

Learning from Bangladesh’s fabrics industry

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igeria can pick some lessons from the way Bangladesh has grown and managed its fabrics industry.

Nigeria’s total non-oil export earnings from more than 25 commodities in 2018 was $3.3 billion (N1.19 trillion), according to the National Bureau of Statistics (NBS), but Bangladesh, once one of the poorest countries on earth, earned $33 billion from the industry.

Bangladesh has 5,000 garment factories that engages about 20 million people, mostly women, which pushed the extreme poverty in the Asian country down to 12.9 percent, according to the World Bank.

Nigeria’s poverty rate is nearly 50 percent, with fewer than 20 firms making caps, sweaters, handkerchiefs and other types of textile.

Yale e conomist Ahme d

Mushfiq believes that Bangladesh’s recent economic success is in part attributable to the flourishing garment manufacturing industry.

There were things Bangladesh did right. The South Asian country de-emphasisised the primary product—cotton— and paid attention to the entire textile manufacturing value chain.

The raw material for yarn is cotton but in Bangladesh only five percent of cotton needs are met by local production and the rest are imported, according to an SNV report done by the Kingdom of the Netherlands.

For knit products, 80 percent of the yarn requirements are met by domestic suppliers because the country has a competitive advantage in that area. However, only 20 percent of the woven requirements for the garment sector is catered www.businessday.ng

by local firms.

The country’s parliament passed a bill specifying the level of quality which all export firms must meet in order to beat China to number one in competitiveness. Hence emphasis was laid on competitiveness, with the government providing market access for companies through trade negotiations targeted at removing international barriers.

More so, some of Bangladesh citizens were sent to China and Europe to acquire the skills needed to run the mills.

Again, the country paid a closer attention to the use of modern technology to lower costs and save the environment.

Big brands such as Walmart, H&M, Benetton, Gap and Zara were lured into distributing Bangladeshi ready-made garments.

Stitch Dairy, a local Bangladeshi publication, said that that

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the South Asian country was able to enjoy duty-free advantage to export garments to the European Union, the US and Malaysia.

Experts equally attribute Bangladesh’s success to a convivial business environment with minimal government influence and low taxes, which attracted Chinese and Vietnamese firms to Bangladesh.

Textile Today reported in 2015 that firms from Singapore, Japan, Taiwan and South Korea, which had traditionally relied on low-cost production in China, were shifting out of China and making their way to Bangladesh as a result of well developed Bangladeshi textile value chain that guarantees three to five years return on investments.

Another key factor in Bangladesh is cheap labour with @Businessdayng

minimum monthly wage of a garment worker at $197, which makes it the last but one lowest wage among 21 textile-making countries in the world.

However, Nigeria has even more advantage than Bangladesh in terms of labour cost as its recent minimum wage hike to N30, 000 amounts to only $83.3 per worker.

“Some of the mills in Nigeria 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. The textile industry needs to be saved from the excruciating burden of high operating and production cost,” Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said recently.

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REAL SECTOR WATCH Palm oil makers boost investments to tap supply opportunity

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alm oil makers are ramping up investments and capacities to tap local supply gaps amid challenges of smuggling and poor patronage.

Okomu recorded losses in the first half of 2019 as its turnover declined by 34 percent from N12.9 billion in 2018 to 8.5 billion in 2019. This is a reflection of the state of the industry, but the company is unrelenting in its expansion journey.

Okomu recently made moves to cultivate 5,000 hectares of oil palm in Edo State majorly to boost job creation and enhance modern agricultural techniques to raise productivity in the sector.

In 2018, the company disclosed that it was planting 11,400 hectares at a new Extension 2 Plantation in Ovia North East

the state. We have also invested around N20 billion in an oil palm refinery in Lagos,” Santosh Pillai, managing director of PZ Wilmar, told BusinessDay. Located in Edo State, the firm has total land bank of 40,000 hectares of which planted areas are 20,136 hectares of oil palm and 138 hectares for rubber.

Presco’s investment is valued at N75 billion. Its capacity is 63 percent in the peak season and 24 percent in the lean season.

Earlier in 2016, the Central Bank of Nigeria (CBN) restricted some items from accessing foreign exchange— including palm oil. The action was in a bid to enhance local productivity in the country, experts say.

The action boosted production and production initially, but

Local Government Area in Edo State. This was after acquiring two additional machines that produce 30 metric tons per hour mills, valued at $50 million.

Nigeria has a demand-supply gap of 800,000 metric tons in the palm oil market, which translates to over $400 million.

This opportunity is forcing the key players to expand plantations and acquire new facilities needed in new frontiers.

With approximately $150 million, PZ Wilmar, a subsidiary of PZ Cussons, has bought 26,500 hectares of palm oil plantations in Cross River State. About 5,549 hectares (ha) of oil palm plantation are located in Calaro Estate, while 2,369 ha are in an area known as Calaro Extension. The firm also acquired Ibiae plantations with 5,595 ha; Ibad plantations in Akampa with 7,805 ha; Kwa Falls in Akampa Akpabuyo with 2,014 ha, and Oban plantations, also in Akampa, with 2,986 ha.

PZ Wilmar has acquired palm oil mill (POM) and kernel crushing plant (KCP), investing around N20 billion in an oil palm refinery in Lagos.

“We are determined to continue with these investments and looking for opportunities to expand our plantations in

it later heightened smuggling in the industry.

The demand for palm oil is predominantly propelled by household consumption as 90 percent of consumption comes from the food industry while the non-food industry accounts for 10 percent.

Data from the United State Department of Agriculture (USDA) shows that in 2018, Nigeria’s oil palm industry could only contribute 1.40 percent to the oil palm global market as against 45 percent which it achieved earlier in the 1960s.

Since losing its position as one of the world’s largest palm oil producers, Nigeria is yet to recover as a giant in the crude palm oil-producing nations owing to the discovery of crude oil, which changed the country’s palm oil narrative of the ’60s.

As a result, Indonesia and Malaysia have now exceeded Nigeria’s production becoming the global leaders in oil palm production as research shows that on a yearly basis, Nigeria’s CPO import from Malaysia increased to 112,480 metric tons (MT) in the first three months of 2019 from 47,974MT in the corresponding period in 2018.

Smuggling has continued to hurt the firms with porous borders aiding the illegal business.

MAN canvasses full assessment of food industry before FX restriction Stories by GBEMI FAMINU

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he Manufacturers Association of Nigeria (MAN) wants the Federal Government to do an assessment of where the country is in food production before embarking on foreign exchange restriction policy.

President Muhammadu Buhari had last week ordered the Central Bank of Nigeria (CBN) to restrict foreign exchange access from food importers In a statement signed by Segun Ajayi- Kadir, directorgeneral of MAN, weekend, the association said unilateral decision could be counterproductive when the operators are not duly consulted.

“MAN actively supports resource-based industrialisation, and this is based on our position that we should significantly improve our local sourcing of raw materials and develop sustainable value chains,” he said.

MAN said the government must consider the state of the infrastructure and its capacity to respond and support the policy.

“Our mantra is clearly harped on patronage of madein-Nigeria products as we believe the country can only experience development when we buy what we produce and produce what we consume,” the association said.

MAN advised that before carrying out such order, there should be strategic implementation of plans to achieve sufficiently the motive behind the policy, adding that in order to achieve sustainable sufficiency in local food production some measures have to be put in place to encourage the producers.

It added that such policy may counter the motive behind the directive.

“The apex bank will have to do an assessment of where we are in practical terms and realistically weigh its options before embarking on such a far-reaching policy. There should also be a process to be followed before such a plan is unfolded.”

“Clarity is needed and we have to be deliberate and strategic in pursuing such a farreaching monetary measure, especially in the light of our vulnerability occasioned by www.businessday.ng

trade agreements that require the country to be more open to imports and the well-known antics of our neighbouring countries,” the statement concluded.

The association of over 2,000 members said it is not necessarily worried about the directive as it prefers to see it as an expression of the president’s mindset.

MAN said a close examination of the directive reveals that it is broad and would have to be both specific and targeted.

“For instance, we need to know what type of food— finished and ready to eat? Or input for further processing?

In the case of the latter (in particular), we need to know the local capacity available compared to national demand and if not adequate, creditably determine what time and resources are needed to ramp up capacity and production. It is pertinent to pre-determine these suggestions as part of the implementation strategy.

To achieve sustainable selfsufficiency, local producers ought to be incentivised otherwise we may be inviting a looming barrage of smuggling activities.”

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news Nigeria’s food insecurity to worsen on Buhari’s actions Continued from page 1

and if globally adopted standards of food security are anything to go by, then Nigeria is not food-secure.

Food security exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.

The four pillars of food security are availability, access, utilisation and stability.

The nutritional dimension is integral to the concept of food security, as defined in the draft declaration of the United Nation’s World Summit on Food Security in 2009.

Even though President Muhammadu Buhari expressed the view that Nigeria has achieved food security, the country, on factual basis, does not fit the definition of a food-secure nation, going by the earlier definition as well as others findings.

The 2019 report on ‘The State of Food Security and Nutrition in the World’, for instance, identified Nigeria as a country facing food crisis, driven largely by “high food prices and low purchasing power”.

“Food availability, accessibility, and utilisation remain significant challenges in Nigeria,” noted the 2018 Global Food Security Strategy (GFSS) Country Plan for Nigeria by Feed the Future, the US government’s global hunger and food security initiative.

The short answer, said the CEO of a company that has invested heavily in agriculture across different parts of Nigeria, is “we are not food-secure, we import a chunk of our food”. The CEO was, however, worried about any quotes challenging the government, a fear shared by many others.

“Many countries import their food, but ours is a bit much,” he said.

Taiwo Oyedele, head of tax and corporate advisory services, PwC Nigeria, wrote on Twitter that “Nigeria is not food sufficient” as available data suggest the contrary.

“Stopping FX allocation to importers of foods will have unintended consequences,” Oyedele said.

In another tweet, he wrote, “Self-sufficiency in food production cuts across the entire value chain including logistics, transportation, storage, etc. Restricting FX without first addressing these related problems is putting the cart before the horse.”

Oyedele’s position reinforces that of the CEO quoted earlier, who said it was not wise to ban or restrict completely because there would be too much disruption.

If there will be any measures to boost local production, said the CEO who does

not want to be named, it can be done by raising duties and tariffs slightly. Going from 5 to 10 percent, or 10 to 15 percent, is enough to motivate and push local producers to develop their local supply chain, without creating so much disruption in the food imports required.

“By the time we say ban or restrict FX, then prices will go through the roof, since there aren’t local substitutes and not enough time for companies to react and scale up local supply,” he said.

The Agriculture Promotion Policy (APP), 2016 to 2020, which for all intent represents the country’s agriculture roadmap, highlighted that “food security at national level is achieved by a combination of domestic food production, imports and strategic storage”. Out of these three sources expected to drive food security, only one (primary production) is functional, and even so, barely scratching the surface.

Nigeria required 4.7 million metric tonnes (MMT) of wheat as at 2016, according to the APP, but only produced 60,000 MT; 7.5 MMT of maize but produced 7MMT; 750,000 MT of soya beans but produced 600,000 MT, and 2.2 MMT of tomato but produced 800,000 MT. Nigeria also had a demand of 39 MMT of yam but only produced 37 MMT; required 8 MMT of palm oil but produced 4.5 MMT; required 3.6 MMT of cocoa but produced 250,000 MT; required 7 MMT of sorghum but produced 6.2 MMT; required 2.7 MMT of fish but only produced 800,000 MT, and required 200 million chickens but produced 140 million as at the time of the report.

When the agriculture policy was published in 2016, Nigeria had a deficit across every type of food produce, and three years later, with the rapidly growing population, and insecurity threatening farming activities in many parts of the country, this deficit could have, in fact, increased substantially.

The third parameter, which is strategic storage, is also not in place. It was only at the twilight of Buhari’s first tenure in May that the Federal Government handed over silo complexes to concessionaires.

These facilities with varying capacities should enable Nigeria to have strategic food reserves, especially grains, but these are currently lacking, and particularly in volumes that would avert crisis in the event of any unforeseen circumstances.

Food shortages may arise due to structural or incidental low production (droughts, disasters) and in the absence of sufficient forex and proper infrastructure to import and distribute food across the www.businessday.ng

L-R: Edmond Idoko, chief marketing officer, Microsoft MEA Emerging Markets West Africa; Uchechi Nwaukwa, chief technology officer, Signal Alliance; Linda Ochugbua, digital sales manager, BusinessDay Media; Funwa Akinmade, divisional head, retail banking, Unity Bank, and Opeyemi Ojesina, head, SME banking, Unity Bank, at the BusinessDay SME Clinic 1.0, a focused workshop for SMEs in partnership with Unity Bank.

Pic by David Apara

country. At present, there is no backup to keep Nigeria running.

“Food shortages (real or anticipated) drive up prices and thereby jeopardise access to food for urban and rural population,” according to the FG’s APP document, a situation now being precipitated by the president’s directives to the CBN. “The policy will do more harm than good, both to investors and the citizens,” said Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), in an earlier statement when the restriction of forex for milk was announced. “It would trigger avoidable disruptions and dislocations in the investment environment and further undermine investors’ confidence. It would create huge supply gaps in the market with severe harmful consequences,” Yusuf said.

The same implications are now expected, but even on a larger scale, crippling food supply on all fronts and increasing the already bad situation of hungry people.

As Yusuf noted, any restriction of forex is tantamount to a ban as most banks would not process Form M for any product on the CBN forex exclusion list.

While BusinessDay had reported that 5.3 million Nigerians experienced acute food crisis in 16 states of northern Nigeria last year, when the country was identified among eight countries with the worst food crises in 2018, it was further noted that 22.7 million Nigerians in the North alone are at risk of food crisis if things do not improve.

With the direction President Buhari is headed, not only is the already foodinsecure North, but the whole of Nigeria, may be

plunged into severe food crisis sooner than expected.

It could get worse, as Nigeria is expected to be the third most populous country in the world by 2050, overtaking the United States and coming after both China and India.

World Population prospects published by the UN’s Department of Economic and Social Affairs noted Nigeria’s population, currently the seventh largest in the world, is growing the most rapidly, and it is projected to be 411 million by 2050.

Currently, 43.6 percent of children in Nigeria have stunted growth, according to the 2018 Global Nutrition Report. The prevalence of stunting is still classified as a high public health concern, according to World Health Organisation (WHO) standards. Wasting, a reflection of acute malnutrition, affects approximately 18 percent of children under five years old in Nigeria, which, according to WHO standards, is a very high public health concern, noted Feed the Future in its 2018 action plan for Nigeria.

In terms of under-five c h i l d re n w i t h s t u n t e d growth, Nigeria ranks second in the world with 13.9 million children, and retains the same position among countries with under-five wasting, having 3.4 million children, according to the Global Nutrition Report.

In addition, Feed the Future’s report noted 71 percent of children and 48 percent of women of reproductive age are anaemic.

Nutritionally, women are also affected by the burdens of being underweight (11 percent) and obese (25 percent).

In 2018, Action Against Hunger reported that its food security programmes

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have reached approximately one million people in Nigeria, “increasing their social protection, providing food assistance through cash and vouchers, promoting income-generating activities, and cultivating vegetable gardens”. The NGO is one of dozens that continue to spend millions of dollars to feed hungry Nigerians, who are unable to afford even basic meals, let alone good nutrition.

According to the National Bureau of Statistics (NBS), in the first quarter of 2019, the trade in agricultural goods stood at N322.4 billion, representing 3.9 percent of the value of total trade. The export component of this trade was valued at N86.1 billion. In terms of imports, agricultural products were valued at N236.33 billion or 6.4 percent of total imports during the period under review. The major driver was Durum wheat, followed by Mackerel (Scomber scombrus, Scomber australasicus, Scomber japonicus) meat, herrings and other frozen protein food items.

For full year 2018, data by the NBS showed imported agricultural goods accounted for N852.11 billion, a 4 percent decrease from N886.7 billion in 2017.

The 2017 figure was, however, an increase of 35.09 percent when compared to N656.4 billion in 2016.

On the other hand, Nigeria exported a total of N302.24 billion worth of agricultural goods in 2018.

“Supplying food to the country cannot be done overnight, you have to plan for it,” noted the earlier unnamed CEO. With this policy, “smuggling will go through the roof because the food will still have to come into country”, he said. @Businessdayng

Consumer goods stocks slump to lowest ...

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holes in the claims made by Buhari that Nigeria has attained food sufficiency and warn of the adverse implications of the policy on food inflation.

Countries simply produce what they have comparative advantage in and import other foods. This implies that Nigeria would continue to import food irrespective of a foreign exchange restriction. That then means food importers will have to source dollars at the parallel market which would be more expensive.

Nigeria spent $2.2 billion on food imports in 2018, according to data from the National Bureau of Statistics (NBS). If that demand went to the parallel market, the naira could weaken considerably against the dollar if nothing is done to boost dollar supply.

More than anything, the policy has exposed Buhari’s poor grasp of economic matters, according to an investment banker who did not want to be named.

“Nigeria is on sell at the moment,” the person said.

“The broader interpretation of Buhari’s statement is that policy uncertainty is a big feature of this administration and that has frustrated investors to sell down on the country’s assets.”

A motley crew of economists and analysts are worried that an FX ban for food imports could be counterproductive and spark unintended consequences.

“I’m not convinced that FX controls are the best means of achieving food security,” said Razia Khan, Africa chief economist at Standard Chartered Bank.

•Continues online at www.businessday.ng

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news We have not placed restrictions on importation of food items – Presidency Tony Ailemen, Abuja

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residency has clarified the that recent directive

by President Muhammadu Buhari to the Central Bank of Nigeria, CBN, to stop providing foreign exchange for importation of food items did not mean a restriction on the importation.

In a statement signed by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, Presidency explained that importers of food items that wish to source their forexfromnon-governmentfinancial institutions (and pay customs dutyonthoseimports–increasing tax-take) were free to do so.

ThestatementsaidtheFederal Government had neither banned nor restricted importation of food items in the country, adding that “importers can source forex from non-governmentfinancialinstitu-

tions.”

The presidential spokesman explained while reacting to a report in FINANCIAL Times, a letter to the Editor with the titled, “Muhammadu Buhari sparks dismay over policy shift on food imports”, published on August 15, 2019.

According to Shehu, ”Your article“MuhammaduBuharisparks dismay over policy shift on food imports” (15 August) suggests the Nigerian Government is restricting the import of agricultural products into the country. ”Thisissimplyincorrect.Tobe absolutely clear, there is no ban – or restriction – on the importation of food items whatsoever. ”President Buhari has consistently worked towards strengthening Nigeria’s own industrial and agricultural base. A recent decision sees the Central Bank maintain its reserves to put to use helpinggrowthofthedomesticin-

dustryin41productsectorsrather than provide forex for the import of those products from overseas.

“Should importers of these items wish to source their forex from non-government financial institutions (and pay customs dutyonthoseimports–increasing tax-take, something the FT has berated Nigeria for not achieving onmanyoccasions)theyarefreely able to do so.

“Diversification of FOREX provision towards the private sector and away from top-heavy government control, a diversification of Nigeria’s industrial base, and an increase in tax receipts – are all policies one might expect the Financial Times to support.

“Yetforreasonsnotquiteclear, the author and this newspaper seem to believe the president’s administration seeks to control everything – and yet do so via policies that relinquish government control.

Gbenga Shobo, deputy-managing director; Folasade Femi-Lawal, head, Card and messaging business, and Chuma Ezirim, group executive, eBusiness and retail products, all of FirstBank Nigeria, at the Verve Global Card launch in New York, recently

First Bank of Nigeria launches Verve Global Card SEGUN ADAMS

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irst Bank of Nigeria Limited, the country’s premier and leading financial services provider, recently launch of the Verve Global Card. In partnership with Verve International (Interswitch Group) and Discover Financial Services, the launch took place at Times Square New York City on Monday, 12 August 2019.

The Verve Global Card, an introduction by Verve International to FirstBank, is a new entry to the array of card products offered by FirstBank to its customers.

The FirstBank Verve Global Card is an enhancement to the existing Verve Debit card with exclusive capacity for domestic and crossborder transactions across all channels. The card can be linked to Savings & Current accounts, with a “Safetoken” extra protection for webbased transactions.

In attendance at the event were FirstBank’s Deputy Managing Director, Gbenga Shobo; Group Executive, eBusiness & Retail Products, Chuma Ezirim; Head, Card & Messaging Business, Folasade Femi-Lawal and Interswitch Group’s Founder/ GMD, Mitchell Elegbe and Divisional CEO, Verve, Mike Ogbalu. Discover Financial Services’ Senior Vice President, Payment Services, Joseph Hurley and Executive Vice President, Payment

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Services, Diane Offereins, amongst others were also in attendance.

Speaking at the event, Shobo declared that, “in partnership with Verve International, we are pleased to launch the Verve Global Card as it reinforces our commitment to putting our customers first with innovative and state of the art financial products and services that promote seamless transactions regardless of where they are across the globe.”

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Monday 19 August 2019

BUSINESS DAY

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abujacitybusiness Comprehensive coverage of Nation’s capital

Abuja residents to access basic health services as FCTA launches BHCPF James Kwen, Abuja

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esidents of the Federal Capital Territory (FCT), Abuja are now eligible to be enrolled to access the Basic Minimum Package of Health Services Programme of the Federal Government.

This followed the launching of the Basic Health Care Provision Fund (BHCPF), an intervention by the Federal Government to improve health outcomes in the country by the Federal Capital Ter-

ritory Administration (FCTA).

These services include free Ante Natal Delivery and Post Natal Care for all pregnant women, immunization, Malaria, Pneumonia, Measles and Dysentery treatments for Children under Five Years and Malaria Treatment, Screening for Hypertension Diabetes and Family Planning.

Chinyeaka Ohaa, FCT Permanent Secretary at the launched of BHCPF in Abuja, said the plan was to support delivery of primary health services and provision of Basic

Minimum Package of Health Services (BMPS).

Ohaa explained that the fund also covers emergency medical treatment through adequate and sustainable funding that will be efficiently and equitably used to provide health services thereby ensuring financial risk protection in accessing quality health services for all Nigerians, particularly, the poor and most vulnerable.

“You all will agree that this programme will go a long way in meeting some of the basic

health challenges confronting our people but which have proven very costly indeed in terms of lives lost and altered irreparably”, he stated.

In his remarks, Permanent Secretary, Federal Ministry of Health, Abdulaziz Abdullahi said the initiative was in line with the present administration’s commitment to universal health coverage, adding that the approach is consistent with broader national goals as espoused in the Economic Recovery and Growth Plan (ERGP).

RANAO demands comprehensive welfare package for retired military officers Abdulwaheed Olayinka Adubi, Kaduna

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etired Army, Navy and Air Force Officers (RANAO) Association of Nigeria has called on the Federal Government to improve on the welfare of retired military officers in the country.

Axinda Mshelbwala (Retired Major General), National President of the Association who made the assertion during the 32nd Anniversary of the Association in kaduna.

Mshelbwala who said the military served the country dilegently, protecting the people and its territory, adding that some even paid the supreme price with their lives, explained that the way the country can appreciate them is to take the issues of their welfare serious.

He stressed that the welfare of the retired soldiers is not limited to their pension alone but also on issues that affects their health and accommodation, and commended the Federal Government for including them in the National Health insurance Scheme, but said treatment for some the ailments affecting the soldiers are not listed on the scheme.

Mshelbwala noted that some of them are carrying old wounds sustained during services years and as they are gettingolderthewoundsareresurfacing and must be treated.

In his own remarks, the Chairman Board of Trustees of the Association, Zamani Lekwot said the call by the Guest speaker for the establishment of a Ministry that will look after the elderly people is a welcome Development, adding that RANAO will put its think tank together and find a way of passing such suggestion to the Government.

Senator Barau Jibrin, Senator Teslim Folarin and President of the Senate, Ahmad Ibrahim Lawan, on arrival from the Holy pilgrimage at the Nnamdi Azikiwe International Airport, Abuja.

Abuja businesses to benefit as Regus provides opportunities in office spaces Harrison Edeh, Abuja

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buja businesses including small scale, medium enterprises, large corporations and entrepreneurs will now benefit as Regus, a brand if International Work Group (IWG) is set to provide opportunities in office spaces that will help maximized cost of running businesses.

Regus, which operates in 120 countr ies worldwide says it is providing office spaces that will not only allow Businesses maximize cost on rentage but will save up to 70 percent cost involved in setting up a business space which can be ploughed back into their business for higher returns.

The Sales Director, IWG, Karim Ahmed said in Abuja that the avail-

able opportunities are flex ible and includes already serviced offices, virtual offices, day to day rentals, short term and long term leasing which will be accessible to every business owner including start-ups and already established.

Karim noted that one big advantage of the opportunity is that the day to day and monthly rentage on even large spaces offered will help businesses not to tie down capital on long term rent, according to him, some landlords mandate businesses to pay rentage for a minimum of a year, m o n e y t hat c ou l d b e used to run the business.

He said, “an entrepreneur who does not want to work from home and needs a registered address can get a virtual office at a very cost effective rates here and will not need to be in

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the office space. The entrepreneur can use it for mailing and we can receive messages, read e-mails, interprete and send responses on behalf of the entrepreneur or a business man.

“If a business needs a large office space like 500 Sq km but don’t want to rent it for a year space, the business can rent that space for a Month for as long as it is needed only, and not tie down capital”, he sai The Area Manager, IWG, also speaking said the Regus is working to simplify what the use of offices is all about, compared to conventional places where businesses have to worry about how to set up the office, adding that, already serviced spaces will make working very easy for either start-ups or large corporations.

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RMRDC opens window of opportunities for young Nigerians in raw materials James Kwen, Abuja

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he Raw Materials Research Development Council, RMRDC has created vista of opportunities for young Nigerians in the nursing of entrepreneurial spirit in exploiting the nation’s vast raw materials.

One of such windows is the RMRDC’s, “Catch Them Young Programme” designed to excite the interest of young school pupils into the research and development activities.

The Catch them Young programme rests on a three- pronged approach involving National raw materials essay and quiz for secondary schools, National raw materials essay competition for tertiary institutions and youth entrepreneurship promotion activities.

According to Hussaini Doko-Ibrahim, RMRDC has considered it necessary to factor in the entre-

preneurship development of young school pupils in the implementation of its programmes, hence the agency has come out with a unique handbook presented in a pictorial cartoon style with, ‘Mr. Raw Materials’ as the lead character.

He said this consideration has become necessary to build a generation of young people who can understand and secure sustainability in driving issues about the availability and development potentials of the raw materials resources.

“We hope to continue to use this style and medium to produce educational materials that will impact on school pupils by creating the much needed awareness and stimulate interest on issues relating to raw materials development and utilization necessary to lay a solid foundation for future development of entrepreneurs”, DokoIbrahim notend.

Flood: FCTA vows to remove more structures on waterways James Kwen, Abuja

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s part of measures to mitigate the devastating effect of the flood disaster being experienced in Abuja, Chinyeaka Ohaa, Permanent Secretary of the Federal Capital Territory (FCT) has vowed that the Administration will continue to remove illegal structures built on waterways that complicate flood risk in the Territory.

Ohaa who said this at the Emergency Stakeholders Forum on flood mitigation and response Coordination organised

by FCT Emergency Management Agency, FEMA, in Abuja revealed that so far 150 of such structures have been removed in some parts of Abuja.

He commended FEMA for its aggressive flood awareness campaign across the Six Area Councils and assured the stakeholders that the Administration will consider closely resolutions reached at the forum with the view to implementing them in @Businessdayng

line with the extant government policies.

“It is my expectations that your deliberations will not only come up with watertight preventive and response strategies against the impending flood but also proffer durable solutions to the issue of recurrent flood in the Federal Capital Territory”, Ohaa said.

Ab a s Id r i s s, F E M A Director-General pointed out that information available form the Nigeria Hydrological Services Agency, from its daily monitoring of flood water level of River Niger at Lokoja revealed that water level since 8th July 2019 has exceeded the level recorded in 2012 and 2018 after a comparative analysis of same period.

Idris said the recent flood incidents in the FCT are greater threats of further occurrence as alerted by flood forecast agencies giving serious cause for concern, especially to stakeholders on whose shoulders the responsibility of prevention, response and mitigation lies.

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Monday 19 August 2019

BUSINESS DAY

news LG funds: NFIU threatens to sanction governors who breach guidelines Innocent Odoh, Abuja

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he Nigerian Financial Intelligence Unit (NFIU) has promised to employ its statutory powers to sanction any state governor or official who violates the NFIU guidelines on local government funds in the Joint State and Local Government Accounts.

A source from the organisation told BusinessDay at the weekend that it had all the mechanism to carry out the functions, even though no local government had so far officially issued complaints to the Unit about the diversion of the local council funds since the guidelines took effect June 1, 2019.

The NFIU in May drew up guidelines to ensure direct allocation of funds to local government from the Federation Account to ensure financial autonomy of the local councils. The guidelines barred the 36 states governors from interfering with statutory allocation accruing to the Local governments directly from the Federation Account.

Provision 9 of the NFIU guidelines stipulates that “ it’s hereby provided that any public officer anywhere in the country and/or any private

citizen found undermining or violating these guidelines will be investigated and prosecuted under the NFIU Act 2018, the ML(PA), 2011(as amended), EFCC Act, 2004 and the ICPC Act, 2000”.

Also in June, a Federal High Court in Abuja also refused to restrain the NFIU from implementing its guidelines on the Local government funds as requested by the governors. Justice John Tsoho ruled that the Joint Account should only be used to distribute allocation account to the local councils directly. No higher court ruling is yet to be made on the matter so far.

The NFIU source said “For now there have been no other directives on the local government issues and the banks have been complying and I think the funds have been going to the local governments and anyone that has not complained it means that they are receiving their funds.

“The NFIU is already an established institution it is the only institution saddled with the responsibility of receiving statutory reports from reporting agencies, analysing them and disseminating them when necessary as intelligence to support investigations. The NFIU had always been in a position to carry out these responsibilities.

“The NFIU has always had

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the mechanism to carry out these functions. Since no one has complained then that means they are complying. It is a national directive and it is in public glare. So if any local government is not receiving its funds directly, it is free to come out to complain,” the source said.

In a related development, the National Union of Local Government Employees (NULGE) has urged chairmen of the 774 Local Government Areas in the 36 states of the federation and the Federal Capital Territory to henceforth comply with the Guidelines of the NFIU over the disputed issues of local government funds in the Joint State and Local Government Account.

National President of NULGE, Ibrahim Khaleel Abdulkadir made this urge in an open letter to all the chairmen across the 774 local government councils and the FCT made available to reporters last week in Abuja on the need to comply with the NFIU guidelines.

The NULGE President warned that any officer of the Local Government who “blindly follows the instruction of governors to transfer or divert local government funds to nonlocal government projects will be held personally liable.

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Monday 19 August 2019

FT

BUSINESS DAY

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FINANCIAL TIMES

World Business Newspaper SEBASTIAN PAYNE IN LONDON

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fficials close to prime minister Boris Johnson have accused a “former minister” of leaking details of Operation Yellowhammer, the contingency planning for leaving the EU without a deal, and claimed that “the entire posture of the government” has shifted in the past month.

The potential aftershocks of a no-deal Brexit, laid bare in a confidential document, include three months of chaos at ports, shortages of fuel and food, nationwide unrest and a hard border on the island of Ireland. The paper said that businesses were ill-prepared for leaving the EU without a deal due to “EU exit fatigue” resulting from the two delays to the departure date.

Downing Street insiders rebutted the document, stating that it covered the worst-case scenario for a no deal, adding that it was written under Theresa May’s leadership and plans for leaving without a deal had been ramped up since Mr Johnson became prime minister last month.

“This document is from when ministers were blocking what needed to be done to get ready to leave and the funds were not available.

It has been deliberately leaked by a former minister in an attempt to influence discussions with EU leaders,” said a No10 official.

“Those obstructing preparation are no longer in government. Two billion pounds of extra funding has already been made available and Whitehall has been stood up to actually do the work through the daily ministerial meetings. The

‘Former minister’ accused over no-deal planning leak

No 10 says Operation Yellowhammer has been ramped up since report was writ

Boris Johnson is set to meet German chancellor Angela Merkel and French president Emmanuel Macron ahead of the G7 summit next weekend © Getty

entire posture of government has changed.”

Officials also told the Financial Times that the government intended to publish new assessments of the measures required to leave the EU on October 31. A government spokesperson said: “We do not comment on leaked documents.”

But Bob Kerslake, a former head of the civil service who is advising Labour leader Jeremy Corbyn, described the document as “credible” and “lays bare the scale of the risks we are facing with no-deal Brexit in almost every area”.

“These risks are completely insane for this country to be taking

and we have to explore every avenue to avoid them,” he told the BBC. According to the government’s internal calculations outlined in the Operation Yellowhammer document published by the Sunday Times, 50 to 85 per cent of HGVs travelling between Dover and Calais would not reach France due to

lacking the proper paperwork. This would reduce the flow of lorries to 40 to 60 per cent of the current levels. These lorries would stymie the flow of traffic for at least three months.

The assessment said that the availability of fresh food might be affected by slower trade flows at Dover and medical supplies would be “vulnerable to severe extended delays”. Fuel supplies might also be disrupted if the government set import tariffs to zero and refineries would be at risk of going bust.

Operation Yellowhammer is also preparing for congestion at other key transport links around the country, including at the Eurotunnel, the Eurostar terminal at St Pancras, airports and other ports.

The government is also preparing for clashes between the UK and European nations in its fishing waters. “Significant amounts of police resource” may be required to deal with protests across the country in the face of this action.

A Whitehall source told the Sunday Times that the document outlined “the most realistic assessment of what the public face with no deal. These are likely, basic, reasonable scenarios — not the worst case”.

Gibraltar rejects US legal bid Brussels plans to revive money to seize Iranian tanker laundering blacklist Renamed vessel awaits new crew as Washington tries last-ditch move to hold it ANDREW ENGLAND IN LONDON AND NAJMEH BOZORGMEHR IN TEHRAN

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ibraltar has rejected a US legal request to seize the Iranian tanker that has been at the centre of a stand-off between Iran and the west.

The British overseas territory’s justice ministry said on Sunday that it was “unable to seek” a court order to provide the “restraining assistance required by the US”.

The Grace 1 has been held in Gibraltar since local police and British commandos apprehended the vessel on July 4 because it was suspected to be shipping 2.1m barrels of Iranian light crude oil to Syria in violation of EU sanctions.

The decision by the UK and Gibraltar increased tensions between Iran and the west. Concerns about maritime security in the oil-rich Gulf were heightened last month after Iran seized a British-flagged tanker, the Stena Impero, in what was widely viewed as a retaliatory act.

Gibraltar’s supreme court on Thursday ruled that the vessel could be released, citing assurances from Tehran that it would not go to Syria.

But the Trump administration com-

plicated the situation by issuing a legal application to Gibraltar seeking the “restraint” of the Grace 1.

After Gibraltar’s justice ministry rejected the US’s legal move, Washington on Friday sent additional information claiming the supertanker and its load were controlled by Iran’s Revolutionary Guards, the elite military force.

The Trump administration designated the guards a terrorist organisation in April as part of its “maximum pressure” strategy against Iran. President Donald Trump has imposed swingeing sanctions on the Islamic republic and vowed to cut its oil exports to zero since he unilaterally withdrew the US from the nuclear deal Tehran signed with world powers in 2015.

Gibraltar’s authorities said Washington’s request to seize the Grace 1 related to the US’s punitive measures, but said there were no “equivalent sanctions against Iran in Gibraltar”.

The government said it had considered the US’s requests “with great care in order to be able to assist the United States in every way possible”.

“EU law, however, does not help in facilitating Gibraltar in giving the US mutual legal assistance,” it added in a statement. www.businessday.ng

Previous bid to name non-EU countries ran into diplomatic row with accused countries MEHREEN KHAN IN BRUSSELS

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russels is to revive a blacklist of non-EU countries which it accuses of money laundering, after a previous attempt was shot down by European capitals when it named Saudi Arabia and four overseas US territories.

Vera Jourova, the EU’s justice commissioner, told the FT that the incoming commission would

by October unveil a revamped methodology to identify overseas jurisdictions which are failing to crack down on money laundering risks and terrorist financing.

Brussels’ fresh push to produce its first independent blacklist comes after 27 out of 28 EU member states blocked the publication of an initial draft in February, in an unprecedented rebuff to the commission. Governments led by the UK, Germany and France complained they had been blindsided by the initiative and said the list was not drawn up in a “transparent and credible process”.

Ms Jourova told the FT the re-

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jection “is still not easy for me to swallow” but the commission would forge ahead with a fresh blacklist using a new methodology that has been devised in co-operation with EU capitals.

“I believe we honestly did our best to have the methodology right and to have the assessment right,’’ said Ms Jourova, who has been nominated by the Czech government to serve a second term as Prague’s EU commissioner from November.

“The member states were critical with the methodology for two reasons: insufficient involvement from their side in the process and insufficient communication with the territories likely to be listed,” Ms Jourova said. “We have admitted this point and said we need to communicate earlier with the states that might appear on the list. That is why we are now reviewing the methodology.”

The initial draft named 23 jurisdictions including Saudi Arabia, Guam, the US Virgin Islands, American Samoa and Puerto Rico — none of which are named on an @Businessdayng

international blacklist prepared by the Financial Action Task Force, the global authority on money laundering. Their inclusion sparked fierce lobbying of EU states’ national capitals by Riyadh and drew sharp criticism from Washington for being a politically motivated exercise.

Ms Jourova said she was convinced the commission “did right to list Saudi Arabia” but suggested the revamped list would likely name a different group of territories and allow some jurisdictions to be placed on a “grey list” if they co-operate with European recommendations.

“The assessment using the new methodology will come with a new result,” she said. “A problematic aspect of [the first list] was that it was one size fits all but not all states are at comparable levels of risk. So I took all that criticism on board and now the experts are working on how to address this issue.”

Although there are no financial sanctions attached to the blacklist, European banks would have to carry out “enhanced” checks on funds from the named territories by rigorously vetting customers.

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Argentine assets still look vulnerable to another selling frenzy Stocks shed about 40 per cent in dollar terms this week but further dangers loom COLBY SMITH IN NEW YORK

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bruising week for Argentine assets following recent primar y elections has awoken emerging market bond investors to a harsh reality: their preferred candidate, incumbent president Mauricio Macri, is slated to lose October’s presidential contest to Perónist Alberto Fernández.

But what that reality entails, exactly, remains unknown — meaning Argentina’s financial markets, and their patrons, are in for a bumpy ride for at least the next couple of months.

The day after Mr Fernández handed Mr Macri a decisive defeat in the primary elections, the peso lost more than a fifth of its value against the dollar at one point. The country’s Merval stock index, meanwhile, fell 48 per cent in dollar terms in what was the second-largest one-day drop in any of the 94 markets tracked by Bloomberg since 1950.

While the subsequent trading sessions for the week saw less dramatic moves, Argentine markets remain on shaky footing.

In fact, Mr Macri’s announcement midweek of emergency measures to provide economic relief sent the peso to another record low. Yields on the country’s government bonds also spiked, indicating a fall in price.

“The market has repriced for a new reality,” said Pramol Dhawan, head of the EM portfolio management team at Pimco, the Newport Beach-based investment group. “Some people in the market need to clear their risk and as such we are trading at . . . levels that are compounded by limited market liquidity.”

Investors are “in limbo”, as Mr Dhawan put it, because no one really knows how moderate Mr Fernández will turn out to be and what kind of relationship he seeks to have with the IMF, which extended a record $56bn bailout to the country just last year.

While Mr Fernández did indicate on Monday that he wanted to avoid a default on the country’s debts, he has since offered few clues on how he will achieve that goal. Nor has he provided much assurance to shaken financial markets.

His comment last Thursday that he would be “fine” with an exchange rate of 60 pesos per dollar — around where it sits now — caused further concern.

The sharp depreciation is already forecast to stoke inflation, which remains above 50 per cent on a year-over-year basis. It will also make debt repayment a more difficult task since four-fifths of Argentina’s debt is denominated in foreign currencies. The implied probability of a debt

default within five years, as measured by credit default swaps, soared to 75 per cent this week.

Investors are understandably eager for guidance, but few expect Mr Fernández to provide it, given that the election proper is still months away, and many of the policies required to sidestep a debt default and find common ground with the IMF may turn off the very voters that lit his path to the Casa Rosada.

“One challenge we have as investors is that the opposition has been deliberately quite vague about their economic policy agenda,” said Michael Hugman, a portfolio manager at Investec Asset Management in London.

“And one thing that will be very difficult for the market ahead of the October election is that [the opposition has] no incentive to change that.”

Carlos de Sousa, an economist at Oxford Economics, said if Mr Fernández were to go the way of capital controls or run a large fiscal deficit, among other unorthodox policies, “the IMF isn’t going to give Argentina any more money”. Yet, if the opposition leader is not seen to be moving far enough away from the IMF-endorsed policies of the Macri administration, his electoral lead will probably narrow.

Mr Fernández has the added motivation to demur from clearing up any policy uncertainties because, for the time being at least, the resulting market turmoil is likely to weigh more heavily on Mr Macri’s popularity than his own.

“The opposition have a very tricky balance to strike now,” added Mr Hugman of Investec.

“It doesn’t appear that they want to help Mr Macri by calming the market down immediately, but at the same time, it seems clear that if they win in [October] they will need to change the policy narrative with the market quite quickly.”

For Whitney Baker, founder of New York-based research firm Totem Macro, Mr Fernández’s choice of running mate — former president Cristina Fernández de Kirchner — muddies the outlook further.

“One of the big ambiguities around policy under [the Fernández-Fernández ticket] is if Ms Fernández is actually in control,” Ms Baker said. “She has no track record of acting rationally, [and] although the Kirchners didn’t cause the 2001 default, their reaction kept Argentina as a pariah state for the next decade.”

By turning instead to the central bank to finance fiscal spending when the country was shut out of international capital markets, added Ms Baker, Ms Fernández created much of the currency and inflationary pressure seen today. www.businessday.ng

Crowds marched through the streets of Hong Kong in a torrential downpour © AFP

Hong Kong protesters rally in defiance of Beijing Fresh demonstrations held in spite of paramilitary police massing across the border NICOLLE LIU AND CHRISTIAN SHEPHERD IN HONG KONG

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undreds of thousands of anti-government protesters staged a peaceful protest through central Hong Kong on Sunday in defiance of increasingly threatening rhetoric from Beijing.

After 10 weeks of demonstrations that have sparked the Asian financial hub’s biggest political crisis in decades, the crowds rallied in one of the city’s parks before spilling out into the streets and marching towards the central business district.

The evening ended without any major clashes between protesters and police, a victory for organizers who had hoped to show that protests remain peaceful and enjoy popular support.

Organisers estimated that 1.7m people attended the protest, but numbers were difficult to estimate as participants flowed into nearby roads and streets without passing through the designated park area. The police estimated that at its peak 128,000 gathered in the designated protest zone.

Sunday’s rally followed protests on Saturday, when teachers marched in central Hong Kong and anti-government demonstrators gathered across the harbour in Kowloon.

The peaceful end to both was in contrast to recent weeks, when protests have been characterised by fierce clashes between police and protesters.

Beijing responded to the clashes during past protests between police and protesters by accusing the demonstrators of showing “signs of terrorism”. Chinese state-run media have stepped up the pressure, displaying images of paramilitary forces and armoured vehicles massing just a few kilometres away from Hong Kong across the border.

“Whether the Chinese military will come or not is out of the control of Hong Kong’s 7m citizens . . . It is not for me to be afraid of,” said Raymond Sun, a 56-year-old retired professional, marching as a torrential downpour hit the city.

The protests began as opposition to an extradition law that would allow suspects to be sent to China for trial but quickly ex-

panded into calls for an independent inquiry into alleged police brutality and democratic reforms.

“If we don’t insist this time we might not have other chance to come out,” said Crystal Lam, a 23-year-old who was marching on Sunday. “I don’t want these demonstrations to end just like this — if so, maybe 10 years later, the next generation will have to come out again.”

A police permit for Sunday’s protest stipulated that the rally should remain in the park but the organisers claimed that was an unreasonable restriction given the large expected turnout.

A government spokesperson said in a statement: “The government will begin sincere dialogue with the public, mend social rifts and rebuild social harmony when everything has calmed down.”

While the protests have forced the government to suspend the extradition bill, Hong Kong’s leader Carrie Lam has yet to respond to the movement’s other demands, which aside from the police inquiry and universal suffrage, include the full withdrawal of the legislation and the dropping of charges against protesters previously arrested.

Banks benefit as US homeowners rush to remortgage Rise in refinancing demand is balanced by lower margins for banks on lending rates ROBERT ARMSTRONG

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urbulent global markets and fears about slowing global growth are having a positive side effect for US consumers and banks: a wave of mortgage refinancing.

Investors have sought out the relative safety of US Treasuries in recent weeks, driving down yields and pulling mortgage rates down with them. As of last week, the average interest rate on a 30-year fixed rate mortgage was 3.6 per cent, according to Freddie Mac, the government sponsored mortgage guarantor. That is the lowest level since November

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2016 and close to the all-time low of 3.3 per cent set in late 2012.

US homeowners are rushing to take advantage. The Mortgage Bankers Association index of mortgage refinance activity rose 12 and 37 per cent week on week, respectively, in the first two weeks of August, hitting its highest level in three years. The index is based on a broad survey of mortgage originators.

Analysts say, however, that fees earned on refinancing transactions will not be enough to offset the lower lending margins that result from a lower interest-rate environment. “Big banks’ mortgage businesses are a lot smaller than they used to be,” said @Businessdayng

Jeffery Harte of Sandler O’Neill. “I’m thinking of [the refi wave] more like a partial offset to [lending margin] pressure, as opposed to a meaningful earnings boost.”

Many large, systemically important banks reduced their exposure to mortgages after the financial crisis as the capital required to be held against housing debt increased.

Non-banks lenders such as Quicken Loans have taken market share.

Non-banks lenders now originate 60 per cent of the mortgages that are guaranteed by Freddie Mac and its peer Fannie Mae, up from 47 per cent five years ago, according to Inside Mortgage Finance.

Monday 19 August 2019

BUSINESS DAY

FINANCIAL TIMES

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COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Investment banks are losing their grip on IPOs The technology sector in particular now favours direct listing MICHAEL MORITZ

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he coming week marks the 15th anniversary of Google’s initial public offering — the first concerted effort to break the hammerlock that investment banks have always held on stock offerings.

That attempt failed. But now, due to mounting frustrations, advances in technology and changes in the capital markets, investment banks are about permanently to lose the gatekeeping position they have jealously protected.

Google’s IPO was the first time a large technology company had expressed public frustration at the way investment banks cloaked IPOs in secrecy, making it impossible for either issuer or buyer to figure out what was happening behind the curtain. Instead, Google’s management asked the banks to run an open auction — much as eBay conducts a sale — to determine an eventual price. No other company followed suit, largely because the banks closed ranks and succeeded, in a disinformation campaign worthy of the NRA gun lobby in the US, in portraying the IPO as a flop.

Now, years later, the groundswell of dissatisfaction is about to erupt into action. This new ap-

proach, dubbed a direct listing, has so far been employed by only three companies: the music streaming service Spotify and payments company Adyen (both of which started outside the US), and Slack, a San Francisco software company.

These direct listings, largely controlled by the company that is selling shares, occurred because the shrewd and the brave caught on to the idea that, for stock offerings, investment banks occupy the same position in the investment universe as a scalper does in the theatre world. No actor, theatre owner, producer or audience member enjoys knowing that a ticket tout has run off with money that should belong to them. The same goes for the people involved with private companies.

It took the backbone of Barry McCarthy, chief financial officer at Spotify (and previously CFO at Netflix), to buck the system, shining a light on the tactics that the banks have used to frustrate and exasperate everyone but themselves.

Bill Hambrecht, a San Francisco investment banker who helped take Apple public in 1980, spent much of the 1990s making similar arguments to Mr McCarthy — but he failed because his former competitors and collaborators made him a pariah in the manner that the mob treats a turncoat.

Spain offers to take refugee boat turned away by Italy Move highlights growing tension between Madrid and Rome over immigration DANIEL DOMBEY IN MADRID

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pain has said it is ready to allow a boat stranded off the coast of Italy carrying almost 150 migrants to dock, in a move that highlights the growing tensions between Madrid and Rome on immigration.

The government of Pedro Sánchez, Spain’s caretaker prime minister, said on Sunday that it was preparing the southern Andalucían port of Algeciras to accept the Open Arms, an NGO ship carrying 147 migrants. The Spanish vessel has been waiting at sea off the Italian island of Lampedusa for two weeks in difficult weather with worsening living conditions aboard.

The boat has become the latest focus of the political battle between Italy’s warring coalition parties. Interior minister and leader of the rightwing League party Matteo Salvini has refused to let it dock, triggering a furious war of words with his coalition partners the anti-establishment Five Star Movement and prime minister Giuseppe Conte.

Mr Sánchez’s Socialist government said in a statement : “The caretaker prime minister

has taken this decision given the refusal of Matteo Salvini to permit disembarkation in Italy and the difficulties put forward by other Mediterranean countries.”

Madrid added that it would also consider the possibility of taking action in the EU or at an international human rights or maritime law organisation “against the Italian government’s attitude with respect to the reception of the migrants aboard the Open Arms”.

“The prime minister has taken this decision because of the situation of emergency on board,” the Spanish statement said.

“The inconceivable response of the Italian authorities, and in particular Matteo Salvini, interior minister, of closing all its doors . . . has led Spain to once again lead the response to a humanitarian crisis.”

The Spanish government called on Italy to allow the migrants to disembark, arguing that the Italian government now had a guarantee that they would be accepted by other EU countries, including Spain. But Madrid said that it had received no indication that the disembarkation would take place, despite a series of recent contacts with Rome. www.businessday.ng

The US is aiming to sell 66 of the F-16 fighter jets to Taiwan © AP

China to introduce market-driven lending rate Reform seeks to lower cost of borrowing as companies suffer record defaults DON WEINLAND IN BEIJING

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hina’s central bank will replace its key lending rate with a more market-driven benchmark in a longawaited reform aimed at lowering borrowing costs for companies experiencing record defaults this year.

Bank lending in China is priced based on a lending rate set daily by the People’s Bank of China. Banks have used the rate as guidance but the central bank has maintained a strong position in determining the cost of corporate loans.

New measures announced by the central bank at the weekend will make the loan prime rate, or LPR, the benchmark for lending.

Under the new regime, the LPR pricing will be linked to the oneyear medium-term lending facility, a rate that is viewed as being closer to market rates for credit and will help lower the cost of borrowing for private companies.

The central bank said in a statement that the move was a “marketbased reform measure that will lower real lending rates”.

New urgency has been added to Beijing’s efforts to liberalise rates over the past year as private companies in

China face tightened access to credit and an economic downturn linked to the intensifying trade dispute with the US. Rating agency Fitch said it expects record default levels this year due to increased refinancing pressure and poor investor sentiment caused by the trade war.

The early effects on loan pricing of the latest reform would be hard to gauge, analysts said. The lending rate under the old regime was 4.35 per cent, while the one-year mediumterm lending facility, to which the new LPR will be linked, was 3.3 per cent.

“In any case, since policymakers are keen to lower the funding cost in the real economy, both the LPR and average loan rate will probably drop, albeit modestly, after the new mechanism starts,” said Larry Hu, head of greater China economics at Macquarie Capital. “Otherwise, they could put more pressure on banks.”

Analysts said while they expected the new rate to move closer to market-driven pricing they also foresaw continued influence from the People’s Bank of China.

“There are still some obstacles ahead for full-on interest rate liberalisation in China,” CICC analyst Eva Yi said in a note to investors. “The PBoC will

probably remain involved in the LPR pricing for now, in order to safeguard the transition and prevent potential spikes in interest rate volatility.”

The LPR will be published on the 20th of each month, starting on Tuesday.

Interest rate liberalisation in China has been a painfully slow aspect of financial sector reform.

China’s banking system was designed to channel the savings of its people into low-cost loans for stateowned companies. For many years, deposit rates and lending rates were kept artificially low for this purpose.

Delays in moving away from that state-planned pricing system have been linked with the creation of government-controlled “zombie companies” that are kept alive only through their privileged access to loans priced far below market rates.

In recent years, state financial planners have pushed through a number of reforms that have nudged the system closer to market forces. The official lending rate was scrapped in 2013, although it has until now remained the key benchmark for the cost of loans. In 2015, the central bank also removed its cap on deposit rates, helping average people earn more interest on their savings.

SoftBank staff to put up to $15bn into new Vision Fund Almost half of the backing for $108bn venture will be provided by company and employees ARASH MASSOUDI IN LONDON AND KANA INAGAKI IN TOKYO

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oftBank is planning to pour up to $15bn into its new technology investment fund on behalf of its own employees, topping up the contributions promised from outside investors such as Apple and Microsoft.

People familiar with the matter said a large part of the employee contributions would be funded personally by Masayoshi Son, the risk-taking billionaire founder of the Japanese group.

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The exact size of employee participation has not been finalised but it will come on top of the $38bn SoftBank has committed to invest in its second Vision Fund, which has a headline value of $108bn but few confirmed outside investors.

Industry experts said it was not unusual for executives managing a fund to put their “skin in the game” but typically the amount of employee contribution would be less than 5 per cent of the total funds raised.

The outsized SoftBank participation could mean that employees take a 14 per cent position while the group’s overall contribu@Businessdayng

tion, which is likely to be financed by debt, accounts for more than half the headline amount.

The move comes as the Japanese group is trying to convince the sovereign wealth funds of Saudi Arabia and Abu Dhabi to invest tens of billions of dollars on top of the $108bn that have been promised by Apple, Microsoft and other unidentified Taiwanese financial groups, these people said.

SoftBank executives suggest the final figure when the new fund launches could be “a lot bigger” if it can successfully complete negotiations that are under way with other investors.

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BUSINESS DAY

FT

ANALYSIS

Punishing Ireland’s economy will backfire on Brexiters London’s strategy of inflicting as much commercial damage as possible is unjustified DAVID MCWILLIAMS

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rexit has turned into a hostage situation. Boris Johnson is the kidnapper, Ireland is the captive and the backstop is the ransom. The British message to the EU is, “Drop the backstop or we’ll kill the hostage in a no-deal shootout”. Doubtless the UK could inflict much harm on Ireland, particularly in agriculture: near 70 per cent of UK beef imports come from Ireland, for example. And crashing out could badly interrupt Ireland’s global supply chain. Nearly half of the 475,000 Irish freight containers of cargo per year going through British ports go to the EU. That said, the Irish economy is much less dependent on the UK than many Brexiters imagine. Tactically, Dublin knows that “no deal” is only “no deal” for now. The UK must eventually do a trade deal with the EU because 46 per cent of UK exports go to the EU and 53 per cent of UK imports come from the EU. No matter how the hostage drama turns out, and no matter what the political and economic fallout, the UK will be back at the table soon.

The more chaos at British ports, the shorter the self-imposed mercantile lockout.

In the meantime, London’s new Brexit strategy is to inflict as much

commercial damage on Ireland as possible. Given that Ireland didn’t ask for, or vote in, the Brexit referendum and, in recent decades, has been an impeccable neighbour and a calm, dependable partner in the British-created tinderbox that is Northern Ireland, this new aggression seems unjustified. However British sensitivity towards Irish concerns has never figured highly in Anglo-Irish affairs.

Part of the new British approach has been a relentless campaign to paint itself as the victim of Irish inflexibility, simultaneously emboldened by a Rule Britannia assurance that Ireland can, and will, be brought to heel. This unstable combination of whingeing victimhood twinned with pompous selfregard has characterised much of Britain’s negotiations thus far. What has been absent are economic facts.

Here they are. In 1953, when Winston Churchill was prime minister for the last time, 91 per cent of Irish exports went to the UK. Today, that figure is 11 per cent and falling.

Far from being the poor, dependent outpost relying on British largesse — as depicted by Brexiters — the Republic of Ireland is an outwardlooking, dynamic, trading entrepot.

Today, Irish firms in the UK employ more people than UK firms in Ireland.

Emmanuel Macron to tackle Vladimir Putin on Ukraine crisis French and Russian leaders to meet ahead of G7 summit after Kiev’s plea for talks VICTOR MALLET IN PARIS, HENRY FOY IN MOSCOW AND MICHAEL PEEL IN BRUSSELS

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mmanuel Macron will revive EU attempts to persuade Vladimir Putin to help resolve international crises over Ukraine and Iran when the French president hosts his Russian counterpart at his Mediterranean holiday retreat on Monday.

Mr Macron has invited Mr Putin to Brégançon fort as a prelude to the GroupofSevennations’summit,which begins in France later in the week. With Chancellor Angela Merkel’s influence on the wane in Germany and the UK distracted by Brexit, Mr Macron has become western Europe’s most active leader on international issues, and the EU has backed his attempts at peacemaking in Ukraine.

But an earlier attempt to court Mr Putin by inviting him to the Palace of Versailles in 2017 bore little fruit.

Among Mr Macron’s priorities this time is to elicit a positive response from Mr Putin to the call earlier this month from new Ukrainian president Volodymyr Zelensky for fresh peace talks to end the fighting in eastern Ukraine, where Russian-backed separatist militants have fought government forces for five years.

“We are intensifying our efforts on the question of Ukraine,” said one of Mr Macron’s senior officials.

“Ukraine is a major security challenge at the heart of Europe which must be resolved so that we can have a stable relationship with Russia.”

Strong business and trade ties make Paris one of Moscow’s key partners in Europe despite years of sour relations between Russia and the west. Hopes for a productive meeting have been boosted by last week’s transfer of French financier Philippe Delpal to house arrest in Russia; he had been held in a Moscow jail for six months on fraud charges which his lawyers say relate to a corporate dispute with a politically connected rival.

But French officials accept it will not be easy to rein in the authoritarian leader whose annexation of Crimea from Ukraine five years ago triggered Russia’s expulsion from what was then the G8.

Moscow has responded tentatively to the recent election in Ukraine of Mr Zelensky, a former comedian with no previous political experience, and his calls for a new initiative to solve the conflict in the east. France and the EU are meanwhile urgently trying to revive talks in the so-called “Normandy” format that brings together Russia, Ukraine, France and Germany. www.businessday.ng

Iraq’s desperate struggle to stay out of Iran-US feud The country is determined not to be used as a proxy in the fight between its closest neighbour and one of its most important allies CHLOE CORNISH IN BAGHDAD

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raq’s most powerful political and military leaders were gathered in Baghdad’s opulent presidential palace to discuss just one thing: how to stop the country’s closest neighbour, Iran, and its most powerful ally, America, going to war on its soil.

The May 19 meeting took place when US-Iran tensions over Tehran’s nuclear programme and its backing of foreign proxies had put the Middle East on edge. Two weeks earlier, the US had dispatched an aircraft carrier strike group to the Gulf, citing Iranian provocation. In Iraq, which shares a 1,400km border with Iran and majority Shia Muslim populations, there was concern that it could become the flashpoint.

After all, Iraq hosts more than 5,000 American soldiers, while a plethora of local Shia paramilitary groups are loyal to Tehran.

Iraqi leaders could not face the prospect ofa new war after years of conflict long predating the 2003 US invasion that toppled Saddam Hussein. The oil-rich country was just getting its breath back after a four-year military campaign to defeat Isis, supported by both the US and Iran. “[Iraq] is a success that is emerging after four decades of conflict,” says President Barham Salih. “We don’t have the stamina, we don’t have the energy, we don’t have the resources, or the willingness, to become victim to yet another proxy conflict.”

A fresh outbreak of violence, warns Mr Salih, would shatter the country’s hopes of rebuilding its society. Its neighbours and allies “should not be allowed to undermine the hard-won success in Iraq”, he says. “We say Iraq first — and we do not want our stability to be squandered. We have had enough of conflicts.”

Some observers worry that the battle-hardened Iraqi Shia paramilitaries who have received

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training, arms and funding from Iran could provide the spark for any conflict. So powerful are some of these groups that their leaders were at the palace meeting. Their rise has been compared with Hizbollah, another Iran-backed militia, which has become the most potent force in Lebanon.

Washington considered the threat, to US personnel and installations inside Iraq, so severe that it closed its consulate in Basra months earlier and days before the meeting ordered non-essential diplomatic staff to leave Baghdad.

The two sides have history.

Iraqi Shia militants fought American soldiers after the US-led invasion. But in 2014, with Iraq’s regular army collapsing as Isis took control of a third of the country, the Iran-linked paramilitaries mobilised under the umbrella of the Popular Mobilisation Units, or Hashd al-Shaabi.

Alongside volunteers answering a religious call to take up arms against Isis, they numbered some 100,000. Their role in defeating the jihadi group meant that in 2016, Hashd fighters were given legal status and the group gained serious political clout in last year’s elections. People regarded by American diplomats as terrorists in the mid-2000s were voted into parliament.

The Hashd are lauded by many as having stopped Isis reaching Baghdad. But since 2018, their swelling political and economic power has been seen as a challenge to the weak Iraqi state. Mike Pompeo, US secretary of state, said last year that Iran-backed Shia militias “jeopardise Iraq’s sovereignty”.

Many leaders at the Baghdad meeting privately favoured Tehran or Washington. A senior official says Iraq’s neutrality in the USIran melee has frustrated some in Tehran; nonetheless, that stance was reaffirmed at the meeting.

Hours later, a Katyusha rocket hit the central Baghdad Green Zone, home to the sprawling US @Businessdayng

embassy. Analysts had already warned that Iran could hit back at the US by having regional proxies conduct asymmetrical attacks.

It was one in a series of unclaimed attacks close to American targets in Iraq during May and June. They coincided with incidents of sabotage on tankers and oil infrastructure in the Gulf. Mr Pompeo linked the incidents to Iran, which dismissed the allegations. No group claimed the apparently unsophisticated attacks in Iraq, which caused no casualties.

“It was a way to test the limits of the Americans,” says Maria Fantappie, International Crisis Group’s senior Iraq adviser. “Whoever did it is aware that the red line for the Trump administration is bloodshed.”

US anxiety had been evident a fortnight before the presidential palace meeting when Mr Pompeo abruptly cancelled a meeting with German chancellor Angela Merkel in Berlin to make a late night dash to Baghdad, where he restated US concerns about Iraqi armed groups under Iranian command.

The administration of US president Donald Trump did not publicly specify which groups it feared.

And many argue Washington, where anti-Iran hawks are in the ascendancy, overreacted by evacuating the non-essential staff.

American intelligence “has a bias it wants to prove”, says Hisham al-Hashemi, an Iraqi government counter-terrorism adviser. Yet one veteran Iraqi politician describes “nasty threats” by certain Shia militias against “US installations”, including oil companies and diplomatic outposts. US intelligence, he says, indicated Iranian military commanders had met their Iraqi paramilitary allies in Baghdad.

Stoking fears that rogue militant elements could push Iraq into confrontation with its neighbours, a drone strike in May on Saudi Arabia’s Yanbu pipeline, initially claimed by Iran-backed Yemeni Houthis, was later blamed by Washington on Iraqi Shia militants.

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news FG commissions 80kw solar hybrid mini grid in Kogi KELECHI EWUZIE

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L-R: Oluwatoyin Adegbite-Moore, executive director, West Africa; Yemi Cardoso, former Lagos State commissioner for physical planning; Kayode Fayemi, governor, Ekiti State; Adeyemi Dipeolu, special adviser to the president on economic matters, and Christian Jahn, executive director, Inclusive Business Action Network (IBAN), at the African Policy Road Show, themed, building Robust Policies for Increased Social Investment and Inclusive Business in Lagos.

Pic by Pius Okeosisi

Great expectations await new ministers as inauguration commences Tony Ailemen, Abuja

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long list of expectations has been drawn for President Muhammadu Buhari’s long-awaited second-term ministers who will take oath of office this week after a two-day orientation retreat starting today.

The retreat will usher the ministers into the myriad of challenges facing the country, which they will be expected to tackle in the next four years.

Top among the list for the new cabinet members include, amongst others, Nigeria’s rising debt pile, now at N24.3 trillion, equivalent to 20 percent of GDP. The ministers are also expected to find ways of reducing executive/legislature bickering in budgeting that had often led to delays in budget passage and achievement of the much-talked-about January to December budget cycle.

The revelations that over

20,000 projects have been abandoned since 1999 should also provide reasons for worry, even though President Buhari has assured that he would revisit all abandoned projects.

Auwal Ibrahim, executive director, Civil Society Legislative Advocacy Centre (CISLAC), has particularly tasked the ministers to come up with more refined and sustainable methods of dealing with corruption.

Ibrahim urged the incoming ministers to drop the current “reactionary” approach and adopt the more sustainable “proactive” approach to issues to make it difficult for heads of MDAs to loot public funds.

He advised President Buhari to place each minister in their places where their potentials will be maximised, adding that the only way to guarantee the ministers’ maximum performance would be to place them in their “arenas of strength”.

“The best way to fight corruption is to use technology to

enhance proper monitoring of public expenditures. They also need to evolve sound policies that will strengthen the social security system to guarantee good living standards even after retirement. Thirdly, government must rejig the budget system to ensure maximum benefits through a more efficient implementation,” Ibrahim told BusinessDay. “Everybody is worried about the rising incidence of leakages in public sector finance and as we have seen, the current anticorruption policies of government have not eradicated corruption; rather, they are breeding a new set of corrupt individuals.

So, they must come up with a more enduring approach,” he said.

Another big issue is the current huge judgment debts resulting from poorly conceived contracts which the previous heads of MDAs did not tie up properly, necessitating a review of the country’s contract agreements system that creates so

much loopholes to the advantage of contractors.

This includes the controversial $9bn owed the Process and Industrial Developments Ltd (P&ID), a firm incorporated in the British Virgin Islands. The firm is seeking to seize $9 billion worth of Nigeria assets in the United Kingdom over an aborted gas supply agreement reached with the Federal Government in 2010.

The firm had alleged that government failed to honour contract agreements to supply gas to a processing plant in Calabar, Cross River State.

BusinessDay gathered that the case which came up in a UK court in June has been hanging due to the absence of ministers.

Bougei Attah, national coordinator, Procurement Observation and Advocacy Initiative (PRADIN), wants to see a more strengthened Bureau of Public Procurement (BPP), as part of “strong institutional mechanisms to check leakages”.

Don’t listen to bad advice against other Egba Obas, Obasanjo tells Alake RAZAQ AYINLA, Abeokuta

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ormer President Olusegun Obasanjo has advised Alake and paramount ruler of Egbaland in Abeokuta, Oba Adedotun Gbadebo, not to listen to bad advice and intrigues to disunite other monarchs in Egbaland, saying it is high time all Obas in the land unite for socio-economic development of Ogun State.

BusinessDay reports that Egbaland, which consists of Abeokuta, state capital and Ogun Central Senatorial District, has been involved in royal bickering among the four major Obas in the city, namely, Alake, Osile, Agura and Owu sections of the city, and the bickering predates the coming on board of Agura of Gbagura for which for-

mer President Obasanjo and former Governor Ibikunle Amosun had tried all efforts to settle in recent past.

Obasanjo, who is a high chief - Ekerin and Oluwo in Egba and Gbagura in Abeokuta, respectively, wanted all monarchs in the state capital to steer clear of an aged-long bickering and rivalry among Obas as prolong bickering could never bring peace nor development to Egbaland, the state and Nigeria as a whole.

The former president, being a son of the soil and father of the day at the coronation ceremony of Oba Saburee Babajide Bakre, Jamolu II, ninth Agura of Gbaguraland on Sunday at Oke-Iddo in Abeokuta, admonished the new monarch not to join old issues with Alake and other Obas in the land.

He asked Agura of Gbagura, being the new monarch with a quality exposure as retired senior officer of Nigeria Customs Service, to deploy his wealth of experience to further unite Obas in the land as peace and unity were mostly needed in the country at this trying period.

He said, “Alake, I am happy that you are here because when you ascended the throne, the first speech you gave then was encouraging and appealing, but, you later listened to (bad) advisers.

“Don’t listen to bad advisers on Agura, ensure that everyone comes together so that they can be development in Egbaland. All of you should work together to achieve development. You all nerd to support government for socioeconomic development. You

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must all join hands together to ensure community development because your support will help government to develop the state.”

He also warned the newly installed Oba to work tirelessly and assiduously to move Gbagura and Egbaland forward in the comity of towns and cities in the state, saying: “I congratulate you for the success of today, you will be long on the throne and your reign will be the beginning of new things in Gbaguraland.

“Kabiyesi, you have a lot of work to do in Gbaguraland and Abeokuta as a whole. Our traditional rulers are not united and you do not have bad baggage because as you are coming, your hands are pure, you must ensure that everything about you is pure.

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ederal Government, through its implementing agency – Rural Electrification Agency (REA), will today (Monday) commission the 80 kilowatt (KW) solar hybrid mini-grid power plant project in Upake community, Kogi State.

The project is part of government commitment to provide electricity access to unserved and underserved communities across Nigeria, thereby increasing electricity access to particularly hard to reach areas.

Following the installation of the 80kw solar hybrid mini-grid power plant, 496 residential and commercial buildings will be connected and will receive constant electricity henceforth.

Damilola Ogunbiyi, managing director/CEO, REA, says the move to light up every nook and cranny of Nigeria reiterates the commitment of the Buhari-led administration in fulfilling its mandate to ensure electricity access for Nigerians.

According to Ogunbiyi, “More families and businesses in Upake will have access to

clean, sustainable and reliable electricity from the sun. This enhances productivity and provides jobs in Upake”.

The first call of the Rural Electrification Fund (REF) will energise 12 communities and deploy 19,000 Solar Home Systems (SHS).

Upake community is one of the 12 communities to benefit from the first set of grants under the REF, which is a REA initiative. Other communities set to commission solar hybrid mini-grid in the coming weeks include Kare, Dadin-Kowa and Tsulaye communities in Kebbi State, and Akpabom community in Akwa Ibom State.

The REA is tasked with electrification of unserved and underserved communities. The REF provides equitable access to electricity across Nigeria to maximise the economic, social and environmental benefits of rural electrification grants, to promote off-grid electrification, and to stimulate innovative approaches to rural electrification.

REF projects are administered using a Public-Private Partnership (PPP) model.

AIB extends accident investigations to rail, road, maritime … to sign MoU with SA, Saudi Arabia, Gabon, to investigate air accidents IFEOMA OKEKE

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ccident Investigation Bureau (AIB), a body responsible for investigation of accidents in Nigeria, has disclosed plans to expand investigations from just air accidents to multi-modal, which include rail, road and maritime related accidents.

The bureau, which awaits the approval of its bill in the Senate, says the bill will approve its investigation into various modes of transportation and enhance its investment in research and development.

Speaking during AIB symposium on aviation safety in conjunction with National Transportation Safety Board, (NTSB) at the weekend, Akin Olateru, AIB commissioner, assured that before the end of the year, the AIB bill would be signed, which would make AIB one of the few organisations worldwide operating the multi-modal system.

According to Olateru, very soon, some of its staff will commence training on investigations of road, rail and maritime accidents, as the bureau will expand its scope of earnings to accommodate more equipment and manpower to support its proposed operations.

The commissioner said the bureau had done a lot in human capacity development through trainings and retraining of its staff and to achieve this it had approached several global institutions, one of which is the NTSB. He said the United States @Businessdayng

government through NTSB and Safe Skies for Africa programme had continued to support AIB in human capacity development, adding that through this support, the bureau had been able to attract several countries such as South Africa, Saudi Arabia and Gabon to commence plans to sign memorandum of understanding (MoU) with AIB. “We have signed MoU with France, Republic of Benin and Sao Tome and in the next one month, we will be signing an agreement with Saudi Arabia. Before a country will want to sign MOU with you, they must have seen there is something different about you.

Infrastructure and equipment, human capital, systems processes and procedures are elements we have built on to attract these partnerships.

“In terms of equipment worldwide, AIB is rated amongst the top 10 in the world. In just two and half years, AIB has released 58% of the total number of accident reports released since 12 years the bureau commenced operations. Today, we are influencing safety. We have brought in African nations to join us in aviation safety programme in conjunction with Safe Skies for Africa and NTSB,” Olateru said.

The commissioner, who expressed his regret that going forward, the US will no longer sponsor the Safe Skies for Africa programme, called on African countries to work together to strengthen the aviation section in Africa.

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BD Money

Monday 19 August 2019

BUSINESS DAY

PERSONAL FINANCE

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PERSONAL FINANCE

ESTATE

Five things employers look out for in a resume

Where to find the best online education on the web

Whether you are a corps member preparing for your passing-outparade or you are currently stuck at an entry-level position you occupy in your office, or you desire to change your current job for some reasons, you would need a resume to land your dream job.

Making money is a simple trade of skills whether the economic activity requires racking one’s brain or getting one’s hands busy. People exchange money or resources for the value others create or add value placing a premium on knowledge.

Identifying profitable niche markets in expatriate, elite changing taste

Seven land documents you must demand before buying landed asset

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For many smallholder farmers, identifying a profitable niche market for the produce they have long laboured to grow can sometimes be as herculean as obtaining bank credits.

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Many Nigerians have been tricked by dubious landowners and grabbers (aka omo-onile) over ignorance of necessary titling documents they ought to have requested when purchasing landed property.

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Monday 19 August 2019

BUSINESS DAY

BD Weekly Tenders Wrap-up Tenders Wrap-up The National Orthopaedic Hospital Enugu: ntends to execute some projects as provided in the year 2019 appropriation. The hospital invites reputable and experienced contractors/ suppliers to tneder in respect of the following projects – supply of theatre/hospital equipment, rehabilitation of wards, offices, hostels, supply of utility vehicles, construction of outpatient complex, drilling of boreholes/water-wells. Interested companies are to collect the Standard Bidding Document (SBD) from the office of the Head of Procurement at the Ground floor of administrative blocks of the hospital on evidence of payment of a nonrefundable tender fee of N10, 000 per Lot, paid into National Orthopaedic Hospital, Enugu’s Remita Account. Bidders are also invited to witness the opening of the bids on Monday, 16th September.

University of Nigeria Teaching Hospital: Invites experienced and competent contractors to bid for projects under works, supply and non-consultancy services under the full year 2019 appropriation. Interested companies on presentation of an evidence of payment of a non-refundable tender fees or N10, 000 per lot into the University of Nigeria Teaching Hospital Remita E-Collection Account shall collect bidding documents starting from Monday, August 12. Service providers /Consultants are not required to pay for bidding document except when shortlisted for Request for Proposal.

Deadline for bidding for works and supply is Monday, September 23, while for non-consultancy services, bidding ends on Monday, August 26. Expression of interest should be addressed to the Chief Medical Director, University of Nigeria Teaching Hospital, Ituku-Ozalia. 1. The United Nations Development Programme (UNDP) working in collaboration with the Energy Commission of Nigeria (ECN) is calling for expression of interest in scaling up clean energy investment in rural areas in Nigeria. The project aims at providing a minimum of 4, 500 customers including residential, public, commercial or productive users using a single phase or three phase connections. Thus UNDP is seeking a NGO or private company to submit proposals for replicable and scalable clean-off energy projects. Interested organization

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should send their expression of interest, technical and financial proposal with a cover letterhead to undpgefsfm@gmail. com latest by 5pm on August 23, 2019.

The Petroleum Technology Association of Nigeria (PETAN): is building its multi-storey state-of-art headquarters at 15,520 sqm property at Greater Port Harcourt, Phase 1A Igwuruta.

The project will comprise the following aspects – civil/structural works, mechanical works and electrical works. Interested construction companies are to submit the following documents including Company’s Certificate of Incorporation, Nigerian Content and Training Policy, Project Quality Management, Contractor’s list of SubContractors and Tax Clearance Certificate for the last five years. Applicants should send their proposal no later than Wednesday, August 28 by 12pm. Also, a non-refundable fee of N250, 0000 sin bank draft payable to PETAN should be attached.

The Medical Laboratory Science of Nigeria: invites eligible contractor to tender for the following works and goods supplies – renovation of 3-storey corporate headquarters office building, completion of one storey building, installation of mechanical fireproof bookshelves. Prospective bidders must possess evidence of Company registration in Nigeria, evidence of company current tax clearance, current copy of valid PENCOM compliance certificate among others. Interested and competent bidders are requested to collect bid documents from the Procurement Unit, Room 304, 2nd floor at the Corporate Headquarters Durumi pHase 11, Garki, Abuja, upon the presentation of evidence of payment of non-refundable Tender fee of N10, 000 only paid to Council TSA Account via Remita account. Bids must be delivered in an envelope with the LOT Number tendered and addressed to Acting Registrar, Medical Laboratory Science, Durumi, Phase II, Abuja.

The Office of the Auditor General for the Federation: invites interested/competent Contractors/Suppliers and Accounting Firms to submit quotation for the supply of stationery, computer consumables, supply and installation of computers and photocopying machines and rehabilitation of office building, establishment of work stations and financials forensics laboratory for evi-

dence and financial consulting in separate projects.

Collection of tender documents can be done at the office of the secretary, Procurement Planning Committee Room 717B, 7th Floor, Audit House, Central Business District, Abuja.

Deadline for category A,B & C is no later than 12.00 noon on Monday, 23rd September while Category D closes 12:00 noon Monday 26th August, 2019.

The National Sugar development Council, Abuja: has called for EoI for the supply of Goods and conduct of pre-feasibility studies for its 2019 capital projects.

The project involves the supply of Soil Laboratory Equipment, Sugar Laboratory Equipment, Plant Laboratory Equipment, Laboratory Consumables/Glassware at National Sugar Institute Limited/ Guarantee, university of Ilorin, Kwara state.

Interested parties may reach out to the Procurement Department of the National Sugar Development Council, Block A, Plot 45, Sugar house, Oro Ago Crescent, off Muhammadu Buhari Way, Garki 2, Abuja for eligibility requirement and collection of tender documents.

The Federal Ministry of Education, Federal Government College New Bussa, Niger state: has published its invitation to tender for execution of 2018 appropriation. The project is titled: Rehabilitation/ Re-modelling of Boys hostel. Interested companies are expected to collect the Standard Bidding Document (SBD) from the office of the Vice-Principal (SD), FGC, New Bussa with evidence of N10,000 paid into the FGC New Busa, Niger state Remita account in any commercial bank.

Prospective bidders can contact the institution for further information. Deadline is 12 noon, 6 September, 2019.

National Orthopaedic Hospital Enugu: invites reputable and experienced contractors/suppliers to tender in respect of the following projects as contained in 2019 Appropriation: LOT 1: Theater/Hospital Equipment.

LOT 2: Service Vehicles-Water tanker and Hiace 14-seater bus. LOT 3: Rehabilitation of wards. LOT 4: Rehabilitation of offices.

LOT 5: Renovation of student’s hostels.

LOT 6: Construction of General Outpatient Complex. LOT 7: Drilling of Borehole/Wa-

ter well.

Interested contractors/ suppliers are advised to obtain Tender Document from the Procurement Department on presentation of evidence of payment of Nonrefundable fees of N10,000 for each LOT direct to National Orthopaedic Hospital account.

Further information can be obtained from the institution. Deadline is 9:00am Monday 16, September 2019.

The Shell Petroleum Development Company of Nigeria Limited (SPDC): invites interested and prequalified parties on upcoming tendering opportunities for the provision of Geosciences Supervision Services for SPDC. The proposed contarct would commence in January 2020 and remain active for 2-year duration followed by one year extension option.

Visit www.nipexng.com to determine your eligibility, download application form, and make necessary payments and visit NipeX office at 8/10 Bayo Kuku street, ikoyi lagos for further action.

The African Development Bank: is calling for expression of interest from eligible firms for supply and installation of various office equipment, stationery, consumables and services for the Nigeria Country Department. Interested companies registered in Nigeria are invited to express interest for one or several of the following lots – clearing & shipping agent services, provision of car hire & rental services and supply of office and computer stationeries among others. Expression of interest and evaluation form are on the bank’s website www.afdb.org/en/about-us/corporateprocurement/procurement-notices/current solicitations/ Interested firms are to submit their expression of interest forms by courier or at delivery at the address indicated below not later than 30th August, 3pm.

Reference: ADB/EO1/ RDNG/2019/0134 The Senior Director, African Development Bank, Nigeria Country Department, 1521 Cadastral Zone A0, Off Memorial Close, Abuja.

The Ebonyi State Universal Basic Education Board, Abakaliki: requires the services of reputable contractors/firms, for the execution of intervention projects in the basic education sub-sector of the state.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder.

Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 19 August 2019

BUSINESS DAY

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Personal Finance Five things employers look out for in a resume Interested contractors are requested to tender for prequalification for the execution of the projects which include construction, reconstruction and rehabilitation of classroom blocks.

Bid document must be enclosed in a sealed envelope marked Lot(s) No of “Year 2016, 2017 or 2018, Universal Basic Education Intervention project” and submitted to the office of head of Department: Physical Planning, Works and Maintenance, Ebonyi State Universal Basic Education Board, Abakaliki, within five (5) weeks.

Lagos State Government: invites expression of interest for the engagement of vendors to provide catering, office stationeries, consumables supply, ICT repair, hotel, travel management, 3rd party logistics, and insurance provision services. The interest should be addressed to the coordinator, Grants Management Unit, LSMOH, GMU, Office, Folarin Coker Staff Clinic, Alausa, Ikeja between the hours of 8.00AM -5.00PM from Thursday 8th August to Thursday 5th September 2019.

Agip energy and natural resources: has opened advert for tender opportunity revamping upgrade od distributed control system and fire & gas system at Agbara platform. To be eligible, tenders must comply with the Nigerian Content requirements in the NipeX system. The closing date of the advert is 2nd September 2019.

Additional information on www.nipex. com West African Power Pool (WAPP) Secretariat: is inviting interest from a reputable consulting firm. Interested consultants should submit an expression of interest in French and English latest September 16, 2019, by 10.00am addressed to West African Power Pool, Mr. Siengul A. K1 Secretary-General Zones des Ambassess, Pk-6 Akpapkpa Cotonou 06 BP Cotonou, Benin.

Edo State Government: invites bid of tenders for land clearing of 1000 hectares. The time and date for the collection of bidding document is 6th August 2019 to Thursday 29th August 2019.

The venue is the Office of the Permanent Secretary, Ministry of Agriculture and Natural Resources, Benin City.

Creative Associates International under its Nigerian Chad Basin NLCB project is releasing a Request for Proposal (RFP) for some projects in Borno State. Interested firms may obtain electronic copy of RFP on this link: https://app.smartsheet .com.

The closing date is August 21st, 2019.

OLUWASEGUN OLAKOYENIKAN

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hether you are a corps member preparing for your passing-out-parade or you are currently stuck at an entry-level position you occupy in your office, or you desire to change your current job for some reasons, you would need a resume to land your dream job.

You probably may have sent your resume to several recruiters advertising for different job positions without any form of feedback inviting you for an interview, clarification or more information. This could be a sign that your resume lacks some or all of these five things employers look out for in resumes.

But before you start updating or writing your resume from scratch, it is important to understand the socioeconomic status of the country you reside in. For instance, in Nigeria, more than 20 million inhabitants, representing 23 percent of people within the working-age bracket, sought for jobs but could not secure one as at September 2018.

This gives an idea that your resume would be read alongside those of several other candidates seeking to occupy the same position. This explains the reasons behind recruiters’ low attention span on resumes, hence you need to creatively make your resume appealing even as you bear in mind that there is no one size fits all.

Skills The skills you have are one of the major things hiring managers look out in your resume. These skills seen as values give employers an idea of what you can offer as a candidate.

So, whenever you come across a job advert and you wish to apply, carefully pinpoint the required skill set or knowledge for the job that matches yours, and arrange the list of skills according to your proficiency level starting with the strongest.

While recruiters do not expect you to perfectly possess all the required skills, you are not also expected to include a skill set which does not reflect your abilities.

These could come in the form of hard skills such as software programming, operating certain equipment or driving. They are mostly thought in schools, certification programs, training materials, among others to enable you to perform some technical tasks.

The skills could also be soft such as leadership, attention to detail, customer service, communication, passion, creativiwww.businessday.ng

ty, organization skills or ability to learn and teach. These abilities, which are not easily acquired, are the attributes you have that you can apply in the job.

Achievements Some jobs applicants are found of exaggerating their abilities by stating skill set they do not have or blowing their proficiency level out of proportion. It would be erroneous for you to have all the list of skills required for all jobs advertised on your resume as that may prompt some doubts over your credibility.

Just like the “Show, don’t tell” rule recommended for writers, recruiters prefer a list of verifiable achievements that show where you put your skills to work. It would be easier for a Fellow of Mandela Washington Fellowship owing to his track record to convince a recruiter about his leadership skills than a candidate who used several adjectives to describe his abilities.

Experience Yes! Experience is another major thing your potential employer expects to see on your resume. You wouldn’t want to send a resume filled with just a list of skills and achievements without stating where you have put them to work.

The recruiter wants to know the key responsibilities you’ve held in each position written on your resume, and how the experience garnered could help you deliver on the new job if considered.

It is expected that most graduates underwent Industrial Training (IT), Student Industrial Work Experience Scheme (SIWES), or Teaching Practice – for education students – in the course of their studies.

For the little who had no opportunity to do either of these, it is expected that they would have leveraged these skills during

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their one-year mandatory National Youth Service Corps (NYSC) programme.

Qualification Qualification comes after experience because while it is a necessary requirement to get the job you desire, it may not be sufficient.

This is where you show you do not only have the needed skills that would make you excel on the job but you are also qualified. Here, recruiters expect to see all your qualifications either academic, professional or both.

These qualifications should be accompanied with the awarding institution, the date it was issued and what was awarded starting with the most recent and relevant to the position you are applying for.

Formatting As mentioned earlier, it takes a very short time for an employer to go through your resume. You may be the best fit for the job but if you have a poorly arranged resume, you may hurt your chances of getting invited for a chat.

Your resume should be written in a reasonably sized and legible font with normal margins, you wouldn’t want your potential interviewer strain his eyes before he sees the contents of your resume.

Also, master the art of using ATSfriendly keywords and phrases to describe your skills, experience, and even achievements. Some recruiters only scan through resumes, while some others use Applicant Tracking System (ATS), a computer application that screens resumes.

Ensure coherence throughout the document, be consistent with formatting, check for typographical and grammatical errors, and include your contact details, and social media accounts.

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Monday 19 August 2019

BUSINESS DAY

Monday 19 August 2019

BUSINESS DAY

PersonalFinance

Cover Story

Where to find the best online education on the web SEGUN ADAMS

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aking money is a simple trade of skills whether the economic activity requires racking one’s brain or getting one’s hands busy. People exchange money or resources for the value others create value, placing a premium on knowledge.

Online education platforms available today make it easy for people to accelerate their career, improve their professional worth and scale up their income even if they run their own businesses.

Folashade, 23, a baker told BusinessDay she perfected her skills taking lessons online and even learnt to manage her confectionary business successfully leveraging internet education programs.

These online platforms can give you the competitive edge you need to up your income and even learn self-improvement skills.

Udemy Whether it is photography, data science, personal development, Udemy has tons of videos to help you learn almost anything.

Udemy is the world’s biggest online learning platform. It is aimed at professional adults and students. Udemy have more than 40 million students who have access to over 30 million minutes of content on Udemy. More than 50,000 instructors are teaching 130,000 courses in over 60 languages.

Udemy lessons are paid for but you can access some free tutorials on the website.

Alison Alison offers over 1000 free online courses across nine distinct categories. The types of courses across the categories include: Certificate Courses, Diploma Courses and Learning Paths.

Certificate Courses allows one specialize in a whole subject area and focus learning on different topics that provide specific expertise in one’s field or industry.

Certificate courses include an abundance of subjects, such as: languages, media studies, journalism and public relations, health and fitness, business studies, computer prowww.businessday.ng

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gramming and networking, and many more.

Diploma courses span a variety of professional subjects, such as: workplace safety and health, business management and entrepreneurship, food safety, nursing and patient care, customer service, and much more!

Learning path allows one master a subject- learn about a subject from a basic (Introduction) level through to proficient (Advanced) level. Examples include Project Management and Physics.

Courses are free but getting certified may require paying a stipend.

Coursera From courses to degrees, Coursera has100 percent online learning from the world’s best universities and companies to Each course is like an interactive textbook, featuring pre-recorded videos, quiz-

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zes, and projects.

On unique thing about the platform is the help and support which connects users with thousands of other learners, to debate ideas, discuss course material, and get help mastering concepts.

Coursera has a mix of free and paid for courses if users want certificates. edX edX is a massive open online course provider. It hosts online university-level courses in a wide range of disciplines to a worldwide student body, including some courses at no charge. It also conducts research into learning based on how people use its platform.

The platform was created by Massachusetts Institute of Technology and Harvard University. edX has over 120 institutional partners and offer lessons ranging from data and computer science to leadership and communications. edX offers both free and paid for courses recognized by many global employers.

The platform also has programs and degrees based on top educational institution curriculum to help further one’s career.

Udacity Udacity allows users take real-world projects from industry experts, one-onone mentor, personal career coach and career services, and a flexible learning option.

The platform allows you find the right learning path by exploring by school or by skill.

Like other platforms, while there are free courses, to take certificates attract a fee.

LinkedIn This is a professional networking site.

Not only does LinkedIn enable you to connect with people you know, it also enables you to connect with the people your LinkedIn connections know.

With more than 5, 000 courses and personalized recommendation, you can discover, complete and track courses related to your field and interests. There are limited number of free courses on LinkedIn. Some of the courses you can get learn on LinkedIn include: data science and analytics, online marketing foundation, project management, body language for leaders and Excel.

Identifying profitable niche markets in expatriate, elite changing taste Temitayo Ayetoto

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or many smallholder farmers, identifying a profitable niche market for the produce they have long laboured to grow can sometimes be as herculean as obtaining bank credits. These farmers who constitute over 88 percent of the total size of Nigeria’s farming population only sell 26 percent of their agricultural products on the average, mainly as a result of high domestic consumption and partly an offshoot of poor access to niche markets, statistics from the Food and Agricultural Organisation of the United States show.

Although they rely on a diverse range of crops, livestock and fishes, five major crops including maize, cassava, yams, beans and millet are the main focus due to their relevance for the domestic economy. Yet, more than 72 percent of smallholders live below the poverty line of $1.9 a day.

However, a turnaround is in view if farmers will, first, shift focus from investing resources in conventional crops to the demand for fresh new crops driven by the appetite of the growing expatriate community, changing taste of some elite and the spreading health consciousness.

There are some crops which were rarely grown in Nigeria a few years ago, which consumers and food processors relied on import to get. Some of them, such as Viccer Gurd, Parsley, Sweet Corn are now being raised locally, to address part of the demand. There are more crops like these which are unpopular but could serve as a niche market for willing producers. Food processing companies and stores are also on the look for local producers to augment their imports.

Parsley is often added to meals to enhance the flavour or presentation of a dish.

Using parsley in cooking serves as a way to boost the taste and improve the look of a dish without adding extra sodium, or salt, to the meal. Nutritionally, it may also protect against cancer, diabetes, and bone weakness, according to medical reviews. One cup of chopped parsley provides 1,230 percent of an individual’s daily recommended vitamin K intake. It can be blended into smoothies or added to meals as a garnish.

Sweet Corn on the other hand, is a particular maize species which differ genetically from the field maize. Its kernels are tender, delicious and eaten as a vegetable in many www.businessday.ng

cuisines worldwide. In contrast to the traditional field corn, sweet corn crops are harvested while their corn-ears have just attained the milky stage.

At 86 calories per 100g, sugar corn kernels are moderately high in calories in comparison to other vegetables. However, fresh sweet corn has much fewer calories than that of in the field corn and other grains like wheat or rice.

Detoun Abbi-Olaniyan, chief executive officer at Thistle Natural Farms says farmers can toe the line of studying the agricultural products that are being imported and carry out a trial on the adaptability of such crops to the local market.

In identifying these unique areas, farmers can also work with firms into providing current market data of agricultural produce and the performance in terms of the demand and supply.

“We do market survey on the products that are being imported. Can we try growing them in Nigeria? Once we are successful with it, it means it can go on to the shelf or the food processing company. There are array of products that can be grown in Nigeria which the small holder farmers we work with are now enjoying the benefit,” Abbi-Olaniyan explained.

“Sweet corn was grown a few years ago and the price was very high. Sweet corn is today effortlessly grown by small-holder farmers who find that they can earn more growing sweet corn compared to growing maize. Farmers can improve by targeting unpopular areas of agriculture, delve into it and supply those markets.”

After identifying a niche market and understanding market requirements in terms of products, standards and quality specification, farmers need to crown the effort with building a network base that can link them

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either with domestic traders, retailers, cooperatives, agro-processor, exporters or farming contractors. This according to experts makes it easier to bridge the gap between them and the target market.

“Smallholders are more than both cluster and commercial farmers. But they do not have direct link to market. They have market access challenge. You find them taking their products to Mile 12 in Lagos, where you have to be part of the association or have an agent who will buy off you,” Thistleberry Natural Farms CEO said.

“What we are doing with smallholders is to grow for off-takers. We have assisted them with market access. With this, we advise them on what the market requires in terms of products, standards, quality specification so that they don’t end up growing outside market needs.”

However, markets are not enough to guarantee success, according to FAO. They must be capable of showing a profit for the entrepreneur who is linked to farmers and the farmers, in turn, will need to be assured of higher net incomes from entering into a new linkage than they could obtain from existing or alternative activities. At a very early stage estimates of farm profitability must be made. Such calculations should be fully costed, making realistic assumptions about production yields and ignoring any subsidies that the linking organization may be tempted to provide. Again, it is not just sufficient to identify the market. Farmers need to be in a position to supply the market in terms of the quality required and the reliability of supply expected by the buyer. Their capacity to do this cannot be automatically assumed and will inevitably involve them in additional investments. Linking is therefore only a small part of the task that those working with farmers have to undertake.

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Monday 19 August 2019

BUSINESS DAY

Real Estate Seven documents you must demand before buying property Israel Odubola

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any Nigerians have been tricked by dubious landowners and grabbers (aka omo-onile) over ignorance of necessary titling documents they ought to have requested when purchasing landed property.

In fact, some think receipt and certificate of occupancy (C of O) are the only titles that confers them rightful ownership of the land they intend to buy.

Buying a land without getting necessary documents could be disastrous.

The truth remains that even if you pay for a parcel of land without getting these documents, you cannot lay claim on the land.

Here are the necessary land titles you must ask landowner or seller before buying a parcel of land in Nigeria.

Survey Plan A land survey plan is a specialized map of a parcel of land, created by thoroughly examining and measuring the property. It’s more than the diagram of a property, but also a key document that shows the exact land borders of the property and applicable aspects of the registered.

It is with a survey plan that you will be able to do a search whether the land you are planning to buy is free or not.

We advise that whenever you are negotiating for land to buy, request for the survey plan, then take it to your surveyor to carry out a search to know if the land is free from government acquisition or whether it’s up for agricultural, residential or commercial use.

Excision Before the enactment of the Land Use Act of 1978, some families have enormous power that they are the ones determining which land will be sold and the one that would be kept.

The Act abolished this practice and vested land ownership to the governor of the state, but government still recognizes families that are customary owners of land.

Thus, excision means taking a part from a whole and the part has been excised will be documented in the official gazette of that state. This means that not having excision means the land could

be seized by the government without compensating even though you actually bought it.

Gazette This title shows towns or villages that have been granted excision and the size of land government has allotted to them.

A community owning a gazette can sell only land to an individual within those lands that have been excised to them and the community or family head of that land has the right to sign your documents for you if you purchase lands within those excised hectare or acre of land.

Gazette is important because if government decides one day to acquire your land, you’d be compensated as long your land is among the excised lands given to the community.

To determine if your land has an excision that has been covered by a gazette, we advise you get a surveyor to chart the site and take it to the surveyor’s general www.businessday.ng

office to conduct proper search.

Certificate of Occupancy (C of O) This is a land document issued by the state government to officially lease any land under its territory to buyers for 99 years. This document gives you the right to occupy the property.

Deed of Assignment This document affirms that the seller of the property has transferred all his rights, title, interest and ownership of that land to the buyer. The deed of assignment contains critical information about the transaction such as the date when ownership was transferred and a specific description of the property.

Inability to produce a deed of assignment when dispute arises on a land simply means you can’t any claim on the land.

Receipt Receipt in land transactions means the seller has acknowledged payment made by you. It does not mean the seller

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has transferred his ownership rights and interests to you.

One mistake rookie investors make is assuming receipt and deed of assignment serve the same function. While the former affirms you have actually paid for the land, the latter confirms that the seller has transferred his rights and interests to you.

Governor’s Consent This is the land document that is obtained whenever a land is bought with C of O. It let the Governor and general public know that the land in question has changed hands. We advise you to attempt perfecting your document by getting Governor’s consent to have total peace of mind. One benefit of getting a Governor’s consent is that it you can transfer your land to another party without meeting Omo-onile or Family head to sign your deed and form 1c, which are obligatory to processing Governor’s consent.

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BUSINESS DAY

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Data

Federal government Eurobond Yields on Eurobonds rose by 0.32 percentage points week on week from an average of 6.36 percent when the market closed last week to 6.66 percent as jitters on the back of ongoing trade war reverberates across markets.

Investors now seek safe haven assets.

Corporate Eurobond For the corporate euro-debt market, yield across the tickers (BAR ecobank which matured during the week) rose 0.02 percent points from 5.475 percent last week to 5.495 percent. www.businessday.ng

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Monday 19 August 2019

BUSINESS DAY

Fixed Income Inter-bank rates rise after CBN mops up N150bn HOPE MOSES-ASHIKE

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he Nigerian inter-bank market on Friday witnessed a rise in the cost of borrowing, following a mop-up of excess liquidity from the banking system via Open Market Operation (OMO) by the Central Bank of Nigeria (CBN).

“This is due to more attractive rates in the secondary market. Offshore investors have continued to take profit on their fixed income investments in Nigeria,” Ayodeji Ebo, managing director, Afrinvest Securities Limited told BusinessDay. OMO simply means the buying and selling of government security, which enables a central bank to control the supply of money in the banking system.

The CBN on the Thursday OMO auction offered N150 billion to investors in the secondary market but the short and medium-term instruments were gripped with low patronage due to high rates.

Consequently, the overnight inter-bank rate which is the rate at which Deposit Money Banks (DMBs) borrow and lend to each other, rose to 19.57 percent on Fri-

day from 12.64 percent recorded the previous day.

Also, the Open Buy-Back (OBB), the money market instrument used to raise short term capital, increased from 11.71 percent on Thursday to 18.00 percent on Friday.

Of the total amount offered by the CBN, a total of N115.89 billion was subscribed by investors but the sum of N88.66 was sold.

The breakdown of the OMO auction show that N20 billion was offered for 84 days tenor and it was undersubscribed by N5.89 billion. Investors bid at a range of between 11.79 percent and 12.68 percent but there was no sale and no stop rate.

For the 175 days tenor, the CBN offered a total of N30 billion at a stop rate of 11.8 percent although investors earlier sought to buy at a bid range of between 11.25 and 12.48 percent. The offer which matures on February 6, 2020 recoded a total sale of N0.69 billion.

The sum of N100 billion was offered for 364 days tenor but a total of N87.97 billion was sold at a stop rate of 12.88 percent after the investors earlier bided at a range of between 12.25 and13.50 percent. The instrument was oversubscribed by a total of N106.27 billion and will mature on August 13, 2020.

Godwin Emefiele, governor of the CBN said in London that the regulators will offer more OMO auctions to counter the upcoming maturities due in September /October. There have been fewer OMO auctions of late. In fact, there may be a requirement to increase yields a bit here to maintain Nigeria’s relative attractiveness to Egypt for fixed income flows (CBN argues Nigeria could remain attractive to Egypt on slightly lower yields given the FX

Week Ahead Week Ahead(Monday, August 19 – Friday, August 23, 2019)

stability).

The CBN on Wednesday after the two day holiday conducted a Primary Market Auction (PMA), rolling over maturing bills worth N34.4 billion across 91, 182 and 364-Day Tenors.

Ayodele Akinwunmi, head, research, FSDH Merchant Bank Limited said over N9.6 trillion worth of government securities are expected to mature in the financial market between August and December this

year.

A report by Afrinvest revealed that on Wednesday last week, the Apex bank offered a total of N100.0bn across three tenors (85, 183 and 344-Day). However, the CBN did not allot any sale on the mid-term bill despite 2.9x oversubscription while the short- and longterm bills were both oversubscribed with bid-to-cover ratios of 1.2x and 3.8x respectively.

“We advise investors to cherrypick bills with attractive yields across the short-medium term space as the sell-offs may persist this week”, the analysts said.

The report indicated that Last week, the Treasury Bills secondary market performance started on a mildly bullish note as market players showed interest on short-term bills in the first trading session due to the high system liquidity (N191.7bn positive) on Monday.

This was however short-lived, following a reduced demand on mid and long-term bills by Tuesday as investors awaited the OMO. On Thursday, the bullish trend was reversed as offshore investors sold off big across all tenors pushing average yields up by 1.3 percent. Thus, average yield on the short- medium- and long-term bills advanced 177bps, 159bps and 94bps respectively.

Chart of the week Favourable harvest push Inflation near 4yr low of 11.08% in July

Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity Corn: Corn prices increased by 0.3% to $413.75 per bushel driven by poor weather conditions in the United States. Going forward, corn prices are expected to trend upwards in the coming weeks due to expectations of adverse weather conditions in the United States.

Fixed Income: Analysts expect risk off sentiments over weakening global economic fundamentals and recessionary fears given the current inversion of United States and United Kingdom curves to continue impacting on investor appetite for federal government bonds in near term.

Currency The naira to trade against the dollar within the band of N362/$ - N363/$ due to increased liquidity. Demand pressures to increase on forex in August and September on the back of payment of tuition fees by international students. Volatility in oil prices could have a negative impact on external reserves, which might likely weigh on CBN’s forex intervention.

Data Release The Nigerian Bureau of Statistics will on Monday, August 19 release on data on Federal Account Allocation Committee (FAAC) disbursement for the month of June.

Furthermore, the statistics office will release the Gross Domestic (GDP) Output Report on Friday, August 23.

Event The Greenwich Alpha ETF Fund (“Greenwich Alpha”) which is an open-ended ETF that tracks the NSE 30 index, will listed on the Nigerian Stock Exchange on Monday, August 19.

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Nigeria’s inflation slowed to 11.08 percent in July, its lowest in 42 months, buoyed by lower food prices on account of favourable harvest.

Figures released by the Abuja-based Statistical Agency showed inflation decelerated for second straight month, nearing the Central Bank of Nigeria’s 6-9 percent target.

But analysts say it’s unlikely for the average change in prices of market basket of consumer goods and services to drop to single digit in near term.

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Monday 19 August 2019

BUSINESS DAY

69

Live @ The STOCK Exchanges Prices for Securities Traded as of Friday 16 August 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. 215,048.62 6.05 2.54 163 13,901,780 UNITED BANK FOR AFRICA PLC 189,806.79 5.55 0.91 237 13,054,405 ZENITH BANK PLC 521,181.80 16.60 2.15 476 19,349,624 876 46,305,809 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 165,118.35 4.60 1.09 275 13,289,807 275 13,289,807 1,151 59,595,616 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,747,859.26 135.00 - 138 1,288,606 138 1,288,606 138 1,288,606 BUILDING MATERIALS DANGOTE CEMENT PLC 2,794,643.21 164.00 1.23 102 3,601,550 LAFARGE AFRICA PLC. 225,509.14 14.00 - 40 355,887 142 3,957,437 142 3,957,437 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 288,337.83 490.00 - 3 445 3 445 3 445 1,434 64,842,104 REAL ESTATE INVESTMENT TRUSTS (REITS) SKYE SHELTER FUND PLC 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 UPDC REAL ESTATE INVESTMENT TRUST 14,408.66 5.40 - 0 0 0 0 0 0 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 VALUEALLIANCE VALUE FUND 3,312.39 103.20 - 0 0 0 0 0 0 0 0 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 46,741.59 49.00 -5.77 19 1,749,113 PRESCO PLC 44,800.00 44.80 - 2 2,850 21 1,751,963 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,520.00 4.26 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 1,320.00 0.44 - 8 218,846 8 218,846 29 1,970,809 DIVERSIFIED INDUSTRIES A.G. LEVENTIS NIGERIA PLC. 661.82 0.25 - 3 838 179.01 0.46 - 0 0 JOHN HOLT PLC. S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 36,989.67 0.91 5.81 96 25,655,350 U A C N PLC. 12,965.83 4.50 - 45 499,209 144 26,155,397 144 26,155,397 BUILDING CONSTRUCTION ARBICO PLC. 711.32 4.79 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 27,192.00 20.60 - 7 20,750 ROADS NIG PLC. 165.00 6.60 - 0 0 7 20,750 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,884.22 1.11 -0.89 2 200,375 2 200,375 9 221,125 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 13,231.85 1.69 - 0 0 GOLDEN GUINEA BREW. PLC. 242.22 0.89 - 0 0 GUINNESS NIG PLC 90,681.85 41.40 - 21 199,854 INTERNATIONAL BREWERIES PLC. 103,150.34 12.00 - 3 16,457 NIGERIAN BREW. PLC. 399,845.10 50.00 - 26 75,516 50 291,827 FOOD PRODUCTS DANGOTE FLOUR MILLS PLC 103,250.00 20.65 -0.72 79 1,001,309 DANGOTE SUGAR REFINERY PLC 115,200.00 9.60 0.52 49 670,575 FLOUR MILLS NIG. PLC. 56,585.24 13.80 7.81 57 533,405 HONEYWELL FLOUR MILL PLC 7,612.99 0.96 1.05 18 533,076 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 33,382.92 12.60 -10.00 12 112,420 UNION DICON SALT PLC. 3,321.07 12.15 - 0 0 215 2,850,785 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 19,345.48 10.30 - 9 34,484 NESTLE NIGERIA PLC. 906,006.10 1,143.00 -10.00 19 65,421 28 99,905 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,366.12 4.29 - 10 92,865 10 92,865 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 23,822.86 6.00 -0.83 26 327,359 UNILEVER NIGERIA PLC. 160,285.65 27.90 -3.12 19 149,402 45 476,761 348 3,812,143 BANKING ECOBANK TRANSNATIONAL INCORPORATED 110,097.31 6.00 -4.76 210 11,641,783 FIDELITY BANK PLC 40,564.72 1.40 1.43 171 23,675,529 GUARANTY TRUST BANK PLC. 765,210.66 26.00 0.97 344 67,862,881 JAIZ BANK PLC 10,901.77 0.37 -5.13 12 1,660,818 SKYE BANK PLC 10,687.83 0.77 - 0 0 STERLING BANK PLC. 69,672.81 2.42 2.98 1,229 25,023,993 UNION BANK NIG.PLC. 203,845.27 7.00 - 17 212,891 UNITY BANK PLC 8,065.64 0.69 - 2 2,086 WEMA BANK PLC. 21,601.70 0.56 -1.75 23 2,478,119 2,008 132,558,100 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 1 80 AIICO INSURANCE PLC. 4,227.42 0.61 -1.61 20 916,027 AXAMANSARD INSURANCE PLC 18,900.00 1.80 - 6 520,000 CONSOLIDATED HALLMARK INSURANCE PLC 2,439.00 0.30 - 0 0 CONTINENTAL REINSURANCE PLC 15,040.48 1.45 - 4 92,752 CORNERSTONE INSURANCE PLC 2,945.90 0.20 - 1 6,500 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. 2,416.73 0.33 - 9 47,706 LAW UNION AND ROCK INS. PLC. 1,417.79 0.33 -8.33 8 228,005 LINKAGE ASSURANCE PLC 4,160.00 0.52 - 2 16,005 MUTUAL BENEFITS ASSURANCE PLC. 2,458.00 0.22 4.76 5 1,403,000 NEM INSURANCE PLC 10,613.81 2.01 - 7 75,300 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 2,583.62 0.48 - 1 533 REGENCY ASSURANCE PLC 1,333.75 0.20 - 0 0 SOVEREIGN TRUST INSURANCE PLC 1,668.16 0.20 - 1 2,000 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 2,582.21 0.20 - 0 0 STANDARD ALLIANCE INSURANCE PLC. SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 1 5 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 4,683.96 0.35 -2.78 32 4,007,016 98 7,314,929

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MICRO-FINANCE BANKS FORTIS MICROFINANCE BANK PLC 11,799.67 2.58 - 0 0 2,446.70 1.07 - 3 155,100 NPF MICROFINANCE BANK PLC 3 155,100 MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 4,158.00 0.99 - 1 200 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 INFINITY TRUST MORTGAGE BANK PLC 5,796.93 1.39 - 0 0 RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 1 200 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 7,200.00 3.60 4.05 28 435,290 CUSTODIAN INVESTMENT PLC 35,291.19 6.00 7.14 12 81,691 DEAP CAPITAL MANAGEMENT & TRUST PLC 660.00 0.44 - 0 0 FCMB GROUP PLC. 31,684.34 1.60 9.59 80 10,603,850 ROYAL EXCHANGE PLC. 1,131.98 0.22 - 0 0 STANBIC IBTC HOLDINGS PLC 337,938.25 33.00 -3.79 32 600,713 UNITED CAPITAL PLC 10,920.00 1.82 1.68 63 2,454,835 215 14,176,379 2,325 154,204,708

HEALTHCARE PROVIDERS EKOCORP PLC. 1,680.29 3.37 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 852.75 0.24 9.09 2 250,000 2 250,000 MEDICAL SUPPLIES MORISON INDUSTRIES PLC. 494.58 0.50 - 0 0 0 0 PHARMACEUTICALS EVANS MEDICAL PLC. 366.17 0.50 - 0 0 FIDSON HEALTHCARE PLC 9,388.62 4.50 - 3 2,720 GLAXO SMITHKLINE CONSUMER NIG. PLC. 9,567.01 8.00 - 15 130,540 MAY & BAKER NIGERIA PLC. 3,536.73 2.05 - 9 123,910 NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 968.57 0.51 -7.27 3 155,000 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 PHARMA-DEKO PLC. 325.23 1.50 - 0 0 30 412,170 32 662,170

COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 710.40 0.20 5.00 5 1,344,200 5 1,344,200 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,470.89 0.50 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 3 1,200 NCR (NIGERIA) PLC. 626.40 5.80 - 3 50,005 TRIPPLE GEE AND COMPANY PLC. 346.47 0.70 - 2 1,524 8 52,729 PROCESSING SYSTEMS CHAMS PLC 1,080.09 0.23 4.55 5 854,500 E-TRANZACT INTERNATIONAL PLC 9,996.00 2.38 - 0 0 5 854,500 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,215,762.01 323.50 - 8 471 8 471 26 2,251,900 BUILDING MATERIALS BERGER PAINTS PLC 1,985.29 6.85 - 4 2,397 CAP PLC 17,325.00 24.75 - 14 10,986 CEMENT CO. OF NORTH.NIG. PLC 190,580.76 14.50 - 16 86,196 MEYER PLC. 313.43 0.59 - 1 100 PORTLAND PAINTS & PRODUCTS NIGERIA PLC 1,959.74 2.47 - 0 0 PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 35 99,679 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,256.91 2.09 - 0 0 CUTIX PLC. 2,747.66 1.56 - 5 4,450 5 4,450 PACKAGING/CONTAINERS BETA GLASS PLC. 29,873.33 59.75 - 1 20 GREIF NIGERIA PLC 388.02 9.10 - 0 0 1 20 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 41 104,149 CHEMICALS B.O.C. GASES PLC. 2,547.42 6.12 9.87 6 221,000 6 221,000 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 92.40 0.42 - 0 0 0 0 6 221,000 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 - 13 337,255 13 337,255 INTEGRATED OIL AND GAS SERVICES OANDO PLC 41,645.23 3.35 -6.94 66 1,233,170 66 1,233,170 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 56,974.05 158.00 - 0 0 CONOIL PLC 12,248.25 17.65 - 12 7,045 ETERNA PLC. 3,390.78 2.60 - 9 41,500 FORTE OIL PLC. 22,142.18 17.00 - 49 435,536 MRS OIL NIGERIA PLC. 6,354.80 20.85 - 3 1,170 TOTAL NIGERIA PLC. 35,921.41 105.80 - 21 30,747 94 515,998 173 2,086,423 ADVERTISING AFROMEDIA PLC 1,820.01 0.41 - 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. 341.14 0.29 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,499.47 4.24 - 6 17,630 TRANS-NATIONWIDE EXPRESS PLC. 361.01 0.77 - 1 1,000 7 18,630 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 1 2,000 1 2,000 HOTELS/LODGING CAPITAL HOTEL PLC 4,723.78 3.05 - 0 0 IKEJA HOTEL PLC 3,035.04 1.46 - 0 0 TOURIST COMPANY OF NIGERIA PLC. 7,862.53 3.50 - 2 205 TRANSCORP HOTELS PLC 41,042.18 5.40 - 0 0 2 205 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 4,800.00 0.40 - 0 0 0 0 PRINTING/PUBLISHING ACADEMY PRESS PLC. 211.68 0.35 - 1 1,300 LEARN AFRICA PLC 1,072.32 1.39 - 9 40,750 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 690.26 1.60 - 7 163,079

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Company IN FOCUS

BUSINESS DAY Monday 19 August 2019 www.businessday.ng

Can SAHCO sustain profitability path?

OLUFIKAYO OWOEYE & ISRAEL ODUBOLA

P

layers in the Nigerian aviation industry have been confronted with myriad challenges, including increased direct cost and reduced availability of foreign exchange which has seen stunted growth of industry operators.

Despite these challenges, SAHCO returned to the path of profitability mid-year 2019. The big question, however, remains whether the Lagos-based aviation handling firm can sustain this stellar performance going forward.

Corporate overview Skyway Aviation Handling Company Plc. (SAHCO), one of the aviation ground handling companies in the country, came into being in 2009 following a prolonged and complex privatisation exercise.

Sifax Shipping Limited and Global Apex Logistics Limited through SAHCO Limited acquired a 100 percent stake of the Federal Government in Skypower Aviation Handling Company Limited as a result of the privatisation of the company. Global Apex Logistics Limited, however, sold its stake in the shares of the company. SAHCOL merged with Skypower in 2018 with the former being the surviving entity. With a low take-off grant in 1999, coupled with being one of the relics from the badly-managed Nigerian Airways, its chances of survival were very little. It was a ‘child’ not positioned for success.

Interestingly, the turnaround in the management and financial performance of the company over the years since the divestment exercise has further lent credence to the fact that countries grow when the economy is open for private companies to invest.

The company currently operates in commercial airports in 16 cities across four regions of Nigeria. The Board is chaired by Taiwo Afolabi, having the highest holding interest of 78 percent (direct and indirect), while Agboarumi Basil is the managing director and CEO. Agboarumi joined SAHCOL, then a subsidiary of the Nigerian Airways Limited, as a pioneer staff/ head of the Public Affairs Unit.

After the privatisation and subsequent takeover of Skypower Aviation Handling Company Limited by the SIFAX Group in 2009, he was appointed the head of corporate communications. He was later elevated to the position of general manager in 2014 in charge of Corporate Communications and Information Technology Department, providing leadership for the day-to-day operations. Agboarumi has more than 18 years’ experience in Aviation Ground Handling & Public Relations/Management.

The company last year listed 1,353,580,000 ordinary shares priced at N4.65. The shares were listed by way of an Initial Public Offering (IPO) on the Main Board,

making the company the first company under the Bureau of Public Enterprises (BPE) privatisation programme to successfully finalise an IPO and list its shares on a securities exchange.

Industry overview The Nigerian aviation ground handling business has only two major players, NAHCO Aviance and SAHCO, effectively making it a duopoly.

The ground handling section of the aviation value chain is the service requirements of an aircraft while it is on ground, between the time it arrives and the time it departs on its next flight, to ensure the safe and smooth processing of passengers, baggage, cargo, mail and other materials associated with air transportation.

According to the International Air Transport Association (IATA), airlines outsource more than 50 percent of the ground handling that takes place at the world’s airports to a third party or nonairline handlers.

Nigeria’s aviation market is the third-largest in Africa. Although

relatively cyclical, the sector has a recorded a 10-year GDP CAGR of 9 percent, almost double the national GDP CAGR of 5 percent.

Nigeria has huge potential to become an aviation hub for Africa, using its natural advantages such as its central location on the continent, huge population estimated at 190 million and expected to reach 250 million in the next decade, and a growing middle class.

Figures from the National Bureau of Statistics (NBS) show that in 2018 the total number of international passengers who passed through Nigerian airports reached 4.43 million in 2018 as against 4.05 million passengers in 2017. This represents 9.42 percent growth rate. Similarly, the total number of domestic passengers who passed through Nigerian airports reached 12.79 million in 2018 as against 10.38 million passengers in 2017.

This represents 23.19 percent growth rate.

Rebound from a negative bottom-line trajectory The group has over the years engaged in restructuring, reposi-

tioning and right-sizing of the company, making further investments in the areas of infrastructure and personnel training and introducing some minor economic incentives.

SAHCO’s full-year 2017 results showed quality performance despite the difficult operating environment. Challenges in the Nigerian economy (lingering recession, increased cost and reduced availability of foreign exchange, deterioration in air traffic numbers, low cargo volumes) as well as the closure of the Abuja airport contributed to the modest results recorded.

Revenue decreased by a marginal 0.9 percent to N4.86 billion.

Increased operating costs and finance expenses meant that the company reported post-tax profit of N217.73 million, a decline from the N897.01 million reported in the full year 2016.

The aviation handling company had a tough 2018 having incurred N665 million losses. Despite that revenue rose nearly by a quarter to N6.13 billion for the 12-month ended December 31, 2019, bottomline closed in red over inability

to tame administration expenses which surged 33 percent.

A further dive into its books revealed that cash from contract with clients forms the bulk of revenue, with proceeds from investment rental income accounting for some 3 percent. Going by disaggregation based on major service lines, receipts from foreign handling and cargo handling accounted for nearly 80 percent. SAHCO rebounded to positive bottom-line path when it realised N171.53 million worth of net income in half-year 2018.

The company’s revenue grew 24 percent to N3.51 billion mid-year 2019 from N2.84 billion last year.

Direct costs which include cargo shed, warehouse, concession fees and oil & lubricants, among others, jumped 17 percent, but grew slowly compared to top-line.

SAHCO’s operating cash was healthier as it generated N762 million from operations half-year 2019, up 44 percent, equating to cash margin of 22 percent.

SAHCO has passed the International Safety Audit for Ground Operations (ISAGO), conducted

by IATA, at three of its bases of operations – Lagos, Abuja, and Kano International Airports. The certification signifies that the company has modelled its operations to the ISAGO standards, as a result committing to operate within accepted industry best practices. The company is also an RA3-certified aviation ground handling company.

The ‘EU Aviation Security Validated Regulated Agents’ RA3 certification is a supply chain security initiative designed by the European Union.

With this certification, EU-member states recognise SAHCO as a regulated agent and confirm that it meets the security requirements for screening air cargo and mail entering the EU. Looking ahead According to SACHO, it has invested in acquiring new equipment that are new to this clime such as the LAM 35 High loader which is the first in the Nigerian aviation ground handling industry, and also the baggage tow trucks which have the biggest capacity in cargo and baggage loading of up to 40 tonnes, while placing a premium on staff welfare by investing in their training and retraining.

As part of SACHO’s expansion plans, the company is building a 3-level commercial structure to accommodate its growing clientele, recently completed the construction of an export cargo accepting bay to accommodate the growing export industry in Nigeria, and this is being used judiciously while empowering its engineering and maintenance team to innovate by building some equipment as well.

SACHO says it is not only concerned about maintaining t h e p re s e nt m o m e nt u m b u t also committed to improving on the present gains in line with global best practices. It is also striving to be the very best within the West Africa region and eventually the globe.

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