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Border closure bites as inflation hits 12.13% ... soaring food prices wakeup call for agric sector, experts say Bunmi Bailey, Segun Adams (Lagos) & Cynthia Egboboh (Abuja)

L-R: Adesoji Ogungbesan, chief financial officer, Asharami Synergy (A Sahara Group Downstream Company); Oluwaseun Yussuf, lubricant sales manager; Moroti Adedoyin-Adeyinka, MD/CEO; Foluso Sobanjo, chief operating officer, and Lekan Ogundowole, CTO, at the launch of ASHA Engine Oil in Lagos, yesterday. Pic by Pius Okeosisi

5 takeaways from IMF’s 2020 outlook for Nigerian economy ENDURANCE OKAFOR

he International Monetar y Fund (IMF ) downgraded its 2020 growth outlook for Nigeria from its initial 2.5 percent to 2 percent on the back of plunging oil price fuelled by the Coronavirus outbreak.

For an oil-dependent nation like Nigeria, the continued spread of Coronavirus could mean additional shock for Africa’s most populous nation as the decline in global oil demand and the consequent fall in prices may throw the country’s 2020 revenue projection in disarray. “Under current policies, the

outlook is challenging. The mission’s growth forecast for 2020 was revised down to 2 percent to reflect the impact of lower international oil prices,” the IMF said in a statement on Monday after concluding its Article IV consultation to Nigeria. The growth cut by IMF was earlier predicted by BusinessDay

after it conducted a survey in January. When a country joins the IMF, it makes a commitment to pursue policies that are conducive to orderly economic growth and reasonable price stability, and to provide the IMF with data about Continues on page 38

igeria’s consumer price index (CPI), which measures inflation, increased by 12.13 percent (year-on-year) in January 2020 for the fifth consecutive time, according to data released by the National Bureau of Statistics (NBS). While core inflation rose slightly, pressure on food prices suggests that the impact of the border closure is still lingering. It was the fastest increase in the price level in 21 months, according to the statistical agency. “This is higher than the rate recorded in December 2019 (11.98) percent. On a month-onmonth basis, the Headline index increased by 0.87 percent in January 2020, this is 0.02 percent higher than the rate recorded in December 2019 (0.85) percent,” NBS said. The increase in consumer prices surpassed expectations as analysts polled by BusinessDay expected inflation to rise between 12.01 and 12.03 percent. Experts have said the continContinues on page 38

Inside

2 years after Dapchi Girls’ abduction, Buhari reiterates commitment to P. 2 recover all victims

Wednesday 19 February 2020

BUSINESS DAY

news Nigeria’s ‘mother tongue’ education policy hasn’t gained much ground 30 years after …as English still medium of instruction in Lagos schools MARK MAYAH

hirty years after it was introduced, Nigeria’s ‘Mother Tongue’ education policy has failed to take root as pupils in many parts of the country’s urban areas still receive instruction in English Language. This is contrary to the stipulation of the National Policy on Education initiated in February 1990 by Babs Fafunwa, then minister of education, that local languages should be the media of teaching in the first three years of primary education. The proponents of the policy had argued that “Nigeria cannot hope to achieve any meaningful development if her technology, culture and efforts are taught in a foreign language”. Olusegun Badaki, an associate professor at the University of Maiduguri, said in a telephone interview that any language other than the mother tongue in the formative years of the child is inhibitive. He said it has been scientifically proven that education ought to be provided in the best possible manner

to millions of children who have never come across any other language except their mother tongue, adding that studies have blamed high primary school dropout rate (40-60 percent) on, among other things, the premature introduction of English as a language of instruction at the primary school level. But BusinessDay checks show that pupils in many schools across the country’s urban centres take instruction in the first three years of education in English. In Lagos particularly, teachers who spoke to BusinessDay said the policy could not be sustained due to the mixed background of the pupils who are mostly better exposed to English Language than their native tongues, thus making it easier to instruct them in English. Other challenges, they say, include the multi-ethnic nature of Lagos, mixed parental background of some pupils, and teachers’ apathy. Even in schools where the policy seems to be in force, the local language is interchanged with English.

•Continues online at www.businessday.ng

2 years after Dapchi Girls’ abduction, Buhari reiterates commitment to recover all victims TONY AILEMEN, Abuja

resident Muhammadu Buhari on Tuesday reiterated his administration’s commitment to secure the freedom of all children and other victims of abduction by terrorists in the country. This was contained in a statement signed personally by the president on the eve of the second anniversary of Dapchi Girls’ abduction. This is coming amid heightening anxiety over the present status of Leah Sharibu, one of the abducted Dapchi girls, and other Chibok girls still in the shackles of Boko Haram insurgents. The Boko Haram leader, Abubakar Shekau, recently intensified his threats even against the president and the minister of communication technology, Isa Pantami. Shekau had in a widely publicised video vowed to kill Pantami over his plans to restrict telephone SIMs to three per person. He also threatened the president to avoid further visits to the North East, claiming “Boko Haram is in control of the region”. But President Buhari in the message marking two years of adoption of the Dapchi girls vowed to rescue the only Christian girl left behind, Leah

Sharibu, and the remaining Chibok girls. “Two years ago, 110 innocent children from the town of Dapchi were taken, against their will, by the terrorists of Boko Haram. 107 survived the ordeal. Today all but one – Leah Sharibu – are returned to their families,” Buhari said. “Now aged 16, Leah remains in the hands of the terrorists – they say because she refuses to renounce her Christian faith. We say, as the government for and of all Nigerians, that no person has the right to force another to change their faith against their will and that all life is sacred,” he said. Buhari said his government continues and seeks to secure the release of all children and captives of terrorists – “and we do so regardless of their creed or the name of their creator”. “As we redouble our efforts for Leah’s return, we can never allow the terrorists to divide us – Christian against Muslim, Muslim against Christian. We are all Sons of Abraham. And all Nigerians have the same worth and rights before the law, and before God,” Buhari said. There are fears that Leah Sharibu may have been forced to convert to Islam, while reports indicate that she gave birth to a baby boy for one of the leaders of the Islamic terrorists.

•Continues online at www.businessday.ng www.businessday.ng

L-R: Sadiya Umar Farouk, minister of humanitarian affairs and disaster management; Lai Mohammed, minister of information and culture; Adeleke Mamora, minister of state for health, and Hadi Sirika, minister of aviation, addressing newsmen on the Federal Government preparedness and precautions for coronavirus epidemic, at the screening point of the arrival at the Nnamdi Azikwe International Airport in Abuja. NAN

Bankers’ Committee raises NIRSAL MFB’s paid-up capital to N7.5bn … to enable branch expansion across the country ... as FG engages CBN, banks on road construction financing HOPE MOSES-ASHIKE

he Bankers’ Committee on Tuesday raised the paid-up capital of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank Limited from N5bn to N7.5bn. This is to enable the bank to promote expansion of branches across the country. “The branches will be used as a tool for financial inclusion and economic development,” Abubakar Abdulahi Kure, acting managing director, NIRSAL MFB, said after the 348th meeting of the Bankers’ Committee in Lagos. Already, NIRSAL Microfinance Bank has disbursed N18 billion from the Agri-Business/ Small and Medium Enterprise Investment Scheme (AGSMEIS) fund to about 5,000 applicants across the country. The Federal Government

has also engaged the Central Bank of Nigeria (CBN) and the Bankers’ Committee in bridging infrastructure gap through financing of four roads construction as part of the government’s public private partnership initiative. To this effect, the Bankers’ Committee has set up a subcommittee among the bank CEOs to work with the CBN in identifyingtheroadsandcoming with a framework to share with the government for a go-ahead. “The government has invited the committee of bankers to also consider the possibility of PublicPrivatepartnership(PPP) in bridging the infrastructural gapanditistothatextentthatthe committee considered coming in to see how we can finance about four roads,” Bello Hassan, thenewlyappointeddirectorfor banking supervision, CBN, said after the Bankers’ Committee meeting in Lagos Tuesday. “We all agreed that government alone cannot provide all

the infrastructure in the country, that we in the private sector have to work hand in hand with government to ensure that the infrastructure that this country needs to move ahead is provided,” Hamda Ambah, managing director/CEO, FSDH Merchant Bank Limited, said. Another issue raised at the meeting was the Loan to Deposit Ratio (LDR). It was disclosed that most of the banks have met the 60 percent LDR and are pushing to complete the remaining 5 percent by the end of first quarter 2020. Segun Agbaje, managing director/CEO, GTBank, said the LDR raise has been one of the most successful things done in 2019 considering how much credit that was availed the real economy within a six-month period. Retail or consumer credit has grown over the period, accounting for 10 percent of banks’ loan books. “The corporates who have

always had credit have also been availed more credit and for any economy to grow, the SMEs and retail segment must be availed with credit and I think the LDR is doing that very well. I think most banks are close to 60 percent which…we will push to try to get ourselves the remainder of the 5 percent between now and the end of first quarter and maybe at the worst by half year,” Agbaje said. Hassan Usman, managing director, Jaiz Bank, said the Bankers’ Committee is looking at ways to support government and the society, whether it is increasing the level of credit to the private sector and real sector of the economy or working with NIRSAL and other banks to increase financial inclusion or specifically intervening in infrastructure. These steps are being taken to ensure that governmentis supported inits drive to grow the economy, reduce unemployment and improve the country’s security, he said.

Monguno/Kyari row exposes deep-seated discord in presidency – Experts ... say presidency’s silence dangerous TONY AILEMEN, Abuja

he current administrative diatribe between the chief of staff to President Muhammadu Buhari, Abba Kyari, and the national security adviser (NSA), Babagana Mongonu, may be just a scratch on the surface of the deep-rooted acrimonies going on under the current administration. The unfolding drama, experts say, reflects the absence of synergy which has been the bane of effective implementa-

tion of public sector policies and service delivery. Monguno had, in a letter dated December 9, 2019, warned Abba Kyari against stepping outside his constitutional role and disrupting the national security framework by meddling in meetings with service chiefs and heads of security organisations. The war between the presidency’s top men, according to the experts, “further reveals that Nigeria’s synergy challenge affects every facet, including security”. Many of the current security challenges have been

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linked to agencies working at cross purposes, refusing data sharing, confusion over who gives orders and whose orders should be obeyed, even in situations of joint security operations. They said this is especially dangerous coming on the heels of recent revelations that the Islamic State of West Africa Province ISWAP/Boko Haram-led insurgents plan to overrun some countries in the Lake Chad and Sahel region, unless urgent steps are taken to deal with insecurity. The experts said the presidency’s silence on the Mongu@Businessdayng

no/Kyari issue is not healthy for the image of the current administration. None of the presidential aides had reacted to the ongoing ‘war’ as at the time of filing this report, creating further rooms for speculations. Ben Okezie, a lawyer and former director, Department of State Security (DSS), described the development as “dangerous for the country” and called on President Buhari to take urgent steps to address the issue.

•Continues online at www.businessday.ng

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Transformation financing and transforming enterprises Small Business handbook

Emeka Osuji

he transition of micro and small enterprises to bigger entities, playing in the formal sector is good for the economy. It is actually one of the dreams of those concerned with the development of that sector. However, in the euphoria of this growth and transition, we often overlook the challenges that confront transiting enterprises, and their financiers with regard to the level of funding a transiting entity should be provided with. The challenges of growth and transition and, indeed, the requirements of sustained production, are often important issues to manage as enterprises grow. One of the many ways of assessing the effectiveness of microfinance is to see how enterprises or client’s transit from one level to the other, often judged by the size of loans they are granted. The operators involved in real microfinancing are close to their clients and they monitor their progress. This often results in the operator wanting to increase funding to the client after meeting certain standards. However, the client may not be ready to take on more funds. It may be that the client does not see the opportunities that are

evident to the financing institution. An there are many reasons why the client will not easily see such opportunities. In reality, this scenario actually plays out in different ways as MSMEs grow. This is common with the very low-level groups of clients in microfinancing. This situation to me, is exactly one of the reasons the microfinance intuition is there. Inability of financiers and their clients to agree that the latter should move on to a higher level of funding sometimes creates difficulties about measurement of the impact of financing on the clients or enterprises. And we must distinguish this issue from the problem of loan-fatigue or being over borrowed. Every operator should be conversant with the consequences of putting more loans on the client, beyond their needs. Ability to help the client to see the opportunities inherent in growth and transition is an important attribute of the operator and makes a lot of difference in outcomes. All over the world, small businesses are supported by credit programmes that are tailored to their needs. These programmes provide them with friendly credit facilities – loans and advances, capacity building support and asset protection insurance services, among others. Many international organizations, including some non-profit institutions based in Europe and the United States, and even Latin America, have advanced the development of the small enterprise sector through a variety of such supportive financing models. It is important to note that as micro, small and medium enterprises develop and expand, their needs also change and expand. New and bigger challenges show up in their faces. Often,

the first thing that happens is that the composition of their personnel will change from a largely family labour force to a mix of family and hired labour, and responsibilities begin to get defined. This implies the introduction of substantial internal reforms in such areas as record-keeping and general administration with enhanced division of labour. At this point, it is good for the leader to begin to give up some of the many things that eat up his valuable time. He needs to begin to accept that the leader cannot do everything alone. One critical functional change at this stage in the case of SMEs is in the area of cash management. It should no longer be the case at this point that the leader sees the business as himself and its funds as his funds. A distinction between the two has become very important. The key evidence that this is happening is a change in the cash management process. The enlarged operating expenses, raw materials and staff costs, higher investment expenditure and so on that arise imply that time has come for business and family finance to be distinguished. The next important change often occurs in the markets and marketing of the products of the enterprise. The local or neighbourhood markets may no longer be adequate as production increases. Effort must be made to expand the market and customer base beyond the immediate environment. Growing enterprises must therefore seek and find new markets and customer bases to absorb their expanding output, if their success is not to be short-lived. The expansion into new markets raises yet another challenge – the challenge of technology. The larger output that targets the new markets is not

‘

It is important to note that as micro, small and medium enterprises develop and expand, their needs also change and expand. New and bigger challenges show up in their faces

Note: The rest of this article continues in the online edition of Business Day @https:// businessday.ng Dr Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@ pau.edu.ng @Emekaosujii

When foolish wins

won’t deceive myself into believing you’ll agree with all the following submissions but I do hope some will cause you to re-examine some stubbornly held positions. I heard someone say on the radio that Nigerians are the most intelligent people in the world but they have refused to educate their intelligence. This comment hit me like a bolt because in just a few words, this man was able to encapsulate a mutually held sentiment, which takes me a whole page to say. It’s incontrovertibly true that we are very smart people, but it’s also painfully true that we’re yet to make our intelligence work best for us in our country. 77 percent of educated blacks in the USA are Nigerians but look at Nigeria. The forces that appear to be working against the emergence of Nigeria as the great nation it has so obviously been created to be, seem altogether overwhelming, so what do we do? We give up on it. “As long as I and the rest of my family are okay, others can worry about the nation’s future.” Speaking to this widely held attitude, I couldn’t agree more with the fellow who said you shouldn’t stop a conversation, just because you encounter a challenge. For instance, the world’s most “foolish” ideas have often proved to be its greatest. Let me qualify that. It was once said that only the birds, which God created to fly, could fly; but now we know better. To their contemporaries, the Wright brothers’ “foolish” attempts to fly made them a laughing stock. Truth is, man has been created to do many things which he is yet to discover. As the saying goes, no venture, no gain. Purely based on what everyone can see, the world would have been a very different place without the oyinbo. One day, as the chicken traipsed past the black man, the black man thanked his lucky stars because food had finally arrived. But before he could catch up with the hapless chicken, the chicken found itself in the clutches of oyinbo, who was equally hungry but was willing to delay that particular gratification

to satisfy a nagging curiosity. While attempting to flee from the black man, oyinbo had observed how the chicken flapped its stunted wings in a desperate attempt to fly. So oyinbo saw the same chicken as the black man but identified a different potential. If birds can fly, by applying the same principle through science, so could man. Impossible is only that which hasn’t been done or even visualized yet. Eventually and with belief, nothing is impossible. I’ve always seen our society as the classic case of the scriptural proverbial town where the Princes and noblemen walk alongside horses mounted by slaves. Apart from the obvious interpretation of a society where meritocracy is altogether abandoned and people of questionable character or mediocrity (at best) hold sway, there’s another and more latent meaning. What many don’t know is that the man with money can still be a slave, so long as he remains enslaved by a poverty mentality. What will a newly freed slave, given the opportunity do? Driven by a poverty mentality, he will mercilessly grab at everything within his reach. He never wants to taste poverty again but unknown to him, every grab, every child whose destiny he truncates by selfishly cornering the commonwealth, only impoverishes his soul the more. So, despite his wealth, he remains a slave. Trying to instil discipline in a hungry man will amount to flogging a dead horse; a waste of time, as it will produce little to no meaningful result. I find it so annoying when we hear people in government lament about how ill-disciplined Nigerians are; as if they’re not part of the problem! All you need to do is to provide for people in a way which makes them feel they have a stake in the country and like magic, the patriotism this conscientious action wells up in them, will push them to ensure their country succeeds. Right now, everyone, including many well to do, are looking for an opportunity to bail out. That’s certainly not an indication of a people who feel they have

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a stake. Someone who has a stake and knows it, will not watch or even bail as his house burns. In trying to identify and raise a new crop of political leaders who he could groom to take over from his pioneering generation, Lee Kuan Yew instructively observed that, “Ability can be assessed fairly accurately by a person’s academic record and achievement in work. Character is not so easily measured.” He further said, “After some successes but too many failures, I concluded that it was more important, though more difficult, to assess a person’s character.” The British moral philosopher, Iris Murdoch “sees the current state of moral chaos arising from the fragmentation of the modern scientific outlook, and the subsequent loss of a shared, public idea of moral good. Like Dewey, she notes that harmony comes from the individual striving for the good within a good society, and that human capacities need the context of community in order to flourish.” So, no man is an island and as a “social animal” we all need the next man, either as a client, a customer or otherwise to bring the best out of us and even to enjoy fulfilment, which our nature demands. There is a level of fulfilment which defies description, a perfect happiness, which we only really experience when we do that which brings joy to others. A shared idea of what is morally good will dictate corporate behaviour, minimize bad behaviour and all these are essential if there is to be harmony in a society. Because of our penchant to fit everything into a compartment we understand, one thing which people sometimes like to label me as is a motivational speaker; but, spoken with all humility and no offence whatsoever to motivational speakers, who we all benefit from listening to from time to time, this is one thing I know I’m not. Why? Because I’m first interested in who we are before concerning myself with what we can achieve. I believe we jump the gun or put the cart before the horse when we try to do it the other way around.

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likely to be produced under the existing technological capacity of the firm. The key man must at this time agree that the time has also come for upgrading of the machines, systems and entire technology, to meet the needs of the growing customer base. At this time, the need to ensure that supply lines are secure equally becomes critical. With expanding markets and effective technology to deliver the output, the enterprise must not allow its own suppliers to become the stumbling block on its way. Finally, among the key challenges of growth is credit. Micro and small enterprises usually begin as integrated firms. They produce their own inputs in the form of raw materials. They buy unprocessed goods in bulk and resale. While the reliance on outside suppliers and larger output calls for increased capitalisation, especially of the working capital category, the need for increased technology and equipment calls for increased fixed asset investment capital. There are various methodologies for addressing MSME finance. Each of them has in its DNA something that links it to particular types of small enterprises in need of growth and development. Ideally, as enterprises pass through various stages of development, they are supposed to be embraced and served by different institutional finance types that are properly attuned to their needs. Unfortunately, this is not always the case and operators make do with what they find.

Character Matters with Daps

Dapo Akande I’m not going to motivate you into believing you can become the best in functionality without first becoming the best in character. And what gave room to this line of thinking? God said He created us in His likeness and in His image. Meaning, He wired us to function like Him especially in creativity but He also expects us to mirror Him in character. Last but certainly not least, I sincerely believe God has a grand plan for every one of us and there are many ways in which we can get there. The route can be short but on the other hand it could detour for 40 years in the wilderness. As some say, it might be too late to change where you’ve gone but you can make a change to decide where you’re going or want to go. The most important thing is for us to eventually get there because no matter the route, all fit into God’s plan for all things to work together for our good. We need to understand that the consequences of each route, teach a different lesson to different sets of people. All of them instruct us in equally valuable lessons and all can serve as a great source of encouragement to others. Sadly though, some take one detour too many and never quite get there. As our people like to say, “At all, at all, na im no good”. Changing the nation...one mind at a time. Akande is a graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

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Before the Supreme Court reviews itself Oguwike Nwachuku

n Wednesday, January 15, 2020, former Vice President of Nigeria and presidential candidate of the opposition People’s Democratic Party (PDP)), Atiku Abubakar advised the sacked Governor of Imo State, Emeka Ihedioha to respect and abide the court ruling. It was not out of hatred for the former Deputy Speaker of the House of Representatives that Atiku gave the advice. If anything, Atiku gave the advice out of love for Ihedioha. It was also out of Akitu’s experience in politics and deep understanding of the workings of the judiciary, even though not a lawyer. Atiku had advised Ihedioha to move on with his life and start in earnest to plan his next political journey if he is still interested in politics instead of wasting his precious time trying to resurrect a dead horse like he is trying to do now through surrogates. Ihedioha did not heed that fatherly pieces of advice as he has returned to the Supreme Court to seek a review of a matter it had painstakingly adjudicated and given its sincere judgment. The issue that made Ihedioha, candidate of the People’s Democratic Party (PDP) in the March9, 2019 governorship election in Imo state return to the Supreme Court is well known to all and we do not need to be-labour it here. However, the summary of his reason to seek a review of the case the apex court had given judgment on January 14, 2020 is that the Supreme Court should sack His Excellency, Senator Hope Uzodinma earlier pronounced winner of the governorship election in Imo state by the Justices and bring him back to office after being sacked. But Ihedioha’s prayer is not as simple as it seems. We shall return to this shortly. For now, let us take a second look at the advice Atiku gave to Ihedioha as

one believed in many quarters to have drank from Waziri Adamawa’s reservoir of experience and knowledge of the Nigerian politics. In a tweet after the Supreme Court’s ruling that changed Ihedioha’s political fortune Atiku said: “With regard to the judgment of the Supreme Court, which nullified the election of the candidate of the PDP, Emeka Ihedioha, as Governor of the state of Imo, I can only say that since the Supreme Court is final, we must accept its judgment.” Atiku continued: “However unexpected and unpalatable it may be, the rule of law must guide our paths even if logic sheds light on a different path.” In taking a position on the Imo State Governorship election after passing through all the legal processes from the Tribunal to the Court of Appeal before berthing at the final court in the land, the Supreme court held that the lower court (Court of Appeal) erred in law when it rejected evidence brought before it that votes due to Senator Hope Uzodinma, candidate of the All Progressive Congress (APC) from 388 polling units were not credited to him. Consequently, the apex court did the needful by adding the votes that were cleverly removed from Uzodinma’s score and also ordered that he be immediately sworn-in as the lawful winner of the March 9, 2019 governorship election in Imo State. It was a ruling that elicited mixed feeling - joy and gloom at different quarters, and later gave rise to some unbecoming demeanour particularly from the losing camp that question the integrity of many people who call themselves our leaders in a democratic setting. Many of those who were beneficiaries of the process that brought the sacked PDP government in Imo state into power did not only go berserk in the way they poured venom on the Supreme Court and the Justices of the institution, but they set out to orchestrate strategic distraction of the newly sworn-in Uzodinma administration,

even when they know too well about the inviolability of certain decisions of the apex court. I am not sure if Ihedioha, a tested lawmaker, must have given vent to the distractive events that followed after the swearing in of Distinguished Senator Uzodinma. However, notwithstanding how reticent Ihedioha has remained, many people are still in shock that he has neither called his supporters to order nor distanced himself from their maddening disposition over the Supreme court ruling, an indication that nobody was ready to heed advice from those who should know, like Atiku. Instead of heeding advice from the informed, Ihedioha’s supporters resorted to calling out the Justices as corrupt, deriding them as not being worthy to answer Justices while the institution they represent has repeatedly been hurriedly tagged as one destroying Nigeria’s democracy. Those of them who paused a bit to take a second look at Atiku’s advice where he urged Ihedioha not to be deterred by the court judgement but to overcome his setbacks and “come back stronger”, saw in that advice a window of opportunity to further denigrate Nigeria’s final court. They saw in it an opportunity to see the hope and future of Imo state and its people lying only in their hands and not in another person’s hands, no matter how well intentioned and competent. Who does such a thing or thinks that way? When Atiku said, “I urge the people of Imo and the entirety of the Nigerian people not to give in to despair,” he was guided by the fact that Ndi Imo have suffered untold hardship in the hands of those they call their leaders. Atiku was prophetically encouraging the good people of Imo state to continue to persevere because hope is in sight. He did not tell them to heed to distractive activities that would create an environment for miscreants to see Imo as a take-off point to further undermine

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Notwithstanding how reticent Ihedioha has remained, many people are still in shock that he has neither called his supporters to order nor distanced himself from their maddening disposition over the Supreme court ruling, an indication that nobody was ready to heed advice from those who should know, like Atiku

Note: The rest of this article continues in the online edition of Business Day @https:// businessday.ng Oguwike Nwachuku is the Chief Press Secretary/Media Adviser to Governor Hope Uzodinma of Imo State

Employees and civil servants: Major lenders to the real sector

he real sector of the economy is very important as it involves the production of goods and services which are sold in exchange for income. It comprises the agricultural, mining, manufacturing, general retail services, building and construction, commerce and services. Index Mundi describes Services as covering “government activities, communications, transportation, finance and all other private economic activities that do not produce material goods. Therefore, the real sector is a combination of the sectors that produce material and non-material goods. Considering the sectors that make up the real sector, there is no doubting its importance to Gross Domestic Product (GDP) which is a measure of economic growth. According to Investopedia, “GDP is the monetary value of all finished goods and services made within a country during a specific period”. In fact, looking at the contribution of services (a subset of the real sector) to GDP, it is clear that for Nigeria to grow to the level most of us believe she can reach, the real sector has to drive it. Statista, a reputable online portal for Statistics, reports that the contribution of services to the GDP of Nigeria was 59.7% in 2016, 55.8% in 2017 and 52.01% in 2018. The Central Bank of Nigeria and other regulatory agencies have been trying to stimulate growth in the real sector by implementing policies which are favourable to her growth.

For instance, the Loan-to-Deposit Ratio policy of the CBN seeks to address the financial difficulties companies/firms within the sector are experiencing by encouraging banks to lend to them. The new finance bill that took effect on February 1, 2020 also seeks to boost the real sector by excluding companies with less than N25 million turnover from Company Income Tax (CIT) while companies whose turnover is between N25 million and N100 million get to pay a reduced CIT of 20% which is significantly lower than the 30% that was applicable to all companies previously. While the CBN, the Ministry of Finance and other government agencies are seeking ways to encourage growth in the real sector, there are a set of people who do not need any extra motivation to lend to the real sector and these are employees of private organizations and Civil Servants. Civil servants include employees of the Federal Civil Service, State Civil Service, Local Government, as well as other federal and state agencies including parastatals and corporations. These people without doubt constitute a major proportion of the informal lenders to the real sector and their impact is both great and significant. Employees and Civil Servants first of all invest in human capital for the country by spending a substantial part of their income on providing quality education for their children to acquire skills essential for breeding new ideas

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that can bring about both economic growth in the short run and economic development in the long run. They are also the ones who usually lend to small and medium scale enterprises directly or sometimes indirectly through Cooperative societies. Most new businesses find it difficult to obtain loans from financial institutions majorly because financial firms prefer to take a risk on established businesses with a stable cash flow rather than on a new business with a low probability of success. Even in developed countries, majority of start-ups fail and even though there is no data on the failure rate of start-ups in Nigeria and Africa as a whole, it is likely that this will be worse than that of the developed economies due to the more difficult terrain and harsh business climate in most part of the continent. In spite of this, employees and civil servants are the ones who normally lend to individuals the funds they need to start up a business because these people are either their friends, family members or some have even been referred to them by other friends. They lend to people based on trust and usually without collateral as they seek to see friends and family succeed. Considering, the high risk they take on businesses, they take the most hit of any failed business. As employees and civil servants have a more direct relationship with the people they lend to, they are better able to assess the creditworthiness of these people which helps to inform their

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the people. Unfortunately, those who have rabid hatred for Governor Uzodinma for the fun of it and are averse to his coming on-board Imo topmost leadership cadre to bring hope to the hopeless in the state are at work trying to undermine the plan. But they will fail. They have been busy throwing stones into the market square oblivious of who the stone will hit. They are the ones crying blue murder over the Supreme Court judgment that brought Senator Uzodinma to power on January 15, the day he was sworn in as governor. They are ready to stop at nothing to arm-twist the hands of the Justices to do the unthinkable as long as that will serve their selfish purpose, forgetting that judicial process thrives on facts, hard facts; or what in judicial parlance is known as evidence before the court. Those who ought to know are not swayed by the unnecessary gyration that is going on at some quarters across the country - Owerri, Abuja, Lagos and laughably outside the country. The open Disco they resorted to be dancing for weeks now in some cities across the country is nothing but attempts to pressure the apex court to undo the decision its seven Justices unanimously took on the Imo governorship election of March 9, 2019 after painstakingly considering the facts before them. We know them for what they are and love doing - meddlesome interlopers and stand-by hired protesters. Their trade is not seasonal. They follow the man ready to pick their bills. I am almost sure after tomorrow they will make themselves available to be hired even by the persons they are protesting against today.

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Philip Oguntoye decision. Sometimes, they just lend to offer support to close friends and family members with almost no expectation of repayment. These businesses they support are the major drivers of the real sector. It is these employees and civil servants who also form cooperative societies to support one another by pooling funds together to help one another when there is a need for this. These funds are collected by participants in the societies at different times to fund individual projects and businesses which later become big enough to source for funds from venture capitalists and other financial institutions as they begin to scale up. When employees and especially civil servants are owed salaries, it has a very negative effect on the real sector and the economy at large as funds become difficult to assess by entrepreneurs and businesses as this is their first and probably most reliable source of funding. It is important for private employers and governments to recognize the importance of employees and civil servants to the overall economy and treat them better as their effect transcends their primary place of work or assignment to include their contribution to the real sector through lending to businesses and individual projects. Twitter: @oguntoyephilip Email: oguntoyephilip@gmail.com

Wednesday 19 February 2020

BUSINESS DAY

Editorial Publisher/Editor-in-chief

Frank Aigbogun

Apply the lessons and reopen the borders Nigerian firms, consumers feeling the brunt

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

even months after, the closure of Nigeria’s western borders has caused pain on both sides and taught many lessons. Those lessons are instructive about the nature of the relationship between Nigeria and her neighbours, the structure of the economies of West Africa and the gaping holes in the management of our systems. Nigeria should take the many lessons from the closure and open the border in line with our commitments in various treaties and agreements. Customs boss Hameed Ali hammered further nails to the matter on October 14 when he declared that the closure of the land borders is now total and would be indefinite. Reopening it hinges on Nigeria agreeing with its neighbours on what can pass or not pass through our land borders. The closure has had multiple ripple effects across West Af-

rica. Prices of essentials such as rice, tomatoes, poultry and sugar have continued to climb, adding to expenses for consumers. Our neighbours are worried. Ghana’s minister of foreign affairs and regional integration Shirley Ayorkor Botchwey lamented the financial losses Ghana suffered from the closure. She said West African nations would use diplomacy to bring about the re-opening of the borders. Soon after she spoke, Kasapreko Limited, the manufacturer of the popular Alomo beverage from Ghana, said it was losing $1million monthly to the closure. Nigerian firms and consumers also feel pain. Many firms send goods to the West African region through our land borders but cannot do so now. Trade and interaction across our borders went beyond smuggling; the closure has put a temporary halt to all the positives. The lessons have been profound. Many of Nigeria’s neighbours were officially complicit in the

illegalities perpetrated by traders at our borders. They allowed it for so long as it brought in revenues to them and none to Nigeria. Benin Republic, with a population less than half of Lagos state, imported more rice than 40 African countries combined. The importers paid duties there while the country looked the other way as they evaded the same and smuggled the goods into Nigeria. Benin, Togo, Cameroon and Niger are all into the business of transhipment and smuggling of rice, vehicles, and sundries into Nigeria and have even made it part of their annual budgets and economic plans. On their part, Nigerian businesses thwarted the intentions of the rice policy aimed at increasing production internally. The government provided funding for owners of existing rice mills and new investors with proof of backward integration plans. The subsidy allowed such organisations to import rice at 10 percent duty and 20 percent levy, totalling 30 percent,

while merchants who only import would pay 70 percent (10 percent duty and 60 percent levy). It played out differently. Despite their gains from the Nigerian market, countries such as Ghana continue to play a lousy card against Nigerians in their country. Ghanaian legislation aimed at Nigerian entrepreneurs requires a minimum deposit of $200,000 to start a business in the country. Ghanaians have been trying to push out Nigerian smallscale entrepreneurs. Ghana’s trade unions have now called for a boycott of Nigerian made goods. Closure of the border cannot be indefinite nor go on for two years as happened in Buhari 1.0 in the 1980s. Nigeria is a signatory to the ECOWAS protocol and to the new African Continental Free Trade Area all of which stipulate open borders. We should apply the lessons learned to tighten and implement procedures at all entry points, but ensure continued trading with our neighbours.

Bashir Ibrahim Hassan

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

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BUSINESS DAY

Wednesday 19 February 2020

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Borrowing our pension contributions: Unsustainable & risky

Franklin Ngwu

ith the announcement that the Federal Government is planning to borrow about N2 trillion from our pension contributions, the fear and worry of many Nigerians as to the security of their retirement livelihood have escalated. Are the fears and worries justified or not, it depends on who you ask? A 56-year-old friend, an employee in one of the firms summarized his feelings as follows: Recalling the litany of problems such as poor and fraudulent management of the previous pension scheme, we cannot but worry and fear that our contributions might be frittered away by the federal government. The enactment into law of the 2004 Pension Reform Act and the subsequent 2014 reform provided the needed relief and encouragement for Nigerians to once again trust and contribute in the growth of a reliable pension sector. We pray and hope that the Federal Government does not dissipate all the efforts and hard work that have been poured into building a good pension sector in the last 16 years, my friend concluded. With total assets under the Contributory Pension Scheme of about N10 trillion naira, it can be said that good progress is being made in the growth of the Pension sector. Nevertheless, while

growth in the contributions is necessary and important, what is more important is the way the contributions are protected and invested to create sustainable return on investment. To make it simple, pension contributions are just savings that are transferred to Fund Managers to properly manage to ensure long term good returns to the contributors especially upon retirement from active work. According to PENCOM, of the total contributions of about N10 trillion, 70 percent have already been invested in federal government securities such as Federal government of Nigeria bonds, treasury bills, agency bonds, sukuk bonds and green bonds. In simple terms, it means that about N7 trillion of the N10 trillion have already been given to the federal government or that the federal government has already borrowed about N7 trillion of our N10 trillion contributions. When asked why it should be so, one is told that government securities are very safe as the government cannot fail. Interesting I have read about government failures with the experiences of some Latin American countries not too far to learn from. As if the amount already borrowed is not too much and risky, we are being told of another plan to borrow additional N2 trillion to bring total federal government borrowing to about N9 Trillion, about 90 percent of our total N10 trillion contributions. It seems that our pension contributions are just contributions for the federal government to use. Basic credit risk management states that risk concentration should be avoided in loan administration. To make matters worse, it is even rumored that the N2 trillion will be borrowed at a low interest rate using government fiat! To be honest, when a critical review

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To be honest, when a critical review of the few economic policies of the present federal government is done, one is left very confused and shocked as to the incoherence of some of the policies especially when examined within the sphere of well tested and correct macro-economic principles

of the few economic policies of the present federal government is done, one is left very confused and shocked as to the incoherence of some of the policies especially when examined within the sphere of well tested and correct macro-economic principles. As this planned borrowing is a further debt in addition to over N26 trillion already owed and another $ 29 billion to be borrowed, the question is where are we headed to with all these borrowings? Who and when will the debts be repaid? It will be nice to read and examine the debt repayment plan of the government. It is like the more we shout of the impending debt crisis, the more the government is determined to borrow more with the pathetic reason that we are still within the 25 percent Debt to GDP ratio. As such, the government seems to be on a borrowing extravaganza increasing the total public debt from about $65 billion in 2015 to the current $85 billion (over N26 trillion) as at 30th September 2019. Even with such unjustifiable and unsustainable increase, we are told not to worry! Relax, we are just about 19 percent of Debt to GDP ratio, so we can borrow more and most likely from China given their concessionary loans with low interest rate of about 1.5% as compared to commercial loans from Europe and North America at about 6-8 percent. Interestingly, it seems that as the concessionary loans are also drying up with the current target of our pension contributions, a friend asked. Moreover, in discussing our debt situation, a most important factor that the government prefers to avoid is the cost of debt service. A situation where we use about two third of our revenue for debt service cannot be described

SMEs and the tax burden – a human angle

n Saturday 8th of February, two tax consultants from the Lagos state internal revenue service LIRS were on a popular radio show in Lagos, explaining how the tax authorities are deploying the new tax law passed as part of the financial bill 2019 which was gazetted and came into effect on the 1st of February 2020 and prior tax laws to increase government revenue. Parts of what they explained as it affects registered companies were the following: All VAT deducted by a company from transactions in a month must be domiciled with the tax authorities on or before the 21st of the next month. Failure to do so would attract a penalty of N5,000 for every month of default. All companies must return their employee taxes for the previous year by the 31st of January on a new year or face penalties of at least N500,000. This amount of penalty is also applicable to any other year that a company failed to return its tax obligations. Companies must also return their income taxes for the previous year within 6 months from their year-end or face penalties of N50,000 in the first month of default and N25,000 subsequently. Small businesses with turnover less than N25m to be FULLY exempted from Companies Income Tax (CIT) and entities with less than N25 million in turnover are exempted from VAT registration. A CIT rate of 20 percent applies mediumsized companies with turnover between N25 million and N100 million. The Value Added Tax is proposed to increase from 5 percent to 7.5 percent.

Banks will request Tax Identification Number (TIN) before companies are allowed to open bank accounts. Existing account holders must provide their TIN to be able to operate their accounts. The new finance bill which was signed into law by the president on the 13th of January 2020 but was gazetted and came into effect on the 1st of February 2020 will not only bring more revenue to the government but will also go a long way to bring the informal sector into the tax net with the requirement that all corporate accounts should have Tax Identification Numbers (TIN)and Bank Verification numbers (BVN) of all the directors as well as giving the tax authorities access to the bank account statement of companies through the financial institutions. With the new tax law, there is no place to hide for SMEs as their financial transactions are now accessible to the tax authorities. But for an economy that had been largely informal for a very long time with a lot of companies operating in the shadows, providing employment to millions of Nigerians and services to several clients including multinationals, the threat to their existence is real from the implementation of this finance bill. A former associate started a consulting business from his rented apartment in 2011, had always used interns as staff and gradually grew his business to a point where he just rented his first real office space in January 2020, employed his first full time staff and got a tax consultant to advise him on how to navigate the new tax law. In essence he has decided to formalise his business and come into the tax net as he had operated largely in the shadows

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while building the company. To his shock, the tax consultant after reviewing his financials and calculating his tax obligation from 2011 when the company was registered till date with the accrued penalties advised him to shut down and start all over again as his business cannot pay the accrued tax. He is in a dilemma now, how does he close a business he has spent a decade building into a national brand with several stake holders including his staff, vendors, and most especially customers and clients who now rely on their services. What options are available to him? Should he continue to operate in the shadows and be unable to scale up his business because of the new tax regime? Should he register a new company and start all over again? The second scenario is not very different from the first. A start-up in the fintech industry. This company was registered in 2016 and started operations same year. As this industry is in its infancy, many regulatory authorities found it hard to place their business in any known category when they sought licenses to allow them operate in their chosen field. It took the better part of three years for customers to accept their solution then in 2019, they signed up a major multinational as a client, other customers started signing up and their customer base grew. Their business is a high turnover, low margin plays such that they retain hundreds of millions of customer money in their accounts but their service charge is less than 0.1 percent of each transaction value. They got a tax consultant to compute their tax in January 2020 and after computation with accrued penalties, their tax liabilities are over N10 million which they

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as appropriate and sustainable. In the N10.59 trillion 2020 budget, while recurrent expenditure is allocated N4.49trillion, capital expenditure is N2.47 trillion with debt service at N2.43trillion. I am referring to the cost of servicing (not repayment) the debt, just interest payments only! This is a country where all the economic development and growth indicators all point south. Poverty and unemployment are increasing, population and insecurity escalating and yet we are just borrowing mainly for public servants and politicians to consume. With the way we are borrowing, the caution of Benjamin Franklin that ‘he that goes borrowing, goes sorrowing’ will soon be our situation. While there is no doubt that we need over N100 trillion to address our infrastructural challenges, the doubt is the approach of the government. After the N2 trillion Pension Fund, where next will we borrow from. Given our development challenges, haphazard approach is not the solution. What we need is a properly formulated and executed national economic development strategy with clear long-term financing options. Of the total global investible funds, over 20 percent earn negative interest. The question and focus should be the reasons why these funds are not coming to Nigeria. How can a country of our size and potential attract less than $1 billion in FDI in 2019? These are key issues that should be focused on to attract the needed finance and investment for our sustainable development and growth. Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- fngwu@lbs.edu.ng

Chukwuma Nwigwe clearly don’t have the money to pay. There is another company in their Oil and Gas industry that has accrued tax liability of over N250 million and another start up in the real estate industry that has accrued tax liability of over N33 million, these two companies also do not have the fund to pay. With the implementation of the new tax law, these companies and several other companies that had remained in the tax shadow as they grew and wants to come into the tax bracket may all have to either remain in the informal sector hoping the tax authorizes do not sniff them out which is almost certain to be impossible as their bank accounts are now linked to their TIN numbers or they shut down operations when the pressure of the tax authorities becomes unbearable. While the governments at the federal and state levels have perfected plans to get all the taxable incomes from companies and individuals, certain discussions must take place such as how do the authorities manage companies and individuals with accrued tax liabilities that they can’t pay?, How does the country avoid mass closure of SMEs due to tax defaults considering that the Nigerian economy before now was largely informal and untaxed?. What is the use of the collected tax when Nigerians continue to be a government unto themselves by provide essential services for themselves such as power, water, security, road etc. Nwigwe is a business consultant and public affairs analyst.

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Wednesday 19 February 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

Financial Services

Here are 2019’s best performing PFAs in Nigeria SEGUN ADAMS

P T Pe n s i o n , AIICO Pension, Premium Pension, AXA Mansard, Fidelity Pension and seven others beat annual inflation in 2019 to emerge best performing Pension Fund Administrators in Fund II, Nigeria’s biggest total Retirement Savings Account (RSA) Fund. Similarly, Premium Pension, APT Pension, AXA Mansard, AIICO Pension, Fidelity Pension and 15 other PFAs recorded above-inflation returns to rank best performing in Fund III category last year. This is based on unit price change in 2019, according to data compiled by Pension Nigeria, a private sector organisation that tracks the sector. The choice of Fund II and III is based on the fact that these fund types dominate total Retirement Savings Account (RSA) Funds, accounting for a combined 85.9 percent share, according to figures from National Pension Commission (PenCom). Fund II is meant for contributors less than 49 years with maximum 55 percent

exposure to variable income securities and preretiree Fund III is meant for contributors above 50 years with 20 percent maximum limit to variable investment securities. AP T Pension Fund Managers Ltd RSA Fund II opened 2019 at N2.7689 per unit but rose 19.38 percent, beating annual inflation of 11.58 percent in December. The unit price of RSA Fund II of AIICO Pension Managers rose 16.45 percent to close the year at N3.6959 a unit. Premium Pension Ltd RSA Fund II unit price rose 15.95 percent to N4.7612 in the year while AXA Mansard Pension and Fidelity Pension Managers rose 1.34 percent and 15.17 percent respectively to N3.2453 and 3.2302 a unit each. Other PFAs that beat inflation includes Investment One Pension Managers, OAK Pension, Leadway Pensure, Pensions Alliance, Veritas Glanvills, NPF Pension, and Stanbic IBTC Pension Managers. For RSA Fund III, Premium Pension saw 19.35 percent surge in unit price to N1.2656, APT Pension Fund Managers surged 17.64 percent to N1.2372,

AXA Mansard Pension jumped 16.92 percent to N1.2402 while AIICO Pension Managers’ unit price rose 16.07 percent to N1.2384. Meanwhile, unit price of Fidelity Pension Managers fund III rose 15.8 percent to N1.2146, Investment One Pension Managers rose 15.03 percent to N1.2034, Veritas Glanvills Pension surged 14.37 percent to N1.2057 and Stanbic IBTC

pension Managers rose 13.68 percent to N1.1924. Other PFAs that beat inflation includes Leadway Pensure, CrusaderSterling pensions, OAK pensions, Pensions Alliance, First Guarantee Pensions, Sigma Pensions, FCMB Pensions, NPF Pensions, Trustfund pension, ARM Pension Managers, Radix pension Fund Managers, and NLPC Pension. Nigeria’s pension fund

assets jumped 18.28 percent year-on-year to N10.22 trillion at the end of 2019. Of the total amount, 71.87 percent or N7.344trn is held in Federal Government Securities with FGN bonds accounting for 52.39 percent of that allocation. 5.41 percent or N552.89bn of the total fund is domestic equity while N71.28bn is in foreign equity. Corporate debt securi-

ties account for 5.55 percent equivalent to N566.85bn while Supra-National debt asset is N4.143bn. Mutual fund as at the end of 2019 made up less than 1 percent of total pension fund assets with infrastructure fund at N37.99bn only. Returns on Investment is not the sole measure of the performance of an investment and past returns are not a guarantee of future outcomes.

L-R: Adenike Olufade, fellow of NIMN; Dickson Boniface Usoroh, council member; Ganiyu Koledoye, immediate past president; Tony Agenmonmen, president, National Institute of Marketing of Nigeria (NIMN); Femi Gbajabiamila, speaker, House of Representatives; Femi Oyewole, 2nd vice president NIMN; Ibrahim Yusufu, council member, and Sidney Ogodo, registrar, at the courtesy to the speaker in Abuja

CONSUMER GOODS

Nigerian Bottling Company targets double-digit revenue growth in 2020 through smart sales approach … To leverage staff development, partnerships IFEOMA OKEKE

igerian Bottling Company Limited (NBC) has said in year 2020, it is targeting a double-digit growth in revenue, which it hopes to achieve through its smart sales strategy. Speaking during NBC’s sales department and trade partners’ award event at Eko Hotel, Lagos, Goran Sladic, Greater Lagos Sales Director, NBC, said the company is working towards accelerating its revenue growth which he said will come from smart sell, which means selling in the places that give people the options to sell to the consumers that can pay more.

“It is about selling smart cases. This is our key pillar to grow our revenue in 2020 faster than we did in 2019. The objective is to grow revenue to double digits in 2020,” Sladic said. Speaking on the major strategies NBC hopes to put in place to sustain and increase growth in 2020, he said the first strategy is to awake all of the best the company has in its entire people at NBC, adding that the company will continue to invest more in the development of its people and in their capabilities. He stressed that its people, strong culture and values are paramount for the company. “We are lucky to partner with companies

like Coca-Cola, Monster and some others. They all represent the same values NBC represents and they are all not just global brands but high-quality brands. The brands will be our second strategy. “We are very clear that every year, we need to improve execution in the market place. What it means is that we need to improve the level of our partnerships with our key customers. We are so lucky that we are in a group of 28 countries. We can take a lot of leanings from the other 27 countries and implement the best tools, programmes, and executions in the market place,” Sladic said. He said the event was

to celebrate its trade partners, who contributed in making the year 2019 a great year, despite the very competitive and difficult market they operate in. He also explained that the event was an opportunity to learn from the other previous period and to share the learning from the wider team. He noted that the objective of NBC is to produce the highest quality products, as safety concerns come first. “For us, quality and safety come first. This requires commitment in investments. So we properly balance quality and safety for us to be as efficient as possible because we understand

that if we don’t hit the price that most of our consumers in Nigeria can pay for; then all is for nothing. So the effort that we are trying to make is to find the proper balance between providing quality products and reaching the affordable price that most of our customers can purchase,” Sladic said. Also speaking at the event, Debora Shittu, a Dealer, Sapphire, and Garnet said NBC products are performing excellently in the market, as it is a top brand with a lot of varieties in the market. According to Shittu, NBC products have an edge over others because of the unique taste. “Coke is unique;

Fanta is also unique. NBC cannot meet up with Fanta supply. There are many other orange drinks in the market but Fanta has a unique taste. When you talk about NBC you expect quality products. “We are located in an area where there is competition. I believe that because of the recent changes there have been a lot of push and penetration. “Another thing that worked for us is the bottle. Because of the level of income earned by people in our location, the glass (bottle) thing is working. People can afford the N50 price so I will say that the strategy of back to glass is great,” she explained.

Wednesday 19 February 2020

BUSINESS DAY

COMPANIES&MARKETS CONSUMER GOODS

Nigerian Breweries doubles down on competition with new route-to-market chain OLUFIKAYO OWOEYE

mid s everal industry challenges faced by beer makers in the country such as stiff competition making it difficult for a price increase, sluggish economic growth which has left consumers cash-strapped, and increase in excise duties, Nigerian Breweries, Nigeria’s largest brewer has deployed measures to hedge against some of these industry challenges. The beer-maker is not leaving any stone unturned as it has decided to explore opportunities in the route-to-market. The distribution subsidiary named 234 Stores Limited commenced under a pilot scheme in 2019. Carving its own distribution chain could lead to higher margins for the beer maker as it would cut off distributors who are in the middle as margins continue to be pressured.

Figures from the 2019 full-year result for the period ended 31 December shows that a total N100 million have so far been spent on the new distribution chain. Heineken, Nigerian Breweries parent company said its premium portfolio increased double-digit with a strong performance by Nigeria, Russia, South Africa, and Ethiopia. Organic net revenue growth was up 8.9percent with Nigeria flat despite an increase in excise duty. Jean-François van Boxmeer, CEO, Heineken, in a conference call noted the difficult operating environment in Nigeria. “Nigeria is my most difficult thing for the moment, to be honest; it is a listed company so you can follow it. The market is growing better so that is the good news; pricing is not going anywhere,” he said. “We have increased last year our prices in November, if I recall well, and we

just did it again in January but that is because of a VAT increase, Our bigger competitor in the world smaller recently announced that it will not increase the prices before March, it remains a very tense competitive environment, I do not know where we are going there. We hold up our share. We are still the market leader,” he said. According to Boxmeer, beer is suffering more in terms of share, if you will, but it remains a pain point. “I went there late last year; they have done a tremendous job in terms of productivity in reengineering the business for operating at structurally much lower prices than we had five years ago. That job has been done and it is currently still being done. On the other hand, the good news out of Nigeria is that the premium end of the portfolio is building up. However, the overall pricing is still lagging behind,” he said.

Business Event

L-R: Eric Epee, chief financial officer West Africa, Upfield; Bamidele Amao, GM, West Africa, Upfield; Jan Van Weijen, Consul General of the Kingdom of the Netherlands in Nigeria; Motola Oyebanjo, head of corporate affairs and communication Africa, Upfield; Gianluca Mormile, head of operations Africa, Asia & Australia Upfield, and Aneto Okeke, head of supply chain, West Africa, Upfield, at a courtesy visit to the Netherlands Consulate General, Lagos.

Dapo Abiodun (r), Ogun State governor, and Muhammad Nami (l), executive chairman, Federal Inland Revenue Service (FIRS), at the sensitisation visit to the governor in Abeokuta

TECHNOLOGY

MTN unveils new ‘Y’ello star reality show to groom musical talents in Nigeria MICHAEL ANI

elecommunication giant, MTN Nigeria has unveiled a new musical reality television show called, ‘Y’ello Star. The show seeks to groom musical talent by providing a lifetime opportunity to turn their dreams and aspirations into reality. The Y’ello Star takes this further by bringing the process of creating the ultimate superstar to every Nigerian television screen. Speaking at the unveiling ceremony, Rahul De, Chief Marketing Officer, MTN Nigeria stated. “We know that they’re a lot of talented people in Nigeria who need to turn up their musical careers. This platform will help launch them to musical heights. We have a wealth of experience in supporting Nigerian talent and are confident we can improve on our past successes,” he said. Since 2006, through the MTNF/MUSON Scholarship Programme, MTN

Nigeria has trained hundreds of young Nigerians in the art and business of music. Through its popular music show, MTN Project Fame”—which was aired for over a decade—enabled it to train and recruit musical stars like Chidinma, Iyanya, who today are making waves in the music industry. In this new show, the firm said it would be digitally driven, with applicants to the show sending in a short recorded video of their songs to either the Mymtnapp or to the firm’s official site mtnonline. com. The telecommunication firm said its drive to tap into talents in the music industry, followed a survey it did 10 years ago, which showed about 58 per cent of Nigerians choosing music as their passionate dreams. This was a huge margin when compared to about 21 per cent of the respondent who chose football. The new reality show is opened to all network users from Nigerians liv-

ing both home and in the diaspora. Regional auditions are holding in Abuja, Enugu and Lagos. Finalists from the auditions will proceed to the ‘incubation hub’ in Lagos, where they will be coached by experts in the music industry in several areas as they aim for the top prize. The competition will run until June 2020. Winners of the show would be entitled to not just the cash price, but also a year recording contract, a fully furnished house, a brand new car, and an opportunity to being tutored by some of the top leaders in the musical industry. MTN Nigeria has been at the forefront of supporting events that celebrate the country’s rich arts and culture. MTN has created entertainment platforms such as Music+, MTN Y’ello Top 10 and the recently launched music-streaming platform, Music Time in a bid to promote unbridled talent on the global stage.

L-R: Okpere Mettabel, corporate affairs terminal officer, domestic terminal 1, Federal Airports Authority of Nigeria (FAAN); Gloria Asoeqwu, Airport duty officer, domestic Terminal 1, FAAN; Alexandra Asogwa Alex unusual of Big Brother Naija 2018; Gbemisola Adepoju, one of the passenger, and Amina Abubakar, assistant GM, FAAN, at the 2nd edition of FAANlentine (Valentine) celebration themed ‘Love is in the Air’ on the 14th of February 2020 at MMA, Lagos.

L-R: Obinna Molokwu, founder, Kwaba; Tony Odiba, co-founder, Rise Capital; Henrietta Bankole-Olusina, MD, Financial Advisors, ARM; Tale Alimi, founderf Owoafara; Victor Osiki, founder, Truesaver, at the press briefing to announce the commencement of the second cohort of the LABS by ARM Accelerator programme, in Lagos.

Wednesday 19 February 2020

BUSINESS DAY

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Wednesday 19 February 2020

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Wednesday 19 February 2020

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Innovation seen boosting farm output, opening investment opportunity Josephine Okojie

or investors to easily harness opportunities in the agricultural sector and agribusinesses boost their productivity there must be technological adoption and innovative solutions, experts say. The experts who spoke at the Ecobank agribusiness conference held recently in Lagos said that the country has continued to record low yield per hectare owing to its inability to switch from the culture of agric to the science of agribusiness. They stated that despite the opportunities across various agric value chains that abound, Nigeria is still unable to feed itself and create jobs through the sector owing to the lack of technological solutions to inherent challenges in agriculture. “We are still doing the culture of agric and not the science and this is why our average yield per hectare is still very low,” said Aliyu Abdulhameed, managing director/CEO,

Davida Echetabu, private clients wealth advisor, Stanbic IBTC Pension Managers Ltd; Samson Ogbole, CEO and lead trainer at Farm Lab; Yewande Kazeem, founder, Wandeville Media; Demola Sogunle, CE, Stanbic IBTC Bank Plc; Sadiq Onifade (aka WurlD), singer/songwriter; Bridget Oyefeso-Odusami, head-marketing and communications, Stanbic IBTC Holdings Plc; Seun Abolaji, co-founder, Wilson’s Juice Company; Ruby Onwudiwe, head -personal banking, Stanbic IBTC Bank Plc; and Seyi Abolaji, co-founder, Wilson’s Juice Company during the Stanbic IBTC Youth Leadership Series in Lagos.

Nigeria Incentive-Based Risk Sharing System for Agricultural lending (NIRSAL) said. “Agribusiness must be driven by technology to be profitable. There must be innovative solutions that solve wastage problems before logistics and other problems to make farming viable,” Abdulhameed said. He u r g e d i nv e s t o r s to take advantage of the

opportunities in the sector, saying that the country already has the factors to do agribusiness which he identified as arable land, water, and labour. He stated that modernday financing has moved from agriculture to productivity, saying that agribusiness without productivity cannot attract finance. “A l l f i n a n c e a n d

investment activities must h av e a m a rk e t- d r i v e n approach and such activities must involve the smallholder farmers” he added. Andrew Nevin, chief economist, PwC who was the keynote speaker, called on Nigeria to focus on measuring its achievement on the United Nation’s Sustainable Development Goals (SDGs) rather than fixated on GDP.

Conservationists call for strict law enforcement, awareness to tackle Nigeria’s pangolin trafficking …as country now accounts for 70% of global illegal trade …marks 2020 World Pangolin Day Josephine Okojie

onser vationists i n t h e c o u nt r y have calle d on the Federal Government to strictly enforce laws prohibiting the trade, and trafficking of pangolins and other endangered wildlife species in the country. The conser vationists who spoke at an event organised by the Pangolin C o n s e r v at i o n Wo rk i n g Guild Nigeria (PCWGN) in partnership with the University of Lagos as part of activities to mark the 2020 World Pangolin Day also call for the need to drive awareness of pangolins in the country. They noted that the country has to improve on its law enforcement owing to Nigeria’s involvement in many trafficking incidences of pangolin scales in the last two years. A c c o rd i n g t o t h e m , Nigeria currently accounts for 70percent of all illegal

pangolin scales traded between 2018 and 2019. “Our message to the Nigerian government is that there is a need to conserve the pangolins and save it from extinction. There is also a need for Nigeria to have a reorientation and need to fight wildlife trafficking,” Olajumoke Morenikeji, coordinator, PCWGN said. “The laws are already there but the enforcement is weak. Our government needs to support our enforcement agencies to enforce the law with seriousness,” Morenikeji who is also a professor of Parasitology at the University of Ibadan said. S h e a d d e d t h a t l aw enforcement agencies need to be empowered to arrest and convicts those illegally trafficking pangolins in the country. She appreciated the Nigerian Customs for its efforts in tackling the illegal trade in the last two years but stated that much more still needs to be done. Pangolin is the most www.businessday.ng

trafficked wildlife mammal globally, owing to the belief that its body parts possess medicinal properties for the treatment of various ailments in Africa and Asia. This has led to the poaching of the pangolins in record numbers, with Nigeria in the last few years accounting for the largest numbers of seizures. “ The government of Ni g e r i a n e e d s t o g i v e more support to the law enforcement agencies to combat this illegal trade that is not only sourced from Nigeria but all across Africa and trafficked through Nigeria to Asia,” said Ray Jansen, founder, and chair, African Pangolin Working Group. “We need to cover all the loopholes of this illegal trade and train more personnel to achieve this,” Jansen who is also a professor said. He added that his organisation is willing to support the country in the area of training. Bernardine Ejiogu representing the Federal

Nevin stressed the need for Nigeria to address productivity in its agribusiness sector as the country’s food import bill as of 2018 stood atN1.4trillion, whereas food exports were N302million representing a deficit of N1.1trillion within the period. Nevin also called for the reform of Nigeria’s land use act in the country, which according to him, will serve as an enabler for boosting agricultural activities. While acknowledging agritech firms like Farmcrowdy and the likes for leveraging technology to provide support for smallholder farmers, he noted that investments in agritech are vital to achieving innovation and transformation in the sector. Ade Ayeyemi, group chief executive officer, Ecobank Transnational Incorporated, in his remarks said agriculture is at the center of Nigeria’s real sector and its growth will no doubt contribute to a sustainable vibrant economy. “Success in Nigeria’s agricultural sector means feeding almost 200 million

Maize production receives boost as H.O Corn opens investment window Josephine Okojie

Controller of Environment, Lagos Zonal Office said t hat t h e c ou nt r y mu s t continue to sensitise Nigerians on the illegal trade so that individuals can start reporting any trading activities within their environment to relevant authorities. “We need to do more jingles to talk about wildlife crime. We need to continue with our efforts and collaboration in driving pangolin awareness,” Ejiogu said. Also speaking during the event, Sule Mutalib, asst. comptroller of the Nigeria Customs Service, said that the country has remained a transit route because of the porosity of our borders while ensuring that the Nigerian Customs is doing everything within its power to ensure that the harmless mammal is allowed to live. “Pangolins are important to the ecosystem and the Customs will continue to work hard to reduce the illegal trade to the barest minimum,” Mutalib said.

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individuals and, amongst others, the reduction in the demand for foreign exchange to import food items into the country,” Ayeyemi said. “This is coupled with the development of the agribusiness value-chain and its resultant creation of a new breed of entrepreneurs as well as jobs,” he added. Mohammed Nanono, minister of agriculture and rural development, said Nigeria’s potential and prospects make the sector a pilot for economic stabilisation, diversification, and growth in the country. The s e ctor is a major contributor to the national GDP and the biggest in job creation in the non-oil sector. Nanono, who was represented by Mustapha Baba Shehuri, minister of state for agriculture and rural development, said President Muhammadu Buhari is committed to finding a lasting solution to addressing the issues of food security in the country, as well as encouraging local farmers to produce more and better quality food for all.

i g e r i a’s m a i z e production has received a boost as H.O Corn has opened an investment window for the cultivation of the crop in large quantities. H.O Corn says it plans to cultivate maize on about 30,000 hectares which will yield an additional 120,000 metric tons to national output to help meet household and industrial demand of the crop in 2020. The investment window created by the firm will allow investors to invest in the cultivation of the crop with a minimum of 50percent return on investment. Harrison Andrew, chief executive officer, H.O Corn while briefing journalists, stated that the 30,000 acres production capacity can accommodate 30,000 investors with a minimum investment of N100,000 per lot and assurance of 50 percent return on investment. “An investor can pay for one lot or more, depending @Businessdayng

on his or her financial strength and is assured of getting 50 percent of his investment as profit,” Andrew said in a statement. “All interesting individual or company needs to do is fill the investor form on our website: www.hocorn.ng and pay the minimum unit price of N100,000 and get N50,000 as profit at the end of a farming season,” he added. According to Andrew, maintaining a steady increase in maize production will have a huge positive impact on the country’s GDP as the importation of maize will be reduced. “O v e r 6 0 p e r c e n t o f Nigeria’s maize production goes into animal feed, especially for poultry; 10 to 15 percent is directly consumed roasted, boiled or prepared as porridge by individuals in households,” Andrew said. “The balance is consumed by f o o d m a n u f a c t u r i n g industries as raw material. This means that the demand for maize would continue to Continues on page 19

Wednesday 19 February 2020

BUSINESS DAY

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How border closure triggers increase demand for palm oil Josephine Okojie

he ongoing border closure by the Federal Government has trigged a higher demand for oil palm in the country, farmers say. Since the shutdown of the country’s land borders in August 2019, farmers and processors of palm oil have seen increased demand for their products. Also, importers of crude palm oil who usually import t o n e i g h b o u r i n g We s t African countries owing to lower tariffs and bring it into the country through the land borders under the ECOWAS Trade Liberalisation Scheme (ETLS) are now compelled to import directly into the country, experts say. “ T h e b o rd e r c l o s u re has impacted the palm oil industry positively. Demand from farmers and processors as increased as they are now getting orders from those that ordinarily would not buy from them,” said Fatai Afolabi, executive secretary, Plantation Owners Forum of Nigeria (POFON). “It has also increased revenue for the government

as some manufacturers who import CPO to Ivory Coast and others to bring into the country because of lower tariffs are now importing directly into Nigeria,” he said. T h e c o u n t r y ’s 2 0 1 9 import data from Malaysia als o confir ms Afolabi’s statement, as imports for the period have risen by 18.4 percent from 2019 from 242, 388 metric tons (MT) in

2018 to 286,964 MT in 2019, according to the Malaysian Palm Oil Council (MPOC). While imports from data from Benin, Ghana, Ivory Coast, and Togo all decrease by 50, 36, 74 and 39.3 percent respectively, the data shows. “ T h e b o rd e r c l o s u re has reduced smuggling of refined vegetable oil by 80 percent, though very little still come in,” Henry

Olatujoye, president, Palm Producers Association of Nigeria. “Demand for palm oil since the closure has increased tremendously as manufacturers who use it as a by-product for production are now sourcing locally,” Olatujoye said. To protect the country’s palm oil industry and spur the industry growth, the Nigerian government had

(L-R) Damilola Adeniyi, corporate affairs manager, Olam Nigeria; Sharon Bort, officersustainability community, Massachusetts Institute of Technology (MIT) Solve; Mireille Wondia Yeo, programme associate - corporate responsibility and sustainability, Olam International; Mukul Mathur, country head, Olam Nigeria; Julie Greene; vice president - corporate responsibility & sustainability, Olam International and Sarah Rawson, social sustainability officer -corporate responsibility & sustainability – Africa Region, Olam International at the challenge design workshop, co-hosted by Olam International and MIT Solve, held recently in Lagos.

Olam, MIT collaborate to address food systems problems Josephine Okojie

lam International, a leading global agri-business, has collaborated with the Massachusetts Institute of Technology Solve (MIT Solve) to design a challenge aimed at addressing Nigeria’s issues around sustainable food systems. Olam International and MIT Solve co-hosted a challenge design workshop which held recently in Lagos in an attempt to proffer solutions to issues around food systems using technology. The workshop was designed to engage crosssector stakeholders in Nigeria, t o d e l i b e rat e o n i ssu e s affecting the country’s agribusiness ecosystem and aid MIT in designing Solve’s 2020 Global Challenges. “Olam started as a single man, single product operation in Nigeria and we have managed to achieve massive growth over a 30-year period. However, we still face problems and we cannot fix these challenges alone,”

Mu ku l Mat hu r, c ou nt r y head, Olam Nigeria said in a statement. “We realize the value of having an ecosystem that can help in proffering solutions, especially around sustainable food systems in Nigeria,” Mathur said. “It is important to have such an ecosystem of likeminded people. I know that together, we can fix these problems,” he added. Sharon B or t, officersustainability community, MIT Solve, described the programme as an initiative of MIT aimed at solving identified global challenges. According to her, the MIT Solve cycle which starts in February yearly initiates competitions in the areas of economic prosperity, health, learning, and sustainability. Bort added that MIT Solve decided to focus on challenges associated with food in an attempt to find solutions to issues around sustainable food systems. A l s o s p e a k i n g , Ju l i e G re e n e, v i c e p re s i d e n t -corporate responsibility www.businessday.ng

and sustainability, Olam International, said the rise in the world’s population presents an opportunity for players in the agricultural value chain. “For the most part of history, people lived near their food sources, they grew their own food. Today over 50percent of the population lives in the cities,” she said. “This has huge implications because of the channels through which these food products are transported and stored. The bigger challenge is that it inhibits people from having a healthy diet,” she added. Green pointed out that agr iculture als o has its negative impacts, despite its positive effects. “Agriculture and other land uses are responsible for a quarter of greenhouse gas emissions from fertilizers, deforestation, and transportation. Agriculture is responsible for 70percent of freshwater withdrawals,” she further said. “While these are critical to productivity, they also

have polluting effects on the environment. We only grow enough food to feed the population, but the problem is that 1/3 of that food never actually reaches our plates due to food loss and waste,” she added. She noted that as a result, the food system needs innovation to address these agr icultural, social and environmental issues. Reji George, vice president, farming initiatives - Olam Nigeria identified food loss and wastage amongst some of the challenges encountered in agribusiness. “One-third of global food production is wasted, and this is estimated to be around 1.3 billion tons of food. If food losses can be improved upon, global food security, systems, and nutrition will also improve,” he said. He, however, added that Olam has commissioned surveys in some selected states in Nigeria, while also working with farmers to know the extent of losses incurred during harvest and find ways of reducing such losses.

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imposed a 35percent tariff (10 percent duty and 25 percent levy) on palm oil imports into the country. Crude palm oil is also listed on the 41 items restricted from forex access. P re s c o a n d O ko mu ’s – Nigeria’s two largest oil palm producers recorded a revenue surge in the last two quarters of 2019 when the border closure policy came into effect. According to the numbers released by Presco and Okomu, combined sales revenue nearly doubled to N11.8 billion in the third quarter of the year, from N7.7 billion in the preceding quarter. Findings from the Q3 financial results of listed firms show that Okomu Palm Oil revenue increased massively year-on-year by 89.9 percent to N7.0 billion in Q3 2019 from N3.7 billion in Q3 2018. P r e s c o’s r e v e n u e increased marginally by 4.3 percent to N4.8 billion in Q3 2019 from N4.6 billion in 2018. “In the first two quarters, we had a lot of problems in having to sell our products locally,” Graham Hefer, managing director of Okomu

Oil Palm, said while reacting to third-quarter results. Hefer said that after the Nigerian government shut its land borders, the impediments to sales faded off as there was a loosening of grip by illegal imports, creating an opportunity for the company to market its products more easily. Last year, the Nigerian government also announced the provision of financial support to the oil palm industry. Nigeria’s apex bank says it has disbursed over N30 billion to the oil palm sector, which has mainly been to support the big players. But currently, modalities are ongoing to also support smallholder palm oil farmers who produce 80 percent of the country’s total production. “We are still working on the modality to provide support to smallholder palm oil farmers with the Central Bank,” said Hilary Uche Igwe, national president, Oil Palm Growers Association. “The association was asked by the Central Bank to work on the numbers o f h e c t a re a n d t h e l i st of farmers under our umbrella,” Igwe said.

Maize production receives boost as ... Continued from page 18

rise in the country,” he said. Nigeria, Africa’s secondlargest maize producer after South Africa is churning out 10.5million metric tons of maize per annum with a demand of 15 million metric tons, leaving a supplydemand gap of 4.5 million MT, data from Federal Ministry of Agriculture states. The 120,000MT addition by H.O Corn will help reduce the country’s deficit and yearly importation of maize. Speaking of growth and development, he said, the company began maize cultivation in 2017 on farmland located at Iseyin Local Government Area in Oyo State. He added that his organisation is now the largest maize farm in the country with the addition of 30,000 hectares. Andrew further explained that the company would increase the cultivation capacity to 50,000 acres next farming season to increase @Businessdayng

opportunities for investors and contribute to mitigating the eminent hunger crisis in the country. The initiative, he said, will contribute to the country’s agricultural growth while creating job opportunities to Nigerians to create wealth through farming. “H.O CORN produces and processes fresh and dry corn and supply to the local market, whose domestic consumption has continued to experience phenomenal growth over the years,” he said. “ We u s e t h e l at e s t technology in agriculture production and operate a complete line of modern machinery that includes corn planter and combine harvester,” he further said. “We believe that food should be of high quality, locally sourced, readily available and sustainable. Our passion is to pursue corn farming as a solution to the hunger crisis in Africa and become a contributor to the continents Agricultural industry,” he added.

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Wednesday 19 February 2020

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Advertise Here Enter the dragon on the road to a trade war

Potential benefits of currency swap to the manufacturing sector in Nigeria – MAN

Need for fair global trade 1 24

Politics of global trade It’s time for Nigeria and in fact Africa as a whole, to position itself for opportunities that this trade schism will churn out, writes Siaka Momoh

here is no questioning the fact that Nigeria is important to the metropolitan countries. Nigeria is being sort after. If you can recall, not too long ago, David Cameron, former British prime minister, delivered a speech at the Pan African University’s Business School(now Pan Atlantic University), Lagos, as part of his one-day visit to Nigeria. His speech focused on three areas of concern: Delivering aid rightly, growing private enterprise and trade, and long term political reform. Regarding private enterprise and trade, one thing came out clearly - UK was worried about China’s robust investment in Nigeria and Africa, and would want the worrisome situation reversed. David Cameron during his visit to Nigeria opened up on this issue to a cross section of informed Nigerians, Pan Atlantic University. Boris Johnson’s tenure And this too was why, at the instance of UK’s Department for International Development (DFID) a few weeks back, the UK-Africa Summit held in London. The Summit saw £2 billion ($2.6 billion) worth of investments committed to African businesses over the next two years from the United Kingdom government’s development finance institution. Infrastructure development was also a key theme of the event, with international development secretary Alok Sharma announcing a new mechanism for financing projects in five countries. The Summit had heads of state from 21 African nations and their delegations attending in London alongside U.K. politicians, as well as African entrepreneurs, and representatives from finance, business, and development. U.K. Prime Minister Boris Johnson, welcomed them to the country, saying the U.K. was a “one-stop shop for investment and business,” and spoke of his ambitions for free trade

with African nations. The development event’s focus on trade and the private sector was not without controversy, however. Chinese entry In recent years, we have witnessed a robust entry of Chinese and South African businesses into Nigeria. Chinese trade relations and other business interests in Nigeria, like in some other parts of Africa, have shot up. The Chinese trade in textiles, garments and a long list of general goods. They are in oil and gas and solid mineral businesses. They are also into road and rail construction works. According to World Bank Weekly Report for July 7, 2008, Sino-African trade exploded from $2 billion in 1999 to $55.5 billion in 2006 and $73 billion in 2007, growing faster than Chinese trade with

the rest of the world, and making a significant contribution to China’s success. Nigeria comes in big as that part of Africa that the Chinese are interested in. It was therefore expected that UK, a traditional ally of Nigeria would not sit by and allow Nigeria’s new-found friends to corner the businesses it hitherto controlled. Global trade politics is no doubt at play. And nations, Nigeria inclusive, must be well equipped to play adroitly on this tough turf. Cebu City Conference Let us recall for instance the occasion of the International Conference on Alternatives to Corporate-led Globalization and Regional Integration which held December 9-10, 2006 in Cebu City, Philippines. Gathered at the city were various organizations and social movements representing

the landless peasants, small farmers, indigenous peoples, artisan fishers, women, workers, small and medium business, consumers, and marginalized peoples in South and Southeast Asia. Their concern was the pain certain policies on trade matters being driven by developing countries were causing them. They gathered to brainstorm on how to fight this. The summit highlighted the problem. For these Asians that gathered, the proliferation of bilateral and regional free trade agreements pushed by developed countries such as the ASEAN- Japan Economic Partnership Agreements, US-ASEAN Trade and Investment Framework (TIFA), the Australia-Thailand FTA, JapanMalaysia FTA, Japan-Philippines Economic Partnership Agreement (JPEPA) and in particular the surge in negotiations for US FTAs in the

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region such as the US-Thailand FTA, the US-Malaysia FTA, and the US-Korea FTA and preparations for such in the Philippines and Indonesia pose grave threats to people’s livelihoods, public health, biodiversity and environment. They argued bilateral and regional free trade agreements aim for a more rapid and comprehensive liberalization of economies of developing and least developing countries, “have exacerbated poverty as well as class and gender inequalities for the last two decades”. The summit, in line with the crusade of the likes of Oxfam International, a hard-line global NGO, argued that through the ASEAN, the negotiations for regional and bilateral free trade and investments agreements with rich industrialized countries were being fast-tracked on top of its existing economic initiatives like the ASEAN Free Trade Agreement (AFTA), ASEAN Industrial Cooperation Scheme (AICO) and ASEAN Investment Area (AIA). Envisioned to create a single market for more than 500 million Southeast Asian people; that these free trade agreements and regional economic integration project “is coated in rhetoric of ‘creating equitable access to opportunities’.” The summit noted that however past and present episodes of liberalization and economic integration “have shown that they merely expand and facilitate market and investment opportunities for developed countries’ transnational corporations. The Asian summit therefore concluded that the creation of an ASEAN single market within the rubric of free trade would only result to worsening the economic, social, political and environmental crisis faced by many developing and least developed countries in the region. It noted in particular, the aggravation of landlessness and disloca-

Continues on page 24

Wednesday 19 February 2020

BUSINESS DAY

BookShelf

Enter the dragon on the road to a trade war A new book, ‘Schism: China, America and the Fracturing of the Global Trading System’, shows how China’s state capitalists overwhelmed the WTO – and how Trump is breaking it. This review (excerpts), is sourced from Asia Times. PAUL BLUSTEIN

hat morning, the Mizuki, a Japan Coast Guard patrol boat, was cruising near the(dispute) islands when urgent word came that a Chinese fishing trawler was acting more belligerently than usual — not only had it disregarded commands to exit the area, it had deliberately collided with a much larger Japanese cutter and sped away. Ordered to pursue the trawler, the Mizuki headed it off, together with another cutter, still within territorial waters claimed by Japan. To the consternation of the Mizuki’s crew, the trawler — clearly bent on another ramming — suddenly steamed toward the patrol boat’s stern on the starboard side. A video conveys the crew’s mixed English and Japanese shouts, over the whooping of an emergency siren: “Stop engine!” “Stop engine! Oi! Tomare!” (Hey! Stop!) “Oi! Tomare! TOMARE!” A loud bang resounded as the trawler plowed into the Mizuki, sending black smoke billowing from the point of impact. Although nobody was injured, the collision dented the patrol boat and damaged a railing. Shortly thereafter the trawler was chased down and boarded by Japan Coast Guard personnel, who took the crew and captain, 41-year-old Zhan Qixiong, into custody. The events that followed sent a jarring message to the world about how China might wield the power accorded by its burgeoning economy. In foreign capitals where China’s growth was beheld with a mixture of awe and disquiet, Beijing’s response to the ship collision ratcheted up the level of anxiety. At first, Chinese anger over Japan’s actions manifested itself in sharp diplomatic protests and demonstrations by groups of citizens aroused by memories of Japanese imperialism. Contending that the trawler had the legal right to fish

in waters deemed by China to be its own, Beijing denounced the detention of the ship and crew as “harassment” and demanded their immediate release… Nine years before the ship collision, China joined the World Trade Organization (WTO), a historic integration into the global economy of the world’s most populous nation at a time when it was rapidly shedding vestiges of Maoist totalitarianism. The WTO, then as now a subject of considerable controversy, is the single most important institution in

preserving and advancing economic globalization; it is the current embodiment of the system established after World War II to prevent a reversion to the protectionist horrors of the 1930s. WTO rules keep a lid on the import barriers of member countries (which numbered 164 at last count), and members are expected to take their disputes to WTO tribunals for adjudication rather than engage in tit-for-tat trade wars… To gain entry to the Genevabased trade body, China had un-

dergone 15 years of negotiations. US trade officials served as Beijing’s chief interlocutors and tormentors, demanding measures to reform the state-dominated Chinese economy and open the nation’s markets in ways that exceeded the requirements imposed on other nations… Starting around 2003, and continuing for about a decade thereafter, China kept the exchange rate of its currency pegged at artificially low levels, bestowing significant competitive advantages on Chinese exporters. That exacerbated a phenomenon that has come to be known as the “China shock,” which refers to the decimation of manufacturing companies in a number of American blue-collar communities. Also in 2003, Beijing established institutions giving it tighter and more efficient control over the management of giant state-owned enterprises (SOEs) and banks, the setting of prices for key commodities and inputs, allocation of subsidies, enforcement of regulations and approval of investments. By the time of the 2010 ship collision, China’s leaders were guiding the country in a new direction, variously dubbed “state capitalism,” “techno-nationalism” and “China Inc.” Although the private sector was vibrant and flourishing — by one estimate, it accounted for roughly two-thirds of China’s GDP — intervention by the government and the Communist Party was becoming far more pervasive than before. Foreign firms that had once been welcomed with open arms were fuming about falling victim to a bewildering array of obstacles and industrial policies aimed at promoting and protecting Chinese competitors favored by the party-state… Concerns about these policies greatly intensified after the rise of Xi Jinping as China’s paramount leader in 2012, notably when Beijing launched a plan called “Made in China 2025” aimed at fostering national self-sufficiency in critical sectors such as new-energy vehicles,

biomedicine and robotics. In theory, the WTO provides the means to remedy such problems — and in numerous instances, countries have brought complaints against China to the trade body and won; Beijing generally complies by changing its policies in accord with rulings by WTO tribunals. But China’s system has become so opaque and uniquely structured that many of its practices fall beyond the scope of the trade body’s rules and bedrock principles. This challenge is of existential importance to the WTO given the outsize dimensions of China’s market and external trade. (China is the world’s largest exporter, with about 13 percent of the global total in 2017.) The administration of US President Donald Trump is dismissive of the WTO’s efficacy with regard to China — that was one of Washington’s main justifications for starting a trade war against Beijing — and for all the president’s misconceptions about trade, he and his acolytes are by no means alone on this score. Their frustration is shared by trade experts across a broad swath of the political spectrum. This book chronicles China’s entry into the WTO and the profound changes that this development has engendered — for both good and ill — for China, for its trading partners (in particular, its most important, the United States) and for the trading system writ large. The rise of the Chinese economic juggernaut is traced, as is the deviation in Beijing’s economic modus operandi from the expectations of other WTO member countries. Also recounted are the efforts by non-Chinese officials and political actors, chiefly Americans, to address China’s most problematic policies; in addition, the book examines the parts played by multilateral institutions, specifically the WTO and the International Monetary Fund (IMF). The narrative culminates in the Sino-US trade war and related events of 20182019 that have brought the trading system to a breaking point.

AfDB says World Bank statement on Africa’s debt profile is misleading, inaccurate

he African Development Bank (AfDB) has described as “misleading and inaccurate” comment by the World Bank President, David Malpass, that the financial institution alongside other regional development banks is worsening the debt situation of already “heavily indebted” countries by lending too quickly. Media reports say Malpass made the statement on Monday at a World Bank-International Monetary Fund debt forum in Washington, United States of America.

Akinwunmi Adesina

Reuters reported that the World Bank chief said AfDB, Asian Development Bank (ASD) and the European Bank for Reconstruction and Development were contributing to debt problems of countries. Malpass was quoted to have said that while ASD was “pushing billions of dollars” into a fiscally challenging situation in Pakistan, AfDB was doing the same in Nigeria and South Africa. “We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official

export credit agencies, have a tendency to lend too quickly and to add to the debt problems of the countries,” Malpass insisted at the forum. But in a statement released on Thursday February 13, by AfDB’s Director of Communication and External Relations Department, Victor Oladokun, the multilateral financial house picked holes in the statement which it said was “inaccurate and not fact-based.” “It impugns the integrity of the African Development Bank, Continues on page 23

Wednesday 19 February 2020

BUSINESS DAY

Potential benefits of currency swap to the manufacturing sector in Nigeria – MAN

he Manufacturing Association of Nigeria (MAN) has listed the potential benefits of currency swap to the manufacturing sector in Nigeria. Its list, according to a document authored by the association’s Economics and Statistics Department include the following: Access to Yuan Renminbi liquidity at Nigerian banks will make trading transactions between both countries smoother, and more cost effective. MSMEs raw materials, spare will find it much easier to import parts and machinery from China Provides adequate local currency liquidity to Nigerian and Chinese businessmen. Eliminates the difficulties usually associated with the search for third party currencies. Reduction of the strain on Nigeria’s foreign reserves denominated in dollars. Smoothening the bilateral trade relationship between Nigeria and China, as China is believed to be Nigeria’s largest trading partner. Making imports about five times cheaper, which may in turn force a drastic reduction in the rate of inflation. Significant reduction of the pressure on U.S. dollar. Reduction of the value of the dollar in relation to the naira. It will enhance leveraging on the technology power of China for Nigeria to attain a sustainable economy.

It will boost local currency liquidity in the Nigerian economy. MAN however listed some likely drawbacks as follow: An unrestricted access to Yuan, at an overvalued naira exchange rate will certainly: •Encourage importation and stifle local production of goods; •Result in upward surge in Chinese imports; •Negate the Federal Government’s import substitution agenda; •Discourage domestic production and place local industries in a pitiable and vulnerable condition; •Lead to unemployment and de-industrialization. MAN is concerned about the following: Given the prevailing disparity

between the economies of Nigeria and China, the currency swap may impact our economy negatively; The success of any currency swap depends on the positive impact of the deal on the economy of the participating countries especially when there is disparity between the countries. The Nigeria-China currency swap if implemented as it stands today, without appropriate monetary and fiscal policies will bring about some new challenges that may affect the attainment of national economic aspirations; Currency swap depends on the positive impact of the deal on the economy of the participating countries especially when there is disparity between the countries.

AfDB says World Bank statement on Africa.. Continued from page 22 undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank. “The very notion goes against the spirit of multilateralism and our collaborative work,” the Bank said in its reaction, adding that it maintains a very high global standard of transparency. It further said, “The African Development Bank provides a strong governance programme for our regional member countries that focuses on public financial management, better and transparent natural resources management, sustainable and transparent debt management and domestic resource mobilization. “We have spearheaded the issuance of local currency financing to several countries to mitigate the impacts of foreign exchange risks, while supporting countries to improve tax collection and tax administration, and leveraging pension funds and sovereign wealth funds to direct more monies into financing development programs, especially

infrastructure. “The African Development Bank’s Africa Legal Support Facility (ALSF) supports countries to negotiate terms of their royalties and taxes to international companies, and terms of their non-concessional loans to some bilateral financiers. We have been highly successful in doing so.” The Bank further noted that with regards to “heavily indebted” countries, it recognizes and closely monitors the upward debt trend saying that “there is no systemic risk of debt distress”. On Malpass’ comment of its “pushing billions of dollars” into fiscally challenging situations in Nigeria and South Africa, the Bank pointed out that the World Bank has significantly larger operations in Africa than itself – highlighting the difference between the World Bank’s US$20.2 billion and her US$10.1 billion operational budgets for Africa in 2018. It further provided details of Nigeria and South Africa’s debt profiles on the domestic and foreign fronts. “According to the 2020 African

Economic Outlook, at the end of June 2019, total public debt in Nigeria amounted to $83.9 billion, 14.6% higher than the year before. That debt represented 20.1% of GDP, up from 17.5% in 2018. Of the total public debt, domestic public debt amounted to $56.7 billion while external public debt was $27.2 billion (representing 32.4% of total public debt). “South Africa’s national government debt was estimated at 55.6% of GDP in 2019, up from 52.7% in 2018. South Africa raises most of its funding domestically, with external public debt accounting for only 6.3% of the country’s GDP,” the Bank said in the statement. On Malpass’ comment regarding the poor level of transparency in lending through use of hidden liens and non-disclosure clauses that could hamper economic growth, the continental bank said it, among other things, closely coordinates its lending activities, especially its public sector policy-based loans, with sister International Financial Institutions (notably the World Bank and the IMF).

MAN made the following recommendations: ❖The CBN must ensure constant monitoring of the agreement so that the rise in demand for the Yuan will not result in depreciation of the Naira against the Chinese currency and further widen the gaps in trade balance and balance of payments in favour of China. Encourage Foreign Direct Investment inflow, especially into productive and high value adding agricultural or/and manufacturing processes. There should be timelines for importation of products with relative manufacturing advantage in Nigeria to discourage import surge of finished manufactured products and boost the domestic production. Special focus on the use of the scheme strictly for manufacturing inputs and finished products not available locally. The government’s agencies especially the Nigeria Customs Ser-

vice, should increase surveillance on borders to prevent smuggling and other unhealthy economic activity. MAN should immediately conduct a survey to ascertain manufacturers’ experience; organize a policy dialogue with relevant stakeholders and manufacturers & thereafter engage the CBN Governor. Currency swap enhances seamless trade in goods and services using National Currencies of Respective Countries. The central banks of both countries exchange an agreed amount of local currencies over a defined time span. It eliminates the use of third-party currency as medium of exchange standard. Since the financial crisis of 2007, central banks around the world have entered into a multitude of bilateral currency swap agreements with one another. The terms of swap agreements are designed to protect both central banks involved from losses owing to fluctuations in currency values.

Editor’s Note

ules or no rules, big countries do not want to be outplayed in international trade. So when Donald Trump tells the world ‘American First’ he is only echoing what has been on ground all these years. There is serious global politicking in international trade. The arm-twisting is there. The US/China trade imbroglio is there for us to draw from. The trade war concerns all of us – the entire globe, giving the strategic importance of these two giants to global trade. Where do we stand in all these? Where does Africa, Nigeria in particular stand? Sure, there will be fallouts, positive and negative. How do we position ourselves for opportunities that this trade war will roll out? Find out about this and more in our cover. And a new book, ‘Schism: China, America and the Fracturing of the Global Trading System’, shows how China’s state capitalists overwhelmed the WTO – and how Trump is breaking it. A review (excerpts), is sourced from Asia Times. You‘ll find it interesting. The Manufacturing Association of Nigeria (MAN) has listed the potential benefits of currency swap to

Siaka Momoh

the manufacturing sector in Nigeria. The association also listed some likely drawbacks and recommendations. AfDB throw jabs at World Bank, saying its statement on Africa’s debt profile is “misleading and inaccurate”. Get the full gist on this and more in your ever delectable magazine. Welcome on board. For advert placements, call Siaka: 08061396410 or email siakamomoh@yahoo. com.

Wednesday 19 February 2020

BUSINESS DAY

Politics of global trade Continued from page 21 tion of small farmers, fishers and indigenous peoples; more virulent import surges destroying local livelihoods and enterprises; stagnation of national industries leading to more unemployment and lower wages and exploitative working conditions, rising out-migration and increased environmental destruction. This is nothing short of the global trade politicking in question. Where do we stand here? US-China trade imbroglio We are not done yet. Recall the ongoing US-China trade imbroglio. ‘Schism: China, America and the Fracturing of the Global Trading’ authored by Blustein, comes in handy here. According to Blustein, history was heralded when China joined the W orld Trade Organization (WTO) in 2001, for good reason: the world’s most populous nation was entering the rules-based system that has governed international commerce since World War II. But the full ramifications of that event, he said, are only now becoming apparent, as the Chinese economic juggernaut evolved in unanticipated and profoundly troublesome ways. In this book, journalist Paul Blustein chronicles the contentious process resulting in China’s WTO membership and the transformative changes that followed, both good and bad — for China, for its trading partners, and for the global trading system as a whole. The book recounts how China opened its markets and underwent far-reaching reforms that fuelled its economic takeoff, but then adopted policies — a cheap currency, and heavyhanded state intervention — that unfairly disadvantaged foreign competitors and circumvented WTO rules. Blustein explained “events took a potentially catastrophic turn in 2018 with the eruption of a trade war between China and the United States, which has brought the trading system to a breaking point”. The trade deal, the truce Then came the trade war truce. Both combatants, after a dingdong battle of words, accompanied by a chain of tariff hikes, recently signed Phase I Trade Deal. Following the signing of this agreement, China said it would slash tariffs on $75 billion of U.S. imports in half as part of its efforts to implement the trade agreement with Washington. According to a recent report by the Wall Street Journal, beginning from February 14, China will cut tariffs on some U.S. goods to 5% from 10%, while levies on some other items will be reduced to 2.5% from 5%, China’s Ministry of Finance said recently. The tariffs were imposed in September and December during a brutal trade fight between US and China, world’s two largest economies. According to the report, U.S. has already laid out plans to reduce the tariff rate on certain imports from China that have been penalized in the trade war, although most tariffs will remain. Starting February 14, the U.S. will lower tariffs on roughly $120 billion in Chinese goods—including electronics and apparel—to 7.5%, from 15% currently, the U.S. trade representative’s office said on January 22. That also fulfills a pledge made under the U.S.-China trade agreement signed January 15.

Need for fair global trade 1

T The tariff cuts come amid growing doubts about Beijing’s ability to follow through on the phase-one trade deal, in which China has pledged to boost its purchases of American merchandise and services by $200 billion over two years. The report notes that a coronavirus outbreak that began in China in late January and has spread to more than a dozen countries has caused a near-standstill in economic activity in the country. Chinese authorities have placed many parts of the country on lockdown in an effort to contain the epidemic. It says with the health crisis threatening an already weakening economy, Beijing could find it more difficult to follow through on all of its pledges. Time to seize gaps created by US-China trade war FurtherAfrica sums it all up in an article titled ‘AfCFTA: Africa needs to seize the gaps created by US-China trade war’ published on its platform November 19, 2019. It notes that trade tensions between China and the US will bring about a change in global trading patterns, giving African countries a chance to step in and make the most of opportunities to form lucrative new trade relationships. This, it states, is despite the potential negative effect of the US-China trade tensions on Africa. It adds that if the ongoing trade tensions cannot be resolved, they could result in a global economic recession with serious repercussions for African economies. “China and the US,” the report says, “are primary trading partners with numerous African countries and any economic fluctuations or increase in tariffs in these countries will be felt down the global supply chain.” It also argues that “Numerous African countries also rely heavily on foreign loans and could find it hard to service international debt due to tightening monetary policies. There is also concern that, subsequent to the trade wars, China could have excess stock of products that could find their way to Africa to recoup trading losses in the US” It states that against this background of geopolitical shifts in trade relations, however, China has noted that it wants to work with African countries in a participative and inclusive way. In 2019, China and representatives from 53 countries in Africa discussed mutual trade and co-operation at the Forum on China-Africa Co-operation. China reiterated that it is looking for new opportunities to trade with Africa to counter trade

tensions with the US. China is one of Africa’s biggest trading partners. According to the China Africa Research Initiative, China-Africa bilateral trade has been steadily increasing for the past 16 years. FurtherAfrica also notes that “Despite the prominence of Chinese investment, the US is also a major player in Africa and is reportedly concerned about the security implications of China gaining control of strategic assets as a result of unsustainable borrowing by some developing countries.” It says “The US Power Africa programme reported recently that over five years it funded 80 transactions valued at more than $14.5bn, and the International Development Finance Corporation recently doubled its lending ceiling to $60bn, both providing a boost to infrastructure activity. In 2018, the US outlined its Africa strategy by reiterating its commitment to strong partnerships with key countries in Africa.” It sums up: “In the meantime, global trade tensions have created supply gaps in the Chinese and US markets. The US is also looking to other parts of the world to source cheaper goods, potentially with lower tariffs. African countries should be making the most of the African Growth and Opportunity Act (AGOA), which is valid to 2025. AGOA governs the trade relationship between the US and sub-Saharan African countries and provides duty-free access to the US market for thousands of products from eligible African countries. African countries should thus ensure they are positioned to use AGOA’s mechanisms to enter US markets with competitively priced goods.” AfCFTA It notes Africa is also looking internally to boost trade, stating that the recently launched African Continental Free Trade Area (AfCFTA) will streamline intra-African trade across the continent, reducing dependence on foreign investors and creating investment frameworks that allow Africa to trade on its own terms. AfCFTA, it states, will also appeal to foreign investors looking to trade seamlessly across borders. It’s time for Nigeria and in fact, Africa as a whole, to position itself for opportunities that this trade schism will churn out. After all, the US-China Phase I Trade Deal may be a political strategy by President Donald Trump to oil his wheel for the 2020 US Presidential Election.

his piece, authored by yours sincerely, was first published in December 2006 on these pages. It was titled ‘Global trade matters’ then. We are republishing it because the lines remain evergreen, because the issues raised then are still on the table today. The story is over 2000 words in length and so cannot be published in one piece due to space constraint. We are therefore bringing it to you in segments. Have a good read. Preamble One thing is certain and applicable to all people on the face of the globe, and that thing is that people must trade to live. They must trade to banish poverty. And to do this successfully, the right quality and prices of products must be available. The right markets also must be there. There must be fair trade; there must be an even playing field. Globally, there is a dichotomy – the North and the South. The North is the industrialized world, variously referred to as the rich world, the developed world, whilst the South is called the underdeveloped, developing or the poor world. The North colonized the South, exploited its resources which it used in developing its economy. Then came independence, flag independence – the South is politically free but economically fettered. There came neo-colonialism, and then globalization – trade liberalization –free enterprise. Where are we as Southerners? Do the North mean well with globalization? Is trade really liberalized? Are we independent or dependent? If we are being shortchanged, what is the way out? This piece will attempt to answer these questions. Gabriel Gold We shall start this discussion with the story of Gabriel Gold. Gabriel Gold, an indigene of Ikare in Ondo State, is an old horse in the agriculture commodity trade who has been on the trade turf for more than 40 years. He is a local buying agent for cocoa beans, cashew-nuts, coffee and palm kernels, buying largely for OLAM Nigeria Limited, an Indian multinational agricultural commodity producer and exporter, based in Lagos (Gabriel Gold is now late. He was a victim of armed robbers attack few years back. May his soul rest in peace). OLAM has a robust presence in rural Nigeria, an intimidating network. In a particular season, Gold bought 100 metric tonnes of coffee at N17, 000 per metric tonnes, basing his purchase on the international price for that season, which would allow him some good margin after sale. But unfortunately for him, the international price of coffee fell to N10, 000 per metric tonne, which meant he would sell bellow the price he bought his stock! He bought at N17, 000 and would sell at N10, 000! He was of course stuck with the stock. This is what the muchtalked-about trade liberalization

can do to a Southerner like Gold. It is the same story for many like him in the Nigerian export trade. Globalization/other institutions of Northern dominance What is being advocated by the rich countries, that is the industrialized world today is globalized trade, that is, trade liberalization. The North wants goods and services to move freely amongst countries. Structures have been put in place to promote this. The World Trade Organization (WTO) is one major institution for this promotion. WTO is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by 148 of the world’s trading nations and ratified in their parliaments. It has as its goal, rendering help to producers of goods and services, exporters, and importers in the conduct of their business. The organization was put in place in answer to the demand of governments of poor countries need for an umpire, when more powerful countries take unfair advantage over those who have less. Tied to this function of the WTO are other institutions of Northern dominance such as the International Monetary Fund (IMF) and the World Bank, ITO, GATT, transnational corporations. These institutions, controlled by the industrialized nations, with the likes the U.S., the U.K., Japan, Germany, France, Canada, and Italy in the forefront, manage the international economy to the disfavour of the South. It is an intricate web in which the Southern countries are perpetually entangled. How does this work out? Developing countries of the South have development projects they need large funds to finance, funds which they do not have. They are therefore forced to go, cap in hand, to borrow from these Bretton Woods institutions. They cannot pay back principal over a long time and interests build up. What follows is the building up of huge external debts. Since they cannot get credit or cash anywhere else, they are forced to go to these international institutions and accept whatever conditions are demanded of them. What follows is a status of perpetual debtor. No country involved in this slavish transaction has ever emerged from its debt problem. Nigeria is a victim of this Northinitiated debt trap. We care very familiar with the celebrated debt cancellation/ forgiveness story which saw Nigeria paying off a large chunk of accumulated debts after successfully negotiating forgiveness for some. Debt forgiveness or not, critics believe it is foolhardiness on the part of government to pay off a large chunk of debt in one fell swoop. None of the G-7 countries, with all their resources, will pay off such huge debt the way Nigeria did, they argue. To be continued

Wednesday 19 February 2020

BUSINESS DAY

BANKING Banks’ LDR ratio rises by 319bsp in seven months

Keystone Bank deepens campaign on tree planting

Stories by HOPE MOSES-ASHIKE

he banking industry’s Loan to Deposit Ratio (LDR) grew by 319 basis points from 57.45 percent at the end of May 2019 to 60.64 percent at the end of December 2019. The industry also recorded growth in average customer deposit and aggregate funding, which grew 6.9 percent over the same period - a positive indication of expanded capacity of the financial sector to sustain further lending to the real sector. The Central Bank of Nigeria (CBN) in October 2019 raised the Loan to Deposit Ratio of banks to 65 per cent, after the September 30 deadline given to the banks to meet its 60 per cent directive. However, the regulator has extended the deadline of the 65 percent LDR to March 31, 2020. Aisha Ahmad, deputy governor, said in her personal statement at the January 2020 Monetary Policy Committee (MPC) meeting that the LDR policy retained its efficacy, stimulating substantial increases in private sector loans, lowering market lending rates and has progressively diversified in-

dustry credit portfolio. Gross credit in the industry grew by N1.9 trillion between the end of May 2019 and the end of December 2019; channelled primarily to employment-generating sectors such as agriculture and manufacturing. This is in addition to increased lending to the retail and SME segments, expected to help boost domestic output growth in the short to medium term in support of the economic diversification agenda of government. According t Ahmad, financial system stability emerged strong into 2020 as data provided by Bank staff indicated sustained improvement in soundness in-

dicators in 2019. The NPLs ratio in particular, reduced further to 6.1 percent at the end of December 2019, from 6.6 percent at the end of October 2019. “The key challenge for the Bank will be to sustain this positive industry risk profile, notwithstanding continued growth in credit driven by the LDR policy,” she said. The banking industry liquidity ratio stood at 45.6 percent last December compared to the minimum requirement of 30.0 percent. The capital adequacy ratio of 14.5 percent is good in relation to the prudential requirement of 10 – 15 percent. The rates of return on

equity (25.8%) and assets (2.3%) are robust and indicate high profitability of the banking industry. The rates are higher than those of comparator countries: Turkey, South Africa and Malaysia, according to Obadan, Mike Idiah, MPC member in his personal statement. In addition, for the banking industry, total assets, deposits, and aggregate credit have grown substantially. The growth in assets has been steady and impressive, rising by 15.36 percent (or by N5.36 trillion) between December 2018 and end-December 2019. The structure of total

assets has also changed in favour of more loans and advances, and less of government securities. It shows that the impact of the loans to deposit ratio (LDR) policy has been positive, said Obadan. However, the Committee advised the Bank to retain the LDR Policy and in addition, continue to deploy its Differentiated Cash Reserve Requirement (DCRR) policy which directs targeted funding to critical sectors of the economy. It further encouraged the Bank to hasten implementation of its risk mitigation measures such as the Global Standing Instruction (GSI) to proactively preserve asset quality.

n a bid to ensure sustainable cities and communities under the Sustainable Development Goal (SDG) 11 of the United Nations (UN), Keystone Bank Limited has partnered with the Nigerian Conservation Foundation (NCF) on a tree planting campaign in Lagos State. The trees are expected to absorb carbon dioxide in the environment and create an ecosystem that will help to reduce pollution. Speaking on the campaign in Lagos recently, Adeyemi Odusanya, an executive director of the bank, said some staff members of Keystone Bank recently visited the NCF office in Lagos to plant some Mahogany trees. He said the objective was to further the operations of the bank with the Sustainable Development Goals , adding that under the arrangement, NCF will nurture the plants to maturity. The SDGs are a collection of 17 global goals designed to be a blueprint to achieve a better and more sustainable future for all. They were set in 2015 by the UN General Assembly and intended to be achieved by the year 2030. The SDGs include: No Poverty, Zero Hunger, Good Health and Well-being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Industry, Innovation and Infrastructure.

Fidelity Bank promotes savings culture with N18m customers’ reward

eying into the financial inclusion o f t h e C e nt ra l Bank of Nigeria (CBN), Fidelity Bank Plc has consistently empowered its customers through a savings promo initiative called “Get Alert in Millions”. Consequently, the bank last week gave out a total of N18 million cash prize and several consolation prizes to lucky winners in the 4th monthly/2nd bi-monthly draws held at the bank’s headquarter in Lagos. After the electronic draw exercise, winners emerged in the categories of N3 million, N2 million and N1 million cash prizes. The winners include Uju Ejindu from Ogbomosho road branch, Mojeed Tijani from Otta

branch, Adepeju Adepoju Gusau branch, Salisu Mohammed from Saka

Tinubu cash center, Imo Amamnkem from Garrison branch, Ogboada

Nnamdi Okonkwo, managing director/CEO, Fidelity Bank www.businessday.ng

Adonyeofori from Woji branch, Abonyi Chukwudi from Nukka branch, Ngozi Olekanma from Azikiwe road, Nwankwo Chinonso from Ikota Mini, Sani Usman from Suleja branch, Abraham Sahid from Kubwa branch and Akinpelu Emmanuel from Ado Ekiti branch. The draw was witnessed by the relevant regulatory bodies including the National Lottery Regulatory Commission (NLRC), Lagos State Lotteries Board (LSLB) and Federal Competition and Consumer Protection Commission (FCCPC). Nnamdi Okonkwo, managing director/CEO said Fidelity has been on this promo since October last year and it turned out to

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be the ninth promo in 12 years. However, this particular series known as Get Alert in Million is actually the fourth – that is why it is called GAIM four. Represented by Martins Izuogbe, divisional head, operations, he said essentially it is all about trying to reward the customers for banking with the bank. “In another way, we are also trying to key into the CBN financial inclusion drives because most people that want to have a banking relationship typically will start from the basis which is savings. The promo covers the four variants of savings that we have. So we have been on this and it I going to run till April next year,” he said. “Incidentally, today’s @Businessdayng

event is like two in one, where we are having the monthly and the by-monthly draws. I have seen people who have emerged, winning N3 million, which is the amount fixed for the by-monthly, then N2 million and N1 million fixed for the monthly draws. We are able to have a national spread, covering all the geopolitical zones. For all the people that have won, we are happy for them and we congratulate them”. He said the initiative to run the promo is something that he believes the customers are happy about and indeed more people are keying into it because of the investment climate where today savings account seems to be the best in terms of yield.

Wednesday 19 February 2020

BUSINESS DAY

insurance today

E-mail: insurancetoday@businessdayonline.com

Coming of Finance Act 2020 has lifted a huge tax burden off insurance companies – NIA Modestus Anaesoronye

he various amendments brought about by the provisions of the Finance Act 2020 has lifted a huge tax burden off the insurance companies, the Nigerian Insurers Association (NIA) has said. NIA said its member companies have endured years of excruciating tax burden under CITA 2007, which did not place insurance companies at a level playing field with companies in other sectors of the Nigerian economy. Yetunde Ilori, director general of the NIA who made the remark in a statement in Lagos lauded president Muhammadu Buhari for the speedy assent to the Finance Act 2020, describing the move as a welcome development, which will usher in a new lease of life for insurance companies. Ilori also commended Shamsuna Ahmed, minister of Finance, Budget and National Planning, and her ministry for taking special interest in matters affecting the insurance industry, noting that her desire to promote the business of Insurance will continue to be appreciated. Understandably too as Insurance is the backbone and livewire of any economy.

Tope Smart, chairman NIA

Giving specific details, she stated that Sections 5 and 6 of the Finance Act, 2020 repeals the punitive and outdated provisions of Section 16 of the Companies Income Tax Act on the taxation of insurance companies., thus resolving significantly tax issues identified on Insurance industry taxation. Additionally, the new Act has eliminated among other things: Restriction of tax-deductible claims and outgoings to percentage of total premium; Restriction of period to carry forward tax losses to four years; the special punitive deemed profit basis for minimum

Yetunde Ilori, director general, NIA

tax computation, and The Finance Act also resolved the issue of computation of deductible unexpired risks by adopting the use of time apportionment basisin line with the Insurance Act. Expressing delight on the matter, she stated that insurance companies would now be able to carry forward losses indefinitely like companies in other sectors of the economy as opposed to the 4-year restriction previously in place resulting in fiscal equity. The finance Act has also simplified basis of computation of minimum tax payable by insurance companies as opposed to the 2007 Act

whichbasis differs significantly from that adopted for other Nigerian companies.” She noted. Other additional values for the insurance industry are: • The Finance Act 2020 provides an inclusion of proper definition of investment income for life insurance business as “income derived from investment of shareholders’ funds.” This will ensure that income attributable to investment of life insurance policy holders’ (insurance customers) funds are not subjected to tax in the hands of life insurance companies; • That tax deductible ex-

penses have been expanded to include additional 10% of estimated figures for “Claims incurred but not reported” Speaking further on the Act, she extolled the leadership qualities of Vice President Yemi Osinbajo who has pursued his reforms for the Ease of Doing Business with unusual fervor and drive, noting that the Finance Act and all the tax issues resolved therein are in furtherance of the goals of Ease of Doing Business. Ilori further stated that notwithstanding the above, the Finance Act also provides for modifications to the Stamp Duties Act (SDA) which legalizes

the charge of stamp duties on electronic receipts and also appoints the FIRS and State Internal Revenue Service as the relevant competent authorities responsible for collecting stamp duty on behalf of the Federal Government and the State Governments, respectively. This also puts to rest the dispute between the NIPOST and the FIRS as to which body is responsible for collecting the duties. Generally speaking, “the Finance Act 2020 has solved the issue of excess taxation on company profits to the effect that no further tax will be paid on any undistributed profit that has already been taxed. It is a major succor for member companies in the on-going recapitalization exercise and the Federal Government should be appreciated for the Act which has become a game changer by ensuring the fair taxation of insurance companies” she enthused. In her conclusion, Ilori noted that the “Act would promote reform of tax laws to align with global best practice and it is expected that it will enhance the industry contribution to GDP and encourage investors whilst entrenching Ease of Doing Business. This will help the insurance business to thrive and attain its full potentials”, She added.

Royal Exchange launches new website Modestus Anaesoronye

L-R: Hairat Suleiman, legal practitioner, Headfort Foundation; Bankole Banjo, brand, media and communications manager, African Alliance; Itunuoluwa Awolu, legal practitioner, Headfort Foundation; Funmi Omo, MD/CEO, African Alliance; Yemi Orija, convener, Headfort Foundation and Deshola Adenowo, executive assistant to the MD/ CE, African Alliance during Headfort Foundation’s courtesy visit to African Alliance. www.businessday.ng

oyal Exchange Plc, Nigeria’s leading financial services and insurance group is has re-launched its corporate website: www.royalexchangeplc.com and also created five additional websites for all the subsidiaries in the group as well as a new mobile site for hand-held mobile devices. The new website, which includes a full re-design and implementation of a robust content management system suited for our specific business needs, offers visitors to the site, comprehensive information on all classes of general insurance, life assurance, financing, and asset/wealth management information for individuals, families and

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business, which can be accessed anywhere they are in the world. It also boasts of conveniences, such as e-payment solutions, insurance quote request form, product features and benefits, access to our insurance procedures, investor relations, current happenings within the Royal Exchange group and a live chat capability with the Call Centre operators for help on issues relating to the business. Speaking recently on the new website, John Iwuajoku, group executive director, Operations, Royal Exchange Plc said, “Our new website is designed with great customer experience at the bedrock. It takes convenience to another level by providing frictionless self-service features that empowers existing and new customer to seamlessly pur@Businessdayng

chase products without any manual intervention. For us, this is indeed a step in the right direction. The re-launch of our website represents a revitalized Royal Exchange Plc and by utilizing the latest web technology, Royal Exchange Plc is poised for the future, with a greater online presence”. The Royal Exchange website redesign was motivated by the need for online and offline brand consistency and Royal Exchange’s desire to develop a consumer-centric web presence. It would be recalled that Royal Exchange Plc won the ‘Best Web Transaction Processing Website Award’, insurance category of the 2012 Web Jurist Award conducted by Phillips Consulting and came third in the same category the following year.

BUSINESS DAY

insurance today E-mail: insurancetoday@businessdayonline.com

Recapitalisation in insurance industry is long overdue, say’s African Alliance CEO Nigerian insurance industry is embarking on a major recapitalisation exercise with a lot of funds expected to flow into the sector, from both within and outside the country. Funmi Omo, MD/CEO of African Alliance Insurance Plc in this interview with Modestus Anaesoronye shares her thought on future of the company; recapitalisation plans and other issues that concern her as a chief executive. Excerpt: Funmi Omo is managing one of the leading life insurance companies in Nigeria, but has preferred to remain quiet. What is the best way to describe you Ma? won’t describe myself as quiet though. Unassuming, yes: intuitive, and with an ability to draw energy from within. African Alliance Insurance recently released its unaudited full year result for 2019, showing major developments in terms of volume and underwriting performance, what have you started to do differently since you came in as CEO of this company? I became the CEO in 2017 and the first thing we knew we needed to do was to reposition the brand. A key strategic decision was to focus more on traditional insurance products and rebrand the business. In doing this, we leveraged heavily on digital technology to improve efficiency, manage cost and deliver faster, better results. All these have reaped good fruits for us as the top line of our financials show. In 2016, the year before I became the CEO, we wrote N14.26 billion of which over 85 percent of that was annuity, meaning roughly N2 billion was from other lines of business combined. We suspended sales of annuity in 2017 and our 2019 unaudited figures showed we wrote N7.5 billion. That is almost 400 percent leap in gross written premium from other lines of business that annuity nearly stifled. Like you said, that is a major leap in terms of volume. This shows we are a viable, virile institution with the right structures and capability to do much more and serve our customers very well. Unfortunately, the impact of suspending the sales of annuity vis-à-vis the peculiarities of payouts to annuitants still shows in our bottom line. However, all hands are on deck to turn this around. It’s a bend I am very confident we will turn this year. Your shareholders we believe are beginning to look at African Alliance differently and more positively now, how long will their waiting for dividend last? Not very long. Not long at all. With the strategies on ground, we are definitely getting there. The nation’s insurance industry is embarking on a major project of recapitalization, which many have said holds the big future for the business, what is your take on this? Honestly, I feel the exercise is long overdue. It’s one that will help strengthen the industry, build stronger institutions and assure stakeholders. It will also help boost

Funmi Omo

our capital bases whose values have taken a hit by current economic realities and by so doing, insurance could take its rightful place as a major driver of the economy. Really, insurance is supposed to be the major sustenance for everyone –individuals, corporates and even the nation. In specific terms, take us through your recapitalization plans? I wish I could literally list the step-bystep plans towards recapitalization but as you know, this is a very sensitive topic and I would not be able to say much. But know this: we are on course. Our shareholders are happy with the plans because we already shared with them and we have started executing same. To be a little more specific, we are looking inwardly, assessing and realizing the full value of some of our assets that we could leverage on as well as a couple of external interests in the business. Remember. we are a legacy www.businessday.ng

‘ brand As a legacy with 60 years of experience in this market, we know enough to say that this is the time to reflect and redefine strategies for survival

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‘

Wednesday 19 February 2020

brand, we have enough assets and goodwill to pull this off; all we are doing is to ensure we do our due diligence and don’t come off short in any way. Are you considering a merger or acquisition, and do you think these are good strategies at this point in the business? You are asking the same question differently. I believe in mutually beneficial strategic partnerships, so we will wait and see. The National Insurance Commission (NAICOM) is expecting so much from annuity business, but this seems different from the way players are looking at it, can you share your thought on this? This is a sensitive question but I’ll quickly say this: the regulators definitely have their perspective and the players have theirs. So, it is neither here nor there. Give an insight into what African Alliance is planning for 2020, and what is your business expectation looking at the operating environment? A lot has been said about the operating environment which I would not want to rehash here. As a legacy brand with 60 years of experience in this market, we know enough to say that this is the time to reflect and redefine strategies for survival. Through thick, through thin, we know how and when to refocus and indeed restrategize. Maya Angelou said every storm runs out of rain. That exactly is our belief at African Alliance. So in 2020, while we weather this storm knowing it will, like many before it, run out of rain, we have re-evaluated our product lines, re-jigged some and created new ones that respond to the market needs. We are making progress despite the operating environment as you can see. We have become more agile, very nimble and extremely creative and innovative to reach our targets. We are not slowing down, we will do more and more until more becomes the norm. Any other issue critical in your mind? The CEO’s mind is always full. First, African Alliance turns 60 this year. As a homegrown CEO, I am quite ecstatic about this milestone as it signals the start of a brighter future for the business especially as it falls in the year of recapitalization. Second, I just lost my dad, Rt. Revd. Samuel Ajani, the first bishop of Egba West, Anglican Diocese. He was my mentor and, of course, major driving force growing up. It’s a tough one for me but then, what has happened has happened. His legacies are overwhelming and his death reminds me of my own mortality and the need to leave a legacy that will surpass his.

@Businessdayng

Wednesday 19 February 2020

BUSINESS DAY

Harvard Business Review

MANAGEMENTDIGEST

Why companies need to help ensure election integrity DANIEL DOBRYGOWSKI

he Iowa Democratic caucus, the first election of the 2020 cycle in the U.S., seems to have played into experts’ most dire concerns about election integrity. We need to recognize it as a warning to ensure election security. It’s well past time to activate everyone who has a stake in trustworthy elections — not only campaigns, government officials and voters, but also private companies. Much of the conversation around election security to date has focused on hacking, and it remains a serious concern. In 2016, Russian hackers targeted election infrastructure in more than two dozen U.S. states and compromised the email servers of Hillary Clinton’s presidential campaign. Adversaries have already begun targeting the 2020 presidential campaigns. Personal information about voters has also leaked from campaigns and political parties who store and analyze it online. But as the Iowa debacle showed us, election security is about more than cybersecurity. Decisions about how and when to use technology are made at every step of the voting process: Election officials increasingly look to digital mechanisms to tally votes; campaigns use a variety of apps to raise funds and get out the vote; and individual voters rely on their smartphones or social media for information. Each of these decision points brings a significant risk of failure, so each needs to be backed by a process that is resilient in the face of attacks by external actors and mistakes by internal administrators. This is where private companies can play a bigger role. If civic responsibility isn’t enough of a reason, economic incentives also demand that companies act as proactive democratic citizens. Democracy is good for economic growth. More directly, supporting elections in a nonpartisan way (like encouraging people to vote or securing polling stations) can also help a company’s bottom line — “being pro-democracy and pro-voter” has been shown to be good for companies. There are two broad areas where companies can help: They can offer technology, and

they can share knowledge. We’re already seeing examples of technological assistance from the private sector. The most high-profile effort, Microsoft’s Defending Democracy Program, has offered an array of solutions for security and combating disinformation. Google just announced a partnership with the nonpartisan, nonprofit Defending Digital Campaigns to consult on digital security and help campaigns protect their email accounts. Smaller companies and organizations are also offering security help, from Cloudflare’s Project Galileo, which protects civil rights and democratic institutions’ websites, to Security Scorecard’s Project Escher, which helps such organizations monitor their own security. The Department of Homeland Security maintains a library of resources aimed at safeguarding electoral systems. More companies can step up and offer such resources for free or at low cost — and work on developing more offerings for election infrastructure, not just for campaigns. But there’s an even greater need for expertise and guidance on how, when or even whether to use new technologies in campaigns and elections. For decades, every industry has been dealing with “digital transformation.” Right now, elections are undergoing www.businessday.ng

their own digital transformation, and this is an area where virtually every company can offer knowledge and support. If we recognize that democracy is a system like any other, with inputs (voters), processes (elections) and outputs (policies), businesses can apply what they’ve learned from other systems. For example, companies across the country are identifying best practices around challenges from access control (ensuring that only authorized users have access to key systems) to data protection (preventing information leaks) to “bring your own device” practices (determining how/when to allow employees to access business information on personal computers or phones). Election officials face these same challenges. Businesses should be forthcoming and offer to share their experiences. All that this requires is openness and taking the initiative to work together. If this kind of dialogue had happened between business leaders and the Iowa Democratic Party, maybe they would have realized that an app isn’t a solution to all problems, that technology doesn’t replace knowledge or strategy and that you shouldn’t apply an untested technology to a core function. Many companies have learned these lessons the hard way, and probably have other hard-earned lessons to share

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to help prevent the next avoidable failure. Even then, these lessons may not be shared quickly enough for the next caucus state, Nevada. Even though it may have ditched the faulty app used in Iowa, the process through which it adopted a new app may leave it open to similar faults. Business can do a lot of good by sharing insights from the digital transformations they’ve undergone over the past several years. Companies can also survey their strategic, risk and IT executives and staff on what they’ve learned and what lessons might be generally applicable for the cause of civic security. Even developing a list of good practices and red flags that can be publicly shared could drastically improve the knowledge base of election administrators. No matter their role, companies that choose to get involved in election security have a special obligation: to avoid harming democracy. No one should profit off democratic failure. These firms must ensure the security and functionality of their products or advice. Right now, there is no regulatory incentive to do so, so companies have to hold themselves to this high standard. So far, the Federal Election Commission has issued a series of rulings recognizing that campaigns need the assistance of private companies to en@Businessdayng

sure their networks are secure and trustworthy. This is a good start. Now business leaders and companies have to wake up to their civic responsibility. State and local election officials can also do more to facilitate the learning that needs to happen. Federal officials from the FBI and Department of Homeland Security already meet with the nation’s biggest tech companies to set strategy for combating foreign interference in elections. State election administrators and secretaries of state can use a similar approach on the broader issue of election technology. By convening companies, big and small, to transparently share plans for how to integrate technology into the electoral process, officials can welcome critical evaluations based on the expertise of people who have already led companies through similar transformations. Linus’s Law, the motto of open-source software, is that “given enough eyeballs, all bugs are shallow.” There’s an unacceptable quantity of bugs in our electoral systems. The only way to make them shallow enough to avoid widespread failure is for companies to lend their eyes to the digital transformation of elections. Daniel Dobrygowski is the head of governance and policy for the World Economic Forum Center for Cybersecurity.

Wednesday 12 February 2020

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Upscaled debutant Sorento changing SUV narratives …With touch of premium material, aesthetic finish MIKE OCHONMA Transport Editor

MIKE OCHONMA

port utility vehicles (SUV) freaks are in for a fresh dose of luxury and safety propositions following the revelation of first official images of the new Sorento this week by Kia Motors Corporation, ahead of its first public appearance at the 2020 Geneva International Motor Show. The next-generation model is based on an all-new platform, raising standards in the midsize SUV segment for space, practicality, efficiency, and quality. In presenting the revamped model, the concept of ‘refined boldness’ inspired Kia’s designers, who sought to maintain the robust, tough-looking aesthetic of earlier generations of Sorento, while applying a greater degree of refinement and elegance. More stylish than ever, the SUVs redefined design incorporates sharper lines and uninterrupted surfaces, making it noticeable more sculpted than its more round-edged predecessor. With more contemporary geometric details and more swept-back, elongated proportions, the result is a more confident, more mature and more desirable design than ever. The more assertive ‘face’ of the Sorento evolves, too, with a new interpretation of Kia’s hallmark ‘tiger nose’ grille. Wider and more expansive, it wraps organically around the integrated

Fashola’s former commissioner back motorcycles, tricycles ban on Lagos roads

ayode Opeifa, executive vice chairman, Presidential Task Team on Restoration of Law & Order on Apapa gridlock, and former special adviser on transportation and later commissioner of transportation to Babatunde Fashola, the current Nigeria’s minister of works and housing and former governor of Lagos state between 2007 and 2015 has expressed support for the ban of motorcycles and motorcycles in parts of Lagos State. Opeifa, said the use of motorcycles and tricycle for com-

headlamps on each side. Sorento’s headlamps themselves feature a new ‘tiger eye’ LED daytime running light, adding extra focus to the design by depicting the intense impression of the lines around a tiger’s eyes. In profile, the proportions are subtly adapted to make it appear longer, with shorter front and rear overhangs and a longer wheelbase. Its new proportions also extend the length of the bonnet, drawing the A-pillar 30 mm further back from the front axle for a more ‘cab-rearward’ design. The trailing edge of the hood wraps around the front wings and turns into a single, strong character line that extends along the side of the Sorento and flows into the new vertical taillights. Inside, the attractive, upscale

cabin introduces a sophisticated new design, incorporating cutting-edge infotainment, supreme practicality, and premium-grade materials. One of the highest quality interior spaces found in any Kia todate, the intuitive, tech-oriented cabin of the new Sorento retains the spaciousness and three-row versatility that has characterized the Sorento over its 18-year existence. Yet it now provides owners with something altogether more striking, desirable and comfortable. The cabin introduces a sophisticated next-generation design. Blending metallic trims, leather upholstery, and embossed woodeffect surfaces, the interior also subtly integrates other technologies to enhance connectivity, driver assistance, and infotainment.

The Sorento comes with a 10.25-inch touchscreen infotainment system incorporating audiovisual navigation, and also comes with a new 12.3-inch high-resolution digital instrument cluster that provides crystal-clear information to the driver. The progressive technologies available in the new model make it the most high-tech vehicle Kia has ever created. The Sorento sits at the heart of Kia’s reinvigorated global SUV line-up, which also includes the Seltos, Stonic, Sportage, and Telluride. It is the result of a collaborative effort between all three studios within the automaker’s global design network in Korea, Europe and North America. Designed and engineered to take on everything life can throw at it, the new Sorento will make its debut on March 3, 2020.

muter services constituted a serious threat to the safety and security of lives of the state, and expressed hope that the ban will drastically reduce the alarming rate of road crashes involving the modes of transportation within the metropolis. Governor Babajide Sanwo-Olu had last January announced that effective February 1, commercial motorContinues on page 30

CFAO Motors DMD becomes LASUMBA 12th National President MIKE OCHONMA

eadership baton changed hands at the Lagos State University MBA (LASUMBA) alumni following the formal investiture and inauguration of Kunle Jaiyesimi, the current deputy managing director of CFAO Motors as the 12th National President of LASUMBA Heritage; an association of alumni and managers of LASU MBA programme. In his inaugural speech, Kunle Jaiyesimi, the LASUMBA 12th national president while admitting that it is no doubt a herculean task to pilot the affairs of such Association with such a massive membership that is strategically spread across both private and public institutions in Nigeria and beyond, he noted that, it remains a greater task when the huge membership is indeed not optimally harmonized for easy access and ad-

R-L: Kunle Jaiyesimi, 12th National President, LASUMBA Heritage, Princess Ojo-Ede Vice-President, Sanni Ganiyu Okanlawon, member, Lagos State House of Assembly representing Kosofe Constituency 1, Rotimi Oladele, the keynote speaker and Muslim Folami, former commissioner for local government in Lagos state at the event.

ministration. Jaiyesimi promised that no matter how bumpy the road may appear, the new national executive is committed to work assiduously to ensure that the narratives are changed and most www.businessday.ng

importantly push for a rebranded LASUMBA Heritage in order to guarantee our pride of place in the comity of Alumni of Business Schools in Nigeria. In his submission, ‘’We know it is

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not going to be easy, but it is certainly achievable. Therefore, we have set in motion machinery in terms of working committees to plan for different programs of the Association during this tenure. Permit me to mention few of the programs lined up for the year’’. The new LASUMBA leader did not mince words when he admitted that the association’s Annual Business Forum has remained the flagship of LASUMBA Heritage programs, and pledged that he will ensure that the new executive will add more glamour and value to the Business Forum following the inauguration of a standing committee to commence plans for the business forum that will be take place by the middle of the year. Among other programmes, there will be periodic colloquium to be organized to stir up conversation on economic and business matters that are of national importance and that will add great value to the LASUMBA @Businessdayng

Heritage brand and of course be beneficial to our members in order to attract national relevance and add voice to national issues. One immediate task is to have a compendium of the over 30,000 MBA graduates that passed out of the School of Postgraduate Studies of the Lagos State University since the commencement of the Programme in 1994. This will he argued will go a long way in its resolve to have a formidable and responsive Alumni Association. The current LASUMBA executive also plans to initiate a Project Fund specially dedicated to instituting worthwhile projects in Lagos State University as a means of giving back to the institution and members will be encouraged to contribute to this fund regularly. Kunle Jayesimi appreciated the valuable role of an Alumni Association like LASUMBA in contributing to the development of their alma mater.

Wednesday 19 February 2020

BUSINESS DAY

TRANSPORTATION Motoring

RailBusiness

ModernTravel

Roads

Evoque is luxury freaks’ favourite compact SUV MIKE OCHONMA

Automakers battling disruptions over Coronavirus woes MIKE OCHONMA Transport Editor

he virus threatens to halve February car sales in China, the largest market for Volkswagen, BMW and Mercedes. It’s the latest setback for Germany’s struggling auto industry, already reeling from waning global demand. With the epidemic ravaging the global economy in one way or another, the killer coronavirus outbreak in China is expected to hurt car sales in the world’s biggest auto market, dealing a major blow to German carmakers, which depend on the Asian economic powerhouse for a bulk of their sales. Specifically, the virus is the latest headache for the German auto industry, already reeling from pollution concerns, exacerbated by the “Dieselgate” emissions scandal, waning global demand amid weakening economic growth, higher tariffs caused by US-China trade tensions and a costly transition to electric and self-driving cars. Its negative impact has caused Mercedes Benzowner Daimler and VW’s

Audi unit to announce nearly 20,000 job cuts in the past few months as they look to save costs to fund their electric car drive, even as car parts suppliers Continental and Robert Bosch also plan to cut thousands of jobs. Emmanuel Bulle, senior director at Fitch Ratings said, “The German automakers and suppliers are the most exposed in Europe to the coronavirus. The risk for them comes mainly from lost sales rather than immediate disrupted production, since BMW, Daimler and VW have no factories in Hubei,” he said referring to the Chinese province which is the auto production hub that is at the heart of the outbreak that has claimed more than 1,300 lives. German automakers, unlike Chinese and US makers, have been increasing their market share in China even as the auto industry in the Asian country witnesses its worst slump in over two decades. China accounts for four out of every 10 Volkswagen cars sold worldwide and almost three out of every 10 BMW or Mercedes cars delivered globally. BMW’s and Daimler’s shares of earnings coming from China are even

higher. While German carmakers may so far have escaped the worst of supply-related disruptions thanks to them not having factories in the auto production hub of Hubei, automakers elsewhere are bracing for major fallout from the virus outbreak. VW and Daimler said that, while it was too early to gauge the full impact of the virus crisis, they do expect it to hit their sales.”Facing the current challenge, we know that purchasing new cars is not a priority for most people,” said Nikolas Thorke, spokesman for VWs China operation. VW has tweaked its marketing strategy with a greater focus now on online interaction and transaction with customers via online showrooms. The company did not provide any data on the response to its online showrooms, but Gong said the online showrooms in general were not attracting much traffic. On the back of extended factory shutdowns, Mercedes-Benz’s Chinese joint venture Beijing Benz restarted production of luxury passenger cars on Monday, about a week later than otherwise scheduled.

VW’s local joint ventures, FAW-VW and SAIC Volkswagen, are expected to resume production at all their plants by the beginning of this week. The JVs delivered 4.21 million vehicles, or about 40 percent of total VW global sales, to buyers on the Chinese mainland and in Hong Kong in 2018. BMW’s joint venture BMW Brilliance (BBA) is also expected to resume production on Monday after an extended production break. The two BBA plants produced over 530,000 in 2019, all intended for the local Chinese market. BMW sold 2.5 million cars worldwide. Analysts say some lost sales have only been postponed and that orders will rebound in the coming months. In fact, new car sales could even go up in the longer term as the experience of disrupted public transportation and ride-hailing services during the crisis may prompt more people to buy their own cars. But, there are fears that if the crisis lingers on for a few more weeks, it would start hurting the broader economy and even at a global dimension and result in a loss in consumer confidence, ultimately hitting auto sales.

he luxury compact SUV was named Best Imported Compact SUV and Off-road Vehicle at the Auto Motor und Sport Best Cars Readers’ Choice Awards after a poll of more than 100,000 magazine readers. Evoque was praised for its combination of Range Rover luxury, modernist design and sustainable and innovative technologies. Jagu a r wa s a l s o among the prizes, with the F-TYPE Convertible taking third place in the Imported Convertibles category. While accepting both awards, Felix Bräutigam, Jaguar Land Rover chief commercial officer said that the award is among the most important barometers for the automotive industry, which is why the automaker is even more excited that the highly discerning jury of magazine readers keeps choosing Jaguar

Land Rover as winners year after year. “By awarding top place to the new Range Rover Evoque, more than 100,000 readers are rewarding its unique concept, design and innovative technology. The third-place finish of the F-TYPE convertible is a testament to the unique character of the new Jaguar convertible. This success is a great affirmation of the work of our entire team. Our customers can continue to expect extraordinary vehicles from us in the future.” He noted. Jaguar and Land Rover models have been consistently successful in the Best Cars Awards. The original Evoque was named Best Imported Compact SUV and Offroad Vehicle in 2015, 2016 and 2017. The Jaguar F-TYPE was making its sixth consecutive appearance on the podium. It was revealed in December and will be launched in sub-Sahara Africa in 2020.

Fashola’s former commissioner back motorcycles... Continued from page 29

cyclists and tricyclists operating on major highways and certain roads in the metropolis will be banned. The development has attracted mixed reactions from many Lagosians since the ban came into force. Contrary to insinuations by many road users in the state, Kayode Opeifa told BusinessDay that, the Lagos state government even un-

This is the ever busy Mile 2, the ever-busy axis on the Lagos-Badagry Expressway where commercial motorcycles still thrives despite government ban www.businessday.ng

der the administration of Babatunde Fashola from 2007 to 2015 did not at any point approve or issue any corporate or individual licenses to motorcycle and tricycle operators. He declared that, the recent move by the Babajide Sanwo-Olu administration in Lagos state will no doubt bring sanity on the roads, lower fatality rates and reduce traffic congestion in the

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metropolis. The state government he said is working hard to improve the transportation system that will make movement easy for every Lagosian. Opeifa said that as a centre of excellence, okada and tricycle (Keke) cannot be part of the plan of a megacity like Lagos. Criticisms have continued to trail the development on different social platforms where @Businessdayng

many despite injection of more additional buses and ferries to cushion the effects of the ban since Februaury 1 when the ban came into effect. While many argued that the governor reneged on his campaign promise not to ban Okada in Lagos, others based their criticisms on the state’s lack of preparedness on the resultant pains and misery that the ban will inflict on the masses.

Wednesday 19 February 2020

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

China, US, India, Netherlands, Belgium lead as Nigeria’s biggest import trade partners amaka Anagor-Ewuzie

hina, United States of America, India, Nethe rla n d s a nd Belgium have been listed as Nigeria’s major import trading partners, showing that most of the goods imported into Nigeria came from the above listed countries in the third quarter of 2019, says the National Bureau of Statistics (NBS) third quarter report. According to NBS, Nigeria’s imports, by country of origin, shows 31.34 percent of goods valued at over N1, 221 trillion were imported mainly from China in the period under review. NBS further stated that Nigeria also imported 11.35 percent of goods from the United States worth N442.4 billion while 7.49 percent of goods worth N292 billion were imported from India within the period under review.

Also, the report has it that 6.80 percent of goods worth over N265.2 billion were imported from the Netherlands and about 3.98 percent of goods valued at N155.2 billion were imported into Nigeria from Belgium in the third quarter of 2019. “Nigeria’s imports stood at N3, 899 trillion in the third quarter of 2019, representing a decrease of

2.70 percent over the value recorded in the preceding quarter two of 2019 and 7.47 percent over the corresponding quarter of 2018,” NBS stated. The report attributed the decline in import value to decrease in the values of mineral fuel, which fell by N381.9 billion or 41.98 percent and crude inedible materials that stood at N15.95 billion or

24.44 percent in quarter under review compare to their values in quarter two. “In terms of import by continent, during the same quarter, Nigeria imported goods mainly from Asia, and valued at N1,998 trillion or 51.3 percent of total imports. Other major imports originated from Europe, valued at N1,194 trillion or 30.6 percent while

amaka Anagor-Ewuzie

…Hapag-Lloyd, Maersk, others decry operational delays amaka Anagor-Ewuzie

hipping liners calling Nigerian ports in Lagos are presently experiencing operational delays due to the lingering congestion within the port terminals resulting in long waiting time of vessels before accessing the port to discharge laden containers. Currently, shipping liners are spending more than 25 days waiting time in Apapa Container terminal, West Africa’s busiest container terminal and over 10 days waiting time in Tin-Can Island Container Terminal. For instance, HapagLloyd, German shipping company recently said that the current waiting time for berth in APMT terminal in Apapa, Nigeria, is now more than 25 days while for TICT terminal (Tin-Can Island) waiting times exceed 10 days. According to the liner, these operational delays

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break-downs and long truck queues. We continue to work proactively with all our terminal partners across West Africa and specifically with Nigerian Ports Authority (NPA) to assist where possible in mitigating the congestion currently being experienced in Lagos,” said the Customer Advisory note. The note further pointed out that Maersk has adjusted its various services across Far East to West Africa network in order to deliver a stable and reliable product to customers. Ma e r s k h o w e v e r e xplained that changes to its ser vice rotation were to ensure it continues call at all West African ports while ensuring that it limits the impact of the delays on customers’ cargo. Recall that terminal owners are also complaining that vessels with laden containers, which ordinarily should seamlessly discharge their consignments within 48 hours, are begin-

Singapore respectively, while machines for reception and chassis fitted with engines for assembly plants, respectively worth N50.36 billion and N50.42 billion were also imported from China during the period under review. However, cane sugar worth N31.95 billion was imported from Brazil. Other products imported were preparations for infant use valued at N12.5 billion, N7.8 billion and N1.7 billion imported from China, the United Kingdom and the Netherlands respectively. “In addition, milk preparations containing vegetable fats worth N8.8 billion, N3.3 billion, N2.1 billion and N1.0 billion were imported from Ireland, Australia, Malaysia and the Netherlands respectively. During the quarter, mixtures of odoriferous substance valued at N10.2billion were also imported from Ireland,” NBS added.

Customs’ agents call for review of border closure

Congestion heightens in Lagos Ports as vessel waiting time hits 25 days are heavily affecting its two services called MIAX and MWX, which have calls at both terminals in their longterm schedules. Hapag-Lloyd further assured its customers that it would continue to take measures for each vessel approaching the port of Lagos in order to minimise the impact on its customers. “If a decision to omit APMT terminal is taken, the cargo will be discharged at TICT terminal and further transferred to KCT terminal by dedicated barge service on Hapag-Lloyd account and arrangement, where Customs clearance of Apapa cargo is possible,” the shipping liner stated. Meanwhile, in a related development, Maersk Line recently confirmed in its Customer Advisory note that its calls to Lagos ports are presently facing challenges. “Currently, we are experiencing severe delays in Lagos due to highly utilised terminal yards, crane

imports from the Americas and Africa amounted to N576.7 billion or 14.8 percent and N106.0 billion or 2.7 percent respectively,” NBS stated. Also, NBS reported that import from Oceania stood at N23.8 billion equaling 0.6 percent of total imports while goods valued at N19.1 billion originated from ECOWAS. “Imports of used vehicles worth N120.6 billion were brought into the country from the United States, N6.3 billion worth of vehicles were brought in from Italy, N4.3 billion vehicles came from Belgium, N3.9 billion vehicles came from Germany and N3.9 billion from Canada. Other imported products were motorcycles from India and China, worth N81.8 billion and N35.7 billion respectively,” NBS said. According to the report, vaccines for human medicine, worth N37.8 billion and N37.6 billion were imported from Denmark and

ning to spend three weeks in waiting time before having access into the ports to berth. Tunde Keshinro, general manager, Ports and Terminal Multservices Limited (PTML) in Tin-Can Island, recently told visiting International Monetary Fund (IMF) delegates to tour Nigerian ports, that his terminal has been recording growing number of overtime and abandoned cargoes that have been abandoned at the terminal since 2016. According to him, overtime cargo is currently occupying more than 30 percent of commercial space in the terminal due to the failure of the Nigeria Customs Service (NCS) to auction them as required. “Since 2016, we have been struggling with 30 percent of our space that was locked up under abandoned cargo because Customs has not been auctioning and that has become a serious concern for us,” he said.

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wing to the alarming number of goods trapped at the land borders estimated at over 2,000 trucks of laden goods, the Association of Nigerian Licensed Customs Agents (ANLCA) has called on the Federal Government to review the border closure policy. Tony Nwabunike, national president of ANLCA, who made the call at a recent media briefing in Lagos, said that though, the ongoing land border closure had brought some gains to the country, that there should be a review of the policy for the benefit of legitimate importers. “Six months into the border closure which commenced on Aug. 20, 2019, the situation of goods at the Seme Border is now very sad; something should be done to reduce the suffering of importers of @Businessdayng

these goods,” Nwabunike pleaded. According to him, some of the imported goods have decayed and attracted maggots and the goods had been under harsh weather. Stating that the borders should not be permanently closed, he said that importers had lost huge amounts of money to the closure. He a p p e a l e d t o t h e Federal Government to urgently review the situation and allow dutiable goods from the affected neighbouring countries to come in. Nwabunike said that such would save many businesses from dying and ameliorate the indebtedness that many genuine businessmen and women found themselves in due to the border closure. He noted that the border closure had led to port congestion due to the fact that the facilities at the port were not adequate for the huge traffic.

Wednesday 19 February 2020

BUSINESS DAY

MARITIMEBUSINESS Shipping

Logistics

Maritime e-Commerce

Coronavirus: Shippers face price hikes, shortages over cancellation of sailings amaka Anagor-Ewuzie

s the extended Chinese New Year and Coronavir us outbreak continue to linger, major shipping alliance have slashed sailings due to shortage of cargoes following the closure of factories in China. According to Sea-Intelligence report, the rapid mass-cancellation of sailings is very likely to cause capacity shortages for backhaul shippers three-six weeks’ time, depending on where shippers are based. “Back-haul shippers should therefore prepare not only contingency plans for potential capacity issues, but also for significant price spikes. In terms of operations, we should expect larger than normal delays in the sailing schedules, an effect which will be felt for several months as the delayed vessels work their

way around their planned loops,” said Sea-Intelligence report. The report further stated that capacity issues could spread to other ports and countries, particularly in Viet Nam, where manufacturing plants have picked up some of the slack, which could lead to ‘capacity issues in secondary ports as well as an impact on feeder carrier rotations.’ Coronavirus blank sailings on the transpacific trade have reached 25, with carriers on the Asia-North America West Coast trade lane announcing 23 blank sailings, the report noted. “In total, roughly 231,100TEUs, 210,800TEUs on Asia-North America West Coast and 20,300TEUs on Asia-North America East Coast, or 6 percent of the total capacity, are slated to be taken out of the Pacific trades in the analysed eight week period, according to data analysis from SeaIntelligence.

It also said that the Asia-Europe trade will see a similar pattern with 22

blank sailings, with 16 on Asia-North Europe and six on Asia-Mediterranean.

“In TEU terms, this translates into a total capacity withdrawal of roughly

L-R: Yusuf Haruna, head, Aviation and Marine, Infrastructure Concession Regulatory Commission; Abayomi Obadare, general manager, Billing, Ports & Cargo Handling Services Limited, a subsidiary of SIFAX Group; Jobson Oseodion Ewalefoh, director, Contract Compliance, Infrastructure Concession Regulatory Commission and Talabi Adekitan, senior manager, Legal and Claims, Ports & Cargo Handling Services Limited, during the 2020 Compliance and Performance Monitoring of Public Private Partnership (PPP) Projects of the commission to Tin-Can Island Terminals recently.

364,800TEUs, 276,900TEUs on Asia-North Europe and 88,000TEUs on the AsiaMediterranean route, or 10 percent of the total capacity on the trade.” “Even then, they are slated to blank a lower amount compared to 2M and Ocean Alliance on that trade lane,” said Sea-Intelligence. For instance, 2M Alliance has announced blank sailings equaling roughly 269,200TEUs, which translates into 12 percent of their total capacity. Ocean Alliance is slated to blank 272,300TEUs or 10 percent of its total capacity. The Alliance will only blank 2 percent of its total capacity, which equates to 41,200TEUs, all to be blanked on AsiaNorth America West Coast route.” Sea-Intelligence reported that exports from China had been slashed by up to 350,000TEUs per week, costing the industry around US$350 million every week.

Amaechi lays foundation for Transport and Logistics Institute in Abia amaka Anagor-Ewuzie

hibuike Amaechi, Minister of Transportation on Saturday, laid the foundation for the building of the Institute of Transport and Logistics at the Gregory University, Uturu (GUU) in Abia State. The Institute upon completion will offer specialised transportation courses and provide laboratories for Maritime and Oceanography, Aviation/

Aeronautic, Designing and Construction Suites, Aerospace Engineering, Central Machining tools centre, Railway Engineering and simulation rooms. Amaechi assured of his willingness to partner the University in its initiative to educate Nigerians in the Transportation and Logistics field, taking advantage of the Federal Government’s development strides in the transport sector particularly the rail and maritime sub-

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sectors. “We will see how to partner with the university especially when we start the construction of the BonnyPort Harcourt-Maiduguri rail line. We are very particular about localising railway technology, that is why we are not only training our people in China but had also made the Chinese to build a transportation university and a wagon Assembly plant here in Nigeria,” Amaechi said. While making the com-

mencement speech at the University’s 8th matriculation ceremony, Amaechi encouraged the students to be diligent, have the fear of God and be courageous to ensure that they succeed. Gregory Iyke Ibe, chancellor/founder of GUU, said he was inspired by Amaechi’s developmental strides in the transportation ministry and the school is enthusiastic to tap into that sector in order to aid growth and training of Nigerians into becoming professionals in

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transport engineering and technology. “What we are doing here is to input technology, change methodology and we must succeed. This university has a printing press, a paint factory, a sew factory, and everything is produced here. We do fibre glasses here. Everything we do here, we do it because technology is done by human beings. I do not see why Nigerians who are well gifted cannot be trained in what we are doing,” he

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added. The Minister also paid a visit to the government of Abia State, where Governor Okezie Ikpeazu represented by his deputy Ude Oko Chukwu sought the Ministry of Transportation’s assistance in ensuring that the planned inland dry ports in Isiala Ngwa, is achieved. He pledged the state government’s willingness to support the Federal Government in any project it’s doing in the state.

Wednesday 19 February 2020

BUSINESS DAY

Corporate governance

Corporate Strategy Formulation and Implementation: The role of the board Olayimika Phillips

very company has its overall commercial objectives which it seeks to achieve, often dictated by the peculiar demands of the economic sector it plays in. The ultimate objective of most companies is to stay competitive in the industry. To achieve this, the company is required to have in place a robust, strategic and innovative business strategies to enable it thrive not just in good times but also in an adverse economic, political and regulatory terrain and consequently maintain competitive edge in the market. This must be clearly defined in its business plan. Given the utility of a clearly defined business strategy to the overall growth and profitability of any company, it is crucial to consider the role of the management and board of directors (the Board) in the formulation and implementation of the strategy. The Management and Corporate Strategy In a typical corporate set-up, the Managing Director/Chief Executive Officer (MD/CEO) heads the management and therefore saddled with the principal responsibility of the day-to-day administration of the company’s affairs. The prevailing view is that the management is expected to devise and present the corporate strategy; while also filling in the minute details of such strategy given their closeness to the core business operations. To illustrate, let us consider a public company operational in the engineering and construction industry. Aside the fact that it has a management responsible for its daily administration, it also has an active board together with other mandatory statutory committees. Given the intense competition in the construction industry in Nigeria largely dominated by established construction companies with strong technical expertise and extensive international experience, it is imperative that the company devises innovative and cuttingedge business strategy targeted at improving its operational efficiency, market satisfaction metrics and overall profitability

ratio. In addition, the company must recruit, train and retain, the best engineers and architects in the industry as well as provide them a very conducive and supportive work environment necessary for optimal employee performance. Any-thing short of this may spell doom to the continued success and overall profitability of the company in the sector with the potential consequence of non-distribution of dividends to shareholders at the end of any financial year. In the long run, the company may simply become unprofitable. To escape this bleak outcome, and given the strategic role of the management to the company, it is indisputably crucial that the MD/ CEO sufficiently understands the practical exigencies of the business, possesses an impeccable business and management skills and, where necessary, work closely with and draw on the expertise of other key business development officers in formulating the company’s business strategy. This is so because the management is the first port of call in all things pertaining to the company’s business and such critical role must not be downplayed. Strategic Role of the Board The role of the Board in strategy formulation and implementation is equally very crucial. As www.businessday.ng

a matter of sound governance practice, the Board is responsible for defining the company’s broad goals and vision and ensuring human and financial resources are effectively deployed towards attaining those goals. In discharging its duties, it is imperative that the Board be composed of members who possess a thorough understanding of the nature of the business and adequately appreciate the strategic vision, mission and direction of the company. In constituting the Board, emphasis must be placed on specific sectoral knowledge, technical expertise and the professional

experience of the proposed board members. Rather than making affiliative appointment of directors based on friendship/ relationships, modern commercial realities- driven by intense competition, particularly for a defined market base, demands an experienced board In this regard, the Board will be well positioned to properly scrutinize and assess the viability or otherwise of any business strategy by making invaluable contributions/insights on any proposed business strategy and appropriately test them against prevailing market forces and current economic trends.

In constituting the Board, emphasis must be placed on specific sectoral knowledge, technical expertise and the professional experience of the proposed board members

Synergy between Board and the Management In defining the strategic plan, it is very important that the Board work closely with the management. The management typically devises and comes forward with the draft business strategy. It is in this wise that the Board scrutinises by adding value, proffering invaluable insights to the strategy formulation and grounding the management where there is a spectre of irrational empire building. The Board considers the potential market challenges the strategy should seek to address which may include emergence of competitors, growth decline, technology disrup-

‘

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tion or an increasingly bloated cost structure, and, where appropriate, propose alternative approaches to this business strategy. The management is therefore expected to consider the proposed recommendations/options in re-formulating and then presenting the desired strategic choice. In addition, the Board owes a primal duty to monitor and hold accountable the management in the proper implementation of the strategy. In sum, the formulation of a functional corporate strategy is a joint enterprise between performance-driven management and an informed board. It is in the utmost interest of the company that a collaborative synergy exists between the Board and the management in the course of making strategic commercial decisions for the company. As much as possible, the propensity for friction in the course of business decision-making will be reduced where the board and management work together in the formulation and execution of strategy. Both sides must see themselves as strategic partners in the overall company’s project. Constant flow of information and unrestricted exchange of ideas between the Board and the management will undoubtedly produce a viable business case with the long-term positive effect of improving the overall profitability and success of the company.

Olayimika is a Partner in the law firm of Olaniwun Ajayi LP and has over 34 years of professional experience. She specializes in corporate governance, providing pragmatic solutions to the diverse challenges which confront corporates at different growth stages and serves on the board of several companies (listed and privately held).”

Wednesday 19 February 2020

BUSINESS DAY

Economic INSIGHT

Headline inflation crosses the 12% threshold

igeria’s headline inflation crossed the 12% threshold in January, rising at a faster pace than we anticipated to 12.13 percent from 11.98% in December 2019. This is the 5th consecutive monthly increase and the highest level in the last 21 months. The slope of the inflation curve, which had declined in the last two months, is up by 0.15%. More disturbing is the fact that the month-onmonth inflation, which is a better reflection of market realities, bucked its two months declining trend. This suggests that the impact of other inflation stoking factors such as money supply saturation and higher logistics costs that have been benign, are becoming more potent. This will be a major concern for the MPC when it meets in March. At the last meeting, the committee emphasized the determination of the CBN to rein in inflation because of its negative impact on GDP growth and unemployment. Notably, all the sub indices moved in the same direction with the headline inflation. Core inflation increased by 0.02 percent to 9.35 percent; food by 0.18 percent to 14.85 percent; urban by 0.16 percent to 12.78 percent and rural inflation by 0.13 percent to 11.54 percent. The continuous rise in the general price level can be largely attributed to: • Money supply saturation: Broad money supply increased by 4.99 percent (5.44 percent annualized) to N28.42 trillion in November 2019 and is expected to rise further due to the CBN’s heterodox policies.

• Higher logistics costs: Diesel, the fuel that powers most distribution trucks and generators, spiked by 2.33 percent to N220 per liter, implying that logistics costs will increase. Inflation Breakdown Month-on-month inflation reverses declining trend The month-on-month inflation increased by 0.02 percent to 0.87 percent (10.99 percent annualized) in January. This is happening after the index declined for two consecutive months to 0.85 percent (10.75 percent annualized) in December 2019. Food inflation remains the culprit of rising inflation The year-on-year food inflation continued its uptick in January, increasing to 14.85 percent from 14.67 percent in the prior month. This is the highest level since March 2018. On a monthly basis, the index rose by 0.02 percent to 0.99 percent. Food items, account for more than 50 percent of the overall basket, thus dictating the direction of headline inflation. The commodities that recorded the highest price increases were Bread and Cereals, Meat, Oils and fats, Potatoes, Yam and other tubers and Fish. Core inflation inches up to 9.35 percent The annual core sub-index (inflation less seasonalities) increased to 9.35 percent from 9.33 percent in December 2019. On a monthly basis, it inched up to 0.82 percent from 0.81 percent in the preceding month. This can be partly attributed to higher logistics costs. Diesel prices increased by

2.33 percent to N220 per liter. Rural & Urban Indices Rural and urban inflation rates (year-on-year) rose to 11.54 percent and 12.78 percent, from 11.41percent and 12.62 percent respectively in December. On a monthly basis, both indices increased marginally by 0.01percent and 0.02 percent to 0.83 percent

The inflation trend across subSaharan Africa (SSA) was mixed in January. Of the 7 SSA countries under our review, 5 have released their January inflation numbers. While inflation declined in Kenya, Ghana, Uganda and Zimbabwe, Zambia recorded an increase. For the first time since June 2018, Zimbabwe’s year-on-year inflation rate declined to 473.1 percent while the month-on-month inflation rate was reported at 2.23 percent (11-month low) from 16.55 percent. This was buoyed by lower prices of food and non-alcoholic drinks.

quent months emanating from higher logistics costs (diesel price increase), the implementation of the new VAT rate of 7.5 percent and the commencement of cost reflective electricity tariffs. The abnormal spike in transport fares in some parts of Lagos state as a result of the ban on motorcycles and tricycles is expected to contribute to rising urban inflation. This will be a front burner issue at the Bankers Committee meeting today. It will also be a major concern for the MPC at its next meeting on March 23/24 especially if the February inflation numbers come in higher. At the last meeting, the committee noted that inflation rate above 12% is detrimental to output growth. The IMF in its recently concluded Article IV report on Nigeria also revised downward the country’s 2020 growth forecast to 2.0% from 2.5% and hinted at the possibility of inflation picking up in subsequent months. This increases the possibility of a change in the CBN’s current stance to a more tightening position.

Outlook & Implications We anticipate a build-up in inflationary pressures in subse-

Courtesy: Financial Derivatives Company Ltd.

and 0.92 percent respectively. State by State Analysis Kwara state had the lowest inflation rate of 9.49 percent, followed by Benue (9.61 percent) and Delta (9.95 percent). The states with the highest inflation rates were Sokoto (15.20 percent), Kebbi (14.37 percent) and Niger (14.23 percent). Sub-Saharan Africa – Mixed inflation trend – 4 Reds, 4 Greens

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Wednesday 19 February 2020

BUSINESS DAY

FINANCIAL INCLUSION

& INNOVATION

Citibank identifies 4 approaches for inclusive financial inclusion growth Endurance Okafor

n many emerging economies, the advent of financial technology (Fintech) industry driven by mobile phone penetration and new regulations that are giving opportunity for the creation of new products have accelerated the pace of financial inclusion. Fuelled by the need to eradicate long queues in banking halls, make cash transactions easier, faster and resolve other issues associated with payments and financial transactions the shifts are also making it possible to achieve inclusive financial inclusion, checks by BusinessDay shows. “From Bangladesh to Kenya, and Nigeria to Mexico, financial sector business models are using digital solutions to fulfill client needs and transform financial inclusion,” Citibank said in its report titled Banking the next billionaire: Digital Financial Inclusion in Action. According to the consumer division of financial services multinational Citigroup countries that should grow fast in mobile money but have faced policy roadblocks include Egypt and Nigeria. “We now flag Nigeria as the market most likely to see rapid growth in the short term as we foresee an industry transformation following regulatory changes that will allow telcoled mobile money models,” New York-based lender said. Telecommunication operators’ push to offer mobile money services in Nigeria received the official nod of the regulator, the Central Bank

with the issuance of guidelines for players to apply for the payment service bank (PSB) licence. A PSB license will allow the companies to among other things; maintain savings accounts and accept deposits from individuals and small businesses, which is covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and prepaid cards; and operate an electronic purse or wallet. Before October 2018, only banks and licensed financial institutions were allowed to provide financial services. Although telecom operators and other Fintech companies indicated interests to operate in the market, the CBN policy would not allow them. The regulator eventually shifted because of the increasing

rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access. The latest figures by EFInA put Nigeria’s financial inclusion rate at 63.2 percent, meaning as much as 36.8 percent of adults still lack access. Telco-led financial inclusion model in African countries has led to tremendous progress in the number of people with access to financial services owing to the already existing large customer base of the Telcos. Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population numbers, remains at 1 percent owing to its bank-led model. Ghana’s decision to have a Telco led model resulted in a 73 percent increase in

registered mobile money customers in just one year, according to World bank data, and has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014. This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent. Ivory Coast has the fifth highest rate of mobile money accounts in the world behind Kenya (58 percent), Somalia (37 percent), Uganda (35 percent), and Tanzania (32 percent), according to Brookings Institute, a Washingtonbased nonprofit public policy organization. Kenya also improved to 81.6 percent financial inclusion rate in 2017 from 74.7 percent in 2014, Ivory Coast improved to 41.3 percent

from 34.3 percent and South Africa increased marginally to 69.2 percent from 70.3 percent. “The roll-out of Payment Service Banks guidelines that allows licensing of Telco subsidiaries is welcome and should be implemented,” International Monetary Fund (IMF) said in April 2019. Citibank said in it believes there are four key approaches on the forefront of driving inclusive growth through financial technology and they include: Unique identity models According to Citibank, unique identity models are changing the way people bank because new national identity programs have facilitated biometric information to tackle regulatory issues that have historically been roadblocks to reaching new clients. Lack of identity being one of the requirements for opening a bank account is one of the reasons for the Nigeria’s high exclusion rate, checks by BusinessDay shows. Although, the Committee on Citizen Data Management and Harmonization inaugurated by President Muhammadu Buhari has assured that it would enhance speedy harmonization of Nigeria’s numerous citizen identification data held by different government Ministries, Departments and Agencies with a view to ensuring a single database owned and managed by the Federal Government. Mobile money Mobile money is one of the approaches recommended by Citibank for any nation that wants to achieve an inclusion

financial inclusion growth. Defining it as the technology that allows people to retrieve, store and spend money using a mobile device, Citibank said due to the combination of simplicity, convenience and safety, mobile money is becoming an alternative to bank accounts and payments in several emerging and frontier markets. “Mobile money has grown at a rapid pace, and mobile money operators and conveniently located agents are replacing traditional bank branches,” said while recommending it as a catalyst for inclusive access growth. Fintech “BigTech firms today have a larger customer base and broader geographic reach than leading financial institutions, and with their robust customer behavior data, could increasingly support customer-centric products and experiences, and even become financial service providers themselves,” Citibank said. Microfinance According to Citibank, microfinance continues to evolve and expand, accompanied by new products such as credit, savings, insurance and payments, often enabled by mobile technology. “By designing financial products and methodologies based on an understanding of their client needs and capacity, microfinance institutions have demonstrated that historically excluded segments can be served sustainably, overcoming some of the biggest obstacles to provide access to credit or savings products,” it said.

Nigerian Esusu, PaddyCover to join 9 African Fintech startups for CATAPULT programme Endurance Okafor

wo Nigerian Fintech companies; savings startup Esusu and insurtech startup PaddyCover has been selected to join nine others from Africa to attend the 2020 edition of the CATAPULT programme. CATAPULT is a 1-week training and networking boot camp for Fintech companies working to develop financial inclusion in Africa. Developed by the LHoFT Foundation, this year’s edition of the programme which helps Fintech companies focusing on financial inclusion to scale will take place in Luxembourg, Europea

between 1st of March 2020 to 8 March 2020. Building on the success of its 2018 edition, CATAPULT: Inclusion Africa aims to build bridges between Africa and Europe. The programme will include sessions on “business model mapping, investment readiness, funding and capital raising, social impact, scaling strategy, building

teams, operational management, advisory meetings with investors, and pitch development,” LHoFT Foundation said on its website. With the objective to highlight and promote synergies, collaboration and potential partnerships between the participating Fintechs and international institutions, the programme aims to provide the selected

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startups with access to a tailor-made program with intensive mentoring, coaching, peer-to-peer learning and dedicated workshops. According to the LHoFT Foundation, the boot camp will support the promotion of Fintech for Financial Inclusion topic to the broader Responsible Finance sector in Luxembourg and beyond, to include PFIs, MFIs, Fund

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Managers, Philanthropists, Advisory and Support firms. Other African startups that made the list include two from Tanzania – investment robo-advisory platform A-Trader and digital wallet Dundiza. Seven other countries are represented, in the form of Ivory Coastbased payments startup CinetPay, Ugandan payments startup Eversend, Rwandan savings startup Exuus, Ghanaian pensions startup People’s Pension Trust, Kenyan digital financial marketplace Pezesha, South African payments startup uKheshe, and UK-based financial services marketplace SympliFi. “Travel and accommodation costs for the participat@Businessdayng

ing Fintech companies will be covered,” LHoFT Foundation assured. The boot camp aims to also promote and draw attention to the importance and value of Fintech for Financial Inclusion, through local and international media exposure, with the focus to bring attention to the initiatives that are driving positive change in Africa. Some of the criteria for selecting the eleven startups as stated by LHoFT Foundation included companies with clear financial inclusion focus that ideally provides the solution that is directly beneficial to work in partnership with a traditional financial institution and/or MFI/PFI.

Wednesday 19 February 2020

BUSINESS DAY

PRIVATEEQUITY &FUNDRAISING

CBN’s long-term naira contract positive, but FX scarcity raises red flag Stories by MICHAEL ANI

he move by the Central Bank aimed at providing a longterm naira contract for investors to hedge funds against a devaluation is a step in the right direction, however, the challenge of dollar scarcity persists, fund managers and private equity investors (PE) have said. The move would provide investors with the right naira pricing that would prevent their investments from eroding in the wake of currency devaluation, but getting dollars to exchange for the naira is always the problem, they said. “Yes, it is a good initiative in terms of the pricing and the ability for investors to hedge against currency risk but one significant thing that PE firms still consider is that signing into the contract still means they are taking the CBN risk,” one Lagos-based fund manager who manages money for over 100 foreign investors said. In a bid to attract more foreign inflows, shore up its dwindling dollar reserves and prevent the currency from weakening, the CBN on Thursday last week introduced longer-term contracts on the naira.

Godwin Emefiele

The financial regulator offered naira-futures contracts for five-year settlement for the first time, priced at 379.81 nairas to the U.S. dollar. The longest tenor before this move was a 13-month contract, which the central bank has offered for more than a year. This implies that forty-seven (47) new monthly OTC FX Futures contracts, in addition to the

existing thirteen (13) contracts have been introduced from February 13, 2020, bringing the total number of open OTC FX Futures contracts at any point to sixty (60). The contracts trade on the FMDQ OTC Securities Exchange. Although the introduction of the longer-term contracts on the naira holds big implications for investors particularly

private equity players and fund managers who manage dollar funds in local currencies, as they have raised red flag of currency devaluation as being their biggest threat in 2020, but can now hedge against such for more than a year yet there are concerns that in the wake of a devaluation, there would be naira looking for dollars to exchange with. Their fears arose from a 2016 scenario where the country suffered an acute dollar shortage owing to a fall in oil prices that followed with a five-quarter of negative growth. At that time, foreign investors searched for dollars to exchange with their naira but barely found any. This spiked inflation to a record high of 18 per cent and made investors pay as much as N500 to get a dollar in the black market. It was not until the Central bank established the Importers and Exporters (I&E) window before investors found comfort. “What the CBN does in FX futures is that your settlement is in Naira however one still have to find dollars then, as the apex bank is not obliged to provide dollars,” one investment banker who doesn’t want name mentioned due to the sensitivity of the matter told BusinessDay.

“Now today, there isn’t a dollar crisis hence one can get dollars, but if there is a run on the currency, one of the things that would happen is that dollars would become scares hence an investor will be sitting down with his naira looking for dollars to exchange with,” the person said. The person noted that the issue of dollar scarcity is what makes private equity players prefer to hedge externally. Pricing at the international market hovers around 395, signalling a huge margin differential between what happens outside and what exit inside in terms of hedging against currency devaluation, however, most PE About four years ago, the Central Bank introduced the naira settlement OTC FX futures to stabilize the market by bringing comfort to investors who had a bad time for their investments after rates where moved from 198-363. Players still prefer to hedge externally since they would have enough dollars at their disposal, the person said Since its inception, about $36 billion worth of contracts has been traded with about $26 billion of the amount settled. Some $10 billion worth of contracts are still outstanding.

AFRICA’S female fund managers to receive major boost with launch of multI-million dollar fund

frican leaders are putting women front and centre of efforts to drive the continent’s economic growth through a game-changing fund that invests in women fund managers and also provides technical assistance. The launch of the African Wo m e n L e a d e r s h i p Fu n d (AWLF) will provide capital to both first time and experienced fund managers in support of UN Sustainable Development Goals 5 (Gender Equality) and 8 (Decent Work and Economic Growth), and African Union Agenda 2063. The ground-breaking partnership formally signed at the weekend in Addis Ababa between the United Nations Economic Commission of Africa (ECA) and Standard Bank Group, will be transformational in breaking down structural

barriers to inclusive investing in Africa. Over $20 million was raised for the fund on Saturday that has a current goal of $100 million. President Paul Kagame of Rwanda was instrumental in leading the way, pledging $500,000. Senegal’s President Macky Sall committed $500,000. South African President Cyril Ramaphosa also pledged to contribute to the fund. The private sector participants pledged the rest. P r i m e Mi n i st e r Ju st i n Trudeau of Canada pledged $10 million to the African Union to boost gender parity. Norway Prime Minister Erna Solberg pledged $8 million to AU initiatives. A portion of these resources will be earmarked for the women’s initiative. Among the world leaders who witnessed the official

launch of this innovative impact investment fund were UN Secretary-General, Antonio Gutteres, African Union Commission Chairperson, Moussa Faki Mahamat, Ethiopian President Sahle-Work Zewde. Former Liberian President Ellen Johnson Sirleaf was also in attendance, as were a number of former African heads of state. “We are turning the tables and making women the decision-makers of investable money in Africa. We want women to be on the supply side of money, not only on the demand side,” said Vera Songwe, UN UnderSecretary-General and Executive Secretary of ECA. A key goal of the fund is to empower women financial leaders who will drive economic growth, job creation, and create prosperity. In Africa, women-owned funds and businesses struggle

due largely to lack of successful fundraising, insufficient exposure to systems and procedures, and lack of track records, among others. They also contend with gender-based social expectation, resistance to women in leadership roles and lack of a support network. The fund will empower Africa’s women by giving them access to financial resources and investment management expertise. Sola David-Borha, Chief Executive of Africa Regions at Standard Bank Group, says the fund aligns with the Bank’s purpose to drive Africa’s growth and “presents an opportunity for Standard Bank to leverage our footprint and expertise on the continent, and the relevant experience of our asset management arms, Melville Douglas and STANLIB Multi-Managers, to build Africa’s economies.

Africa is our home, we drive her growth”. Women fund managers will receive a deployment of capital and subsequently invest in majority female-owned businesses. Even though the fund is sector agnostic, priority sectors will be education, manufacturing, healthcare, clean energy and agriculture. Additionally, technical assistance for fund managers and entrepreneurs will be offered through the initiative. This ranges from building capacity, direct mentoring to leveraging technology in health and education. Songwe emphasized, “The goal here is to give women-led financial investment activities a huge injection of jet fuel to bear out the proven positive correlation between gender balance, higher financial returns and developmental impact.”

BusinessDay PRIVATE EQUITY & FUNDRAISING (Team lead: LOLADE AKINMURELE - Analysts: MICHEAL ANI, ... Graphics: DAVID OGAR ) Businessday’s Private Equity and Fundraising section is a weekly publication that provides in-depth analysis on private equity trends and tracks deal activity in Nigeria.

Email the PE & F team loladeakinmurele@gmail.com

Continues on page 34

Wednesday 19 February 2020

BUSINESS DAY

cityfile

Oyo to revoke 4 road contracts over poor execution REMI FEYISIPO, Ibadan

L-R: Garba Abari, DG, National Orientation Agency (NOA); Mike Omotosho, pesident, Hepatitis Zero World Eradication Project; Samsuel Soughul, director, planning and strategy, NOA, and Mope Hamme, director-general, service, NOA, at Pic by Tunde Adeniyi the flag off event of free screening and subsidised vaccination in Abuja.

Ikokwu-5 case: Coalition demands redeployment of Rivers CP IGNATIUS CHUKWU, Port Harcourt

oalition of civil society organisations (CSOs) and human rights lawyers working on the Ikokwu-5 saga in Port Harcourt have called for the redeployment of Mustapha Dandaura, the Commissioner of Police (CP) in charge of the Rivers State command, The coalition at a press conference in Port Harcourt on Monday, argued that the redeployment of Dandaura would allow for proper investigation into the case. The Ikokwu-5 is the case of five Ikokwu mechanics returning from work at about 7pm on December 19, 2019, when they were stopped by the ECrack unit of the Rivers police command for driving oneway. They were searched and N132,450 was found on four of them. They were accused of being armed robbers and cultists and bundled into detention.

They were allegedly subjected to extreme torture until Chima died, according to the survivors. Enefaa Georgewill, chairman of the coalition which includes Ikokwu Spare Parts Dealers Association leaders, regretted what he described as poor handling of the investigations by the police. He noted that the names of many of those detained were incomplete (single names) while the name of the notorious female police officer that allegedly manhandled the organ of Chima Ikwunado who died in police custody during torture, and some other survivors did not feature on the list. He also alleged that the police public relations officer, Nnamdi Omoni, had admitted on a radio that the E-Crack commander, Benson Adesuyi, lied to the police command in Port Harcourt about the cause of Chima’s death. The CSOs wondered why such an officer was not among

those detained but instead redeployed to the state headquarters on Moscow Road, the same place the entire matter was being investigated. The coalition argued that the public has lost confidence in the ability of the Rivers CP to continue with the investigations and would also not trust words coming from the spokesperson of the police in Rivers, hence the need for the CP redeployment to rebuild the confidence of the people. Enefaa said it was unfortunate that despite the international uproar, the Rivers police command has not addressed the state on the extent of their investigations. “It was the over five million petitions generated worldwide and sent to the President and Inspector-General of Police that forced the Rivers police to allow an independent autopsy to be done in the first place. Everything achieved so far in this matter was through pressure, not out of love by the

CP to do what is right”. Meanwhile, the CSOs said efforts and visits at the police from Mile One to the State CID could only produce five out of the nine phone handsets surrendered by Chima and his boys to the E-Crack Squad after their arrest. The CSOs said the remaining four phones, sum of N132,450, mechanic tools, and batteries of the cars alleged to be robbed by Chima and co-mechanics were not found. The owners of the two cars had earlier told newsmen that their cars were vandalised in the hands of the E-Crack Squad at Mile One. The CSOs said efforts made between Friday February 14 and Monday February 17, 2020, could only produce five phones. It was gathered that the new commander of the Crack Squad at Mile One had asked them to go to the headquarters for any further inquiry because the case had been taken over.

FRSC moves to curtail crashes, loss of lives on Jebba-Bode road … as 32 deaths recorded in less than 2 months

he Federal Road Safety Corps (FRSC) has begun a Special Intervention Patrol (SIP) for the Jebba-Bode Saadu-Olooru road axis in Kwara. The SIP is targeted at halting increasing crashes and fatalities along the route. The zonal commanding officer RS8 of the FRSC, Amauche Nwaka, recalled that the FRSC was established to eradicate Road Traffic Crashes (RTCs) and to check pre-

ventable deaths and injuries occasioned by accidents on Nigerian roads. Nwaka described as worrisome the high fatality being recorded on the Jebba-Bode Saadu-Olooru axis. “A total number of 23 road traffic crashes have been recorded between January and February 9, in which 14 were serious, nine were fatal and sadly 32 lives were lost. This special intervention patrol is a collective effort both from the FRSC, sister agencies and www.businessday.ng

our stakeholders because road safety is everyone’s business,” said. She assured motorists and stakeholders that the corps would mobilise resources towards curbing incessant crashes and associated fatalities along the route through adequate enlightenment and traffic count during the special patrol. The Kwara sector commander, Jonathan Owoade, had earlier said that the high incidence of crashes along the

Jebba-Bode Saadu-Oloru axis were unacceptable. “The Jebba-Bode SaaduOloru road happens to be where the highest number of crashes occur in the state and we are worried about the safety of lives and properties in this area. “We are here to brainstorm and carry out enforcement strategies to reduce these menace, and all hands must be on deck to put road traffic crashes to a very minimal point,” he said.

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our contractors that have failed to meet up with performance specifications in Oyo State risk losing the contracts as the state government has threatened to terminate them. The state commissioner for public works and infrastructure, Rapheal Afonja, who issued the threat, further said that the Governor Seyi Makinde-led administration was compiling list of non-performing contractors in the state. Afonja said: “We have received complaints across the state about pace and quality of work done by these contractors. The governor also inspects the pace of work during the day and even in the night, I can tell you now that soon, termination notice will soon be given to four nonperforming contractors. Among the contracts inherited by the present administration and still ongoing are the dualisation of Idi-Ape-BasorunAkobo-Odogbo Barracks road in Ibadan and dualisation of Saki Township

along Oke-Ogun PolyIlesha-Ibariba road in Saki. Others are Eleyele Junction-Akufo-Ido-Eruwa road, reconstruction of Moniya-Iseyin road and Agodi-Gate-Old Ife Road, Adegbayi in Ibadan. Meanwhile, state government has said that the introduction of park management system in the state was aimed at plugging holes in the income of the state and not for political reasons. The commissioner for public works and infrastructure, Raphael Afonja said this while answering questions from journalists who were at his office after the inauguration of park managers for public motor parks in the State on Monday. Afonja observed that the people were happy that leaks in the state’s income were plugged while individuals appointed would work with trusted consultancy firm to generate income for the state, using technology to monitor activities and accountability of all players while all funds generated would go into the state coffers.

FCTA arraigns 34 for traffic violations JAMES KWEN, Abuja

he Federal Capital Territory Administration (FCTA) on has arraigned 34 traffic offenders in a mobile court as intensive enforcement of traffic rules begins in the city. The director, FCT Directorate of Road Traffic Services (DRTS), Wadata Bodinga told journalists in Abuja on Monday that the enforcement would continue until motorists complied with traffic regulations. Bodinga said fines ranging from N30,000 to N40, 000 were imposed on the offenders, after subjecting them to psychiatric test before their trial at the FCT Mobile Court. “We started the operation on Ahmadu Bello Way and transcended to Gwarimpa and Gudu. Our personnel have been stations on all the intersections where some traffic lights are not working to ensure traffic control. “The operation is basically successful with some little challenges that have to do with the people resisting arrest. But 34 cases were referred to the mobile court and were fined after they

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were found guilty and about 16 cases are being evaluated. Speaking in the vein, Jumai Ahmadu, acting director, FCT Reform Coordination and Service Improvement, said the operation was informed by a matching order from a higher authority. Ahmadu stated the FCT minister, minister of state and permanent secretary took the assignment seriously and urged FCT residents to always be law abiding by obeying traffic law, adding that the faces of offenders would be exposed through the media “It doesn’t matter who you are once you are arrested you will be subjected to psychiatric test and be made to faced the law. Because no normal human being will beat traffic. So we need to check the state of mental stability and when that is done you now face the law and offenders will pay for their mental evaluation”, she noted. Also, chairman of the FCT Ministerial Task Team on Traffic Control, Ihkaro Attah who cautioned against reckless driving, restated the commitment of the FCT administration to ensure free vehicular and human movement in the city.

Wednesday 19 February 2020

BUSINESS DAY

news Border closure bites as inflation hits... Continued from page 1

Dapo Abiodun (l), Ogun State governor, in a warm handshake with Tunji Egbetokun, senior special adviser on political affairs, at the swearing-in ceremony of some Exco members, at the Ogun State Exco Chambers, Oke-Mosan, Abeokuta, Ogun State.

5 takeaways from IMF’s 2020 outlook... Continued from page 1

its economy.

The IMF’s regular monitoring of economies and associated provision of policy advice is intended to identify weaknesses that are causing or could lead to financial or economic instability, and culminates in regular (usually annual) comprehensive consultations with individual member countries. The consultations are known as “Article IV Consultations” because they are required by Article IV of the IMF’s Articles of Agreement. During an Article IV consultation, an IMF team of economists visits a country to assess economic and financial developments and discuss the country’s economic and financial policies with government and central bank officials. According to Amine Mati, senior resident representative and mission chief for Nigeria, the pace of economic recovery in Africa’s largest economy remains slow, as declining real incomes and weak investment continue to weigh on economic activity. “External vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals,” Mati said. The increased dollar sales by the Central Bank of Nigeria to defend the naira in the face of high dollar demand by foreign portfolio investors exiting the nation’s fixed income market has been the key culprit responsible for the country’s continued decline in external reserves. The reserves, which have maintained a downward trend in the last eight months, fell to N37.23 billion as of 13 February 2020, data from the CBN show. If Nigeria is going to contain its vulnerabilities, IMF said major policy adjustments would be necessary to build resilience and unlock growth potential. Thus, the international lender of last resort pointed at the following areas

for immediate attention. Non-oil revenue mobilisation According to the Washington-based agency, non-oil revenue mobilisation, including through tax policy and administration improvements, remains urgent to ensure financing constraints are contained and the interest payments to revenue ratio are sustainable. “Recourse to central bank overdrafts should be limited and the mission supports the authorities’ plans to use the low domestic yield environment to front-load their financing requirements,” IMF recommended. Further tightening of monetary policy Further tightening of monetary policy is needed to contain domestic and external pressures arising from large amounts of maturing CBN bills, IMF said, even if it has to be done through more conventional methods. The fear of a further spike in inflation regime forced the CBN to undertake a moderate tightening stance at the first monetary policy meeting of 2020, leading to the raising of banks’ cash reserve ratio (CRR) by 500 basis points, from 22.5 percent to a new level of 27.5 percent. The rate at which the prices of good and service increase in Nigeria (inflation) jumped to 21-month high in January 2020 fuelled mainly by food price which is as a result of the border closure. Figures by the National Bureau of Statistics (NBS) put Nigeria’s inflation rate (all items year on change) at 12.13 percent in January, highest since April 2019. The mission also reiterated its advice on ending direct central bank interventions, securitising overdrafts to introduce longer-term government instruments to mop up excess liquidity and moving towards a uniform and more flexible exchange rate. “Removing restrictions on access to foreign exchange for the 42 categories of imported goods would be needed to www.businessday.ng

encourage long-term investment,” Mati said. Banking system vulnerabilities While the mission welcomed recent efforts to reduce legacy non-performing loans, it stressed the need for banking system vulnerabilities to be addressed. “The introduction of riskbased minimum capital requirements would also help strengthen bank resilience. Notwithstanding the significant increase in lending, concerns about shortened maturity, asset quality and conflicting monetary policy signals call for revisiting the minimum lending to deposit ratio directive,” IMF said. In its bid to improve lending to the real sector of the Nigerian economy, the CBN upwardly reviewed, for the second time last year, deposit money banks’ portion of minimum loanable deposits to 65 percent. The decision, which is subject to quarterly review, was informed by appreciable growth in the level of the banking sector’s gross credit following the pronouncement of a 60 percent minimum Loan-to-Deposit Ratio (LDR) in July 2019, the apex bank said in a recent circular seen by BusinessDay. Border closure According to IMF, Nigeria’s border closure will continue to have significant economic consequences on the country’s neighbours. “It is important that all involved parties quickly resolve the issues keeping the borders closed – including to stop the smuggling of banned products,” IMF said. Without any formal notice, President Buhari on August 20, 2019 ordered the closure of land borders aimed at curbing smuggling activities, especially of rice. Six months and counting, businesses in Nigeria and other neighbouring West African countries have raised expectations that the Federal Government would finally agree with its neighbours to reopen the borders to genuine import and export trade.

Since the closure, business owners in Nigeria, Benin Republic, and Niger that depend on cross-border trade to survive have been seriously affected following their inability to carry out their legitimate businesses. The Federal Government had earlier scheduled 31 January 2020 as the deadline for the first phase of the Joint Security Operation ‘EX-SWIFT’ Response, but weeks after the deadline there has not been an update on the closure, an indication that there will likely be an extension. Structural reforms In terms of structural reforms, particularly on executing the much-delayed power sector recovery plan, IMF said “implementing the anti-corruption and financial inclusion strategy, and addressing infrastructure and gender gaps, remain essential to boosting inclusive growth”. Launched in 2012, the National Financial Inclusion Strategy (NFIS) by the CBN has a target to include 80 percent of Nigerian adults into the formal financial cycle but the recent data by EFInA put Nigeria’s financial inclusion rate at 63.2 percent, meaning as much as 36.6 million or 36.8 percent of adults still lack access. This leaves an exclusion gap of 16.8 percent. Data by World Bank revealed that Nigeria has financial inclusion gender gap at 24 percent as of December 2017. The IMF applauded the Nigerian authorities and welcomed the steps that have been taken so far. The measures to boost revenue through the adoption of the Finance Bill and Deep Offshore Basin Act and improve budget execution by adopting the 2020 budget by endDecember 2019 were some of the measures cited by IMF. “The tightening of monetary policy in January 2020 through higher cash reserve requirements to respond to looming inflationary pressures is welcome. Progress on structural reforms—particularly in Doing Business, finalizing power sector reforms, and strengthening governance—is commendable,” Mati said.

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ued rise in the Nigeria’s food inflation is more than ever indicating how the agriculture policy is failing and has signalled a wakeup call on the need for robust policies that can drive the desired growth in the sector as well as aid the government’s food security agenda. “We need a robust policy in agriculture. The rise in food inflation is a concern to us. We are not producing as much as we consume. Meanwhile, we shut down food from other countries without empowering our local producers to produce as much as we need. This also contributed to the increase in the price of food,” Tope Fasua, CEO, Global Analytic Consulting Limited, told BusinessDay in a chat. Fasua said there was lack of clarity around the policy direction of the minister of agriculture and rural development and criticised over-emphasis on rice production. At the moment, only the CBN appears to have come to the rescue with its Anchor Borrowers’ Programme while the critical fiscal authorities appear asleep. Chika Ife Okeke, executive director, Feed Africa Advocacy Network (FAAN), said government needs to deepen efforts at fixing the challenges facing the sector, including inactive research institutes, poor infrastructure, poor policies and low funding. Okeke berated the annual budgetary allocation to the sector as inadequate to yield the desired growth in the sector. Onuh Martin Onuh, professor of the crop and biotechnology, Imo State University, said efforts should be heightened to boost agricultural production as the current production is too low to meet demand of Nigeria’s surging population, considering the border closure which has rather led to hike in the price of local production. “I think the attention that the government is currently giving to the sector is still below what is expected. Our production is quite low at the moment, considering the impact of the farmer/ herder clash,” Onuh said. In its first meeting for the year, the MPC increased the mandatory percentage of deposit (Cash Reserve Ratio) that banks kept with the CBN at zero interest by 500 basis points to 27.5 percent in a bid to rein in rising inflation, now 313 basis points above CBN’s preferred maximum level. Sources tell BusinessDay that CBN has done up to three debits on banks since @Businessdayng

it raised the CRR in January. The recent inflation surge which is supplydriven will test the CBN’s creativity some analysts say, ruling out the possibility of either a CRR or Monetary Policy Rate (MPR) hike in March. CBN Governor Godwin Emefiele had in January hinted at the limitations of monetary tools in slowing inflation. “The MPC thus called on the fiscal authorities to speedily address legacy structural impediments giving rise to upward-trending price developments,” Emefiele said January 27. But earlier in January Lagos-based Financial Derivatives Company (FDC) said that if the higher VAT led to a spike in inflation in the month, the CBN’s Monetary Policy Committee (MPC) would be left with no alternative than to commence a tightening cycle and raise the MPR, among other things. If so, it would be the first hike of the main interest rate by the MPC since 2016. While the impact of the new VAT, which came into effect on February 1, will be measured by March, some analysts that spoke with BusinessDay said the CBN, trapped between economic growth concerns and currency stability, would possibly rely on unconventional means to control inflation. “CBN would continue with unorthodox means rather than raise CRR further,” said Boboye Olaolu, research analyst at Lagosbased Cordros Capital. The apex bank recently introduced long-dated FX Futures that extends the maximum contract tenor up to five years as a means to boost dollar-inflow into the economy. Omotola Abimbola, an analyst at Lagos-based Chapel Hill Denham argued that the CBN would not hike rate because the main interest rate is still below inflation. However, Abimbola said the CBN would likely act on the liquidity front given that there was a wage increase in January that increased money supply as well as OMO and bonds maturities injecting more money into the economy. It remains to see what the MPC, sometimes unpredictable, would do when it meets for the second time this year in late March. The committee members will, however, have to weigh the impact of possible electricity tariff adjustments and access the effect of the new VAT in addition to the existing pressures on price levels.

Wednesday 19 February 2020

BUSINESS DAY

news

Nigeria lost $750m to oil theft in 2019, NNPC says Swarovski partners Polo Luxury in first HARRISON EDEH, Abuja

igerian National Petroleum Corporation (NNPC) has disclosed that the nation lost about $750 million to oil theft in 2019. In a presentation to members of the Executive Intelligence Management Course 13 of the National Institute for Security Studies (NISS) who visited the NNPC Towers, Abuja, on a study tour Tuesday, Mele Kyari, group managing director of NNPC, decried the growing activities of oil thieves and pirates, he described as a threat to the operations of the corporation. Kyari, who spoke on the topic: ‘Piracy in the Gulf of Guinea; Issues, Challenges for International Trade, National Security

store in Nigeria

... decries growing activities of oil thieves and Sustainable Development of Member States’, stated that any threat to the corporation’s operations was a direct threat to the very survival of Nigeria as nation, because of the strategic role of the corporation as an enabler of the economy. He listed other security challenges facing the corporation to include vandalism of oil and gas infrastructure and kidnapping of personnel, adding that there was a deep connection between the various shades of insecurity challenges as they were all linked to what was happening in the Gulf of Guinea and the entire maritime environment. He called for a concerted effort and synergy to secure oil and gas operations for the economic survival of the country.

Responding to questions on the challenge posed by the proposed energy migration by most Western countries to renewables, the GMD said fossil fuels would still be relevant and that the demand for crude oil would not reduce in the nearest future. “Even by 2050, fossil fuel would account for 80 percent of the energy mix, and there would still be consumption of at least, 100 million barrels of oil per day. We are determined to remain relevant in the long term,” he assured in a statement issued. In his presentation, NNPC chief operating officer, Downstream, Yemi Adetunji, said in 2016, the Gulf of Guinea accounted for more than half of the global kidnappings for ransom, with 34 seafarers kidnapped out

of 62 cases worldwide. He said the corporation was working closely with security agencies to tackle the security challenges, and cited the “Operation Kurombe” that was recently conducted by the Nigerian Navy at the Atlas Cove as an example of such collaborative efforts. On his part, the executive director, National Institute of security Studies, Ayodele Adeleke, called for synergy among the security agencies to tackle the security challenges not only in the Gulf of Guinea, but in the Nigerian Petroleum Industry generally. The visiting team was drawn from 18 agencies within and outside Nigeria.

Obinna Emelike

orld leading producer of precision-cut crystals for fashion and jewellery, Swarovski, has expanded its luxury, fashion operations and craftsmanship to Nigeria with the recent opening of a store in Ikeja, Lagos. The store, which is the first of the luxury brand in Nigeria, is opened in partnership with Polo Limited, the official retailer of and partner of Swarovski in Nigeria. Located at the Ikeja Shopping Mall, the shop, which opened recently, witnessed a beehive of business as passersby peeped to catch glimpse of the beautiful luxury brands offered by Swarovski. The management of the company used the opening platform to speak on the unique values of the brands

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L-R: Gbenga Daniel, former governor of Ogun State; Seyi Makinde, Oyo State governor, and Kehinde Ayoola, commissioner for environment and water resources, at a countesy visit to governor’s Office Secretariat, Ibadan by Gbenga Daniel. Pic by Remi Feyisipo

NNRC launches 2019 Benchmarking Exercise Report, holds a Policy Dialogue in Abuja James Kwen, Abuja

he Nigeria Natural Resource Charter (NNRC), a non-profit policy institute on natural resource governance launches its flagship Benchmark Exercise Report (BER) in Abuja on Thursday. The Report presents the biennial findings from an assessment of Nigeria’s petroleum sector which covers from 2017 to 2019. The BER identifies petroleum sector progress and areas for improvements and empowers stakeholders to advocate for best practices within their various spheres of work in the sector. It assesses Nigeria’s petroleum sector against 12 Precepts to offer guidance on key decisions faced by the government, beginning with whether to extract resources in the first place, and ending with decisions that determine how generated revenue can produce maximum good for citizens. The 2019 Report provides an update on the last two years of petroleum sector governance, examined gaps in sector transparency and reported changes. NNRC also holds a dialogue with focus on its overarching precondition for effective petroleum resource management;

precept 1 determining whether Nigeria’s strategy, legal and institutional framework governing the petroleum sector secures the greatest benefit for citizens through and inclusive and comprehensive national strategy, clear legal framework and competent institutions. According to Tengi GeorgeIkoli, NNRC Programme Coordinator, the release of the Report comes at an opportune time given the recent reforms instituted by the government and the omnibus reform in the form of the Petroleum Industry Bill (PIB) being championed by the Ministry of Petroleum Resources. George-Ikoli stated that the governance gaps have been well articulated in the 2019 BER and if appropriately addressed in the bill and subsequently implemented, Nigeria would made appreciable improvement captured with a green in areas where it largely still remains at a red. “From the findings, there were marginal changes from the 2017 BER with 10 ambers and 2 reds being recorded. The reds have persisted against precept 5 and 6, the precepts that assesses the impacts of extraction on host communities and the commercial effectiveness of the national oil company; NNPC.

Respite for passengers as NAMA resumes calibration of ILS at Lagos airport IFEOMA OKEKE

he Nigerian Airspace Management Agency ( NA M A ) d i s c l o s e d that it had resumed the calibration of Instrument Landing Systems (ILS) at the Murtala Murhammed International Airport on Tuesday. BusinessDay’s checks s h ow t hat t h e I L S, pu rchased last year, was undergoing calibration until the process was disrupted as a result of inclement weather conditions and other technical issues the agency refused to disclose. It would be recalled that almost all international airlines could not operate into the Murtala Muhammed International Airport (MMIA), Lagos, last week due to inclement weather conditions and breakdown of landing aids at the airport. While some advanced airports operate under as low as zero visibility, the

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foggy weather in Lagos kept aircraft on ground and left thousands of passengers stranded at neighbouring countries where the flights were diverted to. Some of the airlines that recorded multiple flight diversions included British Air ways, Air France, Emirates, Qatar Airways, Ethiopian Airlines, Delta Airlines, and several others. Khalid Udoh Emele, head of corporate communications department at NAMA, confirmed to BusinessDay that the calibration was ongoing and the aircraft that does the calibration was on ground since Tuesday morning. “We did the calibration earlier but there was a break and it continued again today (Tuesday). I don’t know how long the calibration will last but it all depends on the equipment. We will cease this opportunity to calibrate all the navigational aids in Lagos and other airports that have not been calibrated,” Emele said.

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and how they serve the needs of Nigerians with choice luxury brands like bangles, necklaces, wristwatches, crystals, sunglasses, weddings-rings and toys at affordable prices. Speaking on the store, John Burns, Swarovski regional manager, Africa, said, “Our new store in Nigeria aims at offering our discerning customers in the region a delightful experience as obtained in other stores across the world. It also marks our foray into the Nigerian market, which has tremendous growth potential. It is therefore, a perfect avenue for us to share our commitment to excellence, a sense of creativity, surprise and delight.” Burns remarked that Nigeria is fashionable country as the people would find the Swarovski brands very beautiful items to patronise. He added that the big population of the country provides a big market for Swarovski to tap into. Moreover, the addition of the Ikeja store to approximately 4,000 Swarovski stores in over 100 countries creates an employment avenue for Nigerians to join 29,000 global workforce of the Swarovski crystal business.

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Wednesday 19 February 2020

BUSINESS DAY

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BoI opens at Edo Production Centre, as firm accesses bank’s facility for upgrade

n a move to redefine the Micro, Small and Medium Enterprises (MSMEs) scene in Edo State, the Bank of Industry (BoI) has opened its operating office at the Edo Production Centre, on Sapele Road, Benin City, to provide bespoke services to enterprises working at the Governor Godwin Obaseki-backed industrial hub. Managing director, Edo Skills Development Agency (EdoJobs), Ukinebo Dare, in an interview with journalists, said the state government was happy to welcome the BoI at the centre, which is a fulfilment of its promise to provide compact, tailor-made business support solutions to firms operating from the Edo Production Centre. She noted that one of the firms at the centre had just bought a new equipment courtesy of a loan facility from the BoI, which has rolled out packages for firms operating at the centre.

According to Dare, “The Edo Production Centre is a novel idea that is poised to redefine the industrial and light manufacturing scene in the state. Not only are firms operating from the facility enjoying regular electricity supply, they are also benefiting from the special arrangement that gives them a competitive advantage because they can produce at scale and have the support of ancillary services that can boost production.” The state government is committed to replicating the success of the Edo Production Centre in another location in Benin City and then two others, with each serving Edo North Senatorial District and Edo Central Senatorial District, she said. Companies operating at the centre include those engaged in welding, metal and fabrication, polythene production, printing, woodwork, recycling, shoemaking, among others.

MDXi partners Microsoft, HPE to unveil first locally available Microsoft Stack Cloud offering at Nerds Unite 2020

DXi, MainOne’s data centre subsidiary, is set to announce the local offering of Microsoft’s Azure Stack to its customers as part of its ‘Managed Cloud Services’. The Stack platform, provided in partnership with Microsoft and HPE, will be unveiled at MainOne’s fifth annual gathering of customers, partners and tech professionals, called Nerds Unite on February 21. With the introduction of the local offering of Microsoft’s Azure Stack services, MDXi will be the first data centre in Nigeria to offer the Cloud service commercially to customers in Nigeria. This latest Cloud offering by MDXi into the Nigerian market will reinforce MainOne’s leadership positioning in the Cloud market, enabling the company to offer its customer a broader suite of cloud solutions. Ranging from managed Cloud deployment on public and private Cloud services in the MDXi data centre, to management of offshore deployment on Amazon Web Services (AWS) and Azure, in addition to Express Route services that enable secure, reliable communications to cloud services offshore. Showcasing at the launch will be some of the benefits of MDXi’s Azure Stack in processing in-country data and applications thereby reducing customer latency to under 10ms and resulting in better experiences for end users. The demo will also showcase cost effective data storage solutions that allow businesses meet all their data sovereignty requirements with locally domiciled infrastructure. The new Cloud services platform will offer enterprises and businesses the choice of a scalable, flexible computing platform to enable them to migrate critical applications

from legacy technology to modernized and more efficient technology without having to go offshore. “MDXi has been in the business of providing Cloud services to its Enterprise customers for over 5 years, with skilled and certified engineers. We are the data centre of choice for Enterprise looking to host data locally in the Cloud. With the introduction of the Azure Stack solution, we further demonstrate our ability to invest in Cloud infrastructure to meet the changing and growing requirements of our customers in Nigeria, and indeed across West Africa. The partnership with Microsoft and HPE to deploy this platform demonstrates a concerted effort towards accomplishing the vision of being West Africa’s leading communications solution provider, delivering world-class quality services to our local customers.” said Gbenga Adegbiji, managing director, MDXi. Nerds Unite, MainOne’s flagship event of the year, brings together IT professionals, influencers, and decision makers in an environment for one full day to connect, discover opportunities, collaborate, and learn new techniques and breakthrough trends in the global IT industry. This year’s edition will feature presentations and panel discussions on Cloud adoption, Cloud migration and all things Cloud with global leaders across West Africa, making it the perfect platform for MDXI to unveil its new Cloud services. MDXi builds and operates Tier III data centre campuses across West Africa to meet the rapidly expanding global demand for certified data centre facilities. Its Tier III data centre in Lekki, Lagos-Nigeria, is the largest purpose-built commercial data centre in West Africa, designed with a strong focus on high availability, security, and open access connectivity. www.businessday.ng

Falling FDI in manufacturing shows why FG must review policies Gbemi Faminu

ollowing the snail-paced economic recovery from recession, Nigeria has suffered from economic vicissitudes, with foreign direct investments declining. This has affected significant sectors in the economy. The most hit is the manufacturing sector, which is a major driver of economic growth and development. But this is an indication that the government must change critical industry policies to steer the growth of the manufacturing sector. Foreign Direct Investment (FDI) into Nigeria in 2014 stood at $2.28 billion, but five years later, inflows slowed to $1.19 billion, growing at a negative rate of 15 percent as multinationals moved out of the economy in droves, taking with them long-term capital. FDI in half-year 2019 fell by 8 percent and in the third quarter of the year stood at $200.08 million, according to the National Bureau of Statistics (NBS). With approximately 200 million people and an unemployment rate of 23.1 percent, FDI

income is seen as small and if shared equally among Nigerians, each person will get only $1.2 per quarter, which is far worse than the World Bank’s international poverty line of $1.90 per day. This is a trivial amount when compared with countries like Vietnam, Indonesia, Egypt, South Africa and Argentina, who attracted on an average, FDIs worth $2.2 billion, $7.04 billion, $3.5 billion, $1.3 billion and N681 million, respectively, during the same period. Record shows that countries that consume what they produce thrive economically; however, inputs from foreign investments help spur the growth at a faster rate. Therefore, emerging economies are expected to actively attract investments into its economy. The manufacturing sector, which should be one of the active drivers of FDI and economic growth, was only able to contribute a marginal 3 percent, which shows how low investments are in the sector. The number of manufacturing companies silently shutting down or exiting Nigeria is rising

by the day, underlining the need for a comprehensive review of some of the policies guiding this sector. Although Nigeria exited recession in 2017, reports from the Manufacturers Association of Nigeria (MAN) show that over 50 manufacturers, mainly SMEs did not survive the economic turbulence. Investors and local manufacturers in Nigeria have continuously battled various challenges that have continued to hurt the country’s real sector and industry. These issues majorly stem from economic instability, national concerns, unfriendly business environment, and infrastructure deficit, among many others In 2019, Grief, an American manufacturer, suspended its operations in Nigeria due to the challenging market conditions, amid high production cost, also Procter & Gamble, a global brand, shut down its $300 million production plant in Agbara Industrial Estate, Ogun State, Nigeria, after recurrent losses. Pharmaceutical companies are also in the shut-down party, as Evans Medicals shut down

its operations some time ago. Till date, pharmaceuticals are struggling with importation of excipients and other inputs, as Nigeria does not have a strong petrochemical industry that should produce them. Business experts assert that due to the recurrent challenges in Nigeria’s business environment as well as the manufacturing sector, investors are forced to take flight for the proverbial greener path. Although the government has made efforts to combat the challenges, it does not seem effective enough. Consequence of which are visible and impactful in the sector’s level of production, global and local patronage as well as its contribution to the country’s real gross domestic product (GDP), and while some companies have been able to keep their heads above the water, others have gone with the tide and shut down their businesses. The major component and element of any manufacturing industry is infrastructure and presently in Nigeria the huge infrastructure deficit is affecting the manufacturing sector.

L-R: Herman Warren, director, Africa Corporate Network, The Economist; Virusha Subban, partner/head of indirect Tax, Baker McKenzie, Stockholm; Kerry Contini, partner, international trade practice group, Baker McKenzie, Johannesburg; Mattias Hedwall, partner/Global chair, international commercial and trade, Baker McKenzie, Stockholm, and Olumide Akpata, senior partner, Templars; at the Africa Trade Roadshow organized by Baker McKenzie in collaboration with Templars, in Lagos, yesterday. Pic by David Apara

Edo targets hydropower, reiterates Respite for under-resourced schools as TFN set to train 400 leaders plan to dam Ikpoba River

do State government says it was in partnership with the United Nations Industrial Development Organisation (UNIDO) to harness the state’s water resources to generate electricity. Akin Agbaje, the state commissioner for energy, who disclosed this in an interview with journalists in Benin City, said the project was captured in the 2020 budget. The commissioner reassured that the Governor Godwin Obaseki-led administration was committed to exploiting other energy sources to address the power needs of Edo people. Agbaje said, “Sometimes last year, we concluded a feasibility study with UNIDO on the Small Hydro Power Project. The idea is to generate some megawatts from the Ikpoba River Dam to service some locations in New Benin down to the Benin Technical College. We are now in the

second phase of the feasibility study and this is well captured in the 2020 budget. So very soon, the feasibility study will be concluded and construction works will commence.” The commissioner reiterated efforts of the Obaseki-led administration to protect citizens from exploitation, noting, “As a government, we have a responsibility to balance interests and this we are achieving for every investor that comes into Edo State. “We have an Energy Working Committee to coordinate the processes of integration into the communities. When an investor comes, we share the data available on possible locations for investments; while they then go on to conduct the viability study. “Also, in the course of writing memorandum of understanding (MoU) with the host communities, the state government plays a critical role”.

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KELECHI EWUZIE

etermined to bridge Nigeria’s educational inequity and provide children with quality education for better life outcomes, Teach For Nigeria (TFN) has announced the opening of the application for its 2020 fellowship programme. Teach For Nigeria, a nonprofit organisation focused on improving the quality of education for Nigeria’s most marginalised children, says its target is to enrol 400 fellows, the largest since inception, into the fourth cohort of its fellowship programme. Bukola Kolajo, head of recruitment, Matriculation and Selection, TFN, says the organisation understands the challenges and issues facing the education sector in Nigeria and is fighting to resolve this by bridging the nation’s educational inequity gap. Kolajo, while speaking at @Businessdayng

the launch of the application, states that TFN recognises that Nigeria already has much of what is needed to thrive and overcome these challenges. “There is a wealth of incredible talent among university students, recent graduates, and young professionals. We are working to create a new future for Nigeria by galvanising the rising generation of leaders to develop the potential of our children. The recruitment of 400 fellows is a big step towards our vision of developing the potential of every Nigerian child,”Kolajo says. The TFN Fellowship programme is a two-year fulltime paid commitment that is designed to build a movement of leaders who will work towards eliminating educational inequity by teaching in under-served schools in low-income communities across Nigeria.

Wednesday 19 February 2020

BUSINESS DAY

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Rendeavour’s RenWoman partners Lagos first lady on rehabilitation of street children Bunmi Bailey

L-R: Chinwendu Enechi, associate director, Andersen Tax; Sebastine Odimma, Africa head of tax controversy, Maersk Transport and Logistics; Adeyemi Adediran, associate director, Andersen Tax; Joshua Bamfo, partner/head, transfer pricing, Andersen Tax; Richard Ayibiowu, chairman, committee of finance experts, NECA, and Gabriel Ogunjemilusi, director, tax policy, Federal Inland Revenue Service (FIRS), at the enlightenment session on the new Finance Act organised by Andersen Tax in conjunction with NECA in Lagos, recently. Pic by Pius Okeosisi

Oil sector experts express doubts as FG reveals move on PH refinery rehab HARRISON EDEH, Abuja

ndustry sector governance experts have expressed doubts as the Federal Government reveals plans to commence the rehabilitation of Port Harcourt Refinery in a bid to perform optimally and satisfy local consumption of premium motor spirit - petrol. Adeyemi Adetunji, chief operation officer, upstream, at the Nigerian National Petroleum Corporation (NNPC), informed BusinessDay on the side-lines of the just concluded Nigeria International Petroleum Summit that the NNPC had prepared the ground for the commencement of Port Harcourt Refinery rehabilitation. Recall, Mele Kyari, group managing director, NNPC, had given several assurances that the refineries rehabilitation had remained one of his key priorities to ensue local

consumption, assuring that the refinery rehabilitation would commence first quarter of 2020. Industry governance experts had bared their minds on the development, noting that with the current capped price on petroleum price, no bank or would-be investor would be willing to invest money in Nigeria’s refineries. Nigeria, with a population of about 200 million people and four refineries with installed refining capacity of 520,000bpd, is only able to refine 5 percent of installed capacity. “No investor would put his money on a refinery when there is a subsidy regime. Banks specifically won’t finance refinery rehabilitation on a subsidy regime. Refinery businesses are a marginal business, and I wonder how the Group Managing Director of the NNPC would commence rehabilitation as

How we’re winning fight against human trafficking – Obaseki

do State governor, Godwin Obaseki, says his administration is making steady progress in the fight against human trafficking through sustained awareness creation and robust partnership with key stakeholders. The governor said this at the first zonal Community of Practice (COP) meeting for Heads of Budget and Planning agencies across the federation, which held in Benin City, Edo State capital. The governor, represented by the Deputy Governor, Philip Shaibu, attributed the successes recorded by his administration in the fight against human trafficking to collaboration with the Oba of Benin, Oba Ewuare II. Obaseki said his administration was also assisting returnees to acquire skills through training and retrain-

ing programmes as well as the payment of stipends for start-ups run by the returnees. He tasked state governments and Ministries of Budget and National Planning to step up measures in tackling poverty among the people. The governor called for concerted efforts to assist youths gain relevant skills that would make them independent and contribute to national development. In a keynote address, the representative of minister of state, budget and national planning, Olushola Idowu, urged government across all levels to intensify economic diversification and revenue generating efforts. Idowu urged state governments to put in place necessary policies that would create jobs and wealth for Nigerians. www.businessday.ng

promised. “When you cap a product, investors are aware because it cannot guarantee them profit on the product. The corporation must focus on the liberalisation of the downstream sector,” they said. Tunji Oyebanji, chairman, Major Oil Marketers Association, told BusinessDay on the side-lines of the summit that the government needs to come clear on whether it wants to be addressing issues on oil resources as a social safety issue or purely an economic issue, which he said was impacting negatively on investment into the sector. Emmanuel Iheanacho, a former federal cabinet minister, had also decried Federal Government’s inability to prioritise investment in refineries despite the much talked about expansion of the sector to global frontiers. “We are not investing

enough in refineries. Instead of waiting on OPEC to give us a quota of 2 million barrels per day, we can produce 4 million barrels per day and build refineries to refine and add value to our crude,” Iheanacho said. He compared the Nigeria downstream market structure and that of the United States of America, a non-member of the Organisation of Petroleum Exporting Countries (OPEC). “The United States has a population of 327 million with a total of 139 refineries with the refining capacity of 16.7mbpd. Texas, a state in the US, has a population of 28.7 million with 47 refineries and a refining capacity of 5.7 million barrels per day. Compare these numbers with Nigeria that has a population of 200 million people with four refineries with installed refining capacity of 520,000bpd but is only able to refine 5 percent of installed capacity,” he said.

AlphaCrux to host fourth real estate outlook conference REMI FEYISIPO, Ibadan

takeholders in the Nigerian Real Estate Industry are set to converge to examine both global and local mega trends in the industry that will shape the development of the sector in the next decade and find innovative solutions to industry challenges. Themed, ‘Repositioning Nigeria’s Real Estate Industry for a New Decade,’ the daylong conference, the fourth edition of its kind, will take place at the Grand Junction, Landmark Towers, Victoria Island, Lagos, tomorrow. Tobi Adama, CEO, AlphaCrux, organiser of the event, says the conference offers a unique platform to dissect trends in the industry and take a peep into the future. “Following the success of the 3 previous conferences where we had over 500 participants attend the con-

ference and multiple deals signed, we believe the Real Estate Outlook Conference is a veritable platform for the convergence of great minds from government, financial services, academia, investors and most importantly the real estate industry. “The purpose of this conference is to have a platform where real estate experts, investors and government representatives set the tone for commercial activities for the real estate industry for the year. This will be a gathering of leading CEOs, top level managers and decision makers from companies and government representatives in Nigeria and Sub-Saharan Africa. “We believe this platform will help real estate stakeholders the real estate industry, with underlying goals of deepening industry knowledge, setting agenda and networking,” according to Adama.

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enWoman, an initiative promoted by Rendeavour with the empowerment of women in Africa as its primary focus, has partnered the First Lady of Lagos State, Ibijoke Sanwo-Olu, to rehabilitate destitute and disadvantaged children in the state. RenWoman, the women group of Rendeavour, Africa’s largest new city builder, has a mission to create an enabling and progressive environment for the advancement of women in the workplace through knowledge sharing, networking, and leadership development to ensure personal and professional success of women. RenWoman initiatives are carried out by Rendeavour’s team of women professionals in partnership with organisations and individuals committed to gender equality. During a meeting with Ibijoke Sanwo-Olu last week, representatives of RenWoman and Renwoman’s partner Rising Tide assured her that the group would support her efforts at championing the wellbeing of children. “The First Lady is very passionate about the rights of children and women; and this is something that resonates with our objectives,” Adejoke Odocha, Rendeavour’s legal counsel for West Africa, said, saying, “We will work with her to take children off the streets and raise awareness for the rights of

children in Lagos.” Rendeavour, in partnership with the Lagos State government, is building Alaro City, a mixed-income city-scale development in the Lekki Free Zone. Alaro City is conceived as a 2000-hectare development with industrial and logistics locations, complemented by offices, homes, schools, healthcare facilities, hotels, entertainment and 150 hectares of parks and open spaces. Communities around Alaro City will be the target of RenWoman’s interventions in the rehabilitation of street children. RenWoman will work with the Lagos first lady to reverse the cycle of poverty, especially among street children and the disadvantaged in the communities around Alaro City and in Lagos State in general, Funke Beke, Rendeavour’s Real Estate advisor, said, noting, “This is something that we are passionate about in all the countries we operate in and we are therefore pleased to find a formidable partner in the First Lady for our plans for Lagos.” Responding, Sanwo-Olu welcomed the support by RenWoman and reiterated her commitment to partnering organisations like Rendeavour focused on championing the rights of children in Lagos State. She also used the opportunity to call on parents and guardians in the state to ensure that children were not subjected to slavery, abuse or anything that was detrimental to their growth and development.

Edo/Delta Customs command targets N32bn revenue for 2020 Francis Sadhere, Warri

he Nigeria Customs Service, Edo/Delta Command says it has been given a target of N32 billion for the 2020 fiscal year, as against the target of N18 billion for 2019. The Customs area controller, Olaniyi Alajogun, who disclosed this to BussinesssDay in Warri on Monday, said the 2020 revenue target translated to N2.7 billion per month in contrast to last year’s monthly target of N1.5 billion. Alajogun said the upward review of the revenue target for Edo/Delta Command had become imperative as the Federal Government increased the target for the entire Nigeria Customs Service for year 2020 to almost N2 trillion. He announced that despite the 2020 target, the Command collected a sum of N1.8 billion this January, hoping that collections for subsequent months would show progressive improvement. He said, “I want to believe that it is always like that at the beginning of every year all over the place because that is when businessmen are expecting what the Budget and the government policies will look like.” The area controller revealed that irrespective of the challenges confronting the Edo/Delta Command, @Businessdayng

it did well in 2019 when it even surpassed its revenue target of N18,023,840,518.73 for the year, by recording N22,181,117,360.75, adding that comparatively the figure showed that the revenue collected for the year under review was N6,350,682,647.75 higher than the collections for 2018. While tasking the officers and men of the command to see the task as wake up call, Alajogun said, “The revenue that we will be able to collect in the Command is largely based on the cargo input, that is, the volume of cargo that we are able to get. And considering the peculiar nature of this Port (Warri Ports), we know it is not very active Port, and it is no mean task; but we are always hopeful that things will get better. “On our part, the best we can do is to make sure that the little cargo that comes, we make sure we collect all collectable revenue by putting in our expertise and make sure that no revenue that is supposed to come into government coffers go untapped. So, that is the best we can do considering the cargo inlet that we have in this axis. “We are determined that whatever little things we have, due diligence must be done to make sure we collect maximum duty. It is just a question of applying ourselves properly to the job we have to do.”

Wednesday 19 February 2020

BUSINESS DAY

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Coronavirus: Nigeria at severe risk of drug insecurity — NAFDAC … NCDC refutes rumour of Coronavirus in broiler chickens Godsgift Onyedinefu, Abuja

he National Agency for Food and Drug Administration and Control (NAFDAC) has raised the alarm that Nigeria is at a severe risk of drug insecurity because of the outbreak of the Covid-19 (Coronavirus) in China. Mojisola Adeyeye, the director-general, who raised the alarm on Monday in Abuja, said 70 percent of drugs were imported into the country, while expressing fears over China’s inability to find a lasting cure to the virus, which according to her, might necessitate greater global restrictions on its exports, especially medicines. The situation may worsen if urgent attention was not paid to local manufacturing of drugs in the country, she said, noting, “We import 70 percent of our drugs, and NAFDAC is sounding the alarm that we have drug insecurity in the country. “The situation is made worse with the current Coronavirus threat. Even India is already feeling the insecurity, because they also buy

most of their active ingredients from China. “If India is feeling it, then we should be praying (for divine intervention), because we don’t even manufacture anything but import everything including the active, the non-active ingredients, and the equipments used in drug making. “It is a scary situation. Severe drug insecurity is staring us in the face. If something untoward happens to the countries we import our drugs from, then we are in serious trouble especially when 70 percent of our drugs are not made in Nigeria. “That’s why we are harping on local manufacturing of drug products in the country. If we fail to do that, then we will sink deeper in trouble. Achieving Universal Health Coverage will o be impossible unless we have drug security”. Meanwhile, the Nigeria Centre for Disease Control (NCDC) has dismissed the rumour making the rounds on social media that the novel coronavirus disease (COVID-19) is spread through broiler chickens as completely false.

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The centre in a statement on Tuesday explained that scientists were working on identifying the animal source of the new virus, explaining that there was currently no known link between the virus and broiler chickens. “The NCDC is aware of a rumour being shared on social media, that the novel coronavirus disease (COVID-19) is spread through broiler chickens. The NCDC can confirm that this is completely false. The public is advised to disregard this rumour and discourage further spread. “For accurate information on COVID-19 or disease outbreaks in Nigeria, please visit www.ncdc.gov.ng, Twitter and Facebook- @NCDCgov,” the statement read in part.

Jostle for admission commences as 350,000 candidates write JAMB mock examination KELECHI EWUZIE

reparation for the upcoming 2020 Unified Tertiary Matriculation Examination (UTME) commenced Tuesday, as 350,000 candidates across Nigeria took part in the Computer Based Test (CBT) mock examination. The mock examination, which is optional, presents an opportunity for secondary school leavers seeking to gain admissions into universities, polytechnics or colleges of education to test their preparedness for the main examination. Ishaq Oloyede, registrar, Joint Admissions and Matriculation Board (JAMB), says about 64 computer-based centres across the country will be used for the mock examination. One of the purposes of the mock examination is to test-run the facilities in these centres.

Anyone of them that falls short of the standard will automatically be delisted, Jamb spokesperson, Fabian Benjamin said. Oloyede said over 1.9 million candidates registered for the UTME examination, schedule to take place from March 14 to April 4, 2020, while ‘200,000 registered for direct entry. Fabian Benjamin, head of Media and Information, in a recent interview reports that the 2020 UTME and DE registrations exercises started on January 13 and ended on February 17 across the country. Benjamin opines that the examination board has no plan to extend the date for the registration of candidates for both the UTME and the direct entry (DE) as being speculated in some quarters. He disclosed that the over 1.9 million candidates registered for the examination without doubt, is the highest that the board has

ever recorded in the history of its examination. According to Benjamin, a total of 669 out of the 747 centres across the country will be used for the conduct of the CBT. He called for the support and cooperation of stakeholders so as to collectively deliver on the public responsibility. BusinessDay investigations reveal that the carrying capacity in tertiary education institutions in Nigeria has not significantly improved in relation to the exponential growth in the number of candidates seeking tertiary education in the country. Tertiary education institutions in Nigeria include, but not limited to, the universities, colleges of education and polytechnics. In the 2019 Unified Tertiary Matriculation Examinations (UTME), over 1.9 million candidates sat for the examinations, while the spaces available were not more than 500,000.

USAID to sign first-ever bond guarantee to boost power in Nigeria Innocent Odoh, Abuja

nited States Agency for International Development (USAID) will sign the first-ever bond guarantee to boost the Nigerian power sector on Thursday, February 20, 2020. According to a statement

issued on Tuesday by the public affairs division of the US Embassy in Abuja, the N13 billion ($36.1m) guarantee represents a partnership with InfraCredit, a Nigeria-based private infrastructure guarantee company and a Power Africa partner that seeks to facilitate private investment in infrastructure to support

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sustained economic growth in Nigeria. The statement adds that InfraCredit will partner GEL Utility Limited, which develops, operates, and provides gridconnected and off-grid electric power. GEL delivers electricity to the Port Harcourt Refining Company through an 84-megawatt

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(MW) power plant. Through the bond agreement, GEL will provide 14 megawatts of excess generated electricity from the power plant to customers within the Port Harcourt area, either through Port Harcourt Electricity Distribution Company or directly to eligible customers, the statement read.

Wednesday 19 February 2020

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Wednesday 19 February 2020

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tax issues Fiscal impact of the 2020 Finance Act on MSMEs Olufemi Babem & Ijeoma Uche

Introduction fter many years, the Federal Government of Nigeria has reintroduced the practice of presenting a Finance Bill along with the annual budget proposal. This practice, which is standard in many tax jurisdictions, was a usual feature under the Military Governments in Nigeria. The Finance Act is a fiscal policy statement, which shows how the Government intends to finance budgeted expenditure and achieve other socio-economic objectives. The President of the Federal Republic of Nigeria signed the Finance Act into law on 13th of January, 2020. The objectives of the 2020 Finance Act include: to support Micro, Small and Medium-Sized Enterprises (MSMEs) in line with the Ease of Doing Business Reforms (EDBR). The EDBR aims to remove critical bottlenecks and constraints to doing business in the country and make Nigeria a progressively easier place to do business. MSMEs are the engine growth of most economies of the world including Nigeria. The collaborative National survey carried out by the National Bureau of Statistics (NBS); and Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in 2017 found that MSMEs constitute over 90percent of businesses in Nigeria and employ about 60million people. These businesses contributed about 49.78percent to Nigeria’s GDP in 2017. Based on the National Policy on MSME, businesses that qualify as MSME typically employ less than 200 people with assets base of less than N500million. The overriding differentiator between micro, small and medium scale enterprises is the number of employees. However, under the Finance Act, a company that earns gross turnover of N25 million or less is defined as a small company and a company that earns gross turnover greater than N25 million but less than N100 million is defined medium-sized company. The collaborative survey referenced above found that high/ multiple taxes was considered as the second most unfavorable policy affecting MSMEs in Nigeria. Therefore, one of the initiatives of the Presidential Enabling Business Environment Council is improving the ease of paying taxes, by evaluating the administrative burden of paying taxes on medium-sized companies. The Finance Act and MSMEs The Finance Act introduces a few provisions targeted at MSME. These provisions include: (i) The exemption of small companies from payment of any tax under the Companies Income Tax Act (CITA). This includes the normal corporate income tax (CIT) at 20percent or 30percent of taxable profit or minimum tax, tertiary edu-

cation tax, and deduction of withholding tax (WHT) by its customers. With regards to the non-deduction of WHT by customers, the Federal Inland Revenue Service (FIRS) may need to issue certificates to these small companies to enable them to present same alongside their bids, contracts and invoices. However, to qualify for this exemption, the small company must register for the tax and submit its annual income tax returns to the FIRS. For small businesses, this exemption should provide additional funds which can be ploughed-back into the business for growth. It should also help to improve cash flow, considering that customers are not required to deduct WHT from their invoices. In the view of the authors, the objective of this exemption is to attract more small businesses into the tax net. Many of the business that qualify as small companies are informal in nature. According to the NBS/SMEDAN collaborative survey, the informal sector (that is Micro businesses) account for about 99.8percent of businesses in the MSME category. Only 10.6percent of these micro businesses were registered with the Corporate Affairs Commission (CAC) – mostly as business names (that is, non-limited liability companies). Among the small and medium enterprises surveyed, only 21percent were registered as limited liability companies. Also, based on our analysis of the number of registered entities with the CAC, about 75percent are registered business names. Entities registered as business names are chargeable to tax under the Personal Income Tax Act (PITA). The income tax exemption provided under the CITA is not replicated under the PITA; thus, a significant number of MSMEs may be liable to pay income tax. The personal income tax is calculated on the taxable profit using graduated rates, from 7percent to 24percent, and is payable to the State Board of Internal Revenue where the business is resident/registered. This is the main source of internally generated revenue for all/most State Governments in Nigeria. Consequently, www.businessday.ng

over 75percent of registered small businesses in Nigeria may not benefit from this exemption. (ii) Small companies are no longer obliged to register for Value Added Tax (VAT) and file monthly VAT returns. The implication of non-registration for VAT is that an unregistered company cannot include VAT on its sales invoices. This initiative should result in improvement of sales for small businesses by making the value of their goods or services cheaper because no VAT is added. But, if a small company is not supplying a VAT-exempt good or service, the customer (that is registered for tax), may still be required to self-account for the VAT in line with the provisions of section 14(4) of the VAT Act as amended. Hence, the goods or services may not be cheaper for the customer in the long run. Furthermore, small businesses are not exempted from payment of VAT on goods and services purchased for business purposes (that is, input VAT). This input VAT cannot be recouped for income tax purposes because small companies are exempted from CIT. So, small businesses engaged in manufacturing or trading of non-VAT exempt goods may have to include VAT on their invoices to customers (that is output VAT), so that they can recover the input VAT incurred on raw materials/inventory purchased against the output VAT received from customers. Also, a small business that intends to recover its input VAT against output VAT would need to submit monthly VAT returns to the tax authority showing the net VAT position. However, such companies may need to evaluate the benefits of recouping the input tax against the costs of compliance (filing of returns) and likely exposure to tax audits. It is important to note that, based on the current administrative practice of the FIRS, tax payers only require a single registration for tax purposes. Therefore, when a small company registers for CIT, it is automatically registered for VAT too. (iii) Medium-sized limited liability companies would be liable to pay CIT at the rate of 20% of taxable

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profits. However, these companies are still liable to pay minimum tax at the rate of 0.5percent of gross turnover (net of franked investment income), if the CIT payable is lower than the minimum tax in any year. If the tax liability is paid 90 days before the income tax filing deadline, the company would be entitled to a 2percent tax credit which can be used to offset its tax liability in subsequent year. Meanwhile, the continued deduction of WHT at 5percent or 10percent may adversely impact the cash flows of this category of companies, especially if the ratio of taxable profit to revenue is less than 17percent in any year. It may therefore be necessary to revisit the WHT rates applicable to this category of companies. (iv) Other general provisions of the Finance Act that would impact MSMEs include –increase in VAT rate on goods and services from 5percent to 7.5percent. This would result in an increase in the cost of goods and services bought and sold by businesses. limited liability companies engaged in agricultural production can enjoy a tax holiday for a maximum period of 8 years (an initial period of 5 years with a possible extension for 3 years). Companies engaged in crop production, management of plantations and animal husbandry will benefit significantly from this provision. - non-payment of excess dividend tax on distribution of dividend to shareholders. complete removal of the restriction on loss carry forward. all businesses must submit a TIN to open and operate a Bank account - expansion of the VAT exempt list to include additional basic food items and raw materials for food processing Key Considerations In the NBS/SMEDAN collaborative survey, the top three unfavorable policies identified by MSMEs include; high interest rates, high/ multiple taxes and high cost of power. Therefore, any tax regulation or initiative that can address all or some of the issues identified would @Businessdayng

have the most impact on MSMEs. Some of the initiatives that the Government may consider include: (i) harmonisation of taxes payable by MSMEs especially at the state and local government level should consider. This would help reduce the incidence of double taxation, and a reduction in the overall tax liability. (ii) extension of the VAT exemption to purchases made by small companies to eliminate irrecoverable VAT incurred. The FIRS may have to issue an exemption certificate to the affected companies so that they can provide this to suppliers and vendors to claim the exemption. The practicality of this certificate would also be an issue, as there may be room for abuse where purchases are made for not for business but for personal purposes and these certificates are then presented. (iii) bringing more MSMEs into the tax net by linking compliance to other government benefits. Also, provision of more incentives in the PITA targeted at unregistered businesses and unincorporated entities would help promote the success of these businesses. (iv) Also, Banks (especially Microfinance Banks) should review the interest rates charged on loans provided to cottage (home-based) industries and other MSMEs engaged in specific types of businesses, because of the income tax exemption granted on such interest income although subject to certain conditions provided in the law. Conclusion Are the incentives in the Finance Act sufficient to drive the growth of MSMEs in Nigeria? Fingers are crossed at this time on this. The impact of the Act would be better assessed at the end of this fiscal year. However, the reintroduction of a Finance Act is a step in the right direction and should provide the platform for Government to address gaps identified in the current Finance Act, in subsequent laws. In terms of implementation, we recommend that the FIRS should apply the law with due consideration to existing socio-economic exigencies. Also, strict review measures should be adopted to avoid abuse of the incentives by taxpayers; for instance, unauthorised collection and retention of VAT by small companies, or setting-up multiple companies to manage gross-turnover. Overall, it appears that small companies registered as limited liability companies are better-off tax wise compared to unincorporated entities. However, there are other regulatory issues that need to be considered, for example, unincorporated entities are not statutorily required to prepare audited financial statements annually. Olufemi and Ijeoma are Associate Director and Senior Associate respectively, in KPMG Advisory Services, Nigeria.

Wednesday 19 February 2020

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Healthcare reform gives Sanders a headache in Nevada

Electoral risks of ‘Medicare for All’ become clear in third Democratic primary LAUREN FEDOR

ernie Sanders heads in to Saturday’s Nevada caucuses as frontrunner, according to polls, despite signs of voter misgivings in the state about the self-declared democratic socialist’s “Medicare for All” healthcare policy. Mr Sanders came out narrowly on top in New Hampshire this month after losing Iowa to Pete Buttigieg, the former mayor of South Bend, Indiana, by a razorthin margin. But he was dealt a blow in Nevada — scene of the third Democratic primary contest — last week when the influential Culinary Union Local 226 distributed a flyer to 60,000 hospitality workers warning that the Vermont senator would “end culinary healthcare”. Some of Mr Sanders’ supporters responded by lashing out at the union’s top officials, according to the Nevada Independent, a local newspaper, sending them threatening phone calls, emails and tweets calling them “bitches” and “evil, entitled assholes”. Former vice-president Joe Biden, who desperately needs to recover ground in Nevada after performing poorly in Iowa and New Hampshire, used the issue to batter Mr Sanders on Sunday. “If any of my supporters did that, I’d disown them. Flat disown them,” Mr Biden told NBC’s Meet the Press. Mr Sanders, whose campaign has long struggled with accusations that it has not done enough to rein in its more strident supporters on social media, said in a statement on Thursday: “Harassment of all forms is unacceptable

Senator Bernie Sanders, his wife Jane O’Meara Sanders and New York City mayor Bill de Blasio attend a campaign event in Carson City, Nevada © Eric Thayer/Reuters

to me, and we urge supporters of all campaigns not to engage in bullying or ugly personal attacks.” Many unions across the US have taken issue with Mr Sanders’ “Medicare for All” proposals, which would effectively eliminate private health insurance in America. Organised labour has historically negotiated for generous healthcare packages, often at the expense of salary increases, and many union leaders, not just in Nevada, have raised concerns that Mr Sanders’ proposals would spell the end of their hard-fought benefits. You know, no one should go after working people for wanting to defend and grow what they have earned, and it’s a key point of dif-

ference at the policy level between me and Senator Sanders Pete Buttigieg On Sunday, Mr Buttigieg also took aim at Mr Sanders over healthcare. “You know, no one should go after working people for wanting to defend and grow what they have earned, and it’s a key point of difference at the policy level between me and Senator Sanders,” he said on CNN’s State of the Union. Mr Buttigieg favours an expansion of the existing Affordable Care Act, with a “public option” that competes against private plans. The Nevada caucuses are seen as a crucial early test of candidates’ appeal to a more diverse electorate. The overwhelming majority

of Democrats in Iowa and New Hampshire are white, while nearly 30 per cent of Nevadans are Latino and another 10 per cent are black. Nevada also has a fast-growing Asian-American population, including many Filipino-Americans in the Las Vegas area. A Las Vegas Review-Journal poll of likely caucus-goers, published on Friday, showed Mr Sanders in first place in Nevada, on 25 per cent, followed by Mr Biden on 18 per cent and Massachusetts senator Elizabeth Warren on 13 per cent. Billionaire activist Tom Steyer had 11 per cent and Mr Buttigieg and Minnesota senator Amy Klobuchar had 10 per cent a piece. The poll had a margin of error of plus or minus 4.8 percent-

age points. Mr Sanders has poured resources into Nevada in recent months, spending money on advertising campaigns and building up sizeable teams of grassroots organisers and volunteers. The 78-year-old senator has strong support among young Latino voters. The decision of the culinary union — whose endorsement helped Barack Obama to win the Nevada caucuses in 2008 against Hillary Clinton — not to back a candidate this time is not just a blow to Mr Sanders. It was “clearly a let-down” for Mr Biden, who has counted on union support, according to Jim Manley, a Democratic strategist who used to be a top aide to former Nevada senator Harry Reid. The former vice-president, who was once seen as the odds-on favourite to take on Donald Trump, finished a disappointing fourth and fifth in Iowa and New Hampshire, respectively. Like Ms Warren — who finished third in Iowa and fourth in New Hampshire — Mr Biden is looking to stage a comeback in Nevada. “[Ms Warren] really needs to do well here,” said Jon Ralston, editor of the Nevada Independent. “To some extent, this is Biden’s last stand here too.” Mr Biden’s weak showing so far has been owing in part to more moderate Democratic voters supporting Mr Buttigieg or Ms Klobuchar instead. But many strategists say those candidates will struggle for similar success in Nevada, especially given they have spent relatively little time in the state and national opinion polls show they have low levels of support with voters of colour.

Coronavirus restrictions hit return to work at Apple’s biggest iPhone plant Huge factory complex struggles to move to full production after extended holiday for lunar year

RYAN MCMORROW, NIAN LIU AND KATHRIN HILLE

pple’s biggest iPhone plant is struggling to return to full production after China’s new year holiday because of restrictions on worker movement caused by the coronavirus, adding to concerns that the outbreak will have a lasting effect on the US company. Contract manufacturer Foxconn assembles many of Apple’s newest iPhones at a huge factory complex at Zhengzhou in China’s Henan province. At full production, more than 200,000 workers put together iPhones on its assembly lines. But Foxconn faces multiple challenges to staffing the factory, which has partially resumed production as workers trickle back

from an extended holiday break. On Tuesday, the unit responsible for iPhone production stopped accepting workers from outside the city, pointing to issues in housing workers in need of quarantine. “In response to government epidemic control requirements to prioritise prevention and safely resume work, and at the same time improve the quality of our worker reception services” non-Zhengzhou workers had to temporarily hold off reporting for work, a notice seen by the Financial Times said. Local authorities are particularly concerned that a large influx of workers returning from around the region could rapidly spread the virus. Companies had to “strictly protect against the virus entering and spreading” in the workplace, Henan provincial officials said on Monday, instructing local health commissions to “step up www.businessday.ng

oversight of workplace virus-control measures”. Faced with municipal policies such as a required quarantine period for returning workers, the Zhengzhou plant has struggled to muster its full workforce. The Zhengzhou city government requires returning workers to selfquarantine for between seven and 14 days. Foxconn had put returning workers in self-quarantine of one person per room at its factory dormitories, workers said. The rooms, which usually pack in eight workers, had quickly filled, causing Foxconn to halt the return of additional staff, explained a Zhengzhoubased factory recruiter, who asked not to be named. “They don’t have enough room,” the recruiter said, adding that workers could now sign up and

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wait for quarantine availability. The news comes as Apple announced a revenue warning due in part to its “temporarily constrained” smartphone supply. The company told investors on Monday that its factories in China were “ramping up more slowly than we had anticipated” and that “iPhone supply shortages will temporarily affect revenues worldwide”. The company has perfected a just-in-time supply chain that cuts costs but makes it vulnerable to unforeseen disruptions. Analysts were divided over how severely the disruption would damage business beyond the shortterm. Manish Nigam, head of Asian technology research at Credit Suisse, forecasts a 15 per cent shortfall in tech production in the first quarter, based on the assumption that a full month of production will be @Businessdayng

lost but partially offset by overtime later in March. Mia Huang, an analyst at Taipeibased industry research company TrendForce, said: “The question raising the most concern is whether the launch date and initial shipments of the iPhone SE2, also known as iPhone 9, which was about to be launched, will be affected. For now, we are lowering our forecast for iPhone production in the first quarter by 10 per cent from 45m to 41m [units].” Others believe the fallout will last much longer. “The impact starts looking bigger and bigger, and in the coming weeks, the impact will grow,” said Bill Lu, head of Asian semiconductor research at UBS, noting component shortages were the next threat. “Inventory is low in the smartphone supply chain,” he added.

Wednesday 19 February 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Manchester City lines up legal defence over Champions League ban Battle in sport tribunal will be closely followed by the football club’s key commercial partners MURAD AHMED AND ARASH MASSOUDI

al family, bought Manchester City in 2008. He has spent hundreds of millions of pounds on world-class footballers in an effort to turn the club into a global force capable of winning the sport’s biggest prizes. The club’s operations are handled by chairman Khaldoon al-Mubarak, one of the closest advisers of Sheikh Mohammed bin Zayed al-Nahyan, Abu Dhabi’s crown prince and the de facto leader of the United Arab Emirates. Mr Mubarak’s multiple roles include running Mubadala, a $230bn sovereign investment fund, and chairing Abu Dhabi’s nuclear energy programme. Uefa investigators began a probe last year following the pub-

lication of leaked club documents and emails obtained by German magazine Der Spiegel and provided by Rui Pinto, a Portuguese national who is facing criminal charges in his home country including for computer hacking. Mr Pinto denies the charges. The internal emails appear to show £67.5m annual sponsorship of the club’s shirt, stadium and academy by Abu Dhabi-based airline Etihad was paid in the past with a large financial “contribution” by a company owned by Sheikh Mansour, and that efforts to skirt FFP rules were directed by Manchester City executives. The club has never confirmed or denied the authenticity of the leaked emails. According to a person with knowledge of the case, Uefa investigators even hired outside lawyers for the first time in an effort to build a watertight case that could avoid the fate of past FFP inquiries — such as against Paris Saint-Germain, AC Milan and Galatasaray — where sanctions were overturned for technical legal reasons. “Provided Uefa don’t cave in they should win at CAS,” the person said, adding that it would be “very difficult” for Uefa “to back down on this one”. The question now lies in whether Manchester City chooses to appeal on narrow grounds, such as whether its sponsorship deals were inflated, or if it seeks to challenge on a broader argument — that the FFP regime is an unfair constraint on clubs.

falling more than 4 per cent. Hong Kong-listed AAC Technologies, a maker of acoustic parts for Apple, fell 3.7 per cent, while chipmaker Taiwan Semiconductor Manufacturing Co declined 2.9 per cent and iPhone assembler Foxconn Technology, which trades under the name Hon Hai Precision, slid 0.6 per cent. “This unexpected news confirms the worst fears of [Wall Street] that the virus outbreak has dramatically impacted iPhone supply from China/Foxconn with a demand ripple impact worldwide,” said Daniel Ives, an analyst at Wedbush Securities. “While we have discussed a negative iPhone impact from the coronavirus over the past few weeks, the magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared.”

Beijing has imposed restrictions on the movement of people and rules on when certain types of companies can restart operations, in a bid to contain the spread of the virus. The coronavirus has killed 1,868 people and infected 72,436 in China as of Monday, according to the country’s National Health Commission. Economists expect China’s economic growth to slow sharply in the first quarter, which could ricochet across other regional economies. South Korea’s President Moon on Tuesday called for “all possible measures” to support the country’s economy. Meanwhile, concerns are rising that Japan may fall into recession. “There is uncertainty, not just about the epidemiological progress of the virus, but effects on the global economy,” Citigroup analysts said on Tuesday.

s Manchester City’s players returned to training following their winter break, executives at the Premier League champions spent the weekend preparing for their biggest battle yet. The decision late last week by Uefa, European football’s governing body, to ban the club from the Champions League for the next two seasons after “serious breaches” of so-called financial fair play rules has raised questions over whether its much-admired manager, Pep Guardiola, as well as its superstar players, will stay. The unprecedented sanction comes with more than just reputational damage and a €30m fine. Exclusion from Europe’s most prestigious club football competition would result in the loss of revenues from broadcasting, prize money, sponsorship and ticketing worth up to £100m a season. With so much at stake, Manchester City officials hunkered down with lawyers from at least three different firms to plot the club’s defence. In the coming days, it will appeal against Uefa’s ruling to the Court of Arbitration for Sport, a body considered the ultimate arbiter of global sports disputes. “This is not about getting a smaller punishment,” said a person close to the leadership of Manchester City. “This is about the substance of the case, which

Manchester City is considering a legal strategy in which it will not only argue that it did not breach the regulations but that these rules should not exist at all © Action Images via Reuters

will finally be heard freshly by an independent group where we believe we will prevail.” As fans of rival clubs gloated about the risk of an exodus of star players, Ferran Soriano, the chief executive of City Football Group, the parent company of Manchester City and a network of sister teams around the world, held crisis talks over the weekend with a group that will follow the legal battle closely: its key commercial partners. They include US private equity group Silver Lake which in November paid $500m for a 10 per cent share in CFG, valuing the group at $4.8bn, a record for a sports group.

The club is now considering an explosive legal strategy in which it will not only argue that it did not breach the regulations but that these rules should not exist at all. If the legal fight were to ultimately turn on whether the FFP regime should remain, football industry executives say it could be as consequential as the Bosman ruling in 1995. That was a European Court of Justice decision that made it easier for players to move between clubs, unleashing the modern era of multibillioneuro broadcasting deals and huge transfer signings. Sheikh Mansour bin Zayed alNahyan, a billionaire businessman and member of the Abu Dhabi roy-

Apple’s coronavirus sales warning hits global stocks Shares in chipmakers fall after iPhone maker flags hit to revenue ADAM SAMSON, ALICE WOODHOUSE AND PHILIP GEORGIADIS

lobal stocks fell as a sales warning from Apple rippled across markets in the latest sign of the mounting corporate and financial cost of the coronavirus outbreak. Europe’s major bourses all fell in late-morning trading on Tuesday, sending the composite Stoxx Europe 600 down 0.5 per cent. Futures pointed to similar losses for the S&P 500 on Wall Street, while the tech-weighted Nasdaq was set to fall around 1 per cent. Shares in Asia were worst hit — Tokyo’s Topix index dropped 1.3 per cent, a seventh straight decline, while Seoul’s Kospi index and Hong Kong’s Hang Seng both shed 1.4 per cent.

Investors have struggled to quantify the impact of the coronavirus on China’s economy, and the likely knock-on effect to supply chains around the world. So far, markets have stayed buoyant on hopes there will be limited spillover internationally and that central banks stand ready to intervene if needed. “The optimism of the major equity markets sits uneasily with incoming real economic data,” said Neil MacKinnon, a strategist at VTB Capital. Investors shifted into US sovereign debt, considered a shelter during economic uncertainty, sending the 10-year Treasury yield down 4 basis points to 1.546 per cent. The 30-year yield fell 5 bps to 1.992 per cent, slipping below 2 per cent for the first time in two weeks. China’s currency was also un-

der pressure. The onshore renminbi dropped 0.3 per cent, weakening to Rmb7 against the US dollar. The offshore variant, which trades outside mainland China, slipped by a similar margin. Japan’s yen, which attracts inflows during times of uncertainty, climbed against the US currency, while Brent crude oil fell 1.8 per cent to $56.60 per barrel. California-based Apple on Monday warned that “worldwide iPhone supply will be temporarily constrained” due to the coronavirus epidemic and that factories run by its suppliers in China were resuming work more slowly than expected. Shares in Apple suppliers dropped on Tuesday. Dutch-listed ASM International and Frankfurtlisted Dialog Semiconductor were among the worst performing major companies in Europe, each

Wednesday 19 February 2020

BUSINESS DAY

ANALYSIS

Climate change: can the insurance industry afford the rising flood risk? Floods were once considered too irregular to insure against. But global warming has changed the calculation ROBERT ARMSTRONG AND OLIVER RALPH

n November 8, Pam We b b w o r k e d a usual day at Truffle Lodge, her spa business in the Yorkshire village of Fishlake, near the River Don. Floods were expected nearby, but an email from the UK’s Environment Agency told her that Fishlake was safe. The agency was wrong. At 9.30pm the water started pouring into the business and Ms Webb’s home next door. “It came in the front and back, it came up through the flooring in every single ground floor room,” she says. “It’s heartbreaking seeing your home and business going in such a small amount of time.” The flood caused tens of thousands of pounds in damage and forced the spa to close for nine weeks. Adding to the trauma, says Ms Webb, flooding had been excluded from her insurance policies about a year earlier, so she has had to pick up the entire cost. It is a scenario that has played out again across parts of the UK over the past 10 days, with two severe storms hitting the country and adding to the cost associated with climate change. Economic damage worldwide from flooding last year was $82bn, the greatest of any natural peril, according to Aon. Just $13bn of that was insured. Global warming means that flooding is likely to become more frequent, say natural catastrophe modelling specialists. Warmer air holds more moisture, leading to wetter and more frequent severe storms. Last year Nasa used temperature data gathered from space to reveal that every additional 1°C of ocean surface temperature increases the probability of severe storms by 20 per cent. Meanwhile rising sea levels mean more coastal flooding, with some estimates suggesting that 230m people are at risk from storm

surges, a risk amplified by steady migration towards conurbations near coasts and rivers. Those numbers, combined with the lack of cover, should be an attractive target for a global insurance industry that has abundant capital after low interest rates drew fresh investors into the sector seeking better returns. The risk consultancy Milliman estimates that the US market alone could generate $48bn of annual premium revenue for insurers. Floods were once considered too irregular to underwrite profitably, but sophisticated catastrophe models — which can more accurately predict where floods might occur — have changed that. “Reinsurance companies want the risk,” says Nancy Watkins, principal and actuary at Milliman. “They have been the leaders, and have been running around trying to sell [flood reinsurance] for four or five years.” Yet, managing the increased flooding is going to be very expensive. Insurance systems and government programmes have developed haphazardly, and are ill-suited to deal with the growing risks. This is prompting a rethink over which risks should be held publicly, and which privately. “The world has got enough insurance capital to protect against flood risk,” says Stephen Hester, chief executive of insurer RSA. “It’s a question of whether society wants people who live on flood plains to pay the right price for the risk, or whether there should be some sort of subsidy.” In the US the National Flood Insurance Program, the federal scheme that provides the overwhelming majority of US residential coverage, has about 5m policies providing $1.3tn of cover. The numbers look large, but only 15 per cent of US households have any flood coverage at all. During 2017’s Hurricane Harvey that hit Texas and Louisiana, 70 per cent of the estimated $125bn in damage was uninsured.

Flood insurance is mandatory for anyone in the US with a government-backed mortgage — that is, most US homeowners — if the home falls into a designated “special flood hazard area,” defined as being at risk of inundation at least once every 100 years. But the NFIP, established in 1968, was never designed or capitalised to operate like a private insurer. The idea “was to price the product so more people would have it and it would [then] reduce the disaster costs to the government”, says David Maurstad, chief executive of the NFIP. By design, “the government would make up the difference” in above-average years for flooding. This arrangement worked until about 20 years ago. Between 1978 and 2003, the NFIP paid out claims of under $500m a year. Since then, the claims have averaged $3.5bn a year. Premiums and fees have been inadequate to cover the payouts. In 2017, the federal government forgave $16bn in NFIP debt. Even so, the scheme owes $20bn to the US Treasury. That the mandatory coverage areas are too small is only part of the problem, say critics. They also give the impression that flood risk stops at a line on a map. In fact, “flood risk varies continuously both within that 100-year floodplain and beyond”, says Carolyn Kousky, executive director of the Wharton Risk Center. Flood risk is not included in US home insurance policies creating the impression, say flood experts, that the risk is incidental or secondary. These are not the only distortions. NFIP charges premiums that do not vary with the replacement cost of houses, so expensive houses pay below-market rates. It means taxpayers are effectively providing subsidies for luxury beach houses. “The more expensive your house, the better deal you are getting from the NFIP,” Ms Watkins says. The NFIP is not permitted to withdraw coverage once it is grant-

ed, so pays repeatedly to repair and rebuild thousands of homes in high-risk areas. According to the Pew Charitable Trust, such “severe repetitive loss” properties had cost the NFIP more than $12.5bn as of 2016. Private insurers hesitate to compete against a subsidised product. A warren of state regulations makes matters worse. In Louisiana, for example, raising premiums because of an “act of God” — defined as a storm or other natural cause — is forbidden. Several US states ban or limit the use of catastrophe models in setting premiums. Various attempts to reform the NFIP and bring premiums into line with the risks have met resistance from coastal residents, their representatives in Congress and the real estate industry. The latest effort “Risk Rating 2.0,” would have linked prices and risk more closely. Originally scheduled to take effect this year, it was recently pushed into 2021. Rising flood risks 230m People around the globe at risk from storm surges — about 3% of the population 70% Of the estimated $125bn in damage caused by Hurricane Harvey was uninsured $3.5bn Average annual cost of claims paid by the US National Flood Insurance Program since 2003 The UK has tried a different model. Flood Re, the UK scheme, forces all home insurance buyers to chip in to subsidise the cost of cover in flood-prone areas. Homeowners pay about £10 per year over their existing premium and, in theory, insurance for people in risky areas becomes more affordable. Flood Re was set up by the government in 2016. If it runs out of money, the industry has to top it up, but that has not happened yet. “The political desire at the time [it was set up] was for it to

be an industry-owned solution,” says Andy Bord, Flood Re’s chief executive. To discourage new development in flood prone areas, Flood Re does not apply to homes built after 2009. Flood Re is only supposed to last for 25 years. The intention was that it should act as a catalyst for better flood planning by the government, local authorities and homeowners, so that by 2039 insurance would be more affordable for people in flood-prone areas, even without the subsidy. There is scepticism in the industry about whether this is achievable. But Mr Bord says, “four out of five people [in flood prone areas] have made a saving of 50 per cent or more on their home insurance”. China and Australia are among the countries that have asked Flood Re for details about the design of the scheme. Flood Re has yet to be fully tested. The years since 2016 have been relatively quiet for UK floods, although recent events such as Fishlake may prove a more rigorous test. It has only dealt with 1,100 claims in total since it was set up, Mr Bord told the Financial Times in January, as opposed to initial expectations that it would deal with 2,000 per year. But they have to avoid complacency, says Mr Bord. “People are taking action, but not fast enough,” he says. “If you haven’t been flooded, you think it can’t happen to you. If you have, you think it won’t happen again.” Flood experts agree that, in relatively wealthy countries, the price of living near the water must better reflect the risks, to both stop overbuilding and encourage infrastructure investment. Many also believe that private insurance — the free market — offers the best pricing mechanism. Yet there is a reason that, as Wharton’s Ms Kousky says, “there

Continues on page 50

Wednesday 19 February 2020

BUSINESS DAY

NATIONAL NEWS

Abenomics on trial as Japan teeters on brink of recession Seven years on there is little to show for Shinzo Abe’s ‘three arrows’ of fiscal stimulus ROBIN HARDING

n 2013, Japan’s new prime minister Shinzo Abe delivered his first policy address, vowing to revive economic growth and end two decades of on-and-off deflation. He planned to achieve this with the “three arrows” of Abenomics: bold monetary easing, flexible fiscal policy and a reform strategy to revive private investment. Seven years on, he has little to show for it. Following October’s rise in value added tax, Japan revealed on Monday that gross domestic product shrunk at an annualised rate of 6.3 per cent in the final quarter of 2019. With the economy suffering a fresh shock from the outbreak of coronavirus, most analysts think a technical recession — defined as two consecutive quarters of declining output — is probable. The big questions are whether a technical recession could turn into a deeper downturn; whether there is anything the government and the Bank of Japan can do about it; and where this leaves Mr Abe’s ambition to revive Japan’s economy as the prime minister’s own time in office draws to a close. Masamichi Adachi, UBS chief economist, said the latest growth numbers were “very weak, dismal, shockingly bad” and showed that the economy was struggling even before the virus struck. “Japan will definitely suffer from a plunge in inbound tourism and from weaker goods trade given the level of activity in China is so

low,” he said. But Mr Adachi said he expected that Japan could avoid a deeper downturn, so long as the virus abated by the end of March, allowing for a rebound in China’s economy. “Moreover, I would argue the [Abe] government will definitely step up with more fiscal stimulus,” he said. M r Ab e ha s re p e at e d l y launched spending packages when the economy weakens, but the timing is a problem this time because the government’s last stimulus has only just been approved in the Diet. Even if the prime minister acted straight away, it would probably take months to compile and pass another round.

“So far, none of last year’s stimulus has taken effect. The first thing to consider is accelerating that spending,” said Harumi Taguchi, principal economist at IHS Markit in Tokyo. That leaves any possible action to the Bank of Japan, where governor Haruhiko Kuroda has already cut overnight interest rates to minus 0.1 per cent, and has been reluctant to do more for fear of negative side effects on the banking system. In an interview with FujiSankei Business, published on Tuesday, Mr Kuroda said the virus was “the biggest source of uncertainty for Japan’s economy” but insisted there was little chance of growth in 2020 falling far below 2019. He

also repeated the central bank’s boilerplate phrase: it would launch further easing “without hesitation” should it prove necessary. There is little doubt, however, that the latest slump in output is another blow to Mr Abe and Mr Kuroda’s plans for Japan to finally escape the “lost decades” of stagnation and falling prices that followed the bursting of a stock market bubble in 1990. The idea was for monetary and fiscal stimulus to revive demand and inflation while structural economic reforms allowed for a higher level of growth. Initially, it worked as intended: the Japanese yen weakened and growth picked up. The economy has generally

been stronger during Mr Abe’s term than in previous decades. But a 2014 rise in consumption tax from 5 per cent to 8 per cent drove the economy into recession, and after last year’s increase to 10 per cent there is a danger of a repeat. To many in Japan, the tax rises were necessary and appropriate given the fiscal deficit and need to pay for its ageing population, but they have also cancelled out any fiscal stimulus measures and resulted in overall fiscal contraction under Mr Abe. Paul Krugman, the economist, described the tax rises as examples of “destructive austerity policies”. Consumption was barely any higher in the final quarter of 2019 than it was in the same period of 2012, when Mr Abe won the election, and inflation has never come close to the BoJ’s 2 per cent target. “I hesitate to say that the VAT hike was a mistake,” said Mr Adachi, arguing that Mr Abe had little alternative given Japan’s long-term fiscal trajectory. Ms Taguchi spoke for those in Japan who think greater deregulation was needed when she said “the big failure of Abenomics was on structural reform”. Mr Abe is expected to step down in the next couple of years and will leave behind a difficult challenge for his successor. This will be whether to mount one last stimulus or accept Japan’s current growth performance is as good as it will get, and that Mr Abe’s dream of economic revival is out of reach.

Climate change: can the insurance industry afford the rising flood risk? Continued from page 49 is almost nowhere in the world with a fully private disaster insurance market.” Floods, she says, “are concentrated and correlated risks . . . you have lots of quiet years and then a really bad year.” This requires insurers to hold lots of capital, and therefore charge high premiums. In some areas high premiums would bring down the prices of prime real estate. In others, they would force out low-income residents. The political barriers to either are high. Barry Gilway, chief executive of Citizens, a Florida-based property insurer, uses the example of Florida Keys. “Without subsidisation no homeowner could really afford to live or build in Monroe County due to the extremely high costs of funding the risk. After Hurricane Irma [in 2017] they had to rebuild to new building codes. While absolutely appropriate, that is very expensive. With no affordable housing and extremely

high insurance costs, where do all the people in the service industry live?” A few steps would make the public-private balance easier to achieve. Investment in detailed public flood maps would also help increase risk awareness and improve underwriting. The First Street Foundation, a non-profit group, has begun work on this in the US, but public investment is required. “We need an atlas of flooding,” says Stijn Van Nieuwerburgh, a real estate economist at Columbia University. Ms Kousky of Wharton recommends a system modelled on the way terrorism is insured in the US: a private market with insurers backstopped by the government. ‘We want to have some amount of risk-based pricing [but] that’s perfectly do-able even with a government backstop at a very high level.” Following the example of the UK, new buildings could be excluded from subsidy programmes. Alternatively, people could be www.businessday.ng

given help to make their homes more resilient, so that future floods cause less damage and cost less to repair. Flood Re wants to be able to cover victims not just for the costs of repairing damage but also to “build back better”. “Flood risk management cannot be done by the insurance industry alone,” says Konrad Schoeck, a flooding specialist at reinsurance group Swiss Re. “It needs to be the insurance industry, the government and private homeowners.” It may be that the suffering caused by flooding is not yet enough to force hard choices. But with waters continuing to rise that is unlikely to remain the case. “As levels of risk rise, there will be more questions about uninsurability and what you do about it,” says Arno Hilberts, vice-president at risk modelling company RMS. “You will reach a threshold where insurance systems don’t really work.” Prevention key to cutting climate costs

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While wealthy countries such as the US and UK struggle to decide which climate change risks the state should carry, the calculus for poor or middle-income countries is very different. Avoiding the worst impact of floods will cost billions. In Indonesia, Jakarta is slowly sinking which last year led President Joko Widodo to announce plans for a new capital on the island of Borneo. Even where the problems are not so eye-catching, there is often little private insurance in place to cover the growing flood risk as few people can afford it. But there is a role for insurers. One is to help countries finance the cost of dealing with floods via so-called parametric insurance policies sold to aid agencies or governments. These policies pay out as soon as a threshold, such as the depth of a flood, is breached. The Centre for Disaster Protection funded by the UK government has just been set up in London to help countries understand @Businessdayng

how insurance or other forms of financing could help. “There is a challenge in the way the world pays for disasters, waiting for them to happen and then paying for them, rather than preparing in advance,” says Daniel Clarke, the centre’s director. Insurance can help but it has to be tailored to cover the right risks. “The only thing worse than no insurance is bad insurance that people rely on and then it doesn’t come through.” One of the challenges is to get three very disparate groups — insurance companies, governments and aid agencies — to work together. “The consequences of the climate crisis such as repeated flooding is ultimately a humanitarian issue. But it’s not one that the public sector and charities can solve on their own — we need to collaborate with commercial partners,” says Simon Meldrum, a former banker who is now an investment specialist with the British Red Cross. Oliver Ralph

Wednesday 19 February 2020

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Tuesday 18 February 2020

Top Gainers/Losers as at Tuesday 18 February 2020 LOSERS

GAINERS Company

Opening

Closing

Change

N38

N38.5

0.5

TANBIC

Company

ASI (Points)

Opening

Closing

Change

N29

N28.85

-0.15

DEALS (Numbers)

GUARANTY

CILEASING

N5.4

N5.8

0.4

N4.7

N4.55

-0.15

UAC-PROP

N0.9

N0.99

0.09

FBNH

N5.95

N5.8

-0.15

VOLUME (Numbers)

UCAP

N2.88

N2.93

0.05

UBA

N7.7

N7.55

-0.15

VALUE (N billion)

NPFMCRFBK

N1.15

N1.2

0.05

ZENITHBANK

N19.6

N19.5

-0.1

MARKET CAP (N Trn)

VITAFOAM

27,547.56 3,075.00 168,073,631.00 2.156 14.347

Global market indicators FTSE 100 Index 7,382.01GBP -51.24-0.69%

Nikkei 225 23,193.80JPY -329.44-1.40%

Shanghai Stock Exchange Composite Index 2,984.97CNY +1.35+0.05%

Deutsche Boerse AG German Stock Index DAX 13,681.19EUR -102.70-0.75%

Generic 1st ‘DM’ Future 29,113.00USD -282.00-0.96%

Shanghai Stock Exchange Composite Index 2,984.97CNY

Banking stocks push NSE ASI further south …market declines by 4.49% month-to-date Stories by Iheanyi Nwachukwu

igeria’s stock market has decreased by 4.49percent since the beginning of this month of February 2020, almost eroding the gains recorded earlier this year. The market extended its loss path after Tuesday’s trading session, driven by investors’ decisions to sell banking stocks like FBN Holdings, UBA, GTBank and Zenith with corresponding demand. The Nigeria stock market’s returns which previously placed it as world’s best has now decreased to +2.62percent year-to-date (ytd). The Nigerian Stock Exchange (NSE) All Share Index (ASI) closed lower by 0.08percent to 27,547.56 points as against preceding day’s high of 27,570.94 points. Only this week, the NSE ASI has decreased by

0.75percent. “The NSEASI was briefly the best performing index globally in January but its gains ytd have since been pared back …This compares with 1.4percent for the Jo’burg all-share and a loss of -3.9percent in Nairobi (NSE20). The brief surge was driven by domestic investors, specifically by retail rather than institutional players”, said FBNQuest analysts in the February 18 note. “Now that the PFAs are excluded from the CBN’s open market operations (OMO), the hope is that they will begin to deploy the proceeds of their maturing bills in the equities market”, the analysts added. The value of listed stocks decreased to N14.347trillion on Tuesday February 18 from preceding day high of N14.359trillion, representing a decline of about N12billion. FBN Holdings Plc led the losers’ league after its share price dropped from day open high of N5.95 to N5.8, losing

15kobo or 2.52percent. Vitafoam Nigeria Plc also joined the top losers table, after its share price moved from N4.7

United Capital proposes N3bn dividend payout amid subdued group earnings …represents 50kobo per share …after tax profit rises slightly to N4.97bn

or the year ended December 31, 2019, United Capital Plc proposes 50kobo dividend per share payable to its shareholders. The proposed dividend amounting to N3billion is contained the company’s audited financial statement released on the Nigerian Stock Exchange (NSE) on Tuesday February 18. The group reported N8.59billion gross earnings in FY 2019 as against N9.29billion in 2018, representing 7.53percent decline. Its pre-tax profit of N4.9billion in 2019 was down by 21.22percent from N6.22billion in 2018 financial year. The Group’s profit after

tax (PAT) printed slightly higher by 14.78percent to N4.97billion in 2019 against N4.33billion in 2018. The group’s earnings per share increased to 83kobo, as against 72kobo in 2018. At the NSE on Tuesday, the shares of United Capital joined the top gainers league after rising from N2.88 to N2.93, adding

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5kobo or 1.74percent. The current price is still below its 52-week high of N3.53 and a corresponding week low of N1.76. This year, the stock has outperformed the NSE ASI, gaining 20percent as at Monday as against NSEASI which has gained +2.72percent year-to-date; and later dropped to +2.63percent on Tuesday.

to N4.55, shedding 15kobo or 3.19percent. The top five decliners list includes UBA Plc which

dipped from N7.7 to N7.55, losing 15kobo or 1.95percent. GTBank Plc was also down, from N29 to N28.85, shedding 15kobo or 0.52percent, while Zenith Bank Plc lost 10kobo, from N19.6 to N19.5, losing 0.51percent. In 3,075 deals, equity investors exchanged 168,073,631 units valued at N2.156billion. Zenith, GTBank, United Capital, Access Bank and FBN Holdings were actively traded stocks. Stanbic IBTC Holdings Plc occupied the top gainers position after its share price increased from N38 to N38.5, adding 50kobo or 1.32percent. It was followed by C&I Leasing which advanced from N5.4 to N5.8, adding 40kobo or 7.41percent. UAC-Property Development Company Plc increased from 90kobo to 99kobo, adding 9kobo or 10percent. United Capital Plc rose from N2.88 to N2.93, adding 5kobo or 1.74percent; while Eterna Plc increased from N2.1 to N2.15, adding 5kobo or 2.38percent.

NSE to hold strategic meetings as demutualisation nears completion

he Nigerian Stock Exchange (NSE) will convene a mandatory Court-Ordered Meeting (COM) of its members to pass requisite resolutions for the demutualisation of the Exchange. Similarly, the Exchange will hold an Extraordinary General Meeting (EGM) to pass the resolutions for the appointment of inaugural board members of Nigerian Exchange Group Plc, post demutualisation of The Nigerian Stock Exchange. Both meetings (COM and EGM) will hold in Lagos on March 3, 2020. Commenting on the Exchange’s quest to demutualise, Chief Executive Officer of NSE, Oscar N. Onyema, said, “Our effort at seeing the demutualisation to completion is fuelled by our commitment to developing a more agile Exchange that is better able to support the economic growth of Nigeria.

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We are confident that postdemutualisation,the NSE will be better equipped to diversify our operations and evolve into a more competitive, robust and liberalised stock market.” Members of the NSE had approved for the Exchange to embark on the demutualisation scheme at an Extraordinary G eneral Meeting (EGM) in March 2017. This was followed by the signing of the Demutualisation of The Nigerian Stock Exchange Bill into law in July 2018. In December 2019, the Securities and Exchange Commission of Nigeria (SEC) in a No Objection letter gave its consent to the NSE’s planned conversion from a not-for-profit entity limited by guarantee into a profit-making, public limited liability company owned by shareholders. This important consent allows NSE to proceed to hold both the COM and EGM. @Businessdayng

Stanbic IBTC signs agreement with Afreximbank on N300bn bond issuance programme

tanbic IBTC Capital Limited, a subsidiary of the Stanbic IBTC Holdings Plc, has established a N300 billion Domestic Bond Programme for the African Export-Import Bank (Afreximbank). The signing ceremony which held in Lagos marked the official kick-off of the initiative. The transaction was consummated in the presence of members of the Stanbic IBTC team, members of the Afreximbank Executive management team, representatives from the Nigerian Stock Exchange and FMDQ OTC Plc, amongst others. Afreximbank, a multiproduct partner of Stanbic IBTC and the Standard Bank Group, is one of Africa’s largest Developmental Finance Institutions and a seasoned issuer in the international capital markets. The establishment of the debt issuance programme in the Nigerian capital market by Afreximbank makes it the third supranational ever to join an elite group of Nigeria’s development partners, enabling the domestic capital market. It is vital to establish the Bond Programme in local currency, considering the strong liquidity and current low yields in the domestic market. This initiative by Afreximbank aligns with global best practice in treasury management and innovation to stay abreast of evolving market conditions. It will aid in stimulating the expansion and development of Nigeria, through the intervention in various sectors of the Nigerian economy. Stanbic IBTC Capital Limited remains fully committed to developing the Nigerian capital markets and has been at the forefront of driving financial innovation and advising clients on staying ahead of changing times.

Wednesday 19 February 2020

BUSINESS DAY

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Wednesday 19 February 2020

BUSINESS DAY

Live @ The STOCK Exchanges Prices for Securities Traded as of Tuesday 18 February 2020 Company

Market cap(nm)

Price (N)

Change

Trades

Volume

Company

Market cap(nm)

Price (N)

Change

Trades

Volume

PRICES FOR MAIN BOARD SECURITIES (Equities) BANKING ACCESS BANK PLC. 344,788.69 9.70 -0.52 159 12,829,821 UNITED BANK FOR AFRICA PLC 258,205.63 7.55 -1.95 166 5,086,995 ZENITH BANK PLC 612,231.63 19.50 -0.51 522 48,985,036 847 66,901,852 OTHER FINANCIAL INSTITUTIONS FBN HOLDINGS PLC 208,192.70 5.80 -2.52 270 10,310,873 270 10,310,873 1,117 77,212,725 TELECOMMUNICATIONS SERVICES MTN NIGERIA COMMUNICATIONS PLC 2,361,123.51 116.00 - 71 442,318 71 442,318 71 442,318 BUILDING MATERIALS DANGOTE CEMENT PLC 2,896,886.26 170.00 - 112 511,686 LAFARGE AFRICA PLC. 243,227.71 15.10 - 52 510,763 164 1,022,449 164 1,022,449 EXPLORATION AND PRODUCTION SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC 356,008.96 605.00 - 6 1,801 6 1,801 6 1,801 1,358 78,679,293 REAL ESTATE INVESTMENT TRUSTS (REITS) SFS REAL ESTATE INVESTMENT TRUST 1,710.00 85.50 - 0 0 UNION HOMES REAL ESTATE INVESTMENT TRUST (REIT) 10,175.81 40.70 - 0 0 9,205.53 3.45 - 11 182,500 UPDC REAL ESTATE INVESTMENT TRUST 11 182,500 11 182,500 OTHER FINANCIAL INSTITUTIONS NIGERIA ENERYGY SECTOR FUND 411.91 552.20 - 0 0 3,312.39 103.20 - 0 0 VALUEALLIANCE VALUE FUND 0 0 0 0 11 182,500 CROP PRODUCTION FTN COCOA PROCESSORS PLC 440.00 0.20 - 0 0 OKOMU OIL PALM PLC. 64,865.88 68.00 - 11 144,396 49,850.00 49.85 - 4 1,273 PRESCO PLC 15 145,669 FISHING/HUNTING/TRAPPING ELLAH LAKES PLC. 8,500.00 4.25 - 0 0 0 0 LIVESTOCK/ANIMAL SPECIALTIES LIVESTOCK FEEDS PLC. 2,070.00 0.69 -1.43 20 979,141 20 979,141 35 1,124,810 DIVERSIFIED INDUSTRIES JOHN HOLT PLC. 217.92 0.56 - 1 500 S C O A NIG. PLC. 1,903.99 2.93 - 0 0 TRANSNATIONAL CORPORATION OF NIGERIA PLC 38,615.59 0.95 -2.11 55 9,011,587 25,931.67 9.00 -5.56 81 4,269,839 U A C N PLC. 137 13,281,926 137 13,281,926 BUILDING CONSTRUCTION ARBICO PLC. 469.26 3.16 - 0 0 0 0 INFRASTRUCTURE/HEAVY CONSTRUCTION JULIUS BERGER NIG. PLC. 29,700.00 22.50 - 29 297,869 ROADS NIG PLC. 165.00 6.60 - 0 0 29 297,869 REAL ESTATE DEVELOPMENT UACN PROPERTY DEVELOPMENT COMPANY PLC 2,572.41 0.99 10.00 9 727,356 9 727,356 38 1,025,225 AUTOMOBILES/AUTO PARTS DN TYRE & RUBBER PLC 954.53 0.20 - 0 0 0 0 BEVERAGES--BREWERS/DISTILLERS CHAMPION BREW. PLC. 7,594.61 0.97 - 9 140,154 GOLDEN GUINEA BREW. PLC. 220.45 0.81 - 0 0 GUINNESS NIG PLC 55,197.65 25.20 - 26 249,984 INTERNATIONAL BREWERIES PLC. 189,377.58 7.05 - 3 3,750 NIGERIAN BREW. PLC. 411,840.46 51.50 - 42 177,562 80 571,450 FOOD PRODUCTS DANGOTE SUGAR REFINERY PLC 148,200.00 12.35 - 46 312,790 FLOUR MILLS NIG. PLC. 94,308.73 23.00 - 44 131,857 HONEYWELL FLOUR MILL PLC 8,168.10 1.03 - 11 641,959 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 34,442.70 13.00 - 13 125,465 UNION DICON SALT PLC. 2,993.06 10.95 - 0 0 114 1,212,071 FOOD PRODUCTS--DIVERSIFIED CADBURY NIGERIA PLC. 17,091.64 9.10 - 11 37,624 NESTLE NIGERIA PLC. 984,479.06 1,242.00 - 76 50,007 87 87,631 HOUSEHOLD DURABLES NIGERIAN ENAMELWARE PLC. 1,680.31 22.10 - 0 0 VITAFOAM NIG PLC. 5,691.34 4.55 -3.19 55 6,185,928 55 6,185,928 PERSONAL/HOUSEHOLD PRODUCTS P Z CUSSONS NIGERIA PLC. 19,852.39 5.00 - 23 116,170 86,175.08 15.00 - 36 186,659 UNILEVER NIGERIA PLC. 59 302,829 395 8,359,909 BANKING ECOBANK TRANSNATIONAL INCORPORATED 117,437.13 6.40 0.78 33 1,156,932 FIDELITY BANK PLC 61,716.32 2.13 -0.47 68 5,918,434 GUARANTY TRUST BANK PLC. 849,089.52 28.85 -0.52 186 17,066,132 JAIZ BANK PLC 20,919.62 0.71 4.41 23 2,554,507 STERLING BANK PLC. 44,913.05 1.56 -3.21 43 1,871,593 UNION BANK NIG.PLC. 203,845.27 7.00 -0.71 30 379,410 6,312.24 0.54 3.85 7 265,058 UNITY BANK PLC WEMA BANK PLC. 26,230.64 0.68 3.03 22 1,634,037 412 30,846,103 INSURANCE CARRIERS, BROKERS AND SERVICES AFRICAN ALLIANCE INSURANCE PLC 4,117.00 0.20 - 0 0 AIICO INSURANCE PLC. 5,682.77 0.82 2.50 23 1,239,167 AXAMANSARD INSURANCE PLC 21,000.00 2.00 - 1 3,000 CONSOLIDATED HALLMARK INSURANCE PLC 2,845.50 0.35 - 1 14,000 CORNERSTONE INSURANCE PLC 8,248.52 0.56 - 4 90,000 GOLDLINK INSURANCE PLC 909.99 0.20 - 0 0 GUINEA INSURANCE PLC. 1,228.00 0.20 - 1 30,000 INTERNATIONAL ENERGY INSURANCE PLC 487.95 0.38 - 0 0 LASACO ASSURANCE PLC. 1,904.09 0.26 - 2 389,200 LAW UNION AND ROCK INS. PLC. 4,253.37 0.99 -4.81 8 601,500 LINKAGE ASSURANCE PLC 3,520.00 0.44 -4.35 6 172,409 MUTUAL BENEFITS ASSURANCE PLC. 2,234.55 0.20 - 4 1,010,150 NEM INSURANCE PLC 10,772.23 2.04 - 3 126,000 NIGER INSURANCE PLC 1,547.90 0.20 - 0 0 PRESTIGE ASSURANCE PLC 3,175.71 0.59 - 12 805,000 REGENCY ASSURANCE PLC 1,333.75 0.20 - 2 270,000 SOVEREIGN TRUST INSURANCE PLC 2,272.89 0.20 - 0 0 STACO INSURANCE PLC 4,483.72 0.48 - 0 0 STANDARD ALLIANCE INSURANCE PLC. 2,582.21 0.20 - 0 0 SUNU ASSURANCES NIGERIA PLC. 2,800.00 0.20 - 0 0 UNIC DIVERSIFIED HOLDINGS PLC. 516.46 0.20 - 0 0 UNIVERSAL INSURANCE PLC 3,200.00 0.20 - 0 0 VERITAS KAPITAL ASSURANCE PLC 2,773.33 0.20 - 0 0 WAPIC INSURANCE PLC 4,416.30 0.33 10.00 18 1,449,858 85 6,200,284 MICRO-FINANCE BANKS NPF MICROFINANCE BANK PLC 2,743.97 1.20 4.35 5 568,491 5 568,491

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MORTGAGE CARRIERS, BROKERS AND SERVICES ABBEY MORTGAGE BANK PLC 6,784.62 1.05 - 0 0 ASO SAVINGS AND LOANS PLC 7,370.87 0.50 - 0 0 5,796.93 1.39 - 0 0 INFINITY TRUST MORTGAGE BANK PLC RESORT SAVINGS & LOANS PLC 2,265.95 0.20 - 0 0 UNION HOMES SAVINGS AND LOANS PLC. 2,949.22 3.02 - 0 0 0 0 OTHER FINANCIAL INSTITUTIONS AFRICA PRUDENTIAL PLC 9,320.00 4.66 -1.89 29 765,282 CUSTODIAN INVESTMENT PLC 35,585.28 6.05 - 3 2,665 DEAP CAPITAL MANAGEMENT & TRUST PLC 540.00 0.36 - 0 0 FCMB GROUP PLC. 35,644.88 1.80 -1.10 54 2,035,818 ROYAL EXCHANGE PLC. 1,183.44 0.23 - 0 0 404,441.24 38.50 1.32 47 1,684,660 STANBIC IBTC HOLDINGS PLC UNITED CAPITAL PLC 17,580.00 2.93 1.74 172 15,637,098 305 20,125,523 807 57,740,401 HEALTHCARE PROVIDERS EKOCORP PLC. 2,592.72 5.20 - 0 0 UNION DIAGNOSTIC & CLINICAL SERVICES PLC 710.63 0.20 - 1 82,000 1 82,000 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 5,215.90 2.50 - 7 114,591 GLAXO SMITHKLINE CONSUMER NIG. PLC. 5,979.38 5.00 - 11 44,840 3,484.97 2.02 - 8 75,520 MAY & BAKER NIGERIA PLC. NEIMETH INTERNATIONAL PHARMACEUTICALS PLC 911.60 0.48 6.67 13 837,683 NIGERIA-GERMAN CHEMICALS PLC. 556.71 3.62 - 0 0 325.23 1.50 - 0 0 PHARMA-DEKO PLC. 39 1,072,634 40 1,154,634 COMPUTER BASED SYSTEMS COURTEVILLE BUSINESS SOLUTIONS PLC 745.92 0.21 -4.55 2 226,100 2 226,100 COMPUTERS AND PERIPHERALS OMATEK VENTURES PLC 1,206.13 0.41 - 0 0 0 0 IT SERVICES CWG PLC 6,413.06 2.54 - 0 0 NCR (NIGERIA) PLC. 321.84 2.98 - 0 0 287.07 0.58 - 0 0 TRIPPLE GEE AND COMPANY PLC. 0 0 PROCESSING SYSTEMS CHAMS PLC 1,361.86 0.29 - 2 162,300 E-TRANZACT INTERNATIONAL PLC 10,962.00 2.61 - 1 100 3 162,400 TELECOMMUNICATIONS SERVICES AIRTEL AFRICA PLC 1,123,311.48 298.90 - 0 0 0 0 5 388,500 BUILDING MATERIALS BERGER PAINTS PLC 1,956.31 6.75 - 2 17,010 BUA CEMENT PLC 1,185,252.39 35.00 - 13 37,700 17,220.00 24.60 - 7 6,369 CAP PLC MEYER PLC. 244.37 0.46 - 0 0 1,769.32 2.23 - 1 1,500 PORTLAND PAINTS & PRODUCTS NIGERIA PLC PREMIER PAINTS PLC. 1,156.20 9.40 - 0 0 23 62,579 ELECTRONIC AND ELECTRICAL PRODUCTS AUSTIN LAZ & COMPANY PLC 2,192.12 2.03 - 0 0 2,395.40 1.36 - 3 11,712 CUTIX PLC. 3 11,712 PACKAGING/CONTAINERS BETA GLASS PLC. 34,998.04 70.00 - 0 0 GREIF NIGERIA PLC 388.02 9.10 - 0 0 0 0 AGRO-ALLIED & CHEMICALS NOTORE CHEMICAL IND PLC 100,754.14 62.50 - 0 0 0 0 26 74,291 CHEMICALS B.O.C. GASES PLC. 1,873.10 4.50 - 3 17,755 3 17,755 METALS ALUMINIUM EXTRUSION IND. PLC. 1,781.64 8.10 - 0 0 0 0 MINING SERVICES MULTIVERSE MINING AND EXPLORATION PLC 852.39 0.20 - 0 0 0 0 PAPER/FOREST PRODUCTS THOMAS WYATT NIG. PLC. 77.00 0.35 - 0 0 0 0 3 17,755 ENERGY EQUIPMENT AND SERVICES JAPAUL OIL & MARITIME SERVICES PLC 1,252.54 0.20 -4.76 16 3,869,026 16 3,869,026 INTEGRATED OIL AND GAS SERVICES OANDO PLC 44,753.08 3.60 - 29 262,098 29 262,098 PETROLEUM AND PETROLEUM PRODUCTS DISTRIBUTORS 11 PLC 48,031.29 133.20 - 12 54,510 CONOIL PLC 12,491.14 18.00 - 12 5,593 ETERNA PLC. 2,803.91 2.15 2.38 34 728,022 FORTE OIL PLC. 24,161.02 18.55 - 7 40,756 MRS OIL NIGERIA PLC. 4,206.05 13.80 - 4 4,300 TOTAL NIGERIA PLC. 36,328.84 107.00 - 14 6,473 83 839,654 128 4,970,778 ADVERTISING AFROMEDIA PLC 1,509.28 0.34 - 0 0 0 0 AIRLINES MEDVIEW AIRLINE PLC 15,796.05 1.62 - 0 0 0 0 AUTOMOBILE/AUTO PART RETAILERS R T BRISCOE PLC. 235.27 0.20 - 0 0 0 0 COURIER/FREIGHT/DELIVERY RED STAR EXPRESS PLC 2,623.26 4.45 - 7 102,150 TRANS-NATIONWIDE EXPRESS PLC. 421.96 0.90 - 1 1,000 8 103,150 HOSPITALITY TANTALIZERS PLC 642.33 0.20 - 0 0 0 0 HOTELS/LODGING CAPITAL HOTEL PLC 4,259.15 2.75 - 0 0 IKEJA HOTEL PLC 2,286.68 1.10 - 2 20,300 TOURIST COMPANY OF NIGERIA PLC. 7,076.28 3.15 - 0 0 TRANSCORP HOTELS PLC 30,781.64 4.05 - 4 5,100 6 25,400 MEDIA/ENTERTAINMENT DAAR COMMUNICATIONS PLC 3,960.00 0.33 - 9 9,000 9 9,000 PRINTING/PUBLISHING ACADEMY PRESS PLC. 223.78 0.37 - 0 0 LEARN AFRICA PLC 956.60 1.24 - 6 41,152 STUDIO PRESS (NIG) PLC. 1,183.82 1.99 - 0 0 UNIVERSITY PRESS PLC. 539.26 1.25 - 1 950 7 42,102 ROAD TRANSPORTATION ASSOCIATED BUS COMPANY PLC 530.46 0.32 - 3 170,600 3 170,600 SPECIALTY INTERLINKED TECHNOLOGIES PLC 688.80 2.91 - 0 0 SECURE ELECTRONIC TECHNOLOGY PLC 1,126.31 0.20 - 0 0

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BUSINESS DAY Wednesday 19 February 2020 www.businessday.ng

Bukola Badejo-Okusanya: Changing the gas narrative in Nigeria ISAAC ANYAOGU

magine a Nigeria where cars are powered by gas and virtual pipelines bring critical gas feedstocks to industries in far-flung corners of the country or where an independent power plants strategically sited at different parts of the country cut excessive reliance on the failing power grid. At GasCo Marine, led by Bukola Badejo-Okusanya, this is their motivation. Last year, the company announced plans to open talks with lenders to secure N40billion through an infrastructure bond to expand into a gas transportation and the development of a mini-liquefied natural gas plant. GasCo Marine also launched an N2 billion Compressed Natural Gas (CNG) plant in OkeSokori, Abeokuta, Ogun State to meet the demand of consumers in Ogun, Lagos, Oyo, and other southwest states are deepening investments in the gas space after successfully delivering the plant 15 months from the date it started construction. “There are so many opportunities in the gas space and our target is to raise N50billion through the infrastructure bond. The first drawdown was N10 billion and it used to build our CNG plant in Abeokuta and to expand our facilities here in Marina,” Bukola Badejo-Okusanya, the company’s managing director said in an interview with BusinessDay. Okusanya said the company’s next phase of growth is expanding its CNG business, running a gas transportation business to take gas to industries outside the South West region. It is also planning the construction of a mini LNG plant. He said the company will fund some of its future projects the same it funded its previous project. It raised an infrastructure bond from pension funds after securing a sovereign guarantee from Infra Credit. “We think that if we meet our targets and deliver on the numbers we promise them we think that that second phase will be much easier for them to invest in our business,” said Okusanya. The company plans to kick start these projects in the next three to five years but banks on its efficient project management system to deliver these projects ahead of schedule. Gasco Marine secures its feedstock from the Nigerian Gas Marketing Company helped by its strategic location. It gets gas directly from the Nigerian Gas Marketing company. The company is located about 300 meters from the Abeokuta City Gates. It is the main receiving facility in Ogun state and is the location of NGC station that sends gas into Lagos, Agbara and some other

Badejo-Okusanya

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Under Okusanya, Gasco Marine aims to become the industry benchmark for quality and affordable service – delivery and reliability in the sale and distribution of CNG and other gases in Nigeria areas. The advantage this has is that it is the last to feel low pressure according to Okunsaya. The company hopes to outdo smaller companies who lack the required gas infrastructure to take the feedstock directly from the gas pipeline. It is targeting manufacturing companies within the Lagos metropolis and free trade zones on the outskirts of Ogun State. Okusanya said that while Gasco Marine is not just solely a CNG company, it will expand its ability and virtual pipeline capacity to take gas outside the southwest region. “We truck the gas from our station through our compression plants to these locations to provide power for their operations or use for feedstock for their heat manufacturing process, ceramics, confectionery and fast food goods or as fuel but we are planning to do much more than that soon.” Gas companies are finding opportunities in Nigeria’s epileptic power supply to provide a more efficient and cost-effective power to industries. According to the National Bureau of Statistics (NBS), the NNPC spent N3.8 trillion or $12.4 billion importing petroleum products in 2018 and gas

companies want a cut in the pie by displacing diesel with gas as the predominant plant feedstock. A consummate professional, Okusanya says that Nigeria’s energy challenges can be solved through harnessing its vast gas potentials. Going by the increasing localization and location of manufacturing industries and power plants in some Southwest states, coupled with the challenge created in the industry with the dearth of energy, Gasco Marine Limited, a subsidiary of Viathan Engineering Limited, has seen its CNG plant in Abeokuta as a game-changer. Gasco Marine Limited entered Nigeria’s midstream and downstream gas value -chain to increase the supplies of much – needed natural gas to the manufacturing industries and the independently – owned power plants, especially in Southwest, to improve on gas supplies and broaden competition among the producers and suppliers of natural gas in the country. Under his watch, Gasco Marine has joined the club of producers and suppliers of natural gas in the country to establish a better and more effective distribution network for the supplies

of gas to manufacturing industries and power plants in the three Southwest states in addition to the already – established market created by six power plants operated by its sister energy company – Viathan Engineering Limited, in Abeokuta, Akute and Lagos. Speaking at the inauguration of the N2 billion CNG plant located in Abeokuta by the immediate past Minister of Works, Power and Housing, Babatunde Fashola, Bukola Badejo-Okusanya, Managing Director, Genco Marine Limited, noted that the inauguration of the CNG would redefine compression and distribution of natural gas in Nigeria’s midstream and downstream gas value chain. He said, “Our Company – Gasco Marine Limited is a fully integrated indigenous gas company that specialises in the processing, transport, storage and sales of natural gas in Nigeria. He further said that over the last five years, the company has quickly evolved its operations and servicing capacity and has grown the market share to almost 13 percent. The company’s processing and distribution infra-

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There are so many opportunities in the gas space and our target is to raise N50billion through the infrastructure bond

structure can deliver gas to power stations and other industries in Ogun, Oyo and Lagos states in an effective and efficient manner. Core strength of Okusanya in managing the business is dealing professionally with staff, customers and investors. This has led to greater confidence in its customers to do business with the company and greater fidelity with its lenders. Under Okusanya, Gasco Marine aims to become the industry benchmark for quality and affordable service – delivery and reliability in the sale and distribution of CNG and other gases in Nigeria, thus becoming a partner, uniquely positioned to be able to guarantee supply assurance. Fashola at the plant inauguration said with the likes of Gasco Marine Limited which is populated by young and vibrant Nigerians that are thinking about how the nation could be much better off at all times, Nigeria stands a chance to be a better country but all hands must be on deck to change the narrative for better It seems Okusanya is keen to walk this talk. In a recent interview, he insisted that Nigeria has the potentials to solve its energy crises but often the right policy combination that will unlock investments has often been lacking. He says one area this can be seen is through billions spent on fuel subsidies which could have been better deplored in other areas of the economy if Nigeria can better utilise its gas resources. He believes the country should not be spending a ton of money on importation of fuel when the country can rather invest the money in developing plants for CNG cars and service stations that could create jobs and save scarce foreign exchange. Fashola at the occasion said: “We can talk about climate change and how we need to convert bad fuel, coal; diesel into cleaner but it won’t go away by just talking. This group (Gasco Marine) has done something about that again by making sure there is cleaner fuel, there is a cleaner source of fuel to use. “To give a message of commendation to the Gasco, viathan, infracredit and to all of the people who were behind putting these project together and why is this important? There is a lot of conversation going on in our country but I don’t see the conversation about what is not happening, about the providence. “I think by committing to producing and deploying more gas, Gasco and Viathan help Nigeria to protect the environment for the next generation, they have also helped to do so by contributing to our initiative as a country to reduce and ultimately, eliminate gas flaring from our country and I am happy to be part of the solution initiative,” Fashola said.

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