BusinessDay 20 Apr 2020 by BusinessDay

Searching for Nigeria’s next Chief of Staff

s President Muhammadu Buhari searches for a new Chief of Staff to replace the suddenly-departed Abba Kyari, we in BusinessDay ask: what kind of

person would we like Mr. President to search for? The phrase “Chief of Staff ” derives from the military, a profession that functions through a staff system populated with of-

FRONT PAGE COMMENT ficers possessing training and individual expertise in personnel, logistics, intelligence, operations

and even religious affairs. The person that coordinates the staff into one cohesive organisation is, obviously, the Chief or Staff. He ensures that his General’s strategic intent is translated into

tactical plans executed by the field commanders. The Chief of Staff system as we know it today was perfected by US President Dwight David Continues on page 28

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Inside How Nigerian fund managers are investing in response to COVID-19 P. 2 Nigeria’s Bonny light is struggling to find buyers in global P. 2 market Lagos decentralises COVID-19 testing as death toll hits 14 P. 2

R-L: Femi Gbajabiamila, speaker, House of Representatives; Sale Mamman, minister of power; Mele Kyari, GMD, NNPC, and James Momoh, chairman, NERC, during a power sector stakeholders’ meeting on the 2-month free power supply to Nigerians convened by the speaker at the National Assembly, Abuja.

Here’s what Abba Kyari’s death means for Nigerian economy See story on page 28

Monday 20 April 2020

BUSINESS DAY

news Nigeria’s Bonny light is struggling to find buyers in global market DIPO OLADEHINDE

mid the uncertainties thrown up by the coronavirus pandemic, prices of Nigeria’s benchmark crude oil grade, Bonny Light is going for cheap and trading at a significant low at an average of $12. According to traders monitoring the West African market, Nigeria’s bonny light traded at $22 on the futures market, however, given the $8 to $9 discount between physical (spot) and Futures (paper) markets, prices were forced lower to an average of $12. The development means that the current selling price is below the cost of production for Nigerian crude producers, which is estimated at $22 and below the budgeted crude benchmark of $30 per barrel. Also, Nigeria’s Bonny light is $16 lower than the value of the global benchmark if crude oil, Brent crude, which stands at $28, as at Sunday 19 April. “Nigeria’s Bonny Light and other light sweet crude oil grades across the world are facing challenges in the international market as they are no longer appealing to buyers,” Charles Akinbobola, an energy analyst at Sofidam Capital said. Findings by BusinessDay revealed Light crude grades with low density and sulphur are the preferred brand by marketers. But now, given that

they are hard to store for long period of time, they have lost favour with buyers in the face of low oil demand and market overhang that had necessitated prolonged storage. Also, light crude grades are mostly used to make naphtha, gasoline and jet fuel, refined products that are both out of favour due to the coronavirus pandemic and the low demand it had orchestrated. While gasoline and jet fuel do not store for long due to their high quality, seasonality and additives, diesel, fuel oil and heavy crude can be stored in tanks for years. Traders also report that 10 million barrels of crude made available for sale in April are still unsold with another 60 million expected to hit the market in May. The vast majority of unsold supplies are Nigerian, traders said, and the glut is made worse because of the drop in demand from traditional European buyers. Reports say it is not just West African oil markets that are struggling in the Atlantic Basin. Principally due to so much European demand halted by the virus, grades in the North Sea and the Mediterranean are also affected. Despite the historic supply cut by the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+) of 9.7 million bpd, lockdowns in most cities of the world have led to a drop in demand for crude oil.

How Nigerian fund managers are investing in response to COVID-19 LOLADE AKINMURELE

igerian fund managers are cutting their risk appetite and focusing more on short-term fixed income assets as they try to survive the COVID-19 outbreak and the current economic uncertainty. Others are simply liquidating what they deem risk assets and increasing their cash levels, according to a BusinessDay survey on some of the biggest fund managers in the country. “The yields on fixed income assets may not be impressive but it doesn’t matter because the focus for fund managers now is return of capital rather than return on capital,” said Wale Okunrinboye, head of investment

research at Sigma Pensions Ltd, Lagos-based pension fund manager. “Fund managers are in a risk-off mode and will be happy to just park cash on an asset that preserves their initial capital,” Okunrinboye said. Yieldsonshort-termfixedincome assets – treasury bills – are anything between 3-4 percent, which implies a real negative return of as much as 9 percent given that inflation rate in Nigeria last printed 12.2 percent. Fund managers say their clients are happy to take low yields rather than risk losing their initial investment trying to chase better returns. “At a period of uncertainty such as this, the focus is on wealth preservation, not wealth accumulation,” said Johnson Chukwu, CEO, Cowry Asset Management Limited.

“Cash is king at this moment and that’s why it makes sense to play at the short end of the fixed income space to limit the risks you are taking. This way, it is easier to liquidate assets when you need to take out your cash and it gives you opportunity to constantly evaluate the risks in the economy,” Chukwu said. Like their Nigerian counterparts, global fund managers are also piling into risk-free money market instruments as a way of preserving capital amid the heightened economic uncertainties brought on by the COVID-19 pandemic. The IMF and a motley crew of economists have all given scathing forecasts for global economic growth this year as a result of the COVID-19 pandemic. Bank of America’s April global fund manager survey

Nigeria must gradually reopen the economy; lockdown cannot be forever, NCDC boss … hails Gov Wike on firm response to COVD-19 Ignatius Chukwu

igeria’s economy must gradually begin to reopen b e c a u s e l o c kdown cannot be forever, so declared the Director-General of the Nigeria Centre for Disease Control (NCDC), Chikwe Ihekweazu, who visited Port Harcourt Sunday afternoon. He said that because the prolonged lockdown cannot continue indefinitely, stakeholders must begin to work towards gradually reopening the economy without endangering the populace. The NCDC boss also urged the private sector to focus more on helping the states to build their capacity to respond to the virus. Ihekweazu commended Gov Nyesom Wike for what he called the governor’s ‘firm and personal leadership to check the spread of coronavirus in Rivers State’. Speaking during a meet-

ing with Gov Wike in Government House, the DG of the NCDC said that Rivers State is important in the fight to stop the spread of the virus. Gov Wike had berated the federal authorities on Friday for allegedly marginalizing the second largest economy in Nigeria and one of the biggest oil states. The DG however said: “This is a working visit. I want to thank you for your firm, strong, committed and personally led response to COVID-19 in Rivers State. “Rivers is one of the most important gate-ways into the country, one of the most important economies in the country . So, Rivers is important , not only to you but to the entire country. “We thank you ver y much for your leadership and we need your leadership to continue in order for us to continue doing our work nationally.” www.businessday.ng

found that 93 percent expect a global recession this year. The monthly survey noted extreme investor pessimism in April with cash levels jumping to 5.9 percent, the highest level since the 9/11 terrorist attacks. In addition, investors think global GDP cuts are largely over but global earnings-pershare cuts are just beginning. The note referred to this as a “rare dichotomy”. Back home in Nigeria, there are also some problems on the domestic front that contribute to the uncertainty of the pandemic. Crude oil sales which account for 80 percent of Nigeria’s foreign exchange inflows and around half of the revenue used to fund the annual budget has been hammered by the global lockdown that has grounded airlines and forced factories to close.

Ramatu Aliyu (l), minister of state for FCT, flagging off, inspecting and handing over palliatives to Abaji Area Council in Abuja. Pic by Tunde Adeniyi

Lagos decentralises COVID-19 testing as death toll hits 14 … health commissioner outlines how COVID-19 dead can be buried Joshua Bassey & Anthonia Obokoh

agos State government has decentralised testing for coronavirus (COVID-19) in the state, with 26 sample centres located across the 20 local government areas of the state. Akin Abayomi, Lagos State commissioner for health, said at a COVID-19 media update on Sunday that the state now has 26 centres where samples of suspected cases of coronavirus can be tested. Oreoluwa Finnih, senior special assistant to Governor Babajide Sanwo-Olu on health, had earlier announced this in a tweet. A breakdown of the locations as released by the state government shows Wright

Memorial PHC is the smaple centre for Somolu LGA, Ifako Mini Stadium for Ifako Ijaiye, Ojo PHC for Ojo, and Surulere Local Council secretariat for Surulere LGA. Furthermore, Kosofe LGA has a smaple centre at Ogudu Area Office, Amuwo-Odofin’s sample centre is located at Amuwo-Odofin LGA Secretariat, Ikorodu has two centres at Ita-Elewa PHC and Igbogbo PHC, Lagos Island has at Igaiduganran PHC, Epe (Epe PHC), Lagos Mainland (Simpson PHC), among others. The government, however, said visit to the centres is strictly by appointment and not for emergency calls. Meanwhile, death toll in Lagos arising from COVID-19 complications reached 14 as an 83-year-old woman was

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reported dead on Sunday. Abayomi said the aged woman had underlying health issues, urging Lagos residents to continue to observe social distancing and stay home to stop the transmission of COVID-19. As at Saturday, April 18, total confirmed cases in the state stood at 309 with 94 patients discharged, according to Abayomi. At the COVID-19 media update on Sunday, Abayomi gave insight into how corpses of COVID-19 victims can be buried, saying families are entitled to claim their dead if they so wish. “The protocol for managing death from COVID-19 is that the body is decontaminated and then placed in a special body bag or in tube body bags and placed within a coffin and @Businessdayng

the coffin is sealed. The family is then given the opportunity to come and collect the body for burial,” said Abayomi. The commissioner explained that the only restriction around burial is that with the current spread of the virus, no large congregation would be allowed at the burial. He said the gathering at the burial cannot be more than 25 people in total, including the religious members of the ceremony and the grave diggers. “So family members can carry out the private burial ceremony once we have conducted the proper protocol for decontaminating the body and ensuring that the body is sealed,” he said, adding that there is no existing policy that bans “us from handing the deceased to their family members”.

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news

UBTH may not be able to manage rising cases of Covid-19 - CMD IDRIS UMAR MOMOH, Benin

uthorities of the University of Benin Teaching Hospital (UBTH), last Thursday said containing the Coronavirus disease by the hospital might become difficult if the number of confirmed cases continued to increase. Darlington Obaseki, chief medical director (CMD) of the Teaching Hospital expressed fear in a statement signed and made available to newsmen in Benin City. Obaseki, who said the hospital was presently coping in terms of personnel, equipment and materials, however, called on well-meaning Nigerians to support the hospital in every conceivable area. “We hope the situation does not blow out of proportion. Presently, we are coping in terms of personnel, equipment and materials but if the figures increase as we see elsewhere, it may become difficult, which is why, despite what we have done, we are calling on well-meaning Nigerians to support us in every conceivable area,” he said. The Hospital has prompt-

ly repurposed, re-structured, equipped and activated a 10-bed Isolation Centre ahead of the first case to be admitted, he said. The CMD also noted that the Hospital was functioning actively and striving for expanded services in the event of more cases of COVID-19 requiring admission. He explained that the Isolation Centre was supported by a dedicated two-bed Intensive Care Unit, equipped with two ventilators for the management of COVID-19 patients in need of critical care. The UBTH Isolation Centre operates with the full complement of doctors, nurses, pharmacists and other personnel needed to provide care, he said. According to Obaseki, the Hospital also has a Rapid Response Team consisting of more than 80 specially trained doctors, nurses, paramedics and other professionals, ready to attend to suspected or confirmed cases of COVID-19. He, however, expressed gratitude to the state governor and chairman of the state COVID-19 Response Team, Godwin Obaseki, for his support to and cooperation with the Hospital.

R-L : Ayodele Fayose, former governor of Ekiti State; Seyi Makinde, governor , Oyo State; Eddie Olafeso, PDP national vice chairman, South West, and Olabode George , former deputy national chairman of the party, during the PDP South West Zonal Stakeholders meeting held at Government House, Ibadan, Oyo State,

Coronavirus: Edo bans street trading to check spread ... as Group empowers rural coordinators to drive message against spread

Innovation seen as key to effective administration of justice post Covid-19 KELECHI EWUZIE

doption of innovation, strong will and discipline in the administration of Justice will help to guard against misplaced justice situation in Nigeria, post Covid-19 pandemic, Olanrewaju Adigun Fagbohun, vice-chancellor, Lagos State University, says. Fagbohun decries the suspension of court sitting in the country pursuant to the directive of the Chief Justice Nigeria as a result of the COVID-19 pandemic, without clear guidelines and directives that would ensure that the wheel of justice does not grind to a halt. According to Fagbohun, it has become very fundamental to adopt strong will, discipline and innovation in order to achieve an effective administration of Justice System in Nigeria, post Covid-19 pandemic. He observes that as things currently stand, post-COVID-19 in terms of civil/criminal cases already leave no room for optimism, as “Deliberate pro-active strategies must be put in place to change the paradigm.” Fagbohun, speaking as a guest speaker on the Impact of COVID-19 on the Administration of Justice in Nigeria, What does the Future Hold?” at the 2020 Knowledge Sharing Series, a virtual lecture organised by the LASU Law Alumni graduate class of 2008, noted that COVID-19 was a wake-up call for Nigeria, urging the judiciary (lawyers and judicial officers) to fully go digital. “The Judiciary in Nigeria must fully go digital. It is not rocket science and enough of excuses. Let us have robust and

open internet access in all courts. There are existing templates that will guide digitisation of court processes,” he said. The senior advocate of Nigeria, Fagbohun, identified four commendable global justice system responses: 1) suspension of in-person proceedings to safeguard people’s health; 2) implementation of technology tools to continue proceedings in urgent or necessary situations; 3) keeping track of proceedings that are daily being postponed; and 4) pro-active thinking on such issues like effect of a statute of limitation and forfeiture as may arise post COVID-19. He reminded the over 100 participants that the Lagos State Judiciary started well on the path of technology. Somewhere along the line, the challenge of continuity of policies clearly stagnated innovation. There is also the need for an audit of processes and operations to know whether the different activities are on track. “In the Lagos State Judiciary, online listing of cases, Case Management System, E- filing system, use of verbatim recorder among others was already in use for quite some time. He concluded that “For as long as Nigeria continues on the same path as is currently, administration of justice will continue to fail on deliverables. The learned silk also took a swipe at legal practitioners and judicial officers who have turned our courts to theatre of repression and injustice. “For as long as we tolerate indiscipline, Nigeria’s Judiciary will continue to wallow in failure. We must advance the highest standard of conduct among lawyers and judges”, he said. www.businessday.ng

do State government has placed a ban on street trading, as part of new measures to enforce social distancing and check the spread of coronavirus (COVID-19) in the state. Speaking during a press briefing last Thursday, deputy governor, Philip Shaibu, said the measure was being taken to restrict movement and ensure compliance to social distancing and other directives imposed by the state government to contain the spread of COVID-19. Noting that the state government is working on more stringent measures to ensure total compliance to different directives aimed at checking the spread of COVID-19, he said, “As part of these measures, we hereby announce a ban on street trading, as an additional measure to restrict contacts among people and enforce social distancing. “This is in the light of the fact that markets have been moved to public and primary school premises to facilitate trading in essential com-

modities such as food and medicines, among others.” He noted, “The government has set up screening centres across Oredo Local Government Area (starting with six Primary Healthcare Centres (PHCs) and four private hospitals) to actualise our plans to screen 500,000 persons with the ultimate goal of testing 5000 persons. These would be scaled to other local government areas across the state.” Meanwhile, as part of efforts to complement the state government’s fight against the spread of coronavirus, a socio-political group, the Godwin Obaseki Support Group (GOSG), has doled out palliatives to its coordinators across the 18 local government areas of the state. Director-general of the group, Henry Imogiemhe Idogun, said the package would enable the leaders effectively take the campaign against the spread of the virus to their various communities, as well as cushion the economic effect of the pandemic.

The group plans to reach over 5,000 residents across the 18 LGAs through its sensitisation and awareness campaign, noting that the coordinators have been empowered to lead the course. Idogun, who noted that government alone cannot win the fight against the pandemic, urged residents to support the Governor Godwin Obaseki-led administration’s efforts at protecting the lives of the people by observing precautionary measures and other guidelines against the spread of the virus. He said while the government is deploying relief materials to the poorest of the poor in the state, including the elderly, physically challenged, widows, among others, to assuage the economic hardship caused by the restrictions imposed in the state to curtail the spread of coronavirus, other affluent Edo sons and daughters must emulate the gesture to save the lives of people. The director-general noted, “This is the best time to

be our brother’s keeper as many vulnerable persons in the society can barely feed. We urge good-spirited Nigerians to emulate the gesture of the government by giving to those truly in need during this period of partial lock down. “We are certain that together we will win the war against this common enemy that has caused global disruption. We urge all residents to stay at home and observe social distancing guidelines and other precautionary measures against the spread of the disease, including regular hand washing with soap under running water and the use of alcoholbased hand sanitizer. If you must go out, kindly ensure to wear facemasks. Always cover your mouth and nose properly when sneezing and/ or coughing.” A senior member of the group, Lambert Ugorji, said the palliatives to the coordinators were a way of complementing the distribution of relief materials by the state.

BusinessDay, Endeavor partner on ‘Scaling through the crisis’, a new web series

s the coronavirus pandemic continues to evolve, the world has been at a standstill. With cases in the hundreds, this brings about a huge crisis for Nigeria’s economy, but it also makes room for great opportunity for innovation within the business community. Businesses are not only dealing with the stress of uncertainty, they are also having to find new ways to work, and make changes w h e re n e c e ssa r y . Ma ny of them are also feeling the underlying anxiety and pressures of this global pandemic. In this regard BusinessDay, in partnership with Endeavor, presents ‘Scal-

ing through the crisis’, a new web series that will air weekly on BusinessDay’s Instagram and YouTube platforms beginning today (Monday). The show, anchored by Lehlé Balde, senior associate, strategy, innovation and partnerships at BusinessDay, will focus on highlighting entrepreneurial grit and inspiring and uplifting others in these difficult times. How are entrepreneurs responding to the crisis, innovating around it, and supporting the economy/general public? Speaking on the partnership, Eloho Gihan-Mbelu, managing director/CEO, Endeavor Nigeria, said Endeavor Nigeria is excited to

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partner with BusinessDay for this new series, ‘Scaling through the crisis’, featuring inspiring entrepreneurs as they meet the challenge head-on. “High-impact entrepreneurs are now innovating their businesses in real time, leading with exceptional courage and contributing to the national crisis response in meaningful ways. ‘Scaling through the crisis’ will amplify the stories of the small business owners, startup founders and scaleup entrepreneurs that are thinking big, finding opportunity in crisis, and inspiring a generation, even through this exceptional period,” Gihan-Mbelu said. @Businessdayng

Established in 1997, Endeavor is a mission-driven, global organisation leading the high-impact entrepreneurship movement. Endeavor was founded on the belief that job creation, innovation, and overall prosperity flourish where there is robust support for highimpact entrepreneurs. Endeavor launched its Nigeria office in 2018 to select and support the best founders of companies at the scaleup and growth stage, who recognise a responsibility to pay-it-forward and multiply their impact in Nigeria’s entrepreneurship ecosystem. Today, Endeavor in Nigeria supports 14 Endeavor Entrepreneurs leading nine companies.

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Giving and misgivings: Gambling, drawing the boundary (Eighth in the series of an address delivered at the Rotary Foundation dinner/dance at the MUSON Centre, Marina, Lagos on 8th February 2020)

Bashorun J.K Randle

s confirmation that some areas of human endeavour are beyond the Rotaria Four Wheel Test, gambling had drawn the boundary – to wit the bold headline story: “How customers, government lose billions to lottery operators.” “Many lottery operators across the country are having a field day no thanks to the rather slack regulatory regime, The Nation has learnt. Investigation by our correspondent revealed that while majority of the operators are declaring hefty profits, this is rather at the detriment of the government as well as the majority stakers who gain little or nothing from their investments. Records from the Nigerian Bureau of Statistics in 2019, records show that over 21 million Nigerians played sports betting daily, whilst over six million play number lotteries daily. On average, over 27 million people, over 10 percent of the Nigeria’s population, play a game or the other every day. This is however exclusive of those millions of people who play promotional games reeled out by telecommunication companies, banks and the big FMCG brands which are also meant to be regulated by the National Lottery Regulatory Commission. The global online gaming market is forecast to reach $128 billion by 2026 and the House of Representatives in the 8th National Assembly recently revealed that some lottery operators were owing

the government as much as $16 billion in unpaid remittances. The News Agency of Nigeria (NAN) reported that roughly 60 million Nigerians between the ages of 18 and 40 are involved in active sports betting. Over N2 billion ($5.9 million) is spent on sports betting daily in Nigeria, which translates to nearly $2.2 billion per annum. Little wonder the Honourable Minister of Special Duties described the lottery industry as a goldmine for Nigeria during a recent visit to the office of the National Lottery Regulatory Commission, which is one of the agencies under his supervision. Senator Akume had said: “The President, Muhammadu Buhari, has made his commitment to lifting over 100 million Nigerians out of poverty in the next 10 years and your commission is in a position to play a major role. If this commission is properly organised, I believe, and strongly too, that there’s no way you can’t rake in billions of naira to the coffers of this government. You have told me and others who are experts have also told me that the possibilities here are huge and enormous.” Tales of woes Speaking with a cross section of respondents, most of who are lottery patrons, they lamented that the gains they have made over the years is not commensurate with the monies they have staked thus far. Checks by The Nation revealed that by the letters of the Lottery Act operators are to keep 30 percent of their total sales revenue for their operations, while they are to pay-out as much as 50 percent of the sales revenue to stakers as winnings, but most operators conduct their activities and resulting draws in secretive manner thus resulting in high incidences of result manipulation. Confirming this development, Chukwudi Francis in a chat with our correspondent confirmed that several

patrons like him have not got value for their money over the years. Specifically, he said, some lottery companies announce spurious claims on prospective winnings all in a bid to hoodwink unsuspecting members of the staking public. “In a situation where the staking publics stake money with no corresponding gain from their investments is worrisome,” he said, adding that this is quite at variance with what obtains elsewhere, even within the West African sub region. While alluding to the experience of staking public in Ghana, Francis said their Nigerian counterparts are not enjoying the best of luck. “I recall that when I travelled to Ghana few months ago, I had a feel of how the lottery industry operates quite unlike what obtains here. Most of us here have been at the receiving end of poor regulation as far as lottery and gaming in the country is concerned.” According to him, “Several complaints and petitions by some members of the staking public about the activities of some gaming companies against their winnings are left unattended by the regulators, as can be seen from petitions on their poorly run social media platforms.” Interestingly, the National Union of Lottery Agents and Employees (NULAE), which has been trying to lead the vanguard against abuse have not had a smooth sail. The Nation learnt that the union has been muscled into near silence by some major operators seeking to remain dominant players in the field, with the tactical connivance of the regulators. However, The Nation learnt that things may be looking up for the union. Rising from its last Central Working Committee meeting in January, the Secretary of NULAE, Comrade Gregory Olatunji said they have resolved to change the narrative. Speaking further, Olatunji said:

‘

The global online gaming market is forecast to reach $128 billion by 2026 and the House of Representatives in the 8th National Assembly recently revealed that some lottery operators were owing the government as much as $16 billion in unpaid remittances

Randle is Chairman/Chief Executive JK Randle Professional Services Chartered Accountants

Systems Leadership: An approach to sustainable system change

oday’s problems, be it poverty, hunger, human health, environmental degradation, and so on, requires coordination among many stakeholders. No one person or organisation can solve these complex problems, but different stakeholders must play their part in developing a shared approach. Solving these complex problems require coordination, vision, trust-building and innovation; in essence, it needs system leadership. Systems leadership is an approach of achieving goals through innovation, collaboration and action that engage a broad network of different stakeholders to advance progress toward a shared vision of systemic change. This approach requires collective action. Everybody is involved in it, both at the individual level and at the organisational level. It is a set of abilities that any individual or organisation can use to facilitate the process of system-level change. It is a departure from the conventional hierarchical approach to implementing change. Indeed, system leadership is a new term for leadership skills and capacity that can be effective in addressing systemic problems. There are three agents involved in achieving systemic change using this approach. These agents are – the individual, the community and the system. The individuals, as agents, drive Systems-change initiatives and their commitment and effort to sustain it. The community, on the other hand, is made up of stakeholders’ actors who interact and influence one another within the system.

Knowledge and insight into the system to be changed are fundamental. For example, the system’s institutional policies and incentives and personal choices and behaviours. A system leadership initiative is characterised by – a systemic view, multi-stakeholder ownership and championship, appointed coordinators and facilitators whose role includes enabling of multistakeholder collaboration within the project, an ability to learn, adapt and change, a proven or potential influence on system behaviour. Therefore, system leaders are individuals or organisations that support system-level change. They achieve this by empowering different stakeholders to act together in new ways to accomplish a shared goal – system change. System leaders can be found everywhere, at the local, national, regional and international level, influencing system change both within an institution and across networks of institutions. To achieve system change, system leaders need to build and apply these skills – understanding the system where the challenge exists, their ability to engage in and support collective action among relevant stakeholders, ability to listen, learn and lead through coordination with and empowerment of others. In fact, for system change to happen there is a clear framework of bringing it to manifestation. The process of bringing this change to manifestation consist of the following: Convene and commit – this involves the exchange of idea by key actors to address a complex issue of common concern. The key actors delinewww.businessday.ng

ate common interest and goals that they share, and commit to making a systemic change by working together in different innovative; Look and learn – The key actors of the change process collectively map out the process and build a mutual understanding of the mechanisms, players and impacts that form the system and its present result, creating new intuitions and ideas. Engage and energise – Different system change actors are involved in continuous communication to develop trust, commitment, innovation and teamwork. What can help drive progress and maintain the energy is encouragement, incentives and indicators (signpost); Act with accountability – Although it is the collective aims, objectives and values that set the shared goals and principles that set the way of the system change initiative, it is the act of accountability that help track the process. Also, as the idea mature, management and governance structure can be created. Review and revise - Stakeholders should review the progress of the initiative regularly and consequently, they should adopt the strategy accordingly. Implementing an agile, flexible, innovative and learning-centred approach allows for evolution and experimentation. Throughout the initiative, this process may overlap or repeat in a circle, meaning that it must not follow a chronological order. Besides, the journey of system leadership is a process that unfolds over time. Hence Sys-

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“Our initial hopes of being commended for the initiative by industry stakeholders was dashed when we were dragged to court in 2016 by Premier Lotto, in its bid to de-register the union, bar it from living to its civic responsibility and continue its grip on the affairs of the industry. Interestingly, in the course of the court proceedings, the said operator employed all tactics known to the books to deceive the court, including harassing some of its employees to write to the court and deny the union, victimising identified members of the union by removing their parameters and even registering a contraption with the corporate affairs commission called Premier Lottery Agents association. The court in its wisdom threw out their entire case and urged the union to continue its civic responsibility to its members and the government.” Re-stating its resolve to rid its industry of anti-labour operators, Olatunji said, “With members, agents and lottery operators in both the private and public sectors of the industry, NULAE is now on a mission to take its rightful place. We will deal decisively with operators who undermine the union or engage in anti-labour practices. The union is resolute and committed to ensuring that the lottery industry has a fair playing field and we are glad that the operator who has been trying to muscle the union has lost on all grounds, from the industrial court, to the police and even in underhanded petitions to regulators and they eventually signed an agreement with the union in September 2019 as brokered by the Ministry of Labour and Employment agreeing to comply with the extant labour laws by allowing the union to address its employees, whilst requesting us to reach out to its agents; which it described as independent contractors.”

Uchechukwu Anagboso tems leaders across the sectors often encounter similar motivations, experience or realisations in the course of their journeys to achieve system change. These recurring insights referred to as the “Aha! Moments”. While not every initiative or individual experiences the same feeling at every moment of the development and implementation of the system change initiative, one of these moments, frequently appear across many Systems Leadership stories. And they are that: “No one is in control”: individuals and organisations can influence the behaviour of a complex system, but not direct or control the process. In other words, no single entity has authority over the entire system. “It’s up to us”: Stakeholders identify a mutual responsibility to tackle the “system challenge” themselves, Sharing liability for collective and effective action. “Everything is connected”: By Collectively mapping and learning about the system, new initiatives are generated, thereby helping you appreciate the interplay within complex systems.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng This article is written by Uchechukwu Anagboso for the Christopher Kolade Centre for Research in Leadership and Ethics (CKCRLE) at Lagos Business School (LBS). CKCRLE’s vision is creating and sharing knowledge that improves the way managers lead and live in Africa and the World. You can contact CKCRLE at crle@lbs.edu.ng.

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Finance lessons for firms, individuals, from the lockdown Patrick Atuanya

i g e r i a n P re s i d e nt Mu ha m ma d u Bu hari, last week announced the extension of the 2 weeks long lockdown for an extra two weeks, as the country fights to keep the toll from the coronavirus pandemic low, through social distancing measures. The economic fallout from these and other measures around the globe is forecast to be particularly dire. The coronavirus outbreak could affect a third of the 440 million formal and informal jobs in Africa as lockdowns across the continent deprive people of the means to make a living, according to McKinsey & Co.

Between 9 million and 18 million of the continent’s 140 million formal jobs could be lost as a result of the crisis, McKinsey said in its Finding Africa’s Path report. A further 30 million to 35 million could see a reduction in wages and working hours. One hundred million of the 300 million informal jobs on the continent are at risk, it said. In major sectors such as manufacturing, retail and wholesale, tourism, and construction, the jobs of more than half the workforce could be affected, McKinsey said. For companies and individuals caught up in this storm it is indeed sobering. So what financial lessons can be learnt from the lockdown so far? Always have liquid assets Firms globally have been scrambling to shore up their cash and preserve lines of credit with banks, amid the disruptions that have happened. One report suggested that companies are turning to bank loans because their preferred source of cash -- the corporate bond market -- has all but ground to a halt. Analysts are looking at bank deposits for strain on the system as stressed companies may withdraw money, prompting lenders to rely more on other forms of short-term funding. In Nigeria, the overnight interbank rates or NIBOR traded at 3.31 percent on Friday, a sign that there is not much stress on the system as yet. Another reason to have a percentage of your assets in cash or cash equivalent liquid assets is that

a time of crises is not the time to begin to look who to sell non liquid assets like property or to expect rental income as some tenants are sure to default or delay payments. Have a 6 – 12 month emergency fund For individuals the usual benchmark for sound personal finance, is to have the equivalent of at least 6 months of one’s salary saved up in a rainy day fund. The uncertainty thrown up by the current crises means that no one is sure when it will end and any such rainy day fund will surely come in handy for a lot of people. For companies this may also be handy as working capital funding sources may dry up abruptly in a time of crises, leaving them unable to pay salaries or fund operations.

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The uncertainty thrown up by the current crises means that no one is sure when it will end and any such rainy day fund will surely come in handy for a lot of people

Digital commerce is a must One major lesson that the coronavirus crises has taught most firms is the need to have operations that can run seamlessly online even without physically being on ground. Traditional e-commerce firms had long learnt this lesson, however other firms have been slow to adapt. The social distancing measures mean that digital offerings should be a major part of all businesses. This includes digital/onine aftersales support as well as robust digital payment systems. Importance of risk management Analysts say risk management is not just about investing but about unexpected things such as the current pandemic the world

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

Why the lockdown is not such a bad idea?

e are entering week three of the official lockdowns in the FCT and Ogun. Week four if you are in Lagos. A couple of days elsewhere in the country. As the president announced the extension of the lockdown last weekend, many expressed their frustration. On the one hand there are many who essentially cannot afford to sit at home for a month. Many people, especially those without formal jobs in urban centres, depend on their daily income to survive. Even many of those with regular jobs do not have enough savings to survive for a month especially in the face potential layoffs from struggling businesses. Then there are those who can afford to stay home but who live in fear of crime and social unrest. Then there are those who, although they live outside the locked down zones, depend on the economies of Lagos and Ogun for their survival. Then there are the mental health issues from having to stay at home for weeks. Whichever way you spin it there are significant costs to the lockdown and many valid reasons to be frustrated. But if a complete lockdown is on one end of the scale then doing nothing is

on the other. And doing nothing can be deadly. I have not been privileged enough to see any of the epidemiological models on the estimated number of deaths without a lockdown or similar action, but assuming the virus spreads and given our population, the number of deaths can quickly get out of hand. Given our population the number of deaths could very easily amount to millions. To put things in context, this COVID-19 is not the first global pandemic that has hit the country. Between 1918 and 1919 Spanish flu swept across the country killing almost two hundred thousand people. Keep in mind that our population back then was somewhere between eight and nine million. The equivalent number of deaths given our current population is over four million. Guaranteed COVID-19 does not seem to be as transmissible or as fatal as the Spanish flu but even at that, the potential number of deaths from the virus spreading out of control is still unimaginable, and probably still in the millions. For context since its inception over a decade ago, boko haram has killed just about 70,000 people according to the Nigeria Security Tracker. Malaria, one of www.businessday.ng

ECONOMIST

the major killers in the country, killed less than 100,000 people in the decade between 2005 and 2015, the last years for which data is available. This COVID-19 if left unchecked, has the potential for the highest casualty rate for any incident in Nigeria since the civil war. This is not to trivialize any of the other negative consequences from the lockdowns but none of those come anywhere close to the potential disaster if COVID-19 spreads out of control. Of course, real life is not that binary. The choices are not only between total lockdown and unrestricted spread. There is a lot in between with every country trying to figure out what works for them and what risks they can take. Some have gone the full lockdown route. Others have done a partial lockdown. Others have tried to lockdown vulnerable populations while preaching social distancing. Others have also suggested curfews as a potential middle ground. Then there are things which can be done to ease some of the pain caused by the lockdown. From cash transfers, to direct food distribution, there are a range of options. And finally, fighting the pandemic is not just about keeping people

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currently faces and the uncertain future businesses and workers face globally. As such a firms risk management processes are very important. How exposed were banks in terms of loans given out just before the pandemic hit? What about indigenous oil companies? How leveraged were their balance sheets as Brent crude collapsed and are we expected to see another round of distressed energy firms and loans tied to them? For individuals risk management is also vital. Taking on too much projects at the same time, or being over leveraged would not have been a good situation to be in right now. While the epidemic has been slow to take off in Africa, the fallout from the disease has decimated the economies of the continent. Shutdowns across many countries have curbing activity while the slowing of global supply chains has depressed the prices of the commodities many countries export. The World Bank now projects the region will have its first recession in 25 years. Coming out of such a recession for Nigeria and getting back to the previous growth curve will require resilience by its firms, businesses and individuals. The lessons from the coronavirus if learnt and applied by companies and individuals alike should help build better balance sheets and a stronger economy going forward.

NONSO OBIKILI

home but involves other things like testing and tracing contacts and so on. As you know Nigeria has chosen the partial lockdown path and it is difficult to fault that choice. Yes, you can argue about the implementation and yes, you can argue that more can be done to ease the pain from the lockdown, but it is difficult to argue against the lockdown itself, just because of the potential for disaster. No doubt there is some hypothetical better middle ground between lockdowns and freedom that, given enough time and resources, we can try to figure out. Until then, as with most questions of public health, it is best to err on the side of caution. Dr. Obikili is the chief economist at BusinessDay

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COVID-19 funds: Nigeria’s private sector shouldn’t donate to government global Perspectives

OLU FASAN

ecently, Transparency International urged the IMF to ensure the transparency and accountability of its Covid-19 funds. Writing to the IMF’s Executive Board on 8 April, the chair of Transparency International, Delia Ferreira Rubio, said that “The urgent need to support countries in their efforts during the pandemic makes transparency and accountability in government spending critically important”, adding: “The scale of the crisis raises the risks and dangers of the theft of public money that should be used to save lives and rebuild livelihoods.” She’s right, and her advice to the IMF could be given to corporate leaders and organisations giving coronavirus-related relief money to government: follow your money! Indeed, I would add that it’s wrong for them to give money to government in the first place. For relief donations to government are not only misdirected, they can incentivise or amplify graft. More on that later. But first, why is COVID-19 a fertile ground for corruption? Well, the answer is simple. The pandemic has led to big government and fiscal splurges globally, and where there is big government, where there is a dramatic increase in the amount and speed of public spending, corruption is not far away. The only safeguards are strong institutions, with embedded transparency and accountability mechanisms. But Nigeria lacks such institutional safeguards, yet it is now flush with coronavirusrelated funds. Indeed, almost every country is flush with COVID-19 cash. As governments try to mitigate the economic consequences of the coronavirus and protect jobs and livelihoods, they have embarked on unprecedented fiscal activism, spending enormous amounts of money to support

businesses, workers and families. For instance, the United States introduced a $2.2 trillion stimulus package; Germany put aside €656 billion; France budgeted €350 billion; and the UK allocated £450 billion, with a vow to “do whatever it takes” to support the people. In Nigeria, the central bank announced a N1 trillion stimulus package, and then the Federal Government asked the National Assembly to approve a N500 billion intervention fund; it also withdrew $150 million from the Sovereign National Fund and indicated it would borrow $6.9 billion – all purportedly to cushion the effect of COVID-19. But here’s the difference. In those western countries, the citizens can hold their government accountable for where every cent or every penny of the money goes. But in Nigeria, the citizens cannot hold anyone accountable for how the Covid-19 funds are spent! Recently, the government said it disbursed N100 billion to beneficiaries of its conditional cash transfer in one week. But how many people actually received the purported N20,000 social palliative? In his broadcast last week, President Buhari directed that the number of households in the so-called national social register be increased from 2.6 million to 3.6 million. But last year, Maryam Uwais, the president’s special adviser on the social investment programme, SIP, said there were just over 700,000 on the register. So, when did the number jump to 2.6 million? Furthermore, given that, according to the World Bank, nearly 50 per cent of the Nigerian population live in extreme poverty (on less than $1.90 a day), who qualifies to be on the register? In 2018, President Buhari’s wife, Aisha, said the SIP “has failed woefully”, and recently the Senate President, Ahmed Lawan, and the Speaker of the House of Representatives, Femi Gbajabiamila, strongly criticised its implementation. And, in a pungent intervention, an advocacy group, Human and Environmental Development Agenda, HEDA, which has been monitoring the SIP since 2016, said that “only 900,000 households have benefitted from the CCT, contrary to the claim that over 2 million households have been reached.” The truth is that any statement trumpeting the “success” of the government’s welfare programmes should be taken

with a pinch of salt. Such statements are, like George Orwell said in Politics and the English Language, designed “to give the appearance of solidity to pure wind”. Whatever the government claims about the SIP and the COVID-19 funds, the reality is that poor Nigerians are unlikely to be their real beneficiaries. In its statement, HEDA said that while the government was spending the N20,000 anti-poverty stipends from the recovered $322m Abacha loot, it gave the impression it was spending it from the COVID-19 funds. Such confusion is inevitable without transparency and accountability. Which brings me to the corporate donations. Businesspeople and philanthropists all around the world are giving massively towards COVID-19 relief. In Nigeria, prominent private-sector leaders, under the auspices of the Coalition Against Covid-19, CaCovid, have donated N21.5 billion. The difference is that, unlike their counterparts elsewhere, they gave the money to the government! Indeed, in his first broadcast on the coronavirus, President Buhari said all private donations should be made to the presidential task force, a government agency, “to ensure efficient and impactful spending.” Really, Mr President? How efficient and impactful were the spending of the North-East’s Internally Displaced Persons’ funds? Private sector leaders contributed about N3bn ($8m), but, according to a Senate Committee probe, there was widespread corruption in the management of the funds, and a secretary to the federal government was forced to resign for the alleged fraud. Elsewhere, corporate donors and philanthropists either give to charities or fund specific initiatives directly themselves. For instance, Jack Dorsey, the chief executive of Twitter, has pledged $1bn to coronavirus relief, part of it given to a charity running a food programme for the poor. Jeff Bezos, the Amazon founder, gave $100m to Feeding America, a charity which supplies food banks. Most charities have as their objects the relief of poverty and the relief of need, hardship and distress. Across the world, charities are rising to the Covid-19 challenge by responding quickly, speedily and effectively to local needs. Consider this scenario. If you give N10m to a reputable Nigerian charity and ask it to distribute relief materials to 1m households, it will do it diligently and with a

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The truth is that any statement trumpeting the success of the government’s welfare programmes should be taken with a pinch of salt. Such statements are, like George Orwell said in Politics and the English Language, designed to give the appearance of solidity to pure wind

passion because that’s its raison d’être. But if you give the same 10m to a local government and ask it to provide relief to 1m households, well, nearly half of the money would be embezzled or misused, and the local government officials carrying out the task would do it shoddily and arrogantly. The truth is, charities are better at delivering relief programmes than government. As someone who chaired a large UK charity for nearly five years and knows the contribution good charities make to a society, I believe that Nigeria will be strong not only when it has an effective government but also successful businesses and successful charities. Which is why businesses should support charities. But if they don’t give directly to charities, they could, as I said, fund specific initiatives themselves. For instance, the Bill and Melinda Gates Foundation gave $100m towards vaccines, testing and treatments. Mark Zuckerberg gave $30m for treatment. Some are contributing to the WHO’s Covid-19 response fund. Last week, Patrick Atuanya, the BusinessDay editor, wrote in his column an interesting piece entitled “Nigeria’s private sector takes lead role in Covid-19 roll back”. He listed several coronavirus-related projects that financial institutions, such as Access Bank, UBA, Guaranty Trust Bank and Union Bank, as well as corporate leaders like Aliko Dangote and Femi Otedola, are funding, including treatment and isolation centres and intensive care unit facilities. That’s commendable and it’s how it should be. Business leaders, corporate organisations and philanthropists should either be supporting indigenous charities – which must be a key part of the social fabric of Nigeria, because no society is civilised without them – or fund and deliver specific initiatives themselves. They should not encourage corruption by giving money to government for relief measures. Meanwhile, corporate donors to the Covid-19 funds should behave like rational businesspeople and follow their money. They must demand transparency and accountability in the administration of the funds! Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

Is autarky still a misnomer for emerging economies?

uddenly, the world appears to be engaging in a massive retreat and somersault from the much-acclaimed globalisation and borderless entity and embracing enclosed ecosystem which autarky represents. Hitherto, globalisation (with its putative benefits) has been put forward as the sine qua non for engaging in trade, investment and not the least, exchange of technology amongst nations of the world. Having the imprimatur of capitalist nations of the world at the time, those of the socialist bent such as China and Russia were not enthusiastic and saw it for what it is: a “capitalist model”. Paradoxically, the world is today witnessing revisionism from the very epicentres that promoted globalisation as the best thing that ever occurred after the discovery of electricity. Populist regimes are springing up everywhere in Europe and those not yet witnessing them are daily being threatened of their emergence by opposition parties espousing populist ideologies and waiting in the wings to take over. Suddenly (permit me to use that word again!), slogans such as “America First”, “Let’s make America work again”, “America shall be great again” now rent the air. To give teeth to those, the Trump Administration has formulated very restrictive immigration policies. Trade agree-

ments with China and other bilateral agreements are daily being reviewed and, in some cases, repudiated. Multilateral agreements are not spared either. To the regime, agreements on such issues as climatic change are not worth more than the papers they were written on. In Europe, Brexit is no longer a slogan; it’s an accomplished reality today. The popularity of opposition parties espousing populist ideologies based on the sentiment of nationalism are more than ever on the ascendancy. It may be a question of time before they step into the reins of power in Germany, France and Italy. Ironically, those that were running secluded or quasi open economies are today stepping out and filling the apparent gaps being vacated by the custodians of capitalism in clear fulfilment of time-honoured injunction that “nature abhors vacuum”. Today, China is aggressively filling the voids to the discomfiture and consternation of America and some Western Economies. Russia is upping its ante in the apparent struggle for the second historic scramble for Africa and other developing economies. If the present slogan, albeit not voiced out, is “to your tents all nations”, how are the emerging economies (for the purpose of this exercise representing both the developing/less developed and frontier economies) including Nigeria www.businessday.ng

embracing the clarion call? It is no longer news that virtually all emerging economies rely heavily on imported capital, foreign loans, aids and grants to run their economies and provide critical infrastructure. How possible will it be for them to fill in the deficits that may arise should they embark on looking inwards and jettison foreign inflows? It is neither feasible nor expedient that the world will ever practice total or absolute autarky but a much-diluted globalisation. It is already happening and one does not need to gaze too far to behold it. The advent of COVID – 19 aka Corona Virus has clearly demonstrated that one’s nation comes first before any other consideration. Nationals of European Union, America and Canada trapped in foreign countries read less developed ones like Nigeria following the onslaught of the virus have been evacuated by their home countries, notwithstanding the fact that the pandemic is ravaging their countries more than it is actually inflicting havoc on these developing economies, especially on human lives scale. The first task before the emerging economies in view of the unfolding scenarios is to wean themselves of the foreign siege mentality that no development can ever occur without foreign input. No doubt, foreign capital will always re-

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Emeka Okolo main desideratum for them but it must at the same time be regarded as means to an end and not an end in itself. Second, cooperation amongst the emerging economies should be given more impetus than is the case presently. Fortunately, some have formed economic blocs in their zones but the level of cooperation amongst them in actualizing the objectives of these blocs is at best just a notch above infancy. Mutual suspicion and fear of domination have militated and continues to militate against robust engagements amongst them.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Dr. Okolo is a Chartered Stockbroker and Management Consultant based in Lagos.

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Monday 20 April 2020

BUSINESS DAY

EDITORIAL Publisher/Editor-in-chief

Frank Aigbogun

COVID-19: Time to prioritise construction to save the economy

editor Patrick Atuanya

Leveraging opportunities in construction provides shelter and creates jobs

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

Bashir Ibrahim Hassan

esides coronavirus pandemic, if there is any major economic issue that agitates the minds of most Nigerians today, it the looming recession which experts say will be the worst in 30 years. For a mono-product economy like Nigeria, this is a sobering moment which calls the managers of its economy to start looking beyond the volatile oil market and the crippling impact of COVID-19 on oil price. It is time for the Nigeria to prioritise growth areas in the economy. And one of such is construction which, in this context, is that economic activity that leads to the creation of buildings and infrastructure—roads, rails and bridges. Construction, arguably, is a growth enabler given its capacity to create multiple jobs with multiplier effects on the economy. It is estimated that about 20 million jobs will be lost in Africa after the pandemic. With Nigeria and Angola projected to be the worst hit in sub-Saharan Africa.

It follows therefore that the country needs to swiftly focus on that sector that can generate sufficient activities that will reflate the economy by creating jobs and promoting trade and commerce. Whether it is infrastructure provisions such as roads, rails and bridges, or real estate activities involving the building of residential houses, commercial facilities such as offices, retail malls or hotels, construction creates a good number of jobs by engaging people as skilled or unskilled labour. Experts say that while a kilometre of road construction can employ over 30 skilled and unskilled labour, it is more when building a house. It is estimated that everyone square metre of building activity creates jobs for three persons, meaning that building 1000 square metres guarantees about 3,000 jobs. At no time has it been more frustrating looking at the number of Nigerians who are either “homeless” or are living in sub-human conditions during this lockdown and stay-at-home regime. Many people spend much of their time

on streets and roads because there are no homes. We are, therefore, convinced that the proverbial 17 million housing units’ deficits in Nigeria does not reflect the true housing situation in the country. It is much more than that, meaning that more houses need to be built to provide homes for the many “homeless” citizens. To make this happen, government has to shift position. We are not in any way advocates of government’s involvement in the provision of housing for the citizens. But it has a role to play. Apart from infrastructure, investors in real estate in general and housing in particular, need incentives such as tax holiday for those of them that opt for low cost housing; reduction in land charges, reduction in import duties, and review of the Land Use Act which is a major clog in housing developing in the country. Governor’s Consent is a big obstacle to ease of property registration in the country and it needs to be expunged from the Act. We believe that leveraging opportunities in this sector serves

dual purposes of providing shelter and creating jobs, leading to wealth generation. A World Bank report estimates that, at N3.5 million per three-bedroom house, the value of the opportunities in the sector is about $385 billion. Right now, Nigeria is looking for ways to lift over 100 million of its citizens out of extreme poverty. Coronavirus will definitely add to that number, meaning that no effort should be spared by government to create the enabling environment for operators in the sector to increase their activities, create more jobs and grow the economy. We share analysts’ view that while the multiplier effect of investment in some other sectors of the economy like oil and gas happen in arithmetic progression, same size investment in housing and infrastructure provision comes in geometric progression, thus creating jobs in multiples of 10s and 100s. This is a latent opportunity to save and grow the economy and we are of the view and conviction that the time to activate that opportunity is now.

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

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Monday 20 April 2020

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT OIL & GAS

OIL & GAS

Chapel Hill Denham sees sharp drop in Seplat’s 2020 revenue on bleak outlook for Oil Producers SEGUN ADAMS

eplat could suffer its steepest revenue decline in seven years, excluding 2016, analysts at Lagos-based Chapel Hill Denham said in a new report that downgraded the oil stock on expected tough 2020 for oil producers. Chapel Hill Denham said expects the Federal Ministry of petroleum to allocate supply cuts to oil producers following Nigeria’s agreement to OPEC+ production cut (1.41mbpd ex-condensates). The analysts now see Seplat revenue declining by 27.7% to $504.38mn. This “could potentially be the steepest fall since the Trans-Forcados Export Route crisis in 2016,” said Chapel Hill Denham, noting its key

forecast of 36.9% production cut to 45.2kboepd including Eland Assets. The analysts also assumed an average realized oil price of $43/b (per barrel), which is at an 8% premium to their base case forecast of $40/b for the year, due to Seplat’s $45/b hedge for 60% of its liquid production through Q1-Q3 2020. “We also expect gas revenue to be impaired as the Oben gas plant is scheduled to go off for maintenance to improve asset integrity,” said Oil sector analyst Ebovi Wali and Research Head Tajudeen Ibrahim. Despite Seplat’s cost efficiency which would allow for profitability at current oil prices, the analysts say EBITDA margin will likely contract to 47.1% in 2020 from 58.6% in 2019 on account of the lower production and price outlook.

“We also expect Seplat to book FX losses on its government receivables due to the recent devaluation in Nigeria, which was a similar case in 2016,” said the analysts. “we are now less constructive on Seplat’s ability to maintain its current dividend policy of 5cents each as interim and final dividends.” Chapel Hill downgraded Seplat to a SELL from BUY previously with a 12-month target price of N406.05 per share. Last month, Seplat CEO Austin Avuru said the company would draw from its experience with a similar crisis to surmount headwinds in a challenging phase for the global economy induced by the COVID-19 pandemic and short-term oil over-supply due to demand and supply shocks.

“Seplat will benefit from being a resilient company built on the solid foundations of prudent financial management and the careful mitigation of risk,” he said. “We are a low-cost producer and will continue to manage our finances prudently.” Avuru also said buffers for Seplat in its gas business, while with the recent addition of Eland and the availability of new pipelines, Seplat’s oil business is broadening and derisking its production fields and routes to market to assure even greater security of revenues in the future. The CEO who spoke in March, before the new OPEC+ deal, said Seplat expects production to hit between 4757 kboepd (including Eland 6-10kbopd) for 2020, although this is subject to market conditions.

L-R: Stephen Shofu, marketing communications manager, Rosabon Financial Services; Chidinma Ezeani, CEO, Classy Glam Makeup; Taiwo Temitope, CEO, Naomi Apparels Fashion; Nkechi Njoku, CEO, Josypat Affairs, and Vivian Chiokwa, lead, financial product development, Rosabon Financial Services, during the presentation of the Rosabon One Million naira Grant cheque to MamaMoni Empowerment Foundation in Lagos.

Chevron Nigeria denies quarantining staff on suspected coronavirus case OLUSOLA BELLO & OLUFIKAYO OWOEYE

hevron Nigeria Limited (CNL), has reacted to speculations that it quarantined some of its staff suspected of having Coronavirus in a hotel in Warri, Delta State. CNL’s general manager, Policy, Government and Public Affairs, Esimaje Brikinn in a press statement sent to BusinesDay said none of CNL’s employees has contracted the COVID-19 virus, noting that based on the Coronavirus directive issued by the Federal Government of Nigeria regarding sustained operations in the oil and gas industry, the company entered into arrangements with some hotels and other facilities in Warri and Lagos where their staff on rotational duties will be accommodated, and their health status monitored to ensure that they do not have the COVID-19 virus before returning to work at its Escravos Operations. Esimaje explained that the precautionary safeguard enables CNL to provide a controlled environment for very close monitoring of the personnel during the period of the supervised quarantine. He added that in order to make this safeguard effective, all personnel will first be required to provide a comprehensive travel history before they are placed in the supervised quarantine. According to him, the first group of personnel scheduled for quarantine were moved to the designated facilities on Friday, April 10, 2020 and other groups will follow based on the crew change schedule and the personnel will be required to strictly maintain social distancing protocols, personal

hygiene, and use of appropriate personal protective equipment during the supervised quarantine period. “We are also working with the hotels and other facilities where the personnel will be placed, to ensure that the hotels and facilities maintain high levels of sanitation and follow strict adherence to all COVID 19 protocols,” he said. Esimaje declared that at the end of the two-week period, only those who are certified free of the COVID-19 virus shall be moved to Escravos and that anyone with suspected symptoms during the period will be subjected to further testing and subsequently transferred to government designated hospitals for further handling in line with the government approved protocols. “Chevron continues to monitor the Coronavirus (COVID-19) outbreak around the world and has been utilizing the guidance of local and international health authorities. We are regularly updating our workforce and will continue to adjust plans as appropriate as we receive more information. Our top priority is to ensure the wellbeing and safety of our workforce and their family members, and we are taking precautionary measures to reduce the risk of exposure,” he added. CNL affirms that as a responsible organization, one of the precautionary safeguards it has put in place to prevent the spread of COVID-19 virus into its operations is the introduction of a compulsory two-week supervised quarantine for all personnel returning to work at its Escravos Operations during this period of the pandemic

FINANCIAL SERVICES

Africa Prudential posts N341.8m profit in Q1 2020 SEGUN ADAMS

frica Prudential, listed Registrar, Investor Services and Business Support Solutions provider, has announced that it made N341.8m in the first quarter of 2020. The profit represents a slowdown in profit of 10% following a decline in revenue due to the unanticipated COVID-19 pandemic which disrupted business activities both domestically and globally. “The COVID19 pandemic had threatened the smooth operations of our business and

that of our clients’ mounting enormous pressure on our revenue sources particularly the Revenue from contract with customers, the resultant effect was the reduction recorded in our gross earnings for Q1 2020,” said Obong Idiong, Managing Director/CEO of Africa Prudential. The bottom-line was also affected by a 25% decline in profit before finance costs and tax as well as an increase in the company’s operating expenses amid the pandemic. While Gross Earnings fell to N743.36m compared to N869.3m year-on-year in Q1,

Africa Prudential saw over 900% surge in its digital consultancy revenue in a boon to its diversification to digital technology business. Interest Income in the period rose by 3% Year-on-Year driven by a 23% surge in the interest realized from loans and advances. Other income also rose some 2% to N2.89m while operating and personnel expenses saw an uptick in the quarter. Compared to full-year 2019, Return on average assets (ROOA) slowed by 1 percentage point to 7% in Q1 2020, while Return on average equity

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(ROAE) dropped by 2 percentage points to 16%. Nonetheless, Africa Prudential was more efficient at utilizing assets to generate profit with a ratio of 6.2x in Q1 2020 compared to a previous 5.7x in FY 2019. More profit was realized per unit of revenue as PAT margin rose 2 percentage points to 46% over the same period while NAPS rose from 5.7x to 6.2x. Total Assets in the first quarter of 2020, shed 3 to N18.09bn despite the 40% surge in cash and cash equivalents to N2.26bn as well as an 11% increase in trade receivables to

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N458.78m. The company recorded gains on creditors claim over its assets as the total liabilities declined by 8% to N9.52bn Year-till-date driven by a 9% decline in customers’ deposits which accounted for about 90% of the company’s liabilities while it grew total equity by 3% to N8.57bn Year-till-date on the back of 5% Year-till-date increase in retained earnings. In response to spread of COVID-19 in Nigeria and to ensure the welfare and safety of employees, Africa Prudential implemented Business Continuity Plan (BCP) which @Businessdayng

involves the work-from-home protocol for all its departments and business segments whilst attending to all shareholders’ request through its electronic channels. Further, it commenced the full end-to-end automation of AGMs while providing technology-driven solutions for the corporate action activities of clients. Africa Prudential said it would continue to offer services through its various cloudbased digital platforms, sustain ongoing technological projects and adequately position for post-crisis continuity of its business operations.

Monday 20 April 2020

BUSINESS DAY

COMPANIES&MARKETS

Business Event

TECHNOLOGY

Covid-19: Rensource launches digital distribution platform, connecting SMEs to customers DIPO OLADEHINDE

ensource, a Nigeria-based provider of merchant infrastructure, has launched a digital platform that helps retailers get discovered quickly while enabling servicing of customer orders online during the ongoing lockdown that has disrupted global supply chains. The Merchlist.co platform was rapidly developed as a solution to keep SMEs viable during the COVID-19 pandemic and has two main features which include allowing customers purchase directly from SMEs and aggregating services, contact details and delivery methods, ensuring that end users can see service availability in real-time. “Energy has always been our core business but in light of the pandemic, we see the opportunity to help small businesses who are the backbone of our economy survive by gaining access to consumers online,” Anu Adasolum, Chief Operating Officer at Rensource said. Adasolum noted that the

launch of Merchlist will ensure that small businesses stay in business and everyday consumers can continue to access essential goods. “Merchlist aims to connect as many small businesses as possible to the millions of internet users in Nigeria– simply, easily and quickly.” “We have also launched a fund to support our merchant families during this period. Donations by Merchlist is providing food, essentials and medical supplies to these families through our partner NGOs, Lagos Food Bank, Foundation for the Support of the Less Privileged and Dream from the Slum,” Adasolum said in a statement. The company has already clinched partnership deals with some SMEs, bringing them on board the Merchlist.co platform. These include Grocery Bazaar, Grand Square, Rx Pharmacy, Food Jaar, and The Meat Shop. Although the platform is currently in its beta testing stage, only accepting a limited number of orders per day, plans are underway to roll out in additional markets across Nigeria– allowing

more SMEs and merchants to go digital and access endusers. “We know that we cannot do this alone and are calling on well-meaning Nigerians to contribute by visiting donations.merchlist. co,” Adasolum said. A top Nigerian renewable energy and merchant services company, Rensource began commercial operations in 2016. It is powering the productivity of small and medium-sized enterprises by building and operating clean energy-based micro utilities for SME clusters in the country while offering value-added services to these merchants. The company’s mission has always focused on enabling access to critical services. Initially a provider of energy, Rensource is now broadening that range and the new addition to its product portfolio – Merchlist – is consistent with that mission, providing access to essential items such as groceries, toiletries, beauty and cleaning products, all at the touch of a button, the company statement adds.

L-R: Ambrose Oruche, acting director general, Manufacturers Association of Nigeria (MAN); Shuaibu Umar, representing permanent secretary, ministry of science and technology; Mansur Ahmed, president, MAN; Isaac Ade-Agoye, national treasurer, MAN; Dr Olugbemi, representing the DG RMRDC, and Usman Ibrahim, chairman, MAN Power Development Company, at the closing ceremony of the 3Day NME/NIRAM 2020 Expo in Lagos.

L-R: Sam Ndata, doyen of stockbrokers; Onyinyechukwu Ezeagu, chairman, Association Of Securities Dealing Houses Of Nigeria, (ASHON); Henry Olayemi, former president, Chartered Institute of Stockbrokers, (CIS); Akin Akeredolu-Ale, managing director, Lagos Commodities and Futures Exchange, (LCFE), and Fatima Lawal, company secretary, LCFE, at the breakfast meeting organized by Lagos Commodities and Futures Exchange (LCFE) to Introduce The Company to Senior Stockbrokers, In Lagos

COVID-19: ENL Consortium donates thousands of protective kits to NPA AMAKA ANAGOR-EWUZIE

NL Consortium, operator of Terminals C and D of the Lagos Port Complex Apapa has donated nose masks and other protective items to the Nigerian Ports Authority (NPA) in support of government’s effort to contain the spread of COVID-19 pandemic in Nigeria. The items donated by ENL Consortium include 3,000 units of nose masks; 1,000 units of hand gloves; 1,000 hand sanitizers and infrared thermometers. Vicky Haastrup, executive vice chairman/CEO of ENL Consortium, who was represented by the company’s executive director, Mark Walsh, during the presentation of the items in Lagos recently, said the gesture was in line with the company’s Cooperate Social Responsibility initiative. Haastrup said the safety of port workers and port users remain a key priority for ENL Consortium. “COVID-19 is a problem all over the world, not just in Nigeria. What we are doing with this donation is to back NPA with what we have because we know that NPA is working

on behalf of the Federal Government. So, this is to support NPA and the Federal Government to make sure we get through this period,” she said. According to her, the company would be out of work if the port community is not working. “So, for us, it is very important that we support the Nigerian Ports Authority, the Federal and Lagos State Governments and do what we can to provide support to this community. We all need the items to keep everybody safe at the port,” she said. Haastrup further said that ENL Consortium has ensured continuity of operations at its terminals in line with the directive of the Federal Government and to ensure that the supply chain is not disrupted. “We must commend President Muhammadu Buhari for ensuring that the ports remain open during this crisis. This is important because even if other sectors of the economy are shut down to guard against the spread of the virus, seaports should remain open to ensure that there is no shortage of food, drugs and other essential supply to Nigerians,” she said. Fumilayo Olotu, Port www.businessday.ng

Manager, Lagos Port Complex, Apapa, who received the items on behalf of NPA management, expressed appreciation to ENL Consortium, saying that the donation would go a long way in supporting NPA and the Federal Government’s effort in the fight against the coronavirus at the nation’s seaports. “We thank you for your collaboration and for sharing in the Federal Government’s commitment in fighting COVID-19. The items donated are relevant especially the thermometer because we need to keep checking people coming into the port in order to ensure that anybody that is above the normal temperature is isolated and presented for further protocols,” she stated. She further stated that people need to be part of regular protocols such as washing of hands and social distancing so that in few weeks, Nigeria would have a wonderful story to tell on how the situation was managed. Olotu assured that some of the items would be given to other agencies at the port including the Port Authority Police Command and Port Health Services.

L-R: Abiodun Ayodeji, head of marketing; Anders Einarsson, managing director; Olakunle Ayeni, head of sales, and Mario Russo, commercial director, all of Promasidor, at the Launch of SunVita Choco Crunch Cereal in Lagos. Pic by Pius Okeosisi

Austin Okere, founder/entrepreneur-in-Residence, the Ausso Leadership Academy and the Members of the Global Shapers Community- Laos Hub (an Initiative of the World Economic Forum) when they were hosted to a Meet the Leader session in Lagos.

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Monday 20 April 2020

BUSINESS DAY

In Association With

Pandemic geopolitics

A Balkan in betrayal Payouts a pandemic

Is China winning?

Which firms should pay dividends?

The geopolitical consequences of covid-19 will be subtle, but unfortunate Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub

HIS YEAR started horribly for China. When a respiratory virus spread in Wuhan, Communist Party officials’ instinct was to hush it up. Some predicted that this might be China’s “Chernobyl”—a reference to how the Kremlin’s lies over a nuclear accident hastened the collapse of the Soviet Union. They were wrong. After its initial bungling, China’s ruling party swiftly imposed a quarantine of breathtaking scope and severity. The lockdown seems to have worked. The number of newly reported cases of covid-19 has slowed to a trickle. Factories in China are reopening. Researchers there are rushing candidate vaccines into trials (see Briefing). Meanwhile, the official death toll has been far exceeded by Britain, France, Spain, Italy and America. China hails this as a triumph. A vast propaganda campaign explains that China brought its epidemic under control thanks to strong one-party rule. The country is now showing its benevolence, it says, by supplying the world with medical kit, including nearly 4bn masks between March 1st and April 4th (see article). Its sacrifices bought time for the rest of the world to prepare. If some Western democracies squandered it, that shows how their system of government is inferior to China’s own. Some, including nervous foreign-policy watchers in the West, have concluded that China will be the winner from the covid catastrophe. They warn that the pandemic will be remembered not only as a human disaster, but also as a geopolitical turning-point away from America. That view has taken root partly by default. President Donald Trump seems to have no interest in leading

the global response to the virus. Previous American presidents led campaigns against HIV/AIDS and Ebola. Mr Trump has vowed to defund the World Health Organisation (WHO) for its alleged pro-China bias (see article). With the man in the White House claiming “absolute power” but saying “I don’t take responsibility at all”, China has a chance to enhance its sway. Even so, it may not succeed. For one thing, there is no way to know whether China’s record in dealing with covid-19 is as impressive as it claims—let alone as good as the records of competent democracies such as South Korea or Taiwan. Outsiders cannot check if China’s secretive officials have been candid about the number of coronavirus cases and deaths. An authoritarian regime can tell factories to start up, but it cannot force consumers to buy their products (see article). For as long as the pandemic rages, it is too soon to know whether people will end up crediting China for suppressing the disease or blaming it for suppressing the doctors in Wuhan who first raised the alarm. Another obstacle is that China’s propaganda is often crass and unpleasant. China’s mouthpieces do not merely praise their own leaders; some also gloat over America’s dysfunction or promote wild conspiracy theories about the virus being an American bioweapon. For some days Africans in Guangzhou were being evicted en masse from their homes, barred from hotels and then harassed for sleeping in the

streets, apparently because local officials feared they might be infected. Their plight has generated angry headlines and diplomatic rebukes all over Africa. And rich countries are suspicious of China’s motives. Margrethe Vestager, the EU’s competition chief, urges governments to buy stakes in strategic firms to stop China from taking advantage of market turmoil to snap them up cheaply. More broadly, the pandemic has fed arguments that countries should not rely on China for crucial goods and services, from ventilators to 5G networks. The World Trade Organisation expects global merchandise trade to shrink by 13-32% in the short run. If this turns into a long-term retreat from globalisation—which was already a worry before covid-19—it will harm China as much as anywhere. More fundamental than whether other countries are willing to see China supplant America is whether it intends to. Certainly, China is not about to attempt to reproduce America’s strengths: a vast web of alliances and legions of private actors with global soft power, from Google and Netflix to Harvard and the Gates Foundation. It shows no sign of wanting to take on the sort of leadership that means it will be sucked into crises all across the planet, as America has been since the second world war. A test of China’s ambitions will be how it acts in the race for a vaccine. Should it get there first, success could be used as a national triumph

and a platform for global co-operation. Another test is debt relief for poor countries. On April 15th the G20, including China, agreed to let indebted nations suspend debt payments to its members for eight months. In the past China has haggled over debt behind closed doors and bilaterally, dragon to mouse, to extract political concessions. If the G20’s decision means the government in Beijing is now willing to co-ordinate with other creditors and be more generous, that would be a sign it is ready to spend money to acquire a new role. Perhaps, though, China is less interested in running the world than in ensuring that other powers cannot or dare not attempt to thwart it. It aims to chip away at the dollar’s status as a reserve currency (see article). And it is working hard to place its diplomats in influential jobs in multilateral bodies, so that they will be in a position to shape the global rules, over human rights, say, or internet governance. One reason Mr Trump’s broadside against the WHO is bad for America is that it makes China appear more worthy of such positions. China’s rulers combine vast ambitions with a caution born from the huge task they have in governing a country of 1.4bn people. They do not need to create a new rulesbased international order from scratch. They might prefer to keep pushing on the wobbly pillars of the order built by America after the second world war, so that a rising China is not constrained. That is not a comforting prospect. The best way to deal with the pandemic and its economic consequences is globally. So, too, problems like organised crime and climate change. The 1920s showed what happens when great powers turn selfish and rush to take advantage of the troubles of others. The covid-19 outbreak has so far sparked as much jostling for advantage as far-sighted magnanimity. Mr Trump bears a lot of blame for that. For China to reinforce such bleak visions of superpower behaviour would be not a triumph but a tragedy.

Dividends are a healthy part of capitalism. In the covid era, many firms should cut them

VER THE next month the toll that lockdowns are inflicting on businesses will become more visible as big Western companies report their first-quarter results and start to give investors a steer on what to expect for the rest of 2020. For some, bankruptcy beckons—this week America’s banks warned of a surge in bad debts as households and firms go bust (see article). Most companies will remain going concerns, but face a collapse in profits. As a result a fraught debate is taking place in boardrooms all over the world about whether firms should cut their dividends, the recurring payments they make to their owners. That may sound like a technicality but it is not. Dividends and share buybacks (another way of returning money to a company’s owners) amounted to

$2.2trn last year for listed firms worldwide. A necessary feature of a market economy, they get a bad rap from those who think plutocratic shareholders are the outsized beneficiaries of modern capitalism. But retirement schemes depend on a steady stream of income from dividends to honour their commitments; if dividends are cut they may instead have to sell shares at exactly the wrong time, during a stockmarket slump. And when mature or cash-rich companies distribute excess cash it can be recycled into funding young companies or to firms whose balance-sheets need repair. Companies are loth to make sudden, big changes to their dividend payments. Yet analysts reckon the total amount paid to shareholders could drop by 30% or more this year. The pressure to cut comes because lower profits make payouts less affordable; because governments, reasonably, want some firms to preserve their cash and capital buffers; and because many Continues on page 17

Monday 20 April 2020

BUSINESS DAY

In Association With

The OPEC oil deal

Which firms should pay dividends?

The future of the oil industry

Continued from page 16

The oil slump is a glimpse of what is to come

IL, IT HAS been said, is the blood coursing through the veins of the world economy. In 2020 the economy is bleeding red. As covid-19 keeps workers at home and planes on the ground, demand for oil has fallen faster and further than at any point in its history. Amplifying the shock, a furious row between Saudi Arabia and Russia set off a price war in early March. Last month oil prices fell by more than half, leaving a giant industry reeling. On April 12th the world’s energy superpowers broke bread and reached a new deal to try to prop up prices. The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, said they would slash production by 9.7m barrels a day from May to the end of June, a record, and restrain output for two years. In the 20th century Uncle Sam was keen to undermine OPEC, but in 2018 America became the biggest oil producer, ahead of Saudi Arabia and Russia. President Donald Trump’s re-election depends on the shale states of Texas, Pennsylvania and Ohio. He argued for the pact and said the industry would recover “far faster” than expected. In fact private oil firms, statecontrolled companies and coun-

tries that rely on energy exports should brace themselves for a long period of pain, and use the crisis to begin the restructuring that will have to take place if the planet is to deal with climate change. This week’s grand bargain is unlikely to work. For a start the sums don’t add up. Global demand may fall by 29m barrels a day this month, three times the OPEC deal’s promised cuts. Private firms outside the alliance may reduce output, too, but by how much is uncertain. And no one knows when demand will pick up. Oil stockpiles are rising and storage capacity could be exhausted within weeks. The alliance is shaky. Russia, the world’s second-biggest producer, has worked with OPEC since 2016 but routinely ignored the terms of deals. It is unlikely that America

will permanently join OPEC in creating a new energy order. The new pact involves assurances that output will fall in America but Texan frackers respond to price signals and the profit motive, not government quotas. The deal almost fell apart when Mexico refused Saudi Arabia’s terms, illustrating how one country can prompt an unravelling. And Saudi Arabia continues to offer deep discounts on crude bound for Asia, a sign of its eagerness to defend its powerful position in oil’s most important market. A last reason for scepticism is that the covid-19 crisis could further dampen long-term oil demand. Hundreds of millions of people are living through an experiment with home-working, fewer flights and less urban pollution. This could help

change public opinion about the desirability of a faster shift from an economy built on fossil fuels. Rather than stability, then, oil producers face volatile demand and production. Iran and Venezuela, already squeezed by American sanctions, will see more unrest. Countries with high costs and poor governance, such as Nigeria and Angola, face capital flight and balance-of-payments crises. Last year bankruptcies among American oil producers jumped by 50%. In 2020 that figure will soar. Beyond this year a deeper adjustment awaits. Volatility will dampen investors’ appetite for new projects. Oil companies have already slashed capital spending by about 25% this year. Some pricey oil will be left underground for good. Shale’s frenetic growth will abate. Big oil exporters, including Saudi Arabia, will have to cut public spending and diversify. For years the oil industry has faced the possibility that demand might fall, as governments moved to limit climate change. That threatened to heap chaos on oil producers, as capital dried up and companies battled for their share of a dwindling market. A peak in demand may still be years away. But oil producers should see covid-19’s turmoil for what it is: not an aberration, but a sign of what is to come.

How to ease a covid-19 lockdown

Fumbling for the exit strategy Overwhelmed by the crisis, most governments are ill-prepared for what comes next Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub

UDDENLY EVERYONE has a plan. Ideas for exiting the covid-19 lockdown are spreading faster than the virus ever did. Spain has let builders return to work, Italy has opened stationers and bookshops, Denmark is allowing children back into nurseries and primary schools. South Africa’s opposition is calling for a relaxed “smart lockdown”. In America President Donald Trump has been sparring with state governors over who should decide what reopens when. Every country is different, but already two things are clear. First, governments need to explain to their people that the world is not about to return to normal. Without a vaccine or a therapy, life will be constrained and economies will remain depressed. Second, testing and contact-tracing are vital to keeping the virus at bay. Countries that failed to invest enough in them when the disease first emerged in China risk repeating the mistake. The need to devise exit plans is

urgent. The alarming cost of hard lockdowns is becoming clearer. This week the IMF forecast that extending full lockdowns well into the third quarter of 2020 would turn a 3% contraction of the world economy this year into a 6% one. An analysis by Norway’s covid-19 task-force, published on April 7th, compared an 18-month hard lockdown with a “slowdown” and concluded that the statistical value of the extra lives it saved would be dwarfed by its longterm cost. And yet, however much exits are needed, they are also hard, because most of the world remains susceptible to a second wave of covid-19. Spain is the country with the highest number of recorded cases per head. Yet

only a tiny share of the population has been infected. Even if the actual number of cases were 100 times higher than official numbers suggest, two-thirds of its population would still be vulnerable— more if immunity is short-lived. Lockdowns have been sold as a way to “beat” covid-19. In fact, they reset the clock. Having failed to stop the disease taking hold, countries have bought themselves a chance to try again. But unless they act differently the virus will surge once more. What should they do? Governments need to choose from the menu of options by comparing the costs of each measure with the benefits it brings—and the calculus will differ in different countries. Should masks be

mandatory? (Yes, if supplies are adequate.) Should schools take pupils back? (More research is needed.) Which industries can safely reopen? (Factories can; hospitality is harder.) Do you shut borders or quarantine travellers? (Quarantine is better.) Policies will evolve as the science improves or the disease flares up. Sometimes, that will mean tightening the rules again. China offers a snapshot of what this means. Since restrictions were relaxed there the streets have filled up, many people have gone to back to work and life has become more liveable. However, consumers remain anxious so some of them stay at home. The talk is of a 90% economy (see article)—better than a 50% economy, certainly, but nonetheless the greatest global economic catastrophe since the 1930s. Managing this part-locked-in, part-let-out world depends on testing. Testing can tell governments about the running rate of infections and which measures work and which do not. It isolates new cases, allowing the tracing of their contacts, helping arrest the spread of the disease. The better the testing, the less all-embracing the social distancing needs to be, because infected people are routinely removed from the population—in theory it could replace distancing altogether.

bosses, haunted by the public backlash against bank bail-outs in 2008-10, worry about being seen to be paying out billions during a crisis. What to do? The dividend debate can be solved by sorting companies into three buckets. In the first are systemically important firms where cuts should be required by governments. Any firm that receives a bespoke or disproportionately large taxpayer bailout should automatically fall into this category: airlines, for example. Taxpayers should be repaid before investors are entitled to a reward. This does not mean, however, that companies that have taken advantage of stimulus measures available to all firms—such as furlough schemes or central-bank liquidity—should be made to cut payouts. There is no need to disrupt the economy more than is already the case. Banks also belong in the first category, because the money they pay out could instead be used to support more lending. Regulators in the euro area and Britain have already enforced dividend bans. American banks have stopped share buy-backs but nearly all are sticking with paying dividends, which amount to about $55bn a year. The Federal Reserve, which regulates lenders, should nip this corporate bravado in the bud. Although banks are a lot better capitalised than in the past the crisis will be a strain. One of the biggest American lenders, Wells Fargo, has just reported that its profits dropped by 99% in the first quarter compared with a year earlier. Remember that taxpayers are on the hook should the financial system totter. In the second bucket are firms that are stretched but feel that keeping up reliable dividends sends an important signal. The danger here is that they rack up debts in order to do so. That strategy might sound mad but could in fact become common. Roughly a quarter of big listed European and American firms are forecast to make lower profits in the next quarter than needed to sustain their dividends. Several of the oil supermajors may end up choosing to borrow in order to pay dividends. Boards should think twice. The cash payments they promised their firms’ owners were implicitly predicated on business-as-usual—and can surely wait until business does indeed return to usual.

Monday 20 April 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Kobe Bryant and estate planning tion to provide financial support for all of his children upon his death. Even though making changes to a trust posthumously can be a challenge, indeed this is one of the advantages of setting up a trust, it is expected that the judge will approve this request. In complicated circumstances, such a posthumous amendment could create an argument that the child was intentionally left out of the will or trust. Kobe Bryant named Vanessa and his agent as co-trustees to manage the trust fund and make discretionary payments to the beneficiaries of the trust. It is important to protect minors to inherit large sums of money too early

‘

Make sure your assets go to whom you want. Without an estate plan, it is the court that decides who will receive your assets. Further, if you want some assets to pass to a non-family member, that may not happen unless it is specified

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did not follow Kobe Bryant’s career during his lifetime. However, in the wake of his passing in a tragic helicopter accident along with his 13 year-old daughter Gianna, and 7 other passengers earlier this year; I have been struck by his legacy and have thus been anxiously waiting to hear about his estate plan and the arrangements he would have made for his loved ones. It is reported that Kobe Bryant established a trust to provide for his 37-yearold widow, Vanessa and their children. According to Forbes, Bryant died with a net worth of about $600 million; he was the second-highest-paid NBA player of all time with career earnings, endorsements and investments. The Trust Deed reportedly states that Natalia and Bianka can “draw from the principal and income in the trust during Vanessa’s lifetime, and then her kids get the remainder upon her death.” Kobe Bryant created the trust in April 2003, shortly after the birth of his oldest daughter Natalia, now 17. The Trust Deed was amended several times over the years including every time the couple had a new baby. He amended it following the birth of his daughter Gianna, and again in 2017 after the birth of his third daughter Bianka, 3. It thus currently includes their eldest daughter Natalia, the late Gianna who was killed along with her father, as well as a further revision effected in 2017 soon after Bianka’s birth. This was the last revision of the document. Unfortunately, 41 yearold Kobe Bryant never got round to updating his estate plan to include his youngest daughter Capri

following her birth in June 2019. Therefore, Capri is not included in the trust and it is silent with respect to Capri and her future descendants. The issue with not amending the trust is that “the Bryant Trust will be divided into two shares, and not three” after Vanessa’s demise. Of course, it is most unlikely that Bryant deliberately disinherited his last daughter but this unfortunate oversight has caused his loved ones some stress. In the midst of her grief, Kobe Bryant’s widow has reportedly requested for a judge to make an amendment to the trust deed to include their youngest daughter Capri in the trust distribution claiming that it was always Kobe’s inten-

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Vanessa Bryant also did something else. She appointed guardians for her three children; a ”Guardian Ad Litem” is a court appointed lawyer for minor children “in case a parent is unavailable to make decisions on the child’s behalf.” She wanted to ensure that her own legal affairs were tidied up as soon as possible in light of “the uncertainty of the Coronavirus pandemic”. There are so many powerful lessons for us all in this tragic situation. Particularly with our extended family social system and exceptionally large families, the importance of estate planning cannot be over emphasized; it is more important than ever to put things in place to protect your loved ones should anything untoward happen to you. Indeed, the reluctance to organize one’s estate and legacy is even more apparent in our own environment where estate planning is often seen as tempting fate or pre-empting one’s own demise. But is not enough to put an estate plan in place; just as important is the need to ensure that the plan is updated to reflect evolving circumstances throughout one’s lifetime. A marriage, a divorce, new beneficiar-

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ies or a significant change in one’s fortunes are important life events to warrant an update of an estate plan. Without the periodic review of your estate plan, you run the risk of disinheriting those whom you love and to whom you intended to bequeath your assets. If one of your to dos is to review your estate plan, just do it. Stop procrastinating. Here are some pertinent reasons why: Probate avoidance is one important reason to have a plan in place. With no estate plan, your family and loved ones may need to go through the stressful, lengthy and expensive probate process. Make sure your assets go to whom you want. Without an estate plan, it is the court that decides who will receive your assets. Further, if you want some assets to pass to a non-family member, that may not happen unless it is specified. Have you nominated a guardian for your minor children? Don’t leave it to someone else to decide who should look after your minor children should something happen to you. A decision, particularly one that you can change, is better than no decision at all.

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You can reduce the risk of a family feud. Making no decisions regarding what you want to happen to your assets, can lead to long-term family disharmony and friction. Deal with potential issues now, and leave fond memories and a lasting legacy and not a devastating family fight in your wake. Deal with incapacity issues even though they probably won’t ever be needed. Putting a Power of Attorney and health care proxy in place along with other estate planning documents will help your loved ones carry out your wishes in case you ever become incapacitated. Minimize the impact of taxes on your estate. It is so important to plan ahead as the impact of estate taxes can be devastating to family members who are often forced to sell properties, even the family home, to pay the bills. Use this period of “lockdown” to review your entire financial plan; from your banking, budgeting, savings, investments, insurance, retirement plan, philanthropy and estate plan. Make a review of your estate plan one of your top financial goals.

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

Monday 20 April 2020

BUSINESS DAY

BD Money Economy

These 3 industries have growth potential in Nigeria’s corona economy, according to Agusto & Co. ENDURANCE OKAFOR

hile a lot of Nigerian businesses have been disrupted by the outbreak of the deadly coronavirus amid the slowdown in global economic activities Agusto & Co. sees the opportunity for some industries in the country. The lockdown in some commercial cities in Africa’s largest economy and the increasing adoption of the work-from-home activity was the basis for the growth projections by the Lagos-based consulting firm. “We believe a few industries are set for strong growth as a result of the pandemic,” Agusto & Co. said in a recent publication-COVID-19 in Nigeria: Economic Perspectives and Mitigating the Risks. The virus outbreak which has led to the crash in crude price, due to a slump in demand and a spike in supply has shown signs of dragging Nigeria’s crude oi-dependent economy into recession with many industries expected to take the most hit. “We believe the pandemic’s effects on economic activities and

businesses in Nigeria will be dire,” Agusto & Co. said. To curtail the spread of the deadly coronavirus, President Muhammadu Buhari recently announced the 14-day extension to a lockdown in Lagos, Abuja and Ogun states to combat the coronavirus pandemic. Buhari said “it has become necessary to extend the current restriction of movement” that was set to expire later in the day. Nigeria reported 35 new cases of Coronavirus on Friday, this brings the total number in Africa’s most populous nation tot 442 confirmed cases, as compiled from data by

NCDC. Agusto & Co., however, expect the following industries to post strong growth as a result of the virus outbreak in the country. Agricultural sector The increasing spate of a lockdown in Nigeria brings the subject of food security to the core and Agusto & Co. believes the agricultural sector will leverage the rush for food to post strong growth. It stated that “grains and other staples (particularly locally grown rice)” are mostly “in a strong position to grow as food demand spikes from panic buying.”

The Federal Government recently announced that all markets in states where a lockdown was imposed-Lagos, Abuja and Ogun will be allowed to open between 10 am and 2 pm daily so that the residents of the states can buy food items. “For markets, only shops and stalls selling food and groceries shall be allowed to open to customers between the hours of 10:00 am and 2:00 pm,” Aliyu Sani, the National Co-coordinator of the Presidential Task Force on COVID-19 said. Telecommunications industry With the surge in work-fromhome activity amid the outbreak of the deadly coronavirus, there is potential for the increase in data consumption, and the use of airtime for voice calls (as many are frequently checking up on their loved ones). Agusto & Co. expects an increase in consumers’ demand for these services to fuel growth in Nigeria’s telecommunication industry. “Working remotely implies that several white-collar professionals will consume more internet data for work and virtual meetings leading to a spike in demand for data,” Agusto & Co. said. The consulting firm also expects that more telecoms consumers (beyond the white-collar professionals)

will spend more time on social media and other streaming apps at this time. “We believe these trends will help drive growth in the telecommunications industry in 2020 through to 2021,” it said. Data by the Nigerian Communications Commission (NCC) shows that Nigeria’s telecommunications industry has a reach of 86 percent, and with 182.7 million customers, the industry has the single largest customer base in the country. Home and personal care industry Agusto & Co. expects the home and personal care industry especially for those who have been able to adapt rapidly to the spike in demand for hand wash and sanitisers to record growths in revenue. “The grocery focused supermarkets also represent a bright spot for the times. The rush to stock-up on groceries by households has been the major driver of growth for this segment of the economy,” it said. Patronage of items like hand sanitisers, disinfectants, hand-washing soaps and gloves increased on request in most cities in Nigeria as many adopted preventive measures. The trend has remained unchanged since Nigeria reported its first coronavirus case in February.

Fixed Income

Renewed sell-off seen in Nigeria’s long-dated Eurobond as oil slides despite OPEC+ planned cut SEGUN ADAMS

nvestors have resumed dumping Nigeria’s long-dated dollarbond after oil price failed to find a floor following a muchawaited record production cut announced by OPEC and its allies last week. Nigeria’s 2047 Euro-bond yield has reversed its decline into the single-digit territory rising to 10.49% Thursday, indicating sell-pressure. The bond had risen to as high as 13.21% following the crash in oil price by more than 50% from midFebruary to March. Investors had renewed their interest in the dollar-debt on the news that OPEC and its allies would cut oil production by at least a tenth of global supply to reduce glut and support price amid the COVID-19 pandemic. OPEC+ last Sunday agreed to a record production cut of nearly 10

million barrels per day (mbpd). The 9.7 mbpd cut which exceeds 2008’s record 2.2 mbpd cut will come into effect in May and June. However, the oil market has been unable to find support as Brent, the

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benchmark crude slid below $30 shortly after the announcement. As of 17:00 GMT+1 Friday, Brent sold for $28.46 on the futures market. The anticipated higher price would have helped ease pressure

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on the naira which is said to be overvalued after CBN’s devaluation to N360/$. This would have reduced currency volatility risk that has caused foreign capital flight whilst improving balance of payment position and reducing potential earnings risk to the oildependent economy. Foreign Reserve of the Central Bank of Nigeria (CBN) stood at $33.908m as of Friday compared to $36.932m mid-February. Nigeria’s ability to meet its foreign-denominated obligations has also been put on the spotlight by global rating agencies including Fitch which in late March downgraded Nigeria’s long-term foreigncurrency issuer default rating (IDR) to ‘B’ from ‘B+’ with a negative outlook citing external and fiscal pressures. Oil market watchers say the reaction of the market has been affected low demand for oil which has fallen by a third since the pandemic. @Businessdayng

With most of the world’s largest economies under lockdown and key oil-consuming sectors like Aviation and Manufacturing affected, investors, do not believe the supply cut would be enough to balance the market, hence a short-term oversupply would remain till lockdown is lifted, they say. According to Reuters, the recently agreed-upon global cuts will include contributions from nonmembers, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases by the world’s largest consumers. The news agency citing relevant sources said the real effective cuts by OPEC+ would total 12.5 million bpd because Saudi Arabia, the United Arab Emirates and Kuwait would cut supplies steeper given higher output in April while some non-members would contribute 4 million to 5 million bpd. Nigeria has agreed to cut production to 1.41mbpd ex-condensates.

Monday 20 April 2020

BUSINESS DAY

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

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

Coronavirus threatens Seplat’s future earnings

SHORT TAKES N312m

….Revenue to fall seven year low

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

BALA AUGIE

eplat Petroleum Development Company (SEPLAT)’s revenue is to fall a seven year low in the face of historical demand losses and plummeting oil prices, according a report by Chapel Hill Denham Limited. Analysts at Chapel Hill Denham led by Ebovi Wali, while revising the their forecast for top line for the indigenous oil and gas firm to $504.28 million, said the slump in sales could potentially be the steepest dip since the Trans-Forcados Export Rout crises in 2016. “Our revenue forecast is underpinned by a sharp cut of 36.9 percent in our production forecast to 45.2kboepd from 71.6kboepd previously, including Eland assets,” said the analysts. They doubt the company’s ability to maintain current dividend policy of 5cents each as interim and final dividends, while contemporaneously adding that the devaluation of the currency by the central bank would result in huge foreign exchange losses, a similar case as 2016. Seplat, however, in a recent statement on its website said its low production cost and benign debt position gives it the leeway to overcome the current crisis, as it intends to spend as much as $100 million of capital expenditure. For the year ended December 2019, the company’s revenue fell by 7.57 percent to N214.15 billion, the first drop since 2017. Operating profit margin fell to 42.36 percernt in December 2019 from 48.19 percent the previous year ; this means the company is not generating

enough profit from operations. The largest indigenous oil and gas firm in Africa’s largest economy is grappling with deteriorating cash flows following a sharp drop in oil and gas recipient. Cash flows from operating activities dipped by 48.06 percent to N78.73 billion in the period under review, against N151.58 billion as at December 2018, while net cash flows from operating activities fell by 48.77 percent to N77.61 billion. The sharp drop in crude oil price due to demand impact from Covid-19 and continued oil oversupply has forced oil majors across the globe to slash output and spending plans. Global oil demand is down as much as 30 percent because of global coronavirus lockdowns and analysts fret that could force companies to

close production. ConocoPhillips , of the world’s largest independent exploration and production companies, said it would voluntarily curtail output by 225,000 barrels a day. Conoco said it would reduce output to at the surmount oil sands facility in Canada by 100,000b/d tp just 35,000 b/d by May. Last week, Chevron announced it had sold its interests in some oilfields in Azerbaijan and a pipeline to Turkey to Mol, the Hungarian company, for about $1.6 billion. Shale producer Continental Resources recently said it would cut production by about 30 per cent, or 50,000 b/d. Other producers have cut spending without specifying their production cuts. Energy International Agency (EIA)

said it expects global demand in 2020 to fall by 9.3 million barrels a day; just United States oil prices sank below $18 a barrel last week Friday. Brent, the international benchmark, was also steady at $27.90 a barrel, but it has lost almost $5 last week. Oil price continues to tumble even as OPEC+ allies have agreed to cut output by as much as 10 million barrels a day. Analysts say if the volatility in the price of the commodity lingers, several Shale oil producers may go bust or cease to exist in the foreseeable future as they are heavily indebted. Sepat has an attractive valuation as price multiples are 2.17 times, but the recent unprecedented global macroeconomic uncertainties could prevent investors from swooping on the company’s shares..

3 years old Nigerian Breweries shares selloff cost shareholders N1.3trn market cap loss IFEANYI JOHN

lobal stock markets may be battling to survive the prolonged market selloffs in the last 3 months but for Nigerian Breweries shareholders, the stock price selloff is now almost 3 years old. Since peaking at N191 in Q2 2017, NB has seen its share price consistently decline, falling to a multi-year low of NGN25.50 as at the end of Q1 2020. The 3 years old selloff cost the brewery giant its priced place in the elite trillion-naira market cap club as the market valuation declined from N1.5 trillion in Q2 2017 to N204 billion in Q1 2020, losing as much as N1.3

P.E

trillion in market valuation over the last 7 quarters. “While the deteriorating financial performance of the firm holds some blame for the prolonged selloff, the depth and speed of the selloff suggest that the stock may be oversold,” said Obinna Uzoma, chief economist at EUA Intelligence. The last time Nigerian Breweries Plc posted a growth in revenue was in 2017 when the stock reached its record high price. In FY 2017, revenue growth was around 9.8 percent but declined by 5.8 percent in FY 2018 and 0.43 percent in FY 2019. “From the company’s peak price of N191 in 2017, the share price has now declined by around 83 percent as at market close on Friday compared to just 6.2 percent decline in revenue

and 51 percent decline in earnings per share over the 3-year period,” Uzoma added. NB shares closed at N32.35 on Friday last week. The company according to its CEO, Mr Doyer stated that FY 2019 results were impacted adversely by increased excise duty rates despite volume growth and further premiumization. He added that the firm had to increase borrowing to reduce a backlog of foreign payables. Although some analysts say that the stock may be oversold, it appears the market has been great at forecasting future earnings of the company and repricing its shares appropriately. For example, in 2018, NB shares traded at N138 per share at the start the year but fell to NGN82 per share by year end, represent-

ing a 41 percent decline in stock performance which matched the 42 percent decline in Profit after Tax (PAT) the brewery suffered in 2018. Year to date, NB share prices has declined 41 percent. Whether this price decline is indicative of the potential drop in earnings is unknown but analysts say it’s not impossible that we see such profit declines from breweries this year considering that we are in an our economy is on the brink of a deep recession, households and businesses are restricted by an extended lockdown, household purchasing power is weaker and a significant cut in household discretionary spending is expected this year. More than enough headwinds to knock any company’s earnings guidance in half.

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

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

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

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

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Monday 20 April 2020

BUSINESS DAY

Start-Up Digest

In association with

Meet Okunfolami who created selfassessment toolkit for Covid-19 ODINAKA ANUDU

re at e n g i s a Lag os-bas e d software and creative design company. The start-up recently designed an e-self assessment toolkit to help combat the spread of coronavirus, also known as Covid-19. It created it in partnership with African Centre of Excellence for Genomics of Infectious Diseases (ACEGID) located at the Redeemer’s University, Ede, Osun State. The app enables Nigerians to provide information about their health status, travel or contact histories, job records and states of residence. With the information provided, the app assesses the chances of individuals contracting coronavirus and provides a verdict of ‘low risk’, ‘medium risk’ or ‘high risk’. High-risk individuals are often those with travel histories and/or exposure to people who have tested positive for the virus.

They are assisted on how to get tested from the Nigeria Centre for Disease Control (NCDC). Medium-risk individuals are advised to self-isolate, repeat the test within seven days and then monitor the symptoms. Adedayo Okunfolami is the chief executive officer of the start-up. He is a software engineer with over 10 years work experience spanning banking, education, construction, media and information technology industries. The firm’s management team is made up of Oladele Dada, Idunnu Eniola and Sanusi Abiodun with expertise across web, mobile applications, graphics design and general ICT support and infrastructure. “We felt the need to contribute our quota as an IT firm to combat the spread of coronavirus pandemic, which requires a multidimensional approach,” Okunfolami says. “With the exceptional and courageous efforts of medics all over the globe,

Adedayo Okunfolami

the need to provide support service using information technology, in addition to other conventional methods in early identification and tracking of both symptomatic and asymptomatic persons, remains vital in putting an end to CoVID 19 spread,” he says. “This is what led us to

SMEs closures seen after Covid-19 pandemic Odinaka Anudu & Josephine Okojie

any small micro, small and medium enterprises (MSMEs) will go out of business after the coronavirus pandemic, experts say. “I foresee many closures,” Ike Ibeabuchi, CEO of MD Services Limited, said. “MSMEs in Nigerian are vulnerable to shocks and are fragile because of the environment in which they find themselves,” he said. Coronavirus, also known as Covid-19, has killed tens of thousands of people across the world and disrupted social and economic lives of the people. The United States is seeking additional $250 billion to complement $350 billion earlier budgeted as relief fund for small businesses in the country. The loans are meant to keep the economy running and jobs intact. On the other hand, the Nigerian government is seeking

$3.4 billion from the International Monetary Fund, $2.5 billion from the World Bank and a further $1 billion from the African Development Bank, according to Zainab Ahmed, finance minister. Analysts are urging the government to ensure that part of the funds go to the MSMEs who have created more than half of jobs in the economy. Bongo Adi, a Lagos-based economist, said that the impact of the pandemic was beyond what the MSMEs would handle and said government must create palliative measures. Femi Egbesola, national president, Association of Small Business Owners of Nigeria (ASBON), said coronavirus was already having a negative impact on the operations of SMEs in the country as some were cutting down production. “I have had several calls from our members that are into the manufacturing of pure water,” he said. “They can no longer get enough supply of polyethylwww.businessday.ng

ene for making sachet water and bottles because they are imported from China. No ship is leaving China currently because their factories have stopped production,” he further said. He predicted that lots of SMEs would close shop if the spread of the outbreak was not controlled within the shortest possible time. Degun Agboade, president and chairman of council, Nigerian Association of Small and Medium Enterprises (NASME), said the situation was becoming unbearable. “It is really affecting us as we can no longer get supply of our raw materials. Even micro businesses that buy and sell cannot get supply of the goods they buy because most of them are majorly imported from China,” he said. “Some are already shutting down since there is no material for production. Lots of our containers are waiting on the seaports in China for shipping but nothing is happening because of COVID 19.”

reach out to African Center of Excellence for Genomics of Infectious Diseases (ACEGID) and with their institutional support, we developed a COVID 19 eself assessment tool, which is localised and available in Igbo, Hausa, Yoruba and Pidgin to work in any part of Nigeria,” he explains.

Nigeria is battling with coronavirus which has infected more than 400 persons with over 10 deaths. Okunfolami has reached out to some of the state governments to encourage them to deploy the Covid-19 e-self assessment tool as his firm’s corporate social responsibility (CSR) project, through ACEGID. But the responses of these states were positive at first, but the entrepreneur and his team were later asked to hold on. “We later got no feedback from them till date,” the young entrepreneur says. Apart from the coronavirus e-self assessment tool, the entrepreneur and his team had earlier launched Motocare - an automobile service linking app that connects vehicle owners to reliable automobile workshops and engineers. The firm has also provided process automation solutions to companies such as Berachah MFB; Biofem Pharmaceutical firm; ICOBA; ACEGID, among many others.

“We also provide monthly training boot camps to young Nigerians in Lagos,” he says. He discloses that the start-up is currently planning to launch a courier solution, agency banking and medical platform. On his advice to younger Nigerians, the IT entrepreneur urges them to take advantage of every opportunity available to add value to the development of the country and never to stop dreaming about the next great idea that can be implemented to boost the economy and put Nigeria on the world map. “Government should provide enabling environment, policies and funding/ grants to encourage growth of start-up companies,” he tells the government. “The Federal Government can also set up proper data collection system and statistics to track activities, challenges and growth of these start-up businesses to the point of becoming established.”

Mobilise SMEs to produce PPEs, experts task FG Odinaka Anudu & Josephine Okojie

xperts say the federal government will need to support small and medium businesses to produce personal protective equipment (PPEs) for hospitals as it is done in many countries at the moment. “SMEs should be mobilised to produce the PPEs for the hospitals and the general public rather than import them from China,” Friday Opara, director of strategic partnership at the Small and Medium Enterprises Developmewnt Agency of Nigeria (SMEDAN), said. “They have the capacity and capability to produce according to specifications and standards,” Opara further said. Coronavirus has infected over two million people across the world and killed more than 140,000 persons. Nigeria has seen over 10 deaths and 400 infections since the index

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case in February. Opara said the present situation is not good for small businesses and urged the government to support this class of business. “The government should do something to help the small businesses in this pandemic, considering their contribution to Gross Domestic Product and to employment,” he said. MSMEs contribute 50 percent to Nigeria’s GDP and accounts for 86.3 percent of jobs (59.6million jobs in 2017), according to a report by the National Bureau of Statistics (NBS) and the SMEDAN. “To many of the small businesses, daily cash flow is their lifeblood. Now, they are confined to their homes and they are not in business due to the lockdown,” he further said. He advocated for the provision of facilities for small businesses, including equipment and funding to aid the PPE production. @Businessdayng

Millions of workers will not return to their jobs after the pandemic, with unemployment peaking at 23 percent before the pandemic. The World Bank said in a 2015 report that 40 to 50 million additional jobs were needed in Nigeria between then and 2030 to reduce poverty and boost inclusive growth. Many MSMEs will be stressed by the time the coronavirus is over. Ike Ibeabuchi, chief executive of a small-scale manufacturing outfit in Enugu and Abuja, said the year is lost for many small and medium businesses, urging the government to aupport MSMEs to enable them to produce face masks, PPEs and other materials needed for the control of coronavirus spread. “Even after the pandemic and lockdowns, the consumers will be so poor that they can’t buy, and firms won’t be able to raise prices, even though the situation warrants that, he said.

Monday 20 April 2020

BUSINESS DAY

Start-Up Digest

Start-ups must go digital, diversify to succeed in post-coronavirus economy — Fashanu Mary Fashanu is a business development consultant and coach with over a decade experience in creating strategy for start-ups, corporate organisations and public institutions. She is the founder of MaryFash Limited, a leading consultancy operating from Manchester, United Kingdom, with specialty in value chain, change management and business strategy. She has cofounded a number of companies including Isoko Y’Afrika (African Market), a media, publishing & research outfit, and Vendii, an ecommerce platform that connects high-end event vendors with individual event planners. In this interview with Odinaka Anudu, she says start-ups must have digital presence and build audience to succeed in the post-Covid-10 economy. Coronavirus has exposed a lot of start-ups to inevitable failure. What should start-ups do post-coronavirus to stay afloat? or start-ups to be able to stay afloat post-Covid-19, they should consider going digital. It is not enough to be offline as business anymore. You need to have online presence. They also need to build audience. There are different strategies to use to build your audience. Start-ups need to be able to collate audience information and build a mailing list. When you have a mailing list, you can still reach out to them, introducing your business products/ services again and keeping the relationship going. Also, it is important to diversify service/product offering. For example, you are a fitness instructor and due to social distancing, you are unable to meet up with your clients physically for their sessions. You can create an online session on IG LIVE, YouTube or Zoom and run fitness session. Add a virtual training or fitness session to your packages so that your clients can enjoy their session in the comfort of their homes. Offer something beyond your core product/service. I am a business coach for startups. I get paid to run business sessions with my clients. But I am not stopping there. I have courses available. I have eBooks available, and I have trainings. This is what I mean by diversification of service/ product offering.

business ideas/products. Investors need to know that they will get their money back. Also, you must be registered as investors need to know that you are legitimate. Again, be professional and prudent with funds. Know your numbers. Do you even know how much you need to make to break even? Do you know how many products you need to sell? Do you have a set price or you just sell to people based on who they are? Moreover, have a process and system in place. You need to be seen and known for someone that actually knows what they are doing and not someone that is all over the place. If you cannot manage your business process well, how can you manage someone else’s funds? Similarly, have book keeping experience:

Generally, why do startups and small businesses fail within the first three years in Nigeria? One is lack of growth mindset. They are set in their ways and focus more on their intelligence and talents and do not believe they

Mary Fashanu

need to put in effort. Another one is lack of proper planning. Starting and sustaining a business require proper planning from the beginning and along the way. Planning helps you to foresee certain situations and helps over them. When planning, you ask yourself ‘what if?’ This question opens up a whole lot of different scenarios that could happen to a business and if you plan well, you will be able to prepare yourself for dark days and you will be able to scale through because you had planned and prepared for it. Next is lack of right support system. You need the right set of people in your corner on your entrepreneurial journey— People that will support and encourage you and help you physically. But not having www.businessday.ng

the right people to counsel you the right way could me downfall as well. There is also loss of focus on what really matters. A lot of start-ups focus on their competitors and what they are doing. As a start-up, your focus should be Customer, Pain points and Solutions (CPS). Identify your ideal customers, identify their

pain points and then create solutions to fix those pain points. Also, why do you want to start a business? Your rationale will determine whether your business is sustainable or not. From your experience, what should start-ups do to attract investors? They need to have bankable

‘ Also, angel investors –individuals with surplus cash and a keen interest to invest in upcoming start-ups—can help. They also work in groups of networks to collectively screen the proposals before investing https://www.facebook.com/businessdayng

What mistakes should start-ups and small businesses avoid in their first one year? First is thinking they can do it alone. No, you cannot do it alone. That will only lead to fatigue and burn out. Two is spending unnecessarily. Ask yourself if you need what you are about to spend money on? Next is having a fixed mindset, and thinking you are the best in your industry and need no learning and improvement. How can start-ups raise funds to scale? What funding channels are available locally and globally? Self-funding/bootstrapping is an effective way of startup financing, especially when you are just starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can in@Businessdayng

vest from your own savings or can get your family and friends to contribute. Next is crowdfunding. This is where an entrepreneur puts up a detailed description of their business on a crowdfunding platform. They will mention the goals of the business, plans for making profit, how much funding they need and for what reasons. Consumers can read about the business and give money if they like the idea. Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Also, angel investors –individuals with surplus cash and a keen interest to invest in upcoming start-ups— can help. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital. Locally, you can source funding via YouWin Connect Nigeria, Tolu Elumelu Entrepreneurship Programme, Bank of Industry, Lagos State Entrepreneurs Trust Fund (LSETF) and more. Are there roles government can play to support start-ups and SMEs? The government can enact startup-friendly public policy. Local, state, and federal governments should at least discuss how the public sector could fill that earlyfunding gap. They need to have a dialogue between entrepreneurs and local government to better each other’s’ needs. Are there steps a start-up can take to become a large enterprise or conglomerate? They should put system in place, and think big. Research what it takes to be a large enterprise of conglomerate and implement the strategy.

Monday 20 April 2020

BUSINESS DAY

real sector watch

Covid-19 produces different outcomes for manufacturers Gbemi Faminu

oronavirus is producing different outcomes for manufacturers as some record gains while other incur losses. Food and beverage companies, which have been licensed to operate within the period, are happy to be in business, even though they have not been able to maximize the opportunity owing to lack of purchasing power of consumers who are mainly sitting at home. “Sales have been good, but not as much as you would want,” an operating manager of a food company based in Ikeja, Lagos, said. “Apart from low purchasing power of the consumers, we experience interruptions in terms of supply chain and logistics,” the manager said. Since the outbreak of the coronavirus pandemic, economies of countries have been hard hit. Nigeria is not an exception with lockdowns threatening thousands of firms and jobs. While pharmaceuticals and food firms are at work, others are uncertain about their future. Layo Bakare-Okeowo, chief executive officer of FAE Limited, said in a telephone interview that the impact of the pandemic in the company is huge. She said that the company is being forced to suspend operations till

further notice. “The impact is huge in the company and right now we don’t know how we want to achieve our projections for the year,” Bakare-Okeowo, whose company produces envelopes,said. “We hope it comes to an end soon so we can get our lives back, not just for the company but also for staff members who have dependents,” she further said. She explained that while she is still able to communicate with her foreign business partners, business transactions have been minimal especially as banks are not in full operation. Similarly, Joseph Onah,

CEO, Sparkles, which manufactures soaps, shampoos, and antiseptics, said he has been forced to stop operations because he has not been able to get raw materials for production and his staff members have not been able to get to the production factory. “Initially, when the pandemic started, we were still able to produce while employing precautionary measures,” he said. “ How ever, since the lockdown began, we have suspended operations. The lockdown extension will make it a month and that is bad for business,” he said. He noted that many of his

FrieslandCampina WAMCO donates N500m to halt Covid-19 spread

rieslandCampina WAMCO Niger ia plc, makers of Peak and Three Crowns brands of milk, has donated N500million as a contribution towards Nigeria’s COVID-19 intervention fund organised by the Private Sector Coalition Against COVID-19 (CACOVID). The donation, which is coming as part of FrieslandCampina WAMCO’s corporate social responsibility, follows the company’s recent donation of N100 million worth of Peak and Three Crowns milk products to support over 100,000 families in low-end communities and vulnerable groups who are at risk of compromising their nutritional needs. This

donation is in line with its purpose of providing better nutrition. Explaining the corporate gesture in Lagos April 16, Moyo Ajekigbe, chairman of the board of directors, FrieslandCampina WAMCO Nigeria PLC, said the novel coronavirus pandemic is a global disaster that has cost the world thousands of lives and threatens its economic well-being. “At FrieslandCampina WAMCO, we believe that everyone must come together to make a difference. If we all join hands with government and credible associations to provide substantial palliatives, critical medical supplies, and with the cooperation of every Nigerian through the adherence of www.businessday.ng

precautionary measures, we will defeat the COVID-19. Hence our donation of products and funds,” Ajekigbe said. On his part, Ben Langat, managing director, FrieslandCampina WAMCO, said, “As a company, we have made several donations to support meaningful initiatives in the fight against the COVID-19 pandemic; this indeed represents the confidence and care we have for Nigeria. As we encourage Nigerians to unite to defeat the COVID-19 pandemic and reach for their peak again, FrieslandCampina WAMCO Nigeria will continue to take responsible actions that ensure we make nourishing dairy nutrition accessible for Nigerians.”

distributors have sold out their stock and there will be a problem in meeting demand when the economy re-starts, as raw materials may not be available or their prices not affordable. A report by Africa’s Pulse titled ‘Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa’ says that the pandemic has taken a toll on human life and brought major disruptions to economic activity across the world. It says the impact of the unprecedented crisis on human life and the global economy reflects the speed and magnitude of the conta-

gion, greater global integration, and the major role that China plays in global supply chains, travel, and commodity markets, “At the global level, incoming data suggest that the economic disruption from the COVID-19 outbreak is extensive, and the global economy is falling into recession. Industrial production, investment, retail sales, and services production contracted sharply in China in 2020 Q1. Contractions of a similar magnitude are expected to follow in other countries, including the United States and the euro area, as localized outbreaks combined with strict con-

tainment measures weigh on activity.” It is well known that when China sneezes, the world catches cold. This is evident as the pandemic continues to expand from a health crisis to an economic, political and social crisis affecting commercial and business activities in the global economy. Akinloye Ayorinde, analyst at CSL Stockbrokers Limited, said the coronavirus, which has slowed down economic activities, will batter the MSMEs despite their significant contributions to economic growth, adding that suspended operations and low demand will result in a gloomy year for them. According to a 2017 report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), the number of MSMEs rose from 37million in 2013 to 41.5million in 2017. Micro enterprises were 41.47 million, constituting 99.8 percent of the total enterprises, while small and medium businesses were estimated at 73,081, which is 0.2 percent of the total. However, the repor t shows that the number of medium scale enterprises majorly constituting manufacturers dropped by 61 percent, from 4,670 in 2013 to 1,793 in 2017. MSMEs contribute 50 percent to the GDP and over 80 percent to employment.

Why we support 30,000 farmers — Guinness MD Odinaka Anudu

a ke r Ma g u n d a, managing director of Guinness Nigeria plc, has said his company supports over 30,000 smallholder farmers to enable them move from basic to more efficient and productive yields. In a recent interview with BusinessDay, Magunda said his firm has a team that works with a wide range of partners to provide technical services, farming knowledge, financing, insurance, processing and harvesting support for the farmers. The farmers supply major inputs such as sorghum to the brewer. “The team helps them to get high yielding seeds

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and to have confidence in financial matters so that when they get money, they can make better choices,” he said. “In our view, it is a contribution that is beyond buying seedlings. We assure them of the market for their produce. As you are aware, African farmers have issues with a reliable market. Therefore, being able to assure them of the market gives them confidence,” he explained. He said the policy direction of the Central Bank of Nigeria is going the right way, and the company supports it. “The governor is saying, ‘Lend more money to the sectors where there are real economic activities and where there is value to be @Businessdayng

created.’ The real economy is in the informal and smallscale sector—the man converting hides and skins into shoes or cotton into fabrics. That is where the money should be lent,” he noted. “When those people cannot access money, it becomes a problem. We like the policy direction of the CBN and we are waiting to see how that comes through the commercial banks.” He further said that infrastructure is critical to export, economic development and competitiveness of the manufacturing sector. “The infrastructure problems need to be dealt with to make us competitive. The help we need from government is to speed up incentives for exporters,” he further said.

Monday 20 April 2020

BUSINESS DAY

FEATURE

An overview of the economic impact of COVID-19 pandemic on Nigeria Joseph Nnanna

Introduction he novel Corona Virus or COVID-19 has infected more than 1.3million people globally. Perhaps for the first time in several decades, the world is witnessing a type of disease that does not discriminate based on age, gender or even race. The virus emanated from the Wuhan province of China and has since spread to every part of the world. The disease has been categorized as infectious and contagious by health experts. As a result, the World Health Organization (WHO) and Governments alike, have advised their citizens to practice good hygiene by washing their hands with soap and water or even alcoholbased hand sanitizer while keeping their nose and mouth covered with a mask. As the news continued to spread and more information was learned about the disease, governments all over the world led by the WHO, impressed on the populace to practice social distancing and the advice culminated in mass self-isolation and a grinding halt in economic activities. Governments all over the world commenced mandating all non-essential persons to remain in their respective homes. To be sure, this wise counsel if heeded, has the potential to reduce the spread of the disease and save lives in the process. Unfortunately, developing countries such as Nigeria already face immense pressure with lack of affordable housing for millions of Nigerians, a broken healthcare system with inadequate facilities to cater for the growing population, epileptic power supply among a host of other challenges. The purpose of the exposé is to examine the impact of the COVID-19 pandemic on the Nigerian economy in the short run and discuss some of the actions taken by the private sector and Government towards ending the pandemic and ushering people back to normalcy. Governments Response to the Pandemic Like other crises such as the Global Financial Crisis of 2008, governments responded through regulations, fiscal stimulus and monetary policy initiatives. For instance, in the United States, funds have been earmarked to reach every tax paying household in the range of $1,000 - $1,200 or so. The aim of this stimulus check is to spur aggregate demand and supply forces since businesses in every sector have been mandated to stop working. This implies countless job losses as was recently reported by the US Department of Labor; a total of 6 million claims were filed, the highest jobless claim yet! Other than stimulus checks to households, regulations such as the (Corona Virus Bill) are currently going through the legislature. On the monetary side, the Federal Reserve Bank has been unleashed! The Fed

has cut rates to 0% and launched a $700 billion quantitative easing program. In other parts of the Western world, the same techniques and strategies are being deployed to ensure maximum impact. In the Eurozone, the European Central Bank attempted to combine fiscal measures amongst its member countries, however, some countries felt the agreement did not go far enough. Consequently, there was a breakdown in negotiations sending the two major players in the region (Germany and France) into recession territory. To be sure, if Germany sneezes, virtually every country in the zone will catch a cold. On the other hand, in developing countries where liquidity is often constrained, the same instruments are being deployed in addition to using multiple approaches such as requesting for loans from Multilateral agencies such as the World Bank and the International Monetary Fund to augment developing country budgets to enable them to fight the pandemic and emerge much stronger. The Nigerian government has made it clear that households will receive a stipend during this period of great uncertainty. Although the intention is well meaning, like most countries globally, the mechanism for implementation might be slow to reach the citizens that are most at risk. Grace Under Pressure: The Nigerian Private Sector’s Response The response of the Nigerian private sector to the COVID-19 pandemic has been graciously large and beyond the normal boundaries of what corporate social responsibility is. For a section of the economy that will be inevitably worse off post-COVID-19 due to the loss in demand and decreased spending power, supply chain disruptions, job losses across the board and the general hard hitting effects of an economic shock such as the one COVID-19 will inwww.businessday.ng

duce, the private sector has rallied to the call and has donated billions of naira in cash, medical equipment and facilities. The tally currently stands at N15.325 billion with more pledges being made daily. This, under the auspices of the Private Sector Coalition Against COVID-19 (CACOVID) set up by the Central Bank of Nigeria (CBN) and Africa’s richest man, Aliko Dangote, aims to provide equipment, training, treatment, testing and isolation centers across the country. These contributions are also meant to be channelled to increasing capacity and services in the health sector across the country and creating more channels to disseminate information on safe habits during this period. Furthermore, the mainstay of the Nigerian economy, the oil and gas industry has also answered the rallying call and has donated N21 billion to the fight against COVID-19. This industry initiative coordinated by the Nigerian National Petroleum Corporation (NNPC) has also donated a 250-bed space facility and several ambulances to the government. This impressive show of kindness and the never-ending spate of donations is sure to help in the fight against COVID-19 in the country. However, questions of transparency and accountability are bound to arise as the average citizen wonders where these donations are going, what they are being spent on and who manages these funds. Yes, the CBN has set up a dedicated COVID-19 treasury single account (TSA) to collate all donations in one place, but what happens down the line? Do MSMEs Sink or Swim? Micro, Small and Medium Enterprises (MSMEs) face a challenge like no other during and after (supposing the pandemic is controlled, or a vaccine/ cure is discovered) the COVID-19 pandemic. MSMEs are especially prone to economic shocks due to their relatively low savings capacity and will have to sink or swim in the

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current climate of pandemic induced economic shock and artificial (but necessary) restrictions on the movement of goods and people. A majority of MSMEs depend to a large extent on the free movement of goods and people to keep their supply chains and ultimately their businesses running profitably. These same MSMEs are enslaved to their daily cash flow transactions i.e. they have virtually no savings as 90% of their income is plowed back into the business as re-invested capital, labor costs and operating expenses. To be sure, when an economic shock induced by a global health pandemic such as the one we are currently experiencing hits MSMEs, they are left to fight for their survival. They either swim with the current economic tide and adapt their businesses to the realities on ground or sink under the weight of reduced orders/demand, increased cost of inputs and a non-enabling environment where a huge chunk of your operating expense is channeled towards providing electricity supply. Perhaps the most at risk MSMEs are those that operate businesses that deal in perishables; the farmer who is unable to transport his produce to a neighboring state, the fresh fruits and vegetables seller who depends on daily turnover, the food vendor who caters to workers in nearby office blocks, and the restaurant owner who cant get any customers due to the restrictions in movement and has to suddenly invest scarce resources into an impromptu online order and delivery service. These are the kind of MSMEs that will be hit hard and will ultimately sink if this pandemic induced economic shock persists and no helping hand is offered to aid them swim above the waters of low demand, high input costs, huge operating expenses and a movement lockdown that is by all means simultaneously draconian and life-saving. To help alleviate some of the threats faced by MSMEs during this period, the Central Bank @Businessdayng

of Nigeria (CBN) has intervened with a N50 billion targeted credit facility that aims to help households and MSMEs that have been particularity hard hit. While the targeted credit facility with a single digit interest rate of 5% is applaudable, many MSMEs already struggle with the burdens of loans taken from family networks, cooperatives, micro-finance and commercial banks, and may not harken to this intervention fund. What at-risk MSMEs need is a lightening of the load, some liquidity relief; a moratorium on loan repayments, complete or partial debt relief for some hard hit MSMEs, reduced rates on already existing loans, innovative means of financing especially those accessible through the internet and mobile phones, increased access to working capital loans at concessional terms, and grants to enable them meet short-term obligations during this trying period. Some of these measures have already been implemented in other parts of the world where MSMEs are not as financially excluded as they are here in Nigeria. However, this line of action must not be seen as a way to make profit for concerned institutions but as a way to support the economy in trying times, spur the wheels of economic growth and create sustainable development in a climate of uncertainty, shock and upheaval. Concluding Remarks There is no gainsaying that MSMEs are the backbone of any economy globally. This theme has been echoed all over the world! The time is now to step up and do what we all know is the appropriate course of action. Please let’s all SUPPORT MSMEs NOW! Simply put, this segment of the economy is the largest and believe it or not, they are one of the highest employers of labor in the country. Consider this, if the MSME segment of the economy collapses, in other words, say, 25% of MSME’s cannot recover from the COVID-19 pandemic, then we are inches away from perpetual social and perhaps economic unrest due to a spike in the general unemployment levels especially among the youth.

Prof. Joseph Nnanna is Chief Economist, Development Bank of Nigeria

Monday 20 April 2020

BUSINESS DAY

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Monday 20 April 2020

BUSINESS DAY

news

OPEC tells IMF/World Bank it is committed to oil markets stability for mutual benefits Olusola Bello

PEC has reaffirmed its long-standing commitment to supporting oil market stability for the mutual benefit of consuming and producing nations, thus contributing significantly to the health of the global economy. It reiterates its commitment to spearhead the joint efforts in re-establishing healthy oil market fundamentals and restoring balance to the oil market in support of the global economy. The organisation’s secretarygeneral, Mohammad Sanusi Barkindo, made this declaration at a meeting Thursday with International Monetary and Financial

Committee (IMFC) and also the meeting of Ministers and Governors in Washington DC, United States of America. He said the historic success of the Declaration of Cooperation between oil producers and other stakeholders had underscored the Organisation’s leadership in ensuring a stable and constructive environment in which future energy requirements could be met. Given the current global crisis brought on by the COVID-19 pandemic, the need for international coordination has become ever more apparent, he said. According to Barkindo, instead of the expected pick-up in activity in 2020, the global economy and, consequently, the global oil market are experiencing one of

the most severe crises in recent history, caused by the COVID-19 pandemic. “Countries around the world have virtually shut down, imposing travel restrictions and mandating social-distancing measures in an effort to contain the pandemic. “These measures have not only severely affected global economic growth; they have also caused a historic demand shock in the oil market, which has led to extreme volatility in oil prices. Concerns about this grave oil market imbalance, which could lead to a large build in global oil stocks in coming months, led to oil prices dropping significantly in late March to reach the lowest levels in nearly 18 years. Oil prices lost about two-thirds of their

value over 1Q20,” he said. In view of the current market conditions and the massive oil demand destruction so far, comprehensive international cooperation is called for to stabilise the global oil market and prevent extensive and lasting damage to the oil industry, he said. “Following global economic growth of 2.9% in 2019, the world economy is forecast to face a severe recession in 2020, declining by 1.1%. Despite slight signs of improvement at the beginning of the year, expectations for global economic growth were burdened by the carry-over of weak 4Q19 data in several key economies, which has been significantly worsened by the strong impact of the COVID-19 pandemic.”

Savannah Petroleum changes name to Savannah Energy OLUSOLA BELLO

avannah Petroleum plc, the British independent oil and gas company focused around activities in Nigeria and Niger, has changed its name to Savannah Energy plc. “The name change to Savannah Energy is reflective of the asset portfolio and business model development that we have seen over the course of recent years,” Andrew Knott, CEO of Savannah Energy, said.

“Savannah is now a major supplier of gas for domestic power projects in Nigeria and we expect to be able to strongly grow this business over the course of the coming years in a similar manner to our plans for our business in Niger,” he said.” The change of name reflects the company’s increasingly diversified asset portfolio. Savannah is now a leading energy producer in Nigeria and, via its controlling interest in the Accugas midstream business, the

company currently provides gas to power stations accounting for over 10% of Nigeria’s power generation capacity and operates one of the largest privatelyowned gas transportation and distribution system in sub-Saharan Africa. In Niger, Savannah is focused on developing its flagship assets in the prolific Agadem Rift Basin, with plans to deliver first oil in the near term. Trading in the company’s shares on AIM will

commence under the new name Savannah Energy and the company’s ticker will change to ‘SAVE’ with effect from 8am Monday, April 20, 2020. The company’s International Securities Identification Number (ISIN) and The stock exchange daily official list (SEDOL) will remain unchanged.

How government can aid OPS avert job losses after COVID-19, lockdown – NECA …says business continuity trust fund inevitable JOSHUA BASSEY

he Organised Private Sector (OPS) through the Nigeria Employers’ Consultative Association (NECA), the umbrella organisation of employers in the private sector, has pointed the way to avert job losses that would likely trail the current COVID-19 lockdown that has shut economic activity. Timothy Olawale, director general, NECA, in an interview with BusinessDay on Friday, said government at both federal and state levels would need to take specific measures in aid of businesses if jobs are to be retained by enterprises who would be struggling to regain their rhythm in the aftermath of the pandemic. “While it’s desirable to keep jobs, government must, however, take deliberate steps to support businesses in order to avoid job losses,” said Olawale. “Specific palliatives such as suspension of tax and levies payments for six months, support in payment of salaries, creation of Business Continuity Trust Fund (BCTF) to aid recovery after the pandemic and other similar initiatives will help businesses to remain competitive,” he said. Olawale said there would be need to create what he called ‘special intervention

NSC directs shipping firms to suspend, refund demurrage charges over lockdown AMAKA ANAGOR-EWUZIE

h e Ni g e r i a n S h i p pers’ Council (NSC) has directed shipping companies to suspend the collection of demurrage charges on cargo that was discharged at port terminals during the period of COVID-19 lockdown with effect from March 30, 2020. Demurrage charge is a fee collected by shipping companies from cargo owners for the inability to take delivery of their containers as and when due. The Council also directed shipping firms to refund

already collected demurrage charges during this period to the consignee or his authorised agent. According to a statement signed by Hassan Bello, executive secretary of NSC, and was sent to BusinessDay at the weekend, the suspension of demurrage during this period, would serve as an incentive for owners of cargo to accelerate the process of taking delivery of their cargo during the lockdown. “During the daily monitoring activities to ensure that seaports run efficiently and smoothly within the present circumstances, the

Council observed that some shippers, through no fault of theirs, were unable to take delivery of their cargo because of lack of public transportation, inadequate banking services and limited service providers due to reduced workforce and among others,” Bello said. He therefore warned that suspension of demurrage charges should not be used as an excuse to delay or abandon cargo at the ports, adding that erring shippers would be sanctioned in addition to having to pay the demurrage due on their cargoes.

PENGASSAN wants NCDC to capture offshore oil workers in Covid-19 test protocol Joshua Bassey

... suspends planned industrial action

crude oil production in protest against the arrest and detention of 22 Exxon Mobil workers by the government of Rivers State. “We also call on the Federal Ministry of Health and NCDC to immediately adjust its Covid-19 testing protocol to include all offshore-going workers. “This will prevent possible incidence of Covid-19 on oil installations with its grave consequences and eliminate need for 14-day self-isolation before travelling offshore with its attendant huge

etroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has demanded the Federal Ministry of Health and Nigerian Centre for Disease Control (NCDC) to immediately capture offshore oil workers in the Covid-19 testing protocol to prevent the spread of the virus on oil installations and repeated harassment of workers. The demand comes as the union announced the suspension of its earlier plan to disrupt

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cost implications on organisations and psychological effect on workers,” it said. The decision to stand down the planned action followed the release on Sunday of the detained workers by Governor of Rivers State, Nyesom Wike. The union had issued a directive to members to suspend all oil production and maintenance services from midnight of Sunday, April 19 in protest against the continued detention of Exxon Mobil staff in Rivers State. https://www.facebook.com/businessdayng

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funds’ at the national level to aid quick recovery, warning that “the longer the lockdown, the higher the probability of job losses”. O l aw a l e, w h o h a d o n Wednesday galvanised chief executive officers (CEOs) of businesses for a virtual meeting with Babajide Sanwo-Olu, governor of Lagos, said the OPS was expecting that critical decisions reached at the meeting would be fully implemented by the government. “Our main expectation is the implementation of all the decisions reached during the meeting, especially on support to businesses in Lagos State, engagement with his (SanwoOlu) colleagues in the Nigeria Governors’ Forum and the step-up of security to protect lives and property,” he said. The DG noted that it was important that the state government continues to engage and collaborate with NECA to facilitate continued supply of essential goods and ultimately, gradual return of economic activities in the shortest possible time. He, however, pointed to other areas where the state government can still be of help to businesses, including but not limited to tax waivers, relief in payment of some statutory charges and levies for period of three-six months.

Monday 20 April 2020

BUSINESS DAY

Insight

COVID-19: Turning adversity into opportunity at the sub-national level Continued from page back page government aid programmes. This should require beneficiaries to use basic electronic channels, which will not only encourage a growth in national identification, but also help to deepen financial inclusion. We have seen the importance of the National Social Register, which contains 2.6 million poor and vulnerable households, and now provides cash transfers of N5,000 per month to benefitting families. At the Governors’ Forum, we are working with the Ministry of Communications and Digital Economy, and service providers to mine poverty data and improve the Social Register. The UUBI will deepen the impact of these and other complementary programmes like the Homegrown School Feeding and Special Public Works Programmes to ensure that as we focus on rebuilding the economy, our poorest and most vulnerable are

not left behind. There is an immediate opportunity to support our businesses, particularly SMEs, by asking financial institutions to suspend loan repayments for at least six months, for which the Central Bank has already taken some commendable steps. Subsequently, the Central Bank, by modifying the conditions for existing loan guarantees, can encourage financial institutions to create new loans for small businesses recovering from the economic slowdown. In order

to boost consumption, government can also allow employees who have lost their jobs to access a portion of their pension contributions earlier than the period stipulated in the Pension Reform Act. There is no national or subnational plan that will not depend on the security of lives and property to succeed. By focusing on job creation and poverty reduction, we will reduce the lack of opportunity, which remains a big incentive for crime. However, for those who still insist on

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There is no national or subnational plan that will not depend on the security of lives and property to succeed. By focusing on job creation and poverty reduction, we will reduce the lack of opportunity, which remains a big incentive for crime. However, for those who still insist on criminality, we must be ready to tackle them…

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criminality, we must be ready to tackle them with well-trained, equipped and appropriately remunerated security agencies. As state governments, we recognise the importance of improving our collaboration to ensure an aligned national agenda. These collaborations include regional collaboration among states within the same geo-political areas; a national collaboration among all states, under the auspices of the Nigerian Governors Forum, and stronger collaboration between states and the federal government, hence our advocacy for a joined up national strategy. In future, we will look at existing programmes that require both federal and state government participation, and seek to optimise them. For example, reviewing the law undergirding the Universal Basic Education programme from a counterpart funded programme to a Programme for Results (PfR)

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approach, will shift the requirement to access the federally managed fund from an ability to match the FGN’s contribution, to a reward for meeting agreed milestones in basic education. This is only one example of what can be done, if as states, we provide the federal government with on-the-ground guidance on how to deliver better solutions to our people. In conclusion, as we battle a pandemic that has no appreciation of tribe, religion, or political affiliation, we only require bold ideas, but also the conviction to press ahead with good decisions, and the courage to jettison bad ones that impede our progress. As Jawaharlal Nehru famously said, “crises and deadlocks when they occur have at least this advantage, that they force us to think.”

Kayode Fayemi, the governor of Ekiti State and chairman of the Nigeria Governors’ Forum, writes from Ado-Ekiti, Nigeria.

Monday 20 April 2020

BUSINESS DAY

news Searching for Nigeria’s Next Chief of... Continued from page 1

L-R: Abdulfatai Isa, area sales manager, FMN; Fatai Sobande, production manager, FMN, and Mohammed Garba, commissioner for information, Kano State, at the official handover of food products in Kano, donated by Flour Mills of Nigeria (FMN), as part of its commitment to mitigate impact of the lockdown instituted to contain the spread of coronavirus.

Eisenhower, who was Su-

Here’s what Abba Kyari’s death means for Nigerian economy LOLADE AKINMURELE & SEGUN ADAMS

he death of Abba Kyari, President Muhammadu’s Buhari’s chief of staff, who contracted the deadly coronavirus on an official trip in March to negotiate a power deal with officials of German electric company Siemens AG – meant to take a fresh stab at resolving Nigeria’s many struggles to keep the lights on – could affect more than the political dynamics in the country. Late Kyari was one of the most influential persons in Nigeria by virtue of his office as chief of staff. Sources close to the presidency say Kyari was one of President Buhari’s most trusted advisers. He was described as the de facto head of the government because in a country where the presidency holds an inordinate amount of centralised power and government funds, deciding who has access to the president accords immense power and influence. Kyari’s passing is a major blow to the Buhari presidency, particularly as it leaves a gaping hole in the administration of the country at a time when it is faced with the double whammy of the coronavirus outbreak and collapse in crude oil receipts. Both factors are likely to tip Nigeria’s economy into its worst recession in 30 years, according to the International Monetary Fund (IMF). Kyari’s death could potentially throw a spanner in the Siemens power deal, even

though some expect the deal to be followed through by Saleh Mamman, minister of power. The deal is crucial for the economy as it is supposed to result in a doubling of Nigeria’s electricity generation and raise distribution capacity three-fold to 11,000MW by 2023. The worry, however, is that the deal may be hijacked by people who wield a stronger influence than Mamman with Kyari now out of the way. The enthusiasm with which Kyari pushed for the deal, even risking his life by travelling to Germany despite the rising spread of COVID-19, is perhaps a sign of just how much seeing the deal through meant to him. Kyari’s death could also affect the speed of decisionmaking within the highest levels of government, where the shots are made for the economy in dire need of reforms. That would be particularly telling at a time when Nigeria is faced with unprecedented economic challenges that would require the best hands to fix. Kyari was considered the brains behind the Buhari administration and was described as an intellectual by those he came in contact with. Kyari, who had worked at the likes of Unilever Nigeria plc and Exxon Mobil Corp.’s Nigerian unit, held degrees in law and sociology from the University of Cambridge and University of Warwick. His demise could spell the end to his largely socialist ideas which economists argue have held back the economy, but it could also leave a vacuum in the econwww.businessday.ng

omy too big to go unnoticed. With a new appointment expected to follow, Kyari’s strong personality and proactiveness may perhaps be what the economy misses the most with President Buhari in charge. “With Kyari’s death, Nigeria is now truly leaderless,” said Farooq Kperogi, a political commentator and professor of journalism at Kennesaw State University. “Sometime in the midpoint of last year, a northern retired general told me Abba Kyari said in private that people who vilify him don’t realise that without him Nigeria would be rudderless and descend into chaos. Now, he is gone, and the chaos he talked about would start in the coming days,” Kperogi said via his Twitter handle Saturday. Calling the shots Late Kyari, who was appointed in 2015, was a trusted figure by Buhari. In August last year, the president ordered all correspondence from then-newly appointed ministers to be passed through Kyari. All submissions for the president’s attention or meeting requests were to be channelled through the chief of staff, Kyari, while all Federal Executive Council matters be coordinated through the secretary to the government of the federation. Kyari had the president’s ear and that power ensured he kept all the ministers and other staff in check. They all had to work with him to succeed. Kyari was appointed by the president to the board of the Nigerian National Petroleum Cooperation (NNPC),

which experts believe needs to be broken into smaller companies in a reform to improve oil sector governance and market framework. Kyari, who issued a query to Babatunde Fowler, former Federal Inland Revenue Service (FIRS) boss, over revenue shortfall last year was also in a leaked letter criticised by Babagana Monguno, national security adviser, over alleged interference on matters bordering on national security. There are news reports of Kyari’s interference in the Ministry of Health which limited the former minister Isaac Adewole’s ability to make critical procurements for the sector. Some analysts say the late chief of staff acted in accordance with the provisions of his office. Importantly, Kyari sat on top-level meetings and was in attendance at the Economic Advisory Council (EAC) meetings. Kyari was also part of key teams set up to advise on Nigeria’s course of action during the COVID-19 and after, e.g., the COVID-19 economic response team which includes the CBN governor, the finance minister and Vice President Yemi Osinbajo’s Economic Sustainability Committee. Political analysts say since Kyari was ill before his demise, plans to ensure continuity of the function of his office had already been put in place, especially with the availability of Boss Mustapha, secretary to the government of the federation. Time will tell just how much the economy shapes up to Kyari’s passing.

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preme Commander of the victorious Anglo-American military machine that overcame German forces in WW2. The greatest tribute to him is that every leader that professes to be effective has a chief of staff system in place. President Eisenhower arguably designed the job description of the modern day chief of staff. As a General leading military forces contributed by countries from almost every continent, Eisenhower learnt that what today we call “emotional intelligence” as much as technical competence is absolutely vital to welding together a capable, effective team. A Chief of Staff is therefore a gatekeeper, a quarterback, who ensures that the team operates smoothly from defence to attack. The Chief of Staff, by whatever name is called, is the position most heads of government fill once elected into office, sometimes before being formally sworn-in. They are also often the first to go, either when things go awry or when the pressure becomes physically and emotionally unbearable. Chiefs of Staff protect their principals, responsible first and only to the latter’s objectives. They protect him or her from undue influence, manage the flow of work and persons into and out of the executive office and serve as the eyes and ears of that leader. Anyone who takes the trouble to search on YouTube for the TV series, “The Gatekeepers” or read the book by Bradley Patterson, “The White House Staff”, will see in practice what we are trying to say here. President Muhammadu Buhari did not invent the office of Chief of Staff as it is known today but it served him brilliantly during military rule. From his tenure as Federal Commissioner (Minister) for Petroleum Resources in 1976-79, battling the Chadians and chasing them back to N’djamena in 1983, as Head of State in 1984-85 or as Chairman of the Petroleum Trust Fund in 1994 - 98, Buhari has always delegated authority to an explicitly trusted and able right-hand man who played the role of a Chief of Staff. Intelligent, very well read, capable, experienced and loyal, Abba Kyari had most of the skill sets for the role. President Buhari, who has said he appoints only those he knows, will not have a problem finding people with similar gifts. How much time it will take an overly deliberative Buhari to find that person is what we worry about. The President’s glacial approach to decision-making, his staunch statist stance on economic development coupled with Kyari’s over centralisation of power are the frailties that have challenged the pace and quality of governance in the past five years. Therefore, whoever is appointed as the next Chief of Staff to the President must get the job done differently. The qualities we have @Businessdayng

highlighted, particularly the staff or collegiate approach, is vital. The President cannot afford a Chief of Staff who appears to cuddle power tightly or adopt the style of a Byzantine Grand Vizier, as we have seen in the past. The President needs urgently a competent and trusted adviser familiar with domestic and foreign policy, an able manager that can arrest Aso Rock from grinding to a halt, and above all who can ensure the timely, competent and coordinated execution of the plethora of bold socioeconomic reforms Nigeria needs to survive the double onslaught of Covid-19 and the collapse of the oil market. Nigeria has had outstanding ChiefsofStaffinboththemilitary and civilian eras. Major-Generals Ekpo, Yar’Adua, Idiagbon, and Abdullahi Mohammed were quiet and unsung Chiefs of Staff in the governments of Generals Gowon, Obasanjo, Buhari himself and civilian President Obasanjo. They helped their bosses run effective governments that set clear goals, pulled the personnel and resources together, ensured the group got the message and drove hard but with discipline for those goals, whatever they were. The planting season is here and we need to protect our farmers from the ravages of COVID-19, even as we desperately seek to ramp up our anaemic healthcare system to deal with the disease. The war in the Northeast, security flashpoints heating up across the country, deeply worrisome socio-economic indicators, restless neighbours on our national borders. All complicated by the paramount importance of developing and executing plans and programmes for a post-Covid 19 recovery amidst an economic recession (perhaps even a depression) that we know will come. Nigeria’s domestic and foreign policy challenges can only be met by a team led by President Buhari assisted by Vice-President Osinbajo, with an excellent quarterback or midfielder, a brilliant Chief of Staff to the President. Theprimaryresponsibilityof the chief of staff is to ensure that the government has competent and well-resourced teams that canfunctionoptimallytodeliver the president’s agenda. Every other thing is secondary. The job of Chief of Staff is not to work for the lily-livered. It is not for one who is less than well educated, versed in both domestic and foreign policy issues, quick-thinking, teambuilding and –playing and of impeccable personal integrity. It is also not work for a Mr. Congeniality (regrettably we are certain the appointee will be male). The work demands focus, a measure of ruthlessness, always seeing the big picture and the corporate interest but never interjecting oneself into that picture. We wish President Buhari searches for his next Chief of Staff through this lens. We wish him well and pray fervently for him as he does so.

Monday 20 April 2020

Harvard Business Review

BUSINESS DAY

MondayMorning

Fighting the coronavirus with big data Julie Shah and Neel Shah

ocial distancing, sheltering in place and other mitigation efforts are critical to blunting the impact of the current pandemic, despite the havoc they wreak on daily routines and markets. However, we know that the sooner we can return to safely congregating, the better. How can we get there? We need to put as much data and computing power into the problem as we can, and now. The first step is getting the basics in order. We need rapid and available testing capabilities. We also need adequate supplies of personal protective equipment for health care workers and others on the front lines, along with ventilators and other lifesaving treatments. The next step is developing smart prevention capabilities. At the Massachusetts Institute of Technology, efforts are underway to use existing mobile technologies to quickly develop privacypreserving contact tracing. When someone tests positive for COVID-19, health care providers could download the names of those who

were in proximity to the infected individual during the relevant time frame without accessing their comings and goings. With that anchoring information, computer scientists could then integrate data from a broad swath of sources to forecast precise community-level infection risks. That data would allow more dynamic risk assessments, sufficiently precise

and current to allow us to decide not whether schools and workplaces should be open but which ones should be open, and for how long. Such targeted isolation strategies would create challenges, too. Starting and stopping operations on the basis of current risk is not trivial; it can wreak havoc on supply chains and daily routines. Adapting such measures to fight the pandemic might

teach us that physical presence is not always as necessary as we had thought. Remote work may simply become part of how we think about work. Here, too, computing could allow us to finely weigh the risks and benefits of having people work alongside one another. We need to not only soften the blow of curtailed timelines and busted budgets but fundamentally redesign the

way essential services are delivered and preserve the functions of society. We have the people. We have the data. We have the computational force. We need to deploy them now.

(Julie Shah is an associate dean at the MIT Schwarzman College of Computing. Neel Shah is a physician and public health researcher.)

Presenting to management? Be prepared for the tough questions the end. Your management likely wants to know the current status, not all the steps you took to arrive at it. Provide more details only if asked. — ADHERE TO A WORD DIET: In charged meetings, be up front but say less. If you tend to ramble when anxious, discipline yourself to stick to three to five sentences. No matter your level of smarts and preparation, it’s unlikely you’ll escape executive presentations without a few stumping questions. These steps can help you react calmly and professionally in the moment.

Sabina Nawaz

“I

don’t understand. How can your numbers be so off?” What would you do if faced with a question like this from upper management at a review meeting? You know how to tackle live questions because you can fall back on your knowledge and experience. But how do you field the tough questions from management — the ones you don’t have an answer to? Here are four ways to handle what you don’t know: — TAKE YOUR TIME: Don’t be too quick to respond after an executive grills you. Be sure you understand the question. Pause to consider your first words. If they’re strong, you and your

questioners will all feel more confident as you continue. Pausing before you speak will also allow for better verbal “posture.” www.businessday.ng

— HAVE AN ABUNDANCE MINDSET: You’re not about to be publicly humiliated or fired. Construct sentences to tell yourself the opposite of

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the fear-based ones flooding your mind. — PROVIDE THE BOTTOM LINE FIRST: Unlike a murder mystery, start with @Businessdayng

(Sabina Nawaz is a global CEO coach and leadership keynote speaker.)

Monday 20 April 2020

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Harbin outbreak threatens China’s coronavirus recovery

Cluster of cases near Russian border leads to fresh lockdowns and new temporary hospital Christian Shepherd

cluster of coronavirus cases in China’s northeastern city of Harbin has forced authorities to impose new lockdowns, shattering the country’s run of weeks of reporting near zero domestic transmissions. China first reported zero new local infections in mid-March and only a few cases were disclosed in subsequent weeks. In the past week, however, dozens of transmissions within the country have been confirmed, the vast majority in Heilongjiang province, which borders Russia. As China attempts to reboot its economy, Huang Yanzhong, a senior fellow for global health at the Council on Foreign Relations, said that the outbreak in Harbin illustrates the present and unpredictable risk of a resurgence. “A second wave attack could be coming in a way that authorities don’t expect,” he said. More lockdowns elsewhere, just as it closed temporary hospitals in Wuhan, would hamper the country’s recovery. As of Sunday, including nonsymptomatic cases, Heilongjiang said it had 61 active cases of Co-

vid-19 from local transmission, 54 of which were in Harbin, the provincial capital. China’s health commission on Saturday said it recorded doubledigit domestic infections for four days in a row. By Sunday, the country had disclosed 1,041 active cases in total, most of which are imported, while it has revealed 82,725

cases since the outbreak began. A 22-year-old university student, who returned to Harbin from the US, has been identified by authorities as the source of more than 40 new infections. She was quarantined at home rather than in a central quarantine facility. Coronavirus spread through the student’s local community, infect-

ing her 87-year-old neighbour, who had a stroke and received treatment in two of the city’s largest and busiest hospitals, where at least 26 other people were infected. The infections in Harbin set off a flurry of activity in the city, with long lines outside major hospitals and some central areas being once

again placed under lockdown, according to videos shared online and local media reports. On Saturday, 18 Harbin officials were given a political demerit, a black mark in Communist party personnel files that can impact career prospects, and accused of “wishful thinking” for failing to prevent the new outbreak. Heilongjiang’s hospitals have been further stretched by hundreds of imported cases from Chinese citizens who entered the country from Siberia via the bordern town of Suifenhe, which now has more than 400 confirmed cases. The influx has made Russia — which has reported a week of record rises in infections and now has more than 35,000 in total — China’s largest source of imported cases. Three planeloads of medical equipment were flown from Wuhan to Suifenhe this week, where a makeshift quarantine hospital with 600 beds has been built. Chinese authorities closed the land border with Russia on April 8, the same day travel restrictions were officially lifted in Wuhan, the city where the coronavirus pandemic began. Wuhan has since closed some of its temporary hospitals.

US business owners frustrated by rescue scheme The $350bn PPP programme disappointed thousands when it ran out of cash last week

Laura Noonan

rian Scheinblum, owner of a boutique hotel and restaurant in Florida’s South Beach, filed his application for some of the government’s $350bn in small business rescue funds as soon as his bank began accepting them on April 6. This weekend, he is one of the hundreds of thousands of small business owners across America anxiously watching as Congress haggles over extending a rescue scheme that left him empty-handed while giving millions to bigger businesses. “Any time there’s a programme like this . . . there’s going to be some people that take advantage,” says Mr Scheinblum who employs 90 between South Beach’s Majestic Hotel and a restaurant on the same property. “There are some people who said, ‘look, I’m going to take this money because I can get it’. Others, they are doing it for the right reason. Under these circumstances, I don’t blame anyone.” I don’t understand how some tiny bank put through an application for me that quickly, and my primary bank that has billions and billions of dollars of resources couldn’t Peter Norman, Bellevue Health-

care As negotiations over a $250bn extension to the Paycheck Protection Program (PPP) continue into the weekend, businesses have been caught in the crossfire of a rescue scheme that has been dogged by delays, technical hitches and controversy over who is eligible. On Friday it emerged that burger chain Shake Shack was among the scheme’s beneficiaries, as was Ruth’s Chris Steakhouse, which got $20m with help from JPMorgan Chase, America’s biggest bank. “I’m upset because when I came to this country from Colombia I picked a big bank like Chase because I trusted their brand and now they have let me down,” said Andres Diaz, co-owner of Latin American restaurant and dance club Her Name Was Carmen in SoHo, New York. Mr Diaz said that on April 7, his banker told him Chase had run out of funds within minutes of the programme opening. “I don’t have a problem with Shake Shack, but they have plenty of ways to tap liquidity. I don’t,” he added. Shake Shack did not reply to requests for comment. Chase said it could not comment on individual cases, but added that the bank did not run out of funds on April 3, the day it opened the scheme. www.businessday.ng

In a memo to clients on Saturday, business banking head Jennifer Roberts said she understood “that it’s been frustrating not to have been funded or to know where your application is in the process”. Alicia Galante, a real estate broker in Fort Myers who approached three or four banks unsuccessfully for support as an independent contractor, said the fact that large companies could apply left the PPP open to abuse. “What’s to stop any company from beefing up their payroll during this time, especially to the execs, that amount gets forgiven and the balance becomes a (low cost) loan?” she said. Ms Galante’s attempts to apply were frustrated by requests for documents she did not have. “It’s very sad because the poor little business guy who put his life into a business isn’t going to make it,” she said, adding that contractors like her “pay taxes like everyone else too”. Mr Scheinblum is more concerned about how his application was handled and how the scheme was designed than he is about losing out while bigger businesses got multimillion-dollar cheques. His restaurant and hotel have been shuttered since late March, in line with local social distancing

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rules. The PPP scheme requires him to rehire workers and spend most of any money he receives paying them. “So I have to give people a pay cheque, but I haven’t actually got any work for them because they can’t work, how does that help anybody?” Mr Scheinblum said, adding that he spends much more on property than on staff since real estate is so expensive in Miami. The hotelier says that for more than a week, all he got from his bank was bulk messages saying it had received a lot of applications and was processing them. On Thursday, he was asked for more information. He supplied it quickly. About an hour later, after the Small Business Administration announced that the programme’s $349bn had been exhausted, Mr Schleinblum got a bulk message saying “that the funds had run out”. “I’m very disappointed,” he said, adding that he thought he had to apply through HSBC since they handled his payroll and companies had to provide details of their payroll as part of their applications for the rescue loans. HSBC did not reply to requests for comment. Peter Norman, chief executive of Seattle medical equipment provider Bellevue Healthcare, spent the first 10 days of the PPP on a fruitless at@Businessdayng

tempt to get a loan from Wells Fargo, who he has banked with for more than 20 years. Coronavirus business update How is coronavirus taking its toll on markets, business, and our everyday lives and workplaces? Stay briefed with our coronavirus newsletter. Sign up here A business contact then recommended Mr Norman approach a small community bank that he had never heard of. He approached them at 5pm on Monday evening, got approved for his loan on Tuesday morning, and got his money the following night. “It’s important for people to know that they were not alone [being locked out by big banks], in that this process was not a fair or inclusive process at all,” said Mr Norman. “I don’t understand how some tiny bank put through an application for me that quickly, and my primary bank that has billions and billions of dollars of resources couldn’t. ” In her memo on Saturday, Ms Roberts detailed the “extraordinarily manual and complex” process to set up the scheme, and said that even with 2,000 people working in 24-hour shifts Chase was left with “hundreds of thousands” of clients in the queue after the funding ran dry.

Monday 20 April 2020

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Emerging market debt burdens may be sorely understated Recent paper suggests overseas liabilities of EMs are greater than previously thought Jonathan Wheatley

or emerging economies, coronavirus struck first through the financial markets. Long before the numbers of cases and deaths in these countries began to spread alarm, many emerging markets experienced a sudden halt in foreign investment inflows. Overseas investors have taken $95bn out of EM stocks and bonds since late January, according to the Institute of International Finance, dwarfing the withdrawals that followed the onset of the global financial crisis in September 2008. As Covid-19 infections rise and fragile health systems struggle to cope, foreign investors may be low on the list of concerns for EM governments. But these outflows will have a big impact on the fiscal measures policymakers can bring to bear on the crisis. Emerging markets’ overseas liabilities, moreover, may be bigger than previously imagined. A paper published by Matteo Maggiori at Stanford and colleagues at Harvard, Chicago Booth and Columbia Business School suggests the true ownership of EM bonds by overseas investors is much greater than shown in standard data — in some countries, by many multiples. The paper also suggests that foreign holdings of shares issued by Chinese companies may be many times greater than the $160bn that shows up in US national accounts.

Of Brazil’s $59bn in reallocated bonds, $42bn were issued in tax havens such as the Cayman Islands © Getty Images/iStockphoto

Should US-China relations sour in the aftermath of the coronavirus crisis, these giant holdings could become a source of significant risk. Mr Maggiori and his colleagues question the normal practice of allocating securities in national accounts on the basis of the residency rather than the nationality of their issuer. It may make sense, for example, for a bond issued by a Brazilian subsidiary of Banco Santander to be added to the debt statistics of Brazil (the residency of its issuer) rather than Spain (the nationality of the issuer’s ultimate owner), because the bond’s proceeds are likely to be put to use in Brazil. But it makes much less sense for a bond issued by Petrobras Interna-

tional Finance Company, a Cayman Island subsidiary of the Brazilian oil group, to be added to the debt statistics of the Cayman Islands. Yet that is what happens in standard, residency-based financial statistics such as the US’s Treasury International Capital data (TIC) and the IMF’s Coordinated Portfolio Investment Survey (CPIS). Mr Maggiori says this results in a vast understatement of the investments by US, European and other international investors in emerging economies. So the academics developed an algorithm to reallocate the securities logged in the TIC and CPIS data according to nationality rather than residency. The results are startling. TIC data

show that US ownership of Brazilian bonds at the end of 2017 amounted to $8bn, based on the residency of issuers. But restated by nationality, the total rises to $68bn. For Chinese bonds, the total rises from $3bn to $55bn. Mr Maggiori says the results sound a warning as the coronavirus crisis threatens to tip emerging markets into a debt crisis. “If we are going to see a wave of corporate defaults, it’s a risk worth thinking about that a lot of issuance has taken place offshore,” he said. “[Our work] shows that exposures are quite large.” What is also striking is the role played by tax havens such as the Cayman Islands. In the TIC data, of

Brazil’s $59bn in reallocated bonds, $42bn were issued in tax havens. Of China’s $52bn, $44bn were issued in tax havens. The results also shine a light on the role of so-called variable interest equity structures in US investments in Chinese companies. VIEs allow US investors to hold shares in these companies, circumventing Chinese restrictions on foreign ownership of some operating businesses. But in these transactions what investors actually buy are shares in listed companies, generally resident in the Cayman Islands, that give them a claim on the profits of Chinese operating businesses. By reallocating such investments on the basis of nationality rather than residence, the paper shows that US “ownership” of Chinese companies at the end of 2017 was not $160bn, as shown in US national statistics, but $700bn. This puts it closer to the amount of Chinese ownership of US Treasuries, of about $1.1tn. This is significant because Chinese regulators are certainly aware of the smoke-and-mirrors act being carried out by VIEs. They could, should they wish, bring the practice to an end. Mr Maggiori is not suggesting they will. But he thinks the risk is worth noting. “You read a lot about the possibility of China dumping its US Treasuries but very little about the possibility of China imposing its own regulations. If we’re talking about one, we should certainly be talking about the other,” he said.

Argentina debt restructuring offer leaves investors cold Country could face a ninth default as coronavirus throws global economy into disarray Benedict Mander and Colby Smith

nvestors have recoiled at Argentina’s harsh debt restructuring offer on $83bn of foreign debt that many warned would lead to the country’s ninth default if the government refuses to improve its terms. The Latin American country’s economy has been hard hit by the coronavirus crisis, but it was unclear whether the leftist government’s attempt to avoid all debt obligations for the next three years and cut interest payments by 62 per cent represented a final offer, or just the beginning of tough negotiations. “If it is a take-it-or-leave-it offer, then there won’t be an agreement,” warned one international creditor close to the negotiations. Echoes of Argentina’s last major default in 2001 increased investors worries, as President Alberto Fernández appeared to be seeking to please voters at home while ignoring investors’ calls for a coherent plan for reviving an economy now in its third consecutive year of recession. The stakes for securing a deal have been heightened as Argen-

tina’s economy has little fiscal space to manoeuvre and is already battling high inflation as the pandemic throws the global economy into disarray. Without plans explaining how the government can repay a debt burden it insists is unsustainable — a claim that is backed by the IMF, Argentina’s largest creditor after lending the country $44bn since a currency crisis in 2018 — analysts say there is little incentive for them to sign a deal. “Argentina continues to seek maximum [debt] relief without articulating a credible plan for how the debt will be paid in the future. Money for nothing does not sell well even in the best of times,” said Walter Stoeppelwerth, chief investment officer at Portfolio Personal Inversiones, an investment firm in Buenos Aires. They will need to offer something better than that, especially if they think they need market access Jared Lou, William Blair Investment Management He argues that the government’s aggressive proposal “points to a ferocious negotiation that will only end in one of two outcomes: hard www.businessday.ng

default or Argentina sweetening the deal terms . . . When push comes to shove, Alberto Fernández will have to take a political decision to make a deal.” Sebastián Brown, Deutsche Bank’s chief economist for Latin America, described the “hardball” offer — which included a drastic reduction in interest rates to an average of just 2.3 per cent, compared to a current average of around 6.6 per cent — as “very unpalatable for creditors”. He predicted a hard default given that it will be “difficult” to reach a deal within the next 20 days, as the government wants. Jared Lou, a portfolio manager at William Blair Investment Management, described the terms as “garbage”. He warned against a repeat of Argentina’s restructuring experience following the 2001 default, seeing similarities between Thursday’s proposal and the offer made in 2005, which led to an acrimonious legal battle with bondholders that was not solved until 2016. “If they think that will fly again, forget it. They will need to offer something better than that, especially if they think they need market

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access,” said Mr Lou. He does still believe common ground can be found because of the damage to the economy from the coronavirus crisis, with many creditors open to accepting debt relief in the short term. “It is understandable that the coronavirus shock has probably increased the need for debt relief, but that needs to be reflected fairly,” said Michael Hugman, a portfolio manager at Investec Asset Management in London. He compares the “aggressive” reduction in coupons to levels used in some African countries that participated in the Heavily Indebted Poor Countries (HIPC) debt relief programme. “It is hard to argue that Argentina needs the same kind of treatment,” he said. The government published further details of its debt plan on Friday evening, presenting investors with the option of swapping their current bonds for a series of new debt instruments. Previously restructured bonds issued in 2005 and 2010 are included in the government’s offer as well as bonds issued since 2016. The older bonds require a higher percentage @Businessdayng

of investors to agree to any changes to the payment terms of the debt, meaning a deal may be harder to strike. Under the proposal, Argentina would not make any principal payments until 2026. The first interest payments would come in 2022, stepping up in size thereafter. While Mr Fernández has insisted that Argentina does not want to default, he also argues that the economy needs to be able to start growing again — with the IMF predicting a contraction of 5.7 per cent this year due to the impact of Covid-19 — before it can start repaying its debt. But a default could be both economically and politically costly for the government. “Economically, it is hard to see a default generating any benefits at all,” said Ignacio Labaqui, an analyst at Medley Global Advisors. Not only would a default exacerbate the country’s existing economic woes, including inflation of around 50 per cent and a currency that is perpetually prone to devaluations, but it would complicate access to international credit for Argentina’s private sector as well as the government.

Insight

BUSINESS DAY Monday 20 April 2020 www.businessday.ng

COVID-19: Turning adversity into opportunity at the sub-national level Kayode Fayemi

ever in our lifetime have we endured the kind of socioeconomic disruption the world is currently experiencing, as the novel coronavirus (COVID-19) ravages people, and continues to cause massive economic displacements across the globe. Since the virus was discovered, it has infected two million people, and caused over 131,000 confirmed deaths in 213 countries, areas or territories. Apart from the significant loss of lives, the virus is now likely to cause a contraction in the global economy. Nigeria is not insulated from the public health and economic crises. We have recorded 493 cases with 17 deaths, across 19 states and the Federal Capital Territory. Thanks to the proactive actions of the federal government, complemented by our efforts as state governments, and our heroic healthcare workers and resilient people, we have minimised the loss of life, albeit at a necessary but great cost to our economy and livelihoods. The pandemic will leave Nigeria facing a significant economic crisis, due to the rapid decline in oil prices, coupled with the necessary restriction on movement taking its toll on our economy. Our people, many of whom require daily activity to earn an income, are struggling to support their families. However, as we deal with the implications of this pandemic, we must remain resolute in the face of adversity, and chart a course for Nigeria to emerge stronger and more resilient in the aftermath of COVID-19. This crisis has taught us one big lesson, that we are only as strong as our weakest link. Globally, the virus has been particularly unkind to our senior citizens, and people with underlying health conditions. Economically, the restrictions put in by the federal and state governments have been tough on our more vulnerable people, leading to widespread concerns about job losses and food security. Even in the aftermath of this virus, many have suggested the world as we’ve known it will change permanently, and force a review of many existing business and even government models we took for granted. Nigeria must emerge from this crisis with a plan to create jobs, reduce poverty and put food on the table of its citizens. In providing jobs, we must attract the investment required to bridge our infrastructure deficit. While the National Sovereign

Investment Authority (NSIA) has shown what is possible with the progress of the LagosIbadan Expressway, Abuja-Kano Expressway and the Second Niger Bridge; and the Ministry of Transport has ensured the Lagos-Ibadan-Kano rail line is progressing, even during this challenging period, we need much more, and quickly too. Domestically, we must ensure that NSIA and its partners, including the Central Bank of Nigeria (CBN), National Pension Commission (PENCOM) and other stakeholders, implement a framework to ringfence regenerative infrastructure assets for private capital to invest. These investments will be led by domestic capital, and we expect the Nigerian pension industry, with assets under management in excess of N9 trillion, will certainly invest a portion of its assets in well-structured infrastructure projects, provided the structure gives the necessary comfort to guarantee both investments and returns. However, domestic capital will not be enough. We will require significant international capital, and with over $10 trillion

invested in assets with negative yields, Nigeria has an opportunity to attract these flows, if we ensure our exchange rate is reflective of market realities. If we successfully shift these projects to private investors, federal and state governments can focus their limited resources on critical investment in education, healthcare, security and other social protection needs. However, as we create the enabling environment for the economy to grow, we must ensure a skilled and healthy workforce is developed to benefit from these investments, and the expected adjustments to the global supply chain. We must optimise our population by preparing for the future of work. From early stage education, to technical and vocational training, and digital skills training, we should equip our young people with the skills needed to take jobs in the Fourth Industrial Revolution. This will require a comprehensive review of our education policy, but one that must be done with the private sector. We have seen the impact of companies like Lambda School in the United States, and closer to us, the likes of Andela,

‘‘

…as we battle a pandemic that has no appreciation of tribe, religion, or political affiliation, we only require bold ideas, but also the conviction to press ahead with good decisions, and the courage to jettison bad ones that impede our progress. As Jawaharlal Nehru famously said, “crises and deadlocks when they occur have at least this advantage, that they force us to think.

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Agriculture, the mainstay of our national and many subnational economies, has never been more important, especially as we seek to reduce hunger. COVID-19 has shown the importance of food security, and our ability to call on the nation’s food reserve at this time only validates the federal government’s decision to prioritise food production. who are providing people with the required skills to compete for jobs globally. These kinds of initiatives must now be implemented in partnership with our formal educational institutions at all levels. As state governments, we must complement the efforts of the federal government by making it cheaper and easier for the deployment of broadband infrastructure across our states, especially as this pandemic has taught us the importance of ensuring even the remotest locations have access to good quality internet services. Agriculture, the mainstay of our national and many subnational economies, has never been more important, especially as we seek to reduce hunger. COVID-19 has shown the im-

portance of food security, and our ability to call on the nation’s food reserve at this time only validates the federal government’s decision to prioritise food production. Our next set of interventions must focus on the following areas: a massive national land clearing programme to open new land banks for agriculture; farm roads that ensure the effective transportation of inputs to, and produce from farms; extension services leveraging mobile and digital technology, which will not only enumerate and geotag farm lands to unlock dead capital, but also share best practices with our farmers using mobile phones; irrigation infrastructure to support wet and dry season farming, which bring an immediate uplift to yields; funding for our research institutes and universities, to develop more productive inputs; and finally, improving the linkage between farmers and markets by promoting more off take and out grower schemes with the private sector. Governments at the state level are ready to engage partners keen to work on these issues. However, as we chart a long term plan for Nigeria to emerge stronger from the crisis, we must also reflect on the immediate actions to address our short term challenges. With a reduction in revenues, we must reduce the cost of government. Apart from the passage of supplementary budgets by federal and state governments, we need to explore various recommendations on streamlining ministries, departments and agencies of government (MDAs) to reduce wastage. We must also be ready to eliminate or minimise non-core expenses, and also ensure the wage bill at all levels of government is accompanied by accountability, productivity and effectiveness of our workforce. Though unfortunate, the current situation validates the need for increased focus on social welfare. With the exit from an expensive petrol subsidy, the gain should be used to meet specific needs arising from the impending fiscal challenge, which will require synergy between the Nigerian National Petroleum Corporation (NNPC) and the fiscal authority to maximise this opportunity. The federal government, again working with states, should consider implementing the concept of an Ultra Universal Basic Income (UUBI). As Nobel laureates, Esther Dufflo and Abhijit Banerjee argue, this concept is crucial to poverty reduction, and helps to simplify Continues on page 27

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