BusinessDay 20 Feb 2019 by BusinessDay

businessday market monitor FMDQ Close

Everdon Bureau De Change

Bitcoin

NSE

FOREIGN EXCHANGE

Biggest Gainer Presco N75

3.31pc

Biggest Loser Mobil N168.2

-1.06pc

32,190.05

Foreign Reserve - $42.73bn Cross Rates - GBP-$:1.31 YUANY-N53.41 Commodities Cocoa

Gold

Crude Oil

US$2,352.00

$1,343.50

$66.19

NEWS YOU CAN TRUST I **WEDNESDAY 20 FEBRUARY 2019 I VOL. 15, NO 250 I N300

₦1,384,871.94

+4.57pc

BUY

SELL

$-N 357.00 361.00 £-N 465.00 474.00 €-N 401.00 409.00

www.

Market I&E FX Window CBN Official Rate Currency Futures

($/N)

Spot ($/N)

362.20 306.80

-0.18 12.04

0.48 13.72

0.00

NGUS APR 24 2019 363.30

PDP cautions against military intervention in elections OWEDE AGBAJILEKE & TONY AILEMEN, Abuja

Continues on page 38

Inside Zenith Bank declares N2.80 total dividend, stock soars to 7-month high

P. 2

Understanding the economy of Nigeria’s 36 states – Bayelsa & Cross River

14.49

NGUS JUL 24 2019 363.75

10 Y 0.03

20 Y 0.00

14.81

14.42

NGUS JAN 29 2020 364.65

g L-R: Mahmood Yakubu, chairman, Independent National Electoral Commission (INEC); Hailemariam Desalegn, former prime minister of Ethiopia, and Jakaya Kikwete, former president of Tanzania, at a news conference on the forthcoming Presidential and National Assembly elections in Abuja, yesterday. NAN

... as IGP reinforces Buhari’s shoot-at-sight directive residential candidate of the People’s Democratic Party (PDP), Atiku Abubakar, on Tuesday cautioned the military against executing President Muhammadu Buhari’s directive to shoot ballot-box snatchers, declaring the directive as an unlawful order. Atiku, who spoke at the 84th National Executive Committee (NEC) of the PDP in Abuja, accused the ruling All Progressives Congress (APC) of plot to manipulate smart card readers during the rescheduled Presidential

FGN BONDS

TREASURY BILLS

FinTech lending platforms fill credit gap for individuals, businesses

As RenMoney, Lidya, Credit Direct leverage credit scores to disburse loans

CALEB OJEWALE & FRANK ELEANYA

inancial technology (FinTech) platforms are gradually filling the lending gap left by Nigerian commercial banks by creating a new way of accessing credit.

Before FinTech lending platforms became popular in Nigeria, raising money to take a small business from point A to point B was often a herculean task when a deposit money bank was involved. Similarly, when individuals needed cash to meet urgent needs, getting loans to

meet those obligations was a nightmare. But today, platforms like Credit Direct, Paylater, Lidya, Kiakia, Zedvance, Branch, and Renmoney are among emerging credit providers that are helping individuals and businesses with the cash flow required to meet

urgent obligations. Most of these platforms even claim to disburse loans without collateral and within 24 hours, although when interest rates are considered, it could be quite a steep price to pay. While low interest rates are Continues on page 38

2 BUSINESS DAY NEWS

www.

Wednesday 20 February 2019

Nigeria’s manufacturing sector still dogged by age-old problems despite improved PMI ODINAKA ANUDU & GBEMI FAMINU

mprovement in the foreign exchange market has helped to shore up Nigeria’s manufacturing Purchasing Managers’ Index (PMI), but critical challenges bedevilling the sector are yet to deflate. Manufacturing PMI, released by the Central Bank of Nigeria (CBN), is computed based on survey responses from sector leaders, indicating changes in the level of business activities in a month. Key assessment indicators are production level, new orders, supplier delivery time, employment level and inventories. A composite PMI above 50 points indicates that the manufacturing sector is expanding; 50 points indicates no change and below 50 points indicates contraction. The index has remained above 50 since January 2018, reaching a high of 61.1 points in December 2018. The Manufacturers Association of Nigeria (MAN) attributed the rise of the PMI in December to improved economic spending that characterised the festive period as well as high patronage of locally-produced goods within that month. Though the PMI in January of 2019 declined to 58.5 index points, it still represented an expansion for the 22nd consecutive month. Analysts believe that the rising PMI is due to improved FX market, which has improved productivity of factories, new orders, employment level and inventories. Frank Jacobs, president, ManufacturersAssociationofNigeria(MAN),explained that improvement in access to dollarsbytheCBNraisedproductionin

firms and boosted employment levels. At the peak of foreign exchange scarcity in 2016, PMI trended below 50 points. In March and April 2016, manufacturing PMI was 45.9 and 43.7 points, respectively. It further declined to 41.9 points in June. This was a period when manufacturers scrambled for greenback to import inputs and machinery. Within this period, 54 manufacturing firms, mostly small and medium players, shut down, according to MAN. The manufacturing PMI, however, rose to 52 points in December 2016, but this was after the CBN had introduced a 60 percent preferential dollar access, meaning that genuine manufacturers were allowed access to 60 percent of available dollars in the market. “Once you improve access to FX, you improve PMI,” Jacobs told BusinessDay in 2017. Manufacturerssaypoliciesthatsupport local input sourcing, such as backward integration, can raise the levels of PMI. Manufacturers source 57 percent of inputs locally and import 43 percent, according to latest data from MAN. Analysts say though PMI tells a story about the current state of manufacturing, it does not indicate the overall health of the sector. Hence, Nigeria’s manufacturing sector indices are not necessarily rising as fast as PMI. Manufacturing sector’s contribution to real GDP in the fourth quarter of 2018 was 8.86 percent, still less than double-digit. Contribution of South Africa’s manufacturing to GDP is 13 percent; and Egypt is 17 percent. Manufacturers say any contribution below 10 percent indicates that the sector is not performing optimally.

•Continues online at www.businessday.ng

Oil price, local currency key factors to watch as retail market struggles ... food & beverages sector tops space occupancy level in 2018 CHUKA UROKO

hough 2018 was a challenging year for the retail market, outlook for the sector in 2019 shows that investors and retailers have a number of factors, particularly oil price and local currency, to watch as the market struggles through an unfriendly macro-economic environment. Of the various segments of real estate, retail seems to be the worst hit with growing vacancy rate, low tenant pool, shrinking footfall and falling prices per square metre, making it a real struggle for landlords to retain existing tenants and drive up occupancy levels. The outlook for oil prices is one embedded in risk, according to a recent Broll-Property Intel retail market viewpoint. The firm noted

that Goldman Sachs has cut down its oil price outlook in 2019 to US$62.50/ barrel, from a previous prediction of US$70/barrel. That has implications for the retail market because with the economy still heavily dependent on oil revenues to sustain economic activity, a slowdown in oil prices could have adverse effects on economic activity which may lead to reduced consumer confidence and purchasing power. It is estimated that 80 percent of Nigeria’s foreign exchange earnings still comes from oil despite government efforts at diversifying the economy. Looking at the size of the economy or the problem the government is dealing with, it will be seen that there is need to do something more dramatic and faster.

•Continues online at www.businessday.ng

L-R: Niyi Omojola, partner, head of investment banking Nigeria, Constant Capital Partners Limited; Bola Onadele. Koko, managing director/CEO, FMDQ OTC Securities Exchange, and Abubakar Suleiman, managing director/ CEO, Sterling Bank plc, during the presentation of the bond listing certificate to the issuer at the listing ceremony for the Sterling Investment Management SPV plc bond at Exchange Place, Lagos, yesterday. Pic Olawale Amoo

Zenith Bank declares N2.80 total dividend, stock soars to 7-month high IHEANYI NWACHUKWU & OLUWASEGUN OLAKOYENIKAN

ollowing a release of the 2018 audited financial statements of Nigeria’s biggest lender by assets, Zenith Bank, which saw profit rising by 11.30 percent, shares of the tier-one bank jumped, Tuesday, to their highest level in more than seven months. The stock gained 5.63 percent to N25.35 after the close of trading on the floor of the Nigerian Stock Exchange (NSE), pushing the year-todate return of the financial institution to 9.98 percent outperforming the NSE Banking Index as well as the All Share Index. The surge was “on the back of the results released by the bank,” said Fola Abimbola, an equity research analyst at Lagos-based FBN Quest.

“There is more buying interest on the stock.” From the retained earnings account as at December 31, 2018, the board of directors of Zenith Bank Plc recommended a final dividend of N2.50kobo for every 50kobo share, in addition to the 30kobo per share paid as interim dividend, bringing the total dividend for the financial year to N2.80kobo. This represents 3.70percent increase as against N2.70kobo total dividend paid in 2017. This dividend proposal will be presented for ratification by the shareholders at the bank’s next Annual General Meeting. Dividend Yield was 11 percent at the close of trading. Zenith Bank had shed 3.03 percent to N24 in the previous trading session amid sell-offs witnessed by most stocks that traded at the Lagos bourse in reaction to last weekend’s

election postponement by the Independent National Electoral Commission. According to Abimbola, the stock would likely continue to rally in the coming days as “there is nothing negative on the stock in particular.” Zenith reported profit before tax (PBT) of N231.68billion as against N199.319 billion in 2017 representing a 16.2 percent increase. The bank’s after tax profit increased by 11.30 percent to N193.424billion in the 2018 financial year, from N173.791 billion in 2017. “We have a Buy rating on Zenith Bank with a target price of N33.41 per share. Current price is N24 per share,” said CSL Research in its February 19 note following the bank’s release of its audited full year 2018 results. “Zenith Bank’s FY 2018 Pre-tax profit was up 16 percent year-onyear (y/y) and 8 percent above our

Continues on page 38

Why Nigeria may not benefit from rising oil prices in 2019 STEPHEN ONYEKWELU & DIPO OLADEHINDE

he global oil community has reason to cheer as rise in oil price signifies increased revenue for oil producing countries. Regrettably, Nigeria may not benefit from this largesse. International Brent crude oil futures moved close to its highest in 2019, at $66.15 per barrel by 3pm Nigerian time on Tuesday, indicating $6.25 in excess of Nigeria’s 2019 budget benchmark. While this might be good news for other Organisation of Petroleum Exporting Countries (OPEC), the re-

ANALYSIS verse seems to be the case for Nigeria. “The oil and gas industry seems to be under a new threat. There is a renewed dislike and global war against fossil fuels and the quest for renewable and cleaner energy,” Luqman Agboola, head of infrastructure at Sofidam Capital Limited, told BusinessDay. “As sweet as Nigeria’s crudes are renowned to be globally, we have recently lost our most-valued customers and our gas buyers are themselves now competing with us

in the same market space as suppliers,” Agboola said. Vessel-tracking data compiled from the Bloomberg terminal observed crude exports from Nigeria fell for a second month in January, led by a drop in shipments of grades including Bonny Light, Brass and Bonga. Nigeria’s crude export fell to 1.69 million bpd in January compared to 1.77 million bpd in December, while Akpo condensate flows fell to 92,000 bpd in January compared to 97,000 recorded in the previous month. Data from the Bloomberg ter-

Continues on page 38

Wednesday 20 February 2019

BUSINESS DAY

Wednesday 20 February 2019

Customs detains four officers for killing man in Ogun AMAKA ANAGOR-EWUZIE

ollowing the killing of one Godwin Onoja by operatives of the Federal Operations Unit (FOU) Zone A of the Nigeria Customs Service (NCS), on Sunday in Ogun, the service said it has detained four of its officers over the incident. In a press statement on Tuesday, Joseph Attah, national public relations officer of the Customs, said the service is in touch with the bereaved family. According to Attah, the Comptroller General of Customs, Hameed Ali (rtd) had set up a panel led by the Zonal Coordinator, A to investigate the killing and vowed that any officer caught on the wrong side will be dealt with accordingly. Recall that a Customs officer, Destiny Onebamho on Sunday shot and killed a man during a heated argument with passengers of a bus in an attempt to intercept bales of used clothes. “Following the unfortunate incident on Sunday 17th February 2019 at Shagamu Interchange involving Operatives of the Federal Operations Unit Zone A, which led to the death of a fellow citizen, Godwin Agada Onoja, the Nigeria Customs Service has continued to maintain close contact with the bereaved family,” Attah said. He said: “We are pained by this sad development and share the grief of losing a fellow compatriot in a seemingly avoidable circumstance. We are and will continue to take every necessary step that will cushion the pain associated with losing a dear one. Attah assured that the outcome of the investigation by the panel would be made public for all Nigerians, adding that the officers whose rifle discharged would also face the panel as soon as he’s fit. “The panel could not immediately conclude the investigation because the actual officer (Destiny Onebamho) whose riffle discharged is presently receiving medical attention as a result of attack following the unfortunate incident. He will face the panel as soon as he is fit to do so, to enable the panel conclude investigation and recommend appropriate action(s). He added that NCS is a reputable organization known for integrity and responsibility. In line with our corporate values, we will not shield any operative found wanting in this ongoing investigation.

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

5 NEWS

BUSINESS DAY

MTN’s woes worsen in Uganda over allegation of duplicity SEGUN ADAMS

TN Uganda, the biggest telecoms operator in the East African country, currently faces questioning from the country’s authority over allegations of falsifying sales figures to avoid its full obligation to the country. According to reports on Reuters, the alleged action further deteriorates the sour relationship between the South-African firm and

the Ugandan government which has in the past weeks deported four MTN officials – with the expulsion of MTN Uganda’s Chief Executive Wim Vanhelleputte last week as the most recent of such action. The government had cited the compromise of national security as reason for the measures taken against the MTN officials. However, MTN Uganda’s spokeswoman Justina Ntabgoba claimed that the government had not given them any detailed informa-

tion to support its claim. “We have not gotten any official communication, so we don’t have a response. Once we receive an official communication then we can respond,” she said. South African Paper Daily Maverick claimed that a “bitter rivalry between Ugandan President Yoweri Museveni and Rwandan President Paul Kagame seems to lie behind the deportation of MTN’s Ugandan CEO and other top company executives over the past month”.

However, the tussle with the telecommunications giant may not be unrelated to desires by the government to keep within borders the profit MTN makes in Uganda as over the years, MTN has been reportedly under pressure to list on the domestic exchange of the country. Just recently, MTN Nigeria ran afoul of Nigeria’s apex bank on account of repatriating some $8 billion outside of the right channel. MTN, however, settled with the Central Bank of Nigeria and is expected to list

on the Nigerian Stock Exchange later this year. For Uganda, which accounts for 4 percent of MTN Group’s earnings, the government claims to have a handle on the transactions of the telco and has made direct and indirect accusations of MTN trying to cheat the government out of its tax obligations. “It is as a result of that technical capacity that MTN and its officials have run afoul,” government spokesman Ofwono Opondo was quoted as telling Reuters.

BUSINESS DAY

Wednesday 20 February 2019

BUSINESS DAY

8 BUSINESS DAY NEWS

www.businessday.ng

www.facebook.com/businessdayng

Unbridled trafficking of pangolin scales worries ecologists TEMITAYO AYETOTO

he upsurge in unbridled trafficking of pangolin scales from Nigeria to East Asian markets, most notably China, has been a source of distress to the community of ecologists as the nocturnal mammal classified as an endangered species faces threat of extinction. Despite laws banning killing or possession of pangolins, Nigeria ranks high as both a source and transit country, with shipments to Hong-Kong, Singapore, France and Thailand on the rise. This contributes to an illegal wildlife trade estimated at $20 billion yearly. In March 2018, shipment of 8,492kg of pangolin scales with Nigerian provenance was impounded, according to African Pangolin Working Group (APWG). About 7,200kg headed for HongKong were confiscated in Hong-Kong in May 2017. In another instance, 3,100kg of scales and wood products destined for China in December 2016 were seized. In July 2016, 7,300kg of scales bound for Hong-Kong were

also seized; 324kg were seized on the way to Singapore in February 2016; 2,000kg of scales bound for China were seized in January 2015, and 250kg to France in July 2014. The sad fact that none of these seizures occurred in Nigeria has espoused fear among ecologists that the Nigerian government cared less about the depleting population of rare members of its ecosystem. Olajumoke Morenikeji, associate professor of Parasitology/Ecology and Environmental Biology, University of Ibadan, said the fact that pangolin is the most illegally trafficked mammal in the world was enough reason to push active conservation. The unsustainable level of poaching and illegal trade in the animal has been driven by increasing demand for its meat, eaten as luxury dish in some parts of the world, and its scales and other body parts used in many traditional medicines, the associate professor explained at a lecture series of the Department of Zoology, University of Lagos, themed ‘Saving the Nigerian Pangolin from Extinction’. Pangolins have overlapping scales and exist only in

Asia and Africa. They are reputed for their ability to control pest naturally as a single pangolin consumes as much as 70 million insects per year. As such, they achieve tender soil. Their mere presence, in conjunction with that of other organisms and processes within the habitat they live in, is absolutely imperative to continued healthy ecosystem functioning. Consequently, the keynote speaker believes the government needs to intensify the enforcement of law criminalising the trading in pangolins to prevent eventual extinction. “We need to save the pangolin and government at all levels, conservation organisations, academia and researchers, the Ministry of Environment and other relevant agencies must help,” Morenikeji said. Under the National Endangered Species Act of the Federal Republic of Nigeria, amended in 2016, persons found in possession of species listed in schedule where pangolin falls are liable to face a fine of N5 million at initial offence, a one-year jail term on the second and subsequent times without any option of fine.

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

comment

@Businessdayng

Wednesday 20 February 2019

comment is free

Send 800word comments to comment@businessdayonline.com

The welfare side of a shifted election Small Business handbook

Emeka Osuji

he past few days have seen the media go awash with fire and brimstone falling from all directions towards a single entity - the Independent National Electoral Commission (INEC), over its bizarre act of shifting the elections billed to hold on Saturday, February 16, 2019.The elections were shifted by one week. Simple as that may look; the socioeconomic consequences are so extensive and pervasive that we will continue to pay the price over the near future. And for once, both the Peoples Democratic Party (PDP) and the All Progressives Congress (APC), the two leading political parties running in the elections, appeared to be united on a national issue and against a common enemy. While the fireworks fly and guns boom at Mahmood Yakubu, the poor professor of History now battling with the storm created by his poor Operations Research and Project Management capacity, and while the call for his head continues to defy all political and religious divides, we see a need for caution, lest we miss a tread while rushing through the staircase. We shall provide a kind of diversion away from the furry and look at the welfare implications of what now appears like an unwarranted disruption of the polls by the electoral umpire. For an unbroken period of over five years, I have consistently written a piece every week in this column. It is my free contribution to our search for a lasting solution to the challenge of endemic poverty, and also to promote Small and Medium Enterprises (SME) development in Nigeria. I do not write politics. My focus is

on poverty alleviation and entrepreneurship development. I am going to try to stay on that beat, despite the temptation to add one’s voice to an obvious national embarrassment of gargantuan financial and economic implications. The temptation to veer off is even more daunting as INEC continues to aggravate citizens by sending to the media, all manner of people to repeat the same lame excuses that fell flat on Saturday. However, we need to take time off the noise of recriminations to look at the welfare implications of the election postponement, and seek ways to ameliorate the pains the ordinary citizens of Nigeria are invariably going to face as a result of this disaster. The Nigerian economy is largely informal and the operating environment in the informal sector is worse than hostile. There is hardly any legal framework for proper operation and the decayed infrastructure, for which Nigeria is famous, has its headquarters in the informal sector. Public support is minimal and survival of the fittest is the order of the day. This means that many of the people work for themselves in micro and small enterprises. So many others just mill around in market playing self-appointed agents and middlemen for a commission. The tenacity with which these “middlemen” accost potential customers on entry to any market in Nigeria gives an indication of how seriously their lives depend on what they earn by running around in the market every day. Most of them have no shops. Their enterprise serves many purposes, including the provision of employment, first to family members and then income to them. The micro and small enterprises are the only means of income generation available to the owner and his staff. They work and live one day at a time. This is why they go to market on public holidays. There is no holiday in the stomach. Operators of microenterprises, which dominate the informal sector do not have multiple investments. There is hardly any investment or other income-generating funds put away for speculation as the richer members of the society do. They therefore do not have multiple streams of

income, which the richer members of society use to tide themselves over difficult times like the present election season. The revenue of these individuals is not only irregular in the most part, it is also insufficient. This is why I often refer to the private economy of the average Nigerian as a hand-to-mouth economy. In handto-mouth economies, income is earned daily from daily activities and is equally spent daily. When you operate a handto-mouth economy, you almost always spend all the day’s earning on the same day. In fact, much of their so-called profit of the day comes in the form of unsold items of the trade, which the owner takes home to feed the family. Profit is actually mostly the left-overs of the vegetables, yams, rice or beans that were brought to the market for sale each day. They just keep a portion of their goods, even if their capital has not been fully recovered. This is why such businesses often suddenly find that their capital has disappeared. In a hand-to-mouth economy hunger and starvation are your next door neighbours. They can knock on the door anytime. Given this scenario, which shows the precarious economic condition of most Nigerian families, it becomes somewhat unreasonable for anyone to call off the election at commencement and reschedule it so soon after. This action seems to be oblivious of the fact that the election had stalled business activities for a while, before finally shutting it down completely on the 16th of February, 2019. On the face of it, all government action is well-intended and aims to promote the welfare of its citizens. Even the worst government does not start as a war against its people. Sometimes they begin with a common enemy, as Hitler did, before turning and crushing the citizens. Nigerian politics is taking much toll on the citizens. They are being starved from loss of economic opportunities, dehumanized, impoverished or outrightly killed. This cannot be the intension of the government of Nigeria, Therefore, we need to think a little deeper through public policy action before we unleash economic terror on the people we serve. And we have thinking people in and out

‘

In a handto-mouth economy hunger and starvation are your next door neighbours. They can knock on the door anytime

of government. The essence of government is to make life less Hobbesian – less brutish, to generate prosperity and ensure it is equitably distributed. Governments all over the world seek welfare improvement for their people and avoid actions that induce social welfare loss or promote poverty. Policies that do otherwise are anti-people. I call them poverty generators. The recent rescheduling of the February 16, 2019 elections is a poverty generator, however we look at it. It is so,not merely because the elections were shifted but because of the timing of both the announcement of the suspension and the choice of the next scheduled date. The shortness of the time to the new date compounds the difficulty of the masses. Those of them that travelled would hardly complete their return trip before they are expected to travel again. They neither have the money nor the time to heal over such a short time. This may even impact the voter turnout. There have been several estimates of the likely financial loss created by the action of INEC. Some estimates put it at over $1.5b. But that is only in terms of naira and dollars. The distortions that have been introduced will have both production and consumption effects. It’s like a tax has been imposed on the people. We can estimate the production effects and get naira and dollars numbers but the loss of social welfare, occasioned by consumption distortions cannot easily be quantified. Indeed, the impact on the GDP is only a part of the big damage. In all, we must curb the way public officials think in Nigeria as though they are either dumb or infallible. Government may be supreme but it is set up for the benefit of the people. It is wrong for public officers, either out of economic ignorance or brazen arrogance, take actions that have pervasive impact on the people at a whim. Sadly there is still no effective sanction for non-performance in public offices in Nigeria. Dr Emeka Osuji is head of the department of Economics at Pan Atlantic University Lagos. eosuji@pau.edu.ng @Emyosuji

Why permit for commercial release of Bt Cowpea in Nigeria should be revoked Joyce Ebebeinwe

urrently, Nigeria and indeed Africa as a whole suffers pressure to accept modern biotechnology as the solution to agricultural problems and the technology is portrayed as the silver bullet to the challenge of food security. Recently,Nigeria’s National Biosafety Management Agency (NBMA)issued permit to Institute for Agricultural Research (IAR), Zaria for commercial release ofBt(Bacillus thuringiensis) cowpea which is said to be resistant to the Maruca insect pest. Cowpea (popularly known as beans) is an indigenous African crop and a major source of protein for the Nigerian populace where it is prepared and eaten in various forms either as ewaagoin, akara or moimoi. It is a staple food crop and an important source of income. The crop is also very essential for animal feed. Nigeria is known as the prime producer of cowpea in the world and we have had a yearly average production of about 2.7 million metric tons over the last ten years. Ironically, Nigeria is also the largest importer of cowpea in Africa. Clearly, the economic challenges for farmers or the unavailability of food is not solely a problem of production. This article serves asa call on the Nigerian populace to pay attention to the issues with

agricultural biotechnology; to speak out against it and on the government to be circumspect about profit-driven technologies that aim to contaminate our natural varieties, destroy our agricultural systems; our socio-economic fabric and assert unbridled control over our food system.Here are a few reasons why the commercial release of genetically modified beans is an erroneous move. Btcowpea is linked to severe health implications Bt cowpea contains aCry1Ab gene developed by Monsanto (now Bayer) and it is the same as in Bt maize event, MON810 manufactured by the company. BtCowpea has not yet been commercialized anywhere in the world. However, Current in-vitro experiments on that maize event have revealed thatprotein produced by the Cry1Abgene has toxic effects on human liver cells. Researchers in Italy in November 2008,resolved thatthe consumption of the Btmaize induced alterations in intestinal and peripheral immune response in mice. Another studywith different investigativeprocessshowed that effects (seen in blood cells, adrenal glands, kidney weights etc.) linked with theBt maize are generally detected after about 4 months of consumption. Additional long-term (up to 2 years) animal feeding studies were recommended. Btcowpea will contaminate natural varieties of the crop Cultivation of a GM variety of cowpea will bring about an irrevocable contamination of the natural and indigenous varieties which have

been nurtured over the years by farmers. Study of pollinator characteristics of the natural West African wild cowpea populations shows that the Bt-gene can pass from the genetically modified lines to non-modified lines resulting to natural cowpea and indeed other plants taking up the resistance trait and causing ecological imbalance. Bt cowpea/genetically modified crops will not ensure economic stability for farmers Genetically modified crops favor industrial agriculture which encourages land grabs for monocultures. Small-scale farmers usually intercrop cowpea with other cereals, mostly staple crops such as maize, millet and sorghum. Also, the high cost of GM seeds and the inability of farmers to reuse GM seeds present serious threat to farmers. Again, Nigeria’s cowpea is presently under a ban from the EU because of quality and residual chemicals issues and majority of the EU locals reject GMOs. Where will the export market for this Bt cowpea be? Btcowpea is not the solution to agricultural problems The pro-GMO gangs present the technology as a means to increase production and cater to the increasing populations. How about the fact that the world currently produces double the amount of food we consume but most of it is wasted due to poor storage and processing facilities or access to markets? This Bt solution responds only to one of the challenges of production that is the pod borer pest and apart from the pod borer (Marucavitrata), other pests disturb cowpeawhich are not controlled by the

Bt toxin. Biological methods(e.g. plant or fungal based bio-pesticides) exists which are effective against the Maruca insect as well as other pests. Use of this Cry1Ab Bt gene was discontinued in South Africa because cultivation of the maize modified with it led to enormous pest infestation. This is very instructive as Nigeriansare made to believe that this Btcowpea will bring about the reduction in pesticide use and increase yield by a paltry projected 20 percent. In place of the Bt solution which presents risks to health, ecosystems and which may lead to more intense pest invasions, Nigeria can focus on biological control and augment with governmental action towards provision of needed infrastructure and other necessities such as credit schemes, access to land and extension services to farmers for enhanced productivity and food security/food sovereignty. We shouldn’t be used for experiments Nigeria will be the first country to commercialize cultivation of this genetically modified crop. Field trials have been ongoing in Burkina Faso, Ghana and Malawi and there has been strong opposition to its release. This resistance across African countries buttresses the enormity of the threat genetic modification of food crops poses to our lives and agricultural systems. Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng Ebeveinwe is Project Officer, Health of Mother Earth Foundation

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

comment

Dapo Akande

n a corrupt society pretty much everything gets contaminated in one way or the other. The decay is not limited to pecuniary issues but permeates every area, activity, and process. Corruption eats away at ideals which hitherto guaranteed some sort of order. As it insidiously seeps in, it’s very first casualty is almost always values. Right and wrong suddenly take on a relative colouration. It’s “right” if you can get away with it but “wrong” if you get caught and lack the “power” to wriggle your way out. One thing which so exemplifies how rotten a system is, is when someone so clearly in the wrong, instead of apologizing and showing remorse as any normal human being should, claims right. A cyclist riding in the wrong direction narrowly escaped with his life the other day as I negotiated a tight bend. Of course I didn’t expect to see anything

BUSINESS DAY

comment is free

Send 800word comments to comment@businessdayonline.com

Simply put, corruption kills Character Matters with Daps

@Businessdayng

at the spot but instead of thanking his lucky stars to have escaped unscathed, he resorted to raining abuses on me! We pride ourselves as being better than other members of the animal kingdom because God saw it fit to give us an ability to reason. An ability expected to continue on the upward scale as our minds further develop, becoming wiser by the day. So why do we try so hard to reverse what God so kindly gave us; to convince God He made a mistake to have endowed us with this ability. Corruption destroys lives in the present and in the future. We may think we’re smart and getting away with it but it will always come back to haunt us and perhaps more painfully, future generations too. Corruption gradually obscures our sight of humanity as it erodes our sense of “right” and “wrong”. Corruption renders countless of noble aspirations unattainable and sadistically dispatches millions of dreams to their early grave. Corruption is an opportunity destroyer as it destroys opportunities for individuals, communities as well as entire nations. Unknown to the majority of people, many countries today ensnared in seemingly intractable civil wars arrived there as a consequence of rampant corruption, which had sapped to the very last drop, any confidence the peo-

ple previously had in the authorities. Corruption kills, almost more than any other epidemic. And, deceive yourself not, it is an epidemic. Here in Nigeria, corruption denies each and everyone one of us of what rightly belongs to us; a good, possibly free or heavily subsidized healthcare system, good public school system, good motorable roads, a more vibrant economy ($80 billion of funds outrightly stolen or corruptly acquired in Africa is transferred out of the country to nations already infinitely more wealthy every year), affordable housing and much more. To put it bluntly, it greatly impinges on our quality of life and the dignity of life we all deserve as members of the human race. The sad, yet unavoidable result is an abysmally low average life expectancy (53.7 years for men and 55.4 for women, incidentally the lowest in West Africa), in a world where life expectancy is increasing in both developed (80 years for men and 84 for women) and most developing (66.9 years for men and 69.9 years for women in India) societies; according to the 2018 statistics. Corruption leads to the collapse of buildings of which quality should never have been approved by regulators in the first place, and the inevitable loss of life. Corruption has now infamously positioned our dear nation

‘

Corruption renders countless of noble aspirations unattainable and sadistically dispatches millions of dreams to their early grave

as the poverty capital of the world where hundreds of people die every day because they can’t afford to buy malaria drugs of less than N1000 or of things even more mundane. According to recent statistics, 40 million Nigerians now suffer one mental disorder or the other. That’s an alarming 20% of our nation’s population of 200 million souls. It’s not a coincidence this comes at a time when another statistic revealed about 87 million Nigerians now live below the extreme poverty line. Corruption has impoverished the nation to the point where hundreds on a daily basis prefer to risk their lives crossing the Sahara desert and the Mediterranean sea in search of a better life, than to stick it out here where they’ll continue to suffer the indignities of oppression and numerous other forms of injustice at the hands of their own people. Is this better than when oyibo is the culprit, which we call racism? Or is it in some grotesque manner considered more acceptable when the hand of the oppressor is black? Simply put, corruption kills. Changing the nation...one mind at a time Akande is a graduate of the University of Surrey, UK, author of the acclaimed book: “The last fight: A personal journey to discovering values.” Contact: dapsakande25@gmail.com

Celebrating committed writings and writers in Nigeria: Signing off public writing

Tunji Olaopa

I have reached a very significant point in my regular public writing, and compelled by a personal work restructuring that I just undertook to step it down significantly, by 70% perhaps. It means I would henceforth intervene in national discourse only in very few occasions when I feel so strongly, and when I need to share lessons that could deepen policy and discourse from lectures I deliver from time to time. And it is therefore a juncture that I feel compelled to share with my vast community of readers who have tolerated my public commentaries and opinion pieces for many years my decision that I am signing off of regular public commentaries into semi-retirement. This simply implies that while I would surface once in a while to reiterate my advocacy issues, I will now have more time to dedicate myself to more lectures, and possibly attempt to write some more books as I receive inspirations in the near and far future. I had returned to this business of writing for about a decade now, and I have satisfied my inner craving that I could still write. I was drawn to writing not willingly, but by a compelling desire to draw the public into the understanding of some salient dimensions of our collective national predicament, and how we must go about reflecting on and resolving them. My founding discipline of political science, and lifelong dedication to the public service both enforce on me the rigid discipline of writing as advocacy for national reconstruction. Sometimes in 2011, and after a very long hiatus in writing in the popular media, I was compelled once again to pick up my pen and enter the public sphere of reasoned and rea-

sonable discourse. There were two interrelated missions on my mind then when I made this decision. The first was stirred by the urgency of deepening institutional reform and institution rebuilding that was becoming obvious. About a decade before then, I had taken up a monthly guest lecturer’s task at the Administrative Staff College of Nigeria (ASCON) at Badagry, and a little less frequently at the Centre for Management Development (CMD) and the National Institute for Peace and Strategic Studies (NIPSS). These seminar series facilitation and lectures take up very defining issues in public sector management and the Nigerian civil service system. From this reform impulse, I made a decision to deploy public education writing series to expand these issues into the broader ones of re-professionalizing the public service as a means of rebranding the civil service in Nigeria into a world class institution by expanding the community of reform champions beyond the bureaucracy. The second impulse to enter the public sphere came from the renowned political scientist, late Prof. Claude Ake, and specifically from his foreword to my biography of the late Prof. OjetunjiAboyade titled A prophet is with honour. In that Foreword, Ake decried Nigeria’s attitude to her heroes and heroines. This gave me the inspiration to, first, see clearly the relationship between these heroic capacities and the Nigerian postcolonial redemption; and second, to generate series of critical narratives around individual heroes and heroines, mentors and statesmen and stateswomen. The cogent essence of these narrative is to argue not only that these extraordinary men and women, patriotic Nigerians all of them, have contributed heroically to achieving the Nigerian project, but that treating them with respect and understanding the point of their heroic sacrifices would serve as a national incentive and encouragement for other Nigerians who are equally determined to give themselves and sacrifice their efforts and even lives for the greater glory of this great country of ours. As far as I am concerned, this is the stuff of which committed writing and public commentaries are made. And in this wise, I have a legion of seasoned and astute forerunners and con-

temporaries whose writing and companionship have served as the occasions for more durable and rigorous conversations on the well-being of Nigeria. Here, I pay an unreserved respect to those sagely wordsmith—Peter Enahoro, Olabisi Onabanjo “Aiyekoto’. Ray Ekpu, Olatunji Dare, Mohammed Haruna, Dan Agbese, Yakubu Mohammed, Fred Onyeoziri, Godwin Sogolo, Femi Otubanjo, Femi Orebe, Sam Omatseye, and many others. I started reading this generation of writers from graduate school. Then there are those who are more contemporary with my entry into the public sphere; especially those with whom I share notes and feedbacks regularly: Ayo Olukotun, Festus Adedayo, Segun Ayobolu, OlusegunAdeniyi, Akin Osuntokun, Reuben Abati, Abimbola Adelakun, Okey Okechukwu, among others. All these old and new Op-Ed and public commentary warriors have helped sharpened my capacity to clearly understand and articulate my worries, understanding and directions for the Nigerian state. These fearless writers embody the courageous commitment and clear-headed focus on the germane issues around which Nigeria and Nigerians ought to reflect. This is what has been the template I had adopted for all my public education and advocacy series. While I may not consider myself as courageous as these veterans largely due to the abiding public service values that remains my testament as mentor to a large pool of bureaucrats, I strove to put in my own little reflections and reasoned inputs into the mix of volatile commentaries on where we are as a nation and what could be done to make Nigeria great. A bulk of my public commentaries has been dedicated solely to the national project, and the challenge of postcolonial development in Nigeria. From education to literature, from politics to governance, from religion and interreligious dialogue to entertainment, and from philosophy and the humanities to gender issues and scientific development, I have sought in all these essays to connect the many complex and labyrinthine dots in Nigeria’s postcolonial and post-independence predicament that have made national development a thorny issue close to sixty solid years after the official end to colonialism. Some of my passionate entries

have been dedicated to the relationship between the humanities and the social sciences (HSS) and the prospect of national integration in Nigeria. I have raised issue, first, with the methodologies of the HSS; and second, why intersectionality with the sciences as well as a renewed understanding of the relevance of the HSS in a global capitalist world is the way forward. I have equally established the critical relationship between politics and governance, and through the eyes and arguments of major global scholars, I have pointed at crucial reform element that would aid institutional transformation of the Nigerian state. I have argued, for instance like institutional scholars, that institutional reform depends on the type of politics a nation wants to play. In several essays, I have pinpointed the relationship between religion, spirituality and nation-building. I have argued that while religiosity has remained one of the banes of disintegration, as many examples across the globe has shown us, spirituality has a role to play in nation-building. I have then argued for an ecumenical platform that would enable the various religious persuasion to, for instance, take a cue from the tolerant spiritual dynamism of the Yoruba which enables for religious pluralism. I have then gone on to critically examine the patriotic and heroic contributions of specific Nigerians, in all these spheres of endeavor I have outlined, to the question of how Nigeria can be put together as a viable and developed country. From Wole Soyinka to Bolanle Awe, from Matthew Hasan Kukah to Hajia Gambo Sawaba, from Hubert Ogunde to Chimamanda Adichie, from Adeoye Lambo to Aliko Dangote, and Billy Dudley, Pat Utomi, to Ken Saro Wiwa and Odia Ofeimun, I explored the heroic capital at the disposal of the Nigerian state, and the potentialities that each of these individuals potent for transforming Nigeria. Note: The rest of this article continues in the online edition of Business Day @https://businessday.ng

Prof. Tunji Olaopa is the Executive Vice-Chairman, Ibadan School of Government & Public Policy – ISGPP, Ibadan tolaopa2003@gmail.com, tolaopa@isgpp.com.ng

A Par

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

Editorial Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua GM, BUSINESS DEVELOPMENT (North)

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

Encouraging signs of policy support to progress power situation

igeria is making slow but steady progress in the policy arena to improve the power situation. These “incremental” efforts come from a variety of sources and players. They deserve support and progression. One of the foremost steps is the proposed legislation outlawing estimated billing. The Electricity Power Reform Act (Amendment) Bill 2018 passed by the House of Representatives in January 2019 prohibits estimated billing and makes it a criminal act. It proposed a one-year jail term and a fine of N1m for defaulters. The bill also directs electricity distribution companies to ensure that customers get prepaid meters within 30 days of application. It also bars the Disco from disconnecting a consumer after the 30 days unless they have provided the meter. The proposed bill stands on a sound philosophical footing. We agree with its chief proponent, Hon Femi Gbajabiamila, who asserted that, “Any regulation that allows estimation of bills when the actual consumption can be ascertained is against natural justice and equity and should not stand.” Sections 68 to 72 capture the

amendments to the Principal Act. Section 68 prohibits estimated billing methodology in Nigeria. In part two, Section 68 states the obligations of the parties. Consumers should apply to the Disco, pay the regulated fee for a prepaid meter for installation in his premises while the Disco is obligated to provide the meter in 30 days. Other sub-sections add: “(3) Customers who elect to buy their prepaid meters through credit advancement metering implementation must state in their applications and such customers must be metered within 30 days of the receipt of their application. “(4) All electricity charges or billings to the premises of the consumer shall be based strictly on prepaid metering and no consumer shall be made to pay any bill without a prepaid meter first being installed in the premises of the consumer.” Further, the Disco must inform the customer of the nature of meter it has installed for her, tariff methodology and the services available to the customer. We call on the Senate to concur and pass the bill for presidential assent. We further call on the President to ensure he assents to the bill within this legislative calendar. Before this, the Nigerian Electricity Regulatory Commission and the Ministry of Power unveiled

the Meter Asset Provider regulation (Regulation No Nerc-R-112)) and the subsequent approval of 87 firms as initial licensees. It is almost a year to the date (March 2018) when they announced this measure. Customers need to see the implementation of this regulation through real term service provision. There is also the Eligible Customer regulation that would open up supply lines and enable Gencos and independent power producers (IPPs) to bypass the Nigerian Bulk Electricity Trading Plc (NBET) to sell electricity directly to eligible customers. It specifies four categories of eligibility. Eligible firms are those who i) Consume not less than 2MW/ hr/r in one month and are connected to a metered 11KV or KV point on a distribution network or licensee under a distribution use of system (DUoS agreement ii) Consume more than 2MW/ hr/h every month and are connected directly to a metered 33kv delivery point on the transmission network under a Transmission Use of System (TUos) agreement iii) Consume more than 2MW/ hr/h within a month, connect directly to the metering facility of a Genco and enters a bilateral agreement to build its distribution line with licensee over the area iv) A user connected to a me-

tered 132kv and 330kv delivery point on the transmission network under a TUoS agreement. Then there is the Solar Power Project under which the Power Ministry would concession the rooftops of Ministries Departments and Agencies of the Federal Government to private solar power developers to generate electricity. The PPP arrangement envisages that the solar power firms would supply 750kw day time and 75kw nighttime electrical energy to the Ministry of Power as test case. The Federal Executive Council approved this proposal with ten years tenure. There are extant opportunities for investment in the Nigerian power sector. Areas include gas, coal to power, transmission and distribution network and renewable energy of hydro, solar, and wind. Local and international investors need to take up the opportunities. We commend the policies on ground. We note, however sadly, that they are yet to take off or to translate to deliverables for the consumer. The test of policies lies in execution and outcomes. The various well-intentioned policies on power need to become action points for the consumer, eyemarked rather than the traditional ear-marked projects of Nigerian officialdom. Bring on the power, please.

HEAD, HUMAN RESOURCES Adeola Obisesan

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

Enquiries NEWS ROOM 08023165438 08169609331 Lagos 08033160837 Abuja

}

ADVERTISING 01-2799108 08034743892 08033225506 SUBSCRIPTIONS 01-2799101 07032496069 07054563299 DIGITAL SERVICES 08026011296 www.businessday.ng The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 Legal Advisers The Law Union

Mission Statement To be a diversified provider of superior business, financial and management intelligence across platforms accessible to our customers anywhere in the world.

OUR Core Values

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

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

COMPANIES & MARKETS

@Businessdayng

BUSINESS DAY

NSE lifts ban on Goldlink Insurance

Pg. 14

C o m pa n y n e w s a n a ly s i s a n d i n s i g h t

Consumer Goods

Nigerian Breweries down 9.64% after first revenue decline in 5 years David Ibidapo & Segun Adams

hares of Nigerian Breweries, the largest brewing company in Nigeria on Monday slumped by 9.64 percent after the company recorded its first revenue decline in the last five (5) years. The decline which came in the first trading session after the postponement of the general elections by INEC was attributed by analysts to be driven by the company’s weak financial performance in full year 2018. “The decline in NB share performance is largely a mirror of investors’ reaction to the company’s fundamentals which was below market expectation,” Wale Okunrinboye, Head of Research at Sigma Pension Ltd. Profit after tax (PAT) declined by 41.2 percent to N19.4 billion in 2018 against N33 billion recorded in 2017, a deviation by -13.24 percent from analysts forecast of N22.39 billion in PAT for the period. The company reported that the drop in profit was largely driven by a steep decline in other income coupled with a decrease in revenue and a marginal increase in marketing and administrative expenses. “The decline in revenue is on the backdrop of intensified competition in the brewery industry triggered by the merger between Interfact, Pabod and International breweries,” Gbolahan Ologunro, an analyst at CSL Stockbrokers said. In addition, Ologunro explained that weak consumer spending experienced in 2018 is seen to have contributed to decline revenue of NB. “Q4 used to be a strong quarter for the brewery industry but Guinness financial

proofed low demand for beer due to weak spending of consumers,” he said. Okunrinboye, explained that the entry of International Breweries into the beer industry put more pressure on Nigerian Breweries as the Nigerian Subsidiary of Belgium-based Anheuser-Busch InBev, set out to increase market shares through competitive offerings. In Q2 2018, International Breweries’ decision to maintain price on its larger products despite a new tax regime introduced by the Federal Government forced Nigerian Breweries to revert price increase on some of its products like Star Radler and Goldberg. According to data gotten from the Bloomberg terminal, revenue for the period was slightly higher than the consensus expectations. Top line growth came in at N324.4 billion in 2018, a 5.9 percent decline compared to 2017 and a +0.16 deviation from analysts’ estimate of N323.85 billion. Revenue trend of NB shows that in the last five years, 2018 revenue position is the first decline in five years. The company had recorded consistent growth in revenue between 2014 and 2017. Meanwhile the steep decline in other income of NB was affected by the absence of income from claims on insurance for the period. Against income claims on insurance in 2017 of N1.57 billion, other income declined significantly by 60.4 percent to N885.3 million from N2.23 billion in 2017. Furthermore, year-to-date (YTD) analysis revealed that stock price of NB is down 12.3 percent afteritclosedonMondayatN75.00, a 9.64 percent decline from N83 market close as at Friday. In line with market reactions to the just postponed

general election on Saturday which has led to negative reactions to the overall equity market, shareholders of NB however refuse to be motivated by dividend declaration by the company. Nigerian Breweries Plc on Monday announced to pay a final dividend of N14.6 billion which is N1.83 per ordinary share of 50 Kobo each for the period ended December 31, 2018. This is however despite unimpressive result released by the beer company for the year ended 2018. “With a dividend yield of 2.2 percent, the declaration of N1.83 per share is below consensus expectation of N3.’’ Okunrinboye said. “I don’t think we would see investors’ moving strongly towards the stock as there is already a negative sentiment.’’ According to report, dividend payment by the firm is subject to the deduction of

the appropriate withholding tax and approval at the Annual General Meeting of the Company which is slated for Friday, May 17, 2019. NB also further explained that only shareholders whose names appear in the Register of Members as at the close of business on Wednesday, March 6, 2019, will be paid. Register of Members is expected to be closed from Thursday, March 7, 2019, to Wednesday, March 13, 2019. “I see investors reacting negatively to the financial position of Nigeria Breweries which may lead to NB share dumping.” Ologunro told BusinessDay. He further reiterated that, “investors are more interested in the sustainability of dividend payment; the decline in revenue and profit of NB is a threat to this reality.” Shares of Nigerian Breweries earlier in February hit the lowest in 18 years at N74

per share on stiff competition among beer makers and the declining purchasing power of consumers who sought cheaper alternatives to products of the brewery. The down trading nature of consumers, going for more cheaper beer alternatives coupled with intense competition in the industry are factors that may pressure down revenue and profit of NB. The drop in revenue and profit has been seen as a likely resultant effect of stiffer competition from other brewers in the period under review. Amongst others, Ghana exported 580,000 cartons of Alomo bitters in Nigeria in 2018 as demand for product increases. NB’s net revenue was down 5.8 percent to N324.38 billion on a 21.4 percent increase in exercise duty expense to N25.8 billion. While revenue from exported products increased significantly by 57 percent to

N190.4 million, NB’s revenue from Nigeria which constitutes about 99 percent of the group sales declined. Going forward Ologunro expressed that he does not see a fundamental shift in NB struggling to grow its revenue ‘’ irrespective of the lager segment, we have seen competition abound,” In Q2 2018, the Brewery experimented with a price raise on some of its products like Star Radler and Goldberg ahead of a new tax regime introduced by the Federal Government but reverted when a major competition left price unchanged for its lager product. Share of Nigeria Breweries may appear not appealing now according to analysts however with excess capacity of about 40 percent which still remains unutilised coupled with rapid growth in the Nigerian population; prospect in the long term for NB to rebound is high.

Conglomerate

Transcorp records biggest fall in over 5 years despite doubling profit in 2018 OLUWASEGUN OLAKOYENIKAN

nvestors looked past a 94.5 percent surge in profit of Transnational Corporation of Nigeria Plc (Transcorp), a leading diversified company in Nigeria, as key profitability ratios disappointed. Transcorp’s shares fell 9.94 percent Monday to close at N1.54, the biggest fall in over five years. “The fundamental of that company is not strong,” said Busayo Awoyemi, an investment analyst at First Ally Capital Limited. Despite doubling its

profit to N20.63 billion in the 2018 financial year, Friday, Feb. 15, the company’s profit margin remained abysmal. Profit margin rose to 8.96 percent, indicating for every N100 the firm generated as revenue in 2018, it could only retain N8.96, which is a marginal improvement from N5.65 held in the previous year. Checks by BusinessDay show that the stock has a price-to-earning (P/E) of 6.7x compared to its peer, UACN Plc with 68.04x P/E. Transcorp invests in companies focused in the

hospitality, agribusiness and energy sectors. “That particular industry is one of the industries that usually get the beating whenever there is a market shock,” said Awoyemi. “Investors look at stocks that even when there is a market shock, the stock does not really respond as much as the decline in the market.” BusinessDay analysis of Transcorp’s consolidated and separate audited financial statements for 2018 shows that the company’s revenue rose to N104.16 billion, representing 29.74 percent increase compared

with its 2017 sales record of N80.28 billion. In spite of over a quarter growth in the cost of goods sold, the firm showed efficiency in its operation as gross profit increased to N48.25 billion from N36.42 billion. It grew its operating profit, an indicator of good cost management, by 32.77 percent to N34.65 billion from N26.03 recorded in the previous year, improving its operating margin to 33.26 percent. Despite an impressive year in 2018, Transcorp leaves little for its shareholders to cheer about as it

proposed a final dividend of 3 kobo per ordinary share, even as it posted 23 kobo earnings per share compared to 12 kobo apportioned from the company’s profit to each of its outstanding share in 2017. Meanwhile, the Nigerian Stock Exchange (NSE) closed on a negative note Monday as sell-offs dominated the market on rising political uncertainties, causing investors over N196 billion losses. The bearish performance in the market “is investors’ reaction to the postponement of the general elec-

Edited by LOLADE AKINMURELE (loladeakinmurele@gmail.com) Graphics: CHINEDUM ONYEMA

tions,” said Lucky Djebah, an equity research analyst at Lagos-based Qualinvest Capital Limited. “Investors do not like uncertainties.” Hopes of Nigerians to decide their President for the next four year were put on hold on Saturday after the Independent National Electoral Commission announced a week delay of the polls hours before they were earlier scheduled to kick-off, citing logistic reasons for the postponement. As a result, 37 stocks declined as against 12 that advanced at the close of trading at Custom Street.

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

COMPANIES & MARKETS

@Businessdayng

Wednesday 20 February 2019

Business Event

Insurance

NSE lifts ban on Goldlink Insurance ISRAEL ODUBOLA

he Nigerian Stock Exchange (NSE), one of Africa’s biggest bourses, has lifted the suspension placed on trading in the shares of Goldlink Insurance Plc, on Monday February 18, 2019.` A notification letter signed by the Head of Listing Regulations of the Exchange, Godstime Iwenekhai, revealed that ban placed on the shares of Goldlink Insurance has been removed following the submission of the insurer’s outstanding Audited and Interim Financial Statements to the Exchange. Recall that on July 5 2017, the NSE announced the suspension on trading in shares of Goldlink Insurance and 16 other companies over failure to submit relevant accounts to the Lagos bourse upon the expiration of the cure period. Analysis of the composite financials for nine months ended September 30, 2018 revealed that the gross premium written appreciated by 3.9 percent to N845.13 million

relative to N813.34 million posted in comparable period of 2017. Net underwriting income, which is net premium income plus commission income and fees stood at N820.03 million in the period reviewed, indicating 1.96 percent expansion over N804.24 million reported a year prior. The insurer’s underwriting profit spiked 26.51 percent to N162.2 million in the considered period, basically driven by 15.91 percent decrease in underwriting expenses to N148.27 million from N128.21 million in comparable period of 2017. Although management expenses dip 10.51 percent to N375.59 million, the insurer incurred N132.44 million losses before tax in the first nine months of 2018 basically of its inability of control management expenses within the limit of underwriting profit and investment income. After-tax losses decelerated to N149.25 million compared to N243.29 million in similar period of 2017. The insurer’s total assets stood at N1.75 billion in the period consid-

ered, indicating 6.91 percent decline from N1.88 billion reported in similar period of 2017. Total liability mounted 8.29 percent higher to N8.1 billion in the first nine months of 2018 from N7.48 billion recorded a year earlier. Shareholders’ funds further fell to a deficit of N6.35 billion compared with N5.60 billion reported in the first nine months of 2017. Goldlink Insurance Plc has issued share capital of 2.46 billion Ordinary Shares of 50 kobo each as at the last day of 2018. Unity Kapital Assurance Plc, the insurer’s major shareholder owns 1.27 billion shares, representing 51.53 percent stake. Other shareholders account for the remaining 48.47 percent, representing 1.19 billion shares. The last trading price of the company’s shares before suspension was N0.53. Goldlink Insurance is a Lagosbased insurer that underwrites classes of insurance including general insurance, life and pension, special risk insurance. It was enlisted on the local bourse in February 2008.

L-R: Mayo Ayilaran, CEO, Musical Copyright Society, Nigeria; John Asein, director general, Nigerian Copyright Commission; Orits Williki, chairman, MCSN, and Louis Udoh, general manager, MCSN, during MCSN’s courtesy visit to the corporate headquarters of NCC in Abuja.

Technology

CcHub opens Africa’s first Design Lab in Kigali OLUFIKAYO OWOEYE

o-creation Hub (CcHub), a Nigerian innovation centre, has launched a CcHub Design Lab in Kigali, Rwanda. The new state-of-the-art lab according to the firm will provide a space for product designers, engineers, scientists, and stakeholders to explore the application of emerging technologies to solve Africa’s public health, education, governance, and private sector challenges. The firm also plans to spend $11 million on designing technology solutions to systemic problems in public health, education, and governance. Bosun Tijani, CcHUB’s Founder & CEO, noted that it was necessary to adopt the concept of design thinking as it would relieve Africa the burden of innovating

just for the sake of it. “It is important to understand that we don’t have the luxury to build solutions just for the sake of solutions. We have to build for end users who desperately need solutions for the existing problems in society. Applying design thinking will help African countries not waste time during the process of building solutions,” he noted. The entrepreneur highlighted a few things that the concept of design can bring; ensuring better outcomes, improve processes, expand capabilities and increase equity. Paula Ingabire, Minister of ICT and Innovation, Rwanda, described the new hub as an exciting landmark for Rwanda’s burgeoning tech community, noting that the country is keen on collaborating with world-

class partners to establish the country as a leading destination that nurtures innovation-driven enterprises. “As we strive to become a knowledge-based economy, we will continue to build long-lasting, strategic partnerships that celebrate excellence, forge ahead with progress and that is, essentially, a force for good that will impact thousands of people across the continent,” he said. The firm also announced Rwanda Biomedical Center as its first local partner. Since launching in 2011, CcHUB has built a community of over 13,000 technologists, entrepreneurs, and thought-leaders, and has incubated and provided support to a portfolio of over 110 early stage ventures providing solutions to social problems with technology

L-R: Babatunde Dada, chief finance officer, MainOne; Funke Opeke, CEO, MainOne, and Libby Barr, chief operating officer, Avanti Communications, during the NERDS Unite 2019 in Lagos.

Consumer Goods

PZ Cussons deepens CSR in Nigeria with 2019 edition of Chemistry challenge IFEOMA OKEKE

s part of the ways to give back to the communities where it operates, PZ Cussons, one of Nigeria’s top manufacturer and distributor of consumer products has launched its 2019 edition of chemistry challenge in Nigeria. The Chemistry challenge is designed to promote the study of chemistry among students whilst demonstrating the relevance of chemistry in the society through an open competition amongst public and private secondary schools. Top three winners will receive a trophy, a medal and N1,000,000, N750,000, and N500,000 respectively. Additional prizes include laboratory equipment for the winners’ schools. Speaking during the a stakeholder parley to kick-off the 2019 PZ Cussons Chemistry Challenge (PZCCC) in Lagos, Abiola Laseinde, head, corporate services, PZ Cussons said the competition is Nigeria’s number one pure science competition and an initiative of the PZ Cussons Foundation, supported by Premier, Nigeria’s number one Toilet Soap. Laseinde said PZ Cussons Ni-

geria Foundation has continued to support Nigerian communities by supporting projects in the areas of education, potable water, health and empowerment. She added that the foundation has completed over 58 projects in different parts of the country after the launch in 2007. Also speaking at the event, Chinwe Remi-Lawal, general manager, RedWood Consulting, explained that since inception in 2013, the competition has grown to more than 3000 participants with an increase in pass rates of chemistry. In NECO, the pass rate of candidates with distinction grew by over 562percent, Credit grades grew by 34.5percent, Pass grades dropped by 46percent and the failed dropped by 56percent, which is a testament to the success of the competition. “This year’s edition promises to be bigger and better with plans to take the competition to a wider audience across Nigeria. Hence, for the first time since inception, the PZCCC will be going pan Nigerian, with regional hubs located in Lagos, Port -Harcourt and Abuja, what better way to celebrate PZ Cussons 120 years in Nigeria? “Target Audience for this edition

still remains SS2 students and there is currently no limit to the number of participating students per school, in this vein we are calling on all secondary schools to participate this year,” Remi-Lawal added. She said the registration portal opens on 27th February while the online CBT will begin 1st March till May 16th, adding that candidates from each zone (Lagos, Abuja and PH) who scale the first stage will then go to a physical center to participate in the second phase, which is another online test. This is scheduled for 25th May. She said the third phase will take place June 15th for the shortlisted students and the grand finale will happen in Lagos on 27th of July. Alex Goma, managing director, PZ Cussons, Nigeria said the competition will encourage students to read and develop interest in Chemistry. “In a bid to improve the capacity of Chemistry teachers across secondary schools, this edition will include a two-day teachers’ training and a ‘Train the Trainers’ segment as a means to equip and reward chemistry teachers who are dedicated to building and impacting future generations,” Goma added.

L-R: Mitchell Elegbe, group managing director, Interswitch; Akachukwu Anumudu, winner at the Interswitch SPAK 1.0, and Steven Adebunmi, representative of acting registrar/chief executive, National Examinations Council, during the prize presentation in Lagos.

L-R: Deji Akinpelu, founder, Rethinking Cities; Raymond Gold, coordinator, Housing and Projects Nigeria Slum and Informal Settlement Federation; Gbenga Komolafe, general secretary, Federation of Informal Workers of Nigeria; and Iyanuoluwa Bolarinwa, manager, CivicHive, during the public presentation of Don’t Get Elected To Get Us Evicted campaign in Lagos.

BUSINESS DAY

Wednesday 20 February 2019

CITYFile

Lagos community knocks politicians over failed promises

ome Residents of Tedi community in Lagos State have condemned the attitude of party candidates who only remember to fix bad roads in the community when elections are around the corner. The resident on Monday said that even two days before the postponed February 16 elections, in spite of past promises by political office holders, heaps of sand were poured on the road for rehabilitation and not leveled. “This measure is the usual practice of candidates in the area to capture votes and disappear after that. “In spite of past promises by such candidates, Tedi roads have been abandoned for years making residents to take other routs out of the area on daily basis. “For this they pay more on transportation to take them out and return them to their places of residence every day,” said a resident, Daniel Aminta. Aminta, a pastor, of Christ Surety Assembly in Tedi, said that the window dressing approach of the candidates would no longer work. “Those trips of sands are tipped on Thursday ahead of the postponed elections; now don’t be surprised that the trips of sands will remain there until next year without being leveled,” he said.

Herdsman charged with killing farmer

n Ado-Ekiti Chief Magistrate Court has ordered the remand of a herdsman, Umaru Abubakar, over alleged murder. Abubakar, 35, whose address was not provided, is being tried on a charge of murder. The prosecutor, Johnson Okunade, told the court that the accused committed the offence on February 13 in Aiyegbaju-Ekiti. Okunade alleged that the accused murdered one Elijah Ogor, a farmer. According to him, the deceased had warned the accused several times to stop rearing cows on his farm but Abubakar did not yield until the faithful day when he killed the deceased. Okunade told the court that Ogor had called his brothers over threats by Abubakar that he would kill him but that before the arrival of the deceased brothers, Abubakar had killed Ogor and escaped. According to the prosecutor, the offence contravenes Section 319(1) of the Criminal Code, Laws of Ekiti State, 2012. The prosecutor urged the court to remand Abubakar in prison, pending an advice from the office of Ekiti State Director of Public Prosecutions (DPP). The plea of the defendant was not taken by the court.

Edo to spend N2bn on furniture production

do State governor, Godwin Obaseki, has revealed plans to spend N2 billion to procure furniture for primary schools across the state. The governor said this during an inspection of remodelling work at the Government Science and Technical College (GSTC), formerly known as the Benin Technical College, in Benin, the state capital. During the visit, Obaseki inspected furniture produced by students of the vocational arm of GSTC, noting that the state government intends to provide furniture for about 150,000 pupils in public primary schools across the state. He said that based on the quality of furniture made by the GSTC students, the school would make a substantial share of furniture for use in schools in the state. “One of the reasons I came here was to see the quality of work the students are doing and their capacity to produce. What I see here is much better than what we are importing from China. If substantial part of the furniture is done by this school, much revenue would accrue to the school,” he said.

Disillusion all over! Homeless Nigerians continuing the morning snap under the light train bridge in Orile, Lagos, on hearing the postponement of the February 16, 2019 presidential election by the Independent National Electoral Commission (INEC). Pic by Pius Okeosisi

Orphanage home operator nabbed for human trafficking ... allegedly offered to sell 2 babies for N3.5m

38-year-old suspected human trafficker and operator of an orphanage home has been arrested by the Edo command of the National Agency for the Prohibition of Trafficking in Persons (NAPTIP). The suspected said to also be involved in sales of children, was arrested in Warri, Delta State while planning to sell a baby for N1.5 million, according to NAPTIP. Zonal commander of the anti-human trafficking agency in Edo, Nduka Nwanwenne, said in Benin on Monday that the suspect was arrested in collaboration with the Nigeria Police Force in Delta. According to Nwanwenne, the suspect, who hails from Okpe local government area of Delta State, operates an unregistered orphanage home, known as Kelly Osia Orphanage Home at Orhuwhorun in Udu local government area. The NAPTIP commander said information at their disposal revealed that several attempts made by the suspect to

register the said orphanage home with the Delta State ministry of women affairs, community and social development, were repeatedly turned down. He explained that despite the refusal of the government to register the orphanage, the suspect continued to operate the home illegally for the sole purpose of adopting and selling of babies. According to Nwanwenne, “the suspect’s cover was blown open in a sting operation when a child protection specialist posed as a prospective client for the adoption of a baby in the orphanage.’’ “The undercover child protection specialist was told to buy provisions and food items, including biscuits, noodles, semovita, and milk among other beverages for the children at the orphanage, to gain access to the home. “The undercover specialist was later asked to deposit the sum of N50, 000 as registration fee at a bank operated by the orphanage. “After the payment of registration fees and completion of the necessary forms

and interviews, the suspect produced a three-month old baby for the child protection specialist and further requested the sum of N1.5 million from the undercover specialist for the baby. “During the negotiation, the undercover child protection specialist said he was going to inform his wife first before picking the baby. “Later that same day, the suspect allegedly called the undercover child protection specialist, saying that there was another child that looks so much like the first one and that they could be paired as twins. “The suspect demanded an additional payment of two million naira to bring the total sum to N3.5 million, for the two babies.’’ Nwanwenne said it was at that point that the child protection specialist immediately reported the matter to the NAPTIP office, for prompt action. “The suspect was apprehended and has been taken into custody and is making useful statements,’’

Police vows to track down killers of Okowa’s aide FRANCIS SADHERE, Warri

elta State police command has vowed to track down the killers of Lawrence Ijie, an aide to Governor Ifeanyi Okowa, who was gruesomely murdered on Friday night by unknown gunmen. Spokesperson of the police in Delta, Chuks Orisewezie, said on Monday that detectives have begun full scale investigation and would do everything legally possible to bring the perpetrators of the heinous crime to book in no distant time.”

According to Orisewezie, the Commissioner of Police (CP) in charge of Delta, Adeleke Yinka, has also appealed to the members of the public to come up with useful information that could lead to the arrest of the culprits, assuring them of commitment to their safety and security. He vowed that the command would leave no stone unturned to ensure justice is done, noting that the motive behind the killing of the governor’s aide was yet unknown whether. “The Delta State police command is saddened by the killing of Lawrence Ijie aka Ngozi

(M), aged 38; special adviser to the governor on youth development by unknown gunmen,” the CP was quoted to have said. The police chief who paid a visit to the palace of the monarch of Uvwie Kingdom, Emmanuel Sideso, also solicited the assistance of the royal father and other stakeholders in achieving peace, safety of Deltans. “The CP also visited Warri, where he held meeting with the area commander, divisional police officers, and other stakeholders regarding the incident and later visited the scene of crime.

BUSINESS DAY

www.businessday.ng

Leadership

https://www.facebook.com/businessdayng

@Businessdayng

Wednesday 20 February 2019

Shaping people into a team

When environmental regulations are tighter at home, companies emit more abroad Itzhak Ben-David, Stefanie Kleimeier and Michael Viehs

f we want to avoid the most damaging effects of climate change, countries need to work together to limit pollution and keep global warming to under 1.5 degrees Celsius above preindustrial levels. But countries differ in their approaches toward environmental regulation. Some are trying to reduce carbon dioxide (CO2) emissions by enforcing strict environmental policies. Others say they are considering withdrawing from the Paris Agreement designed to collectively combat climate change, or already have. This gap makes a difference. Our research finds that global emission levels arelowerfor countries with tighter domestic environmental regulations. One reason for this, we find, is that companies, which are the biggest contributors of CO2 emissions, emit less CO2 at home when domestic environmental regulations are strict. However, these companies also emit more abroad, particularly in countries with laxer environmental standards. Fortunately, the higher foreign emission levels do not outweigh the reductions at home. But if we want progress to pick up, countries will have to take collective action to bring down overall global emission levels further. POLLUTION HAVENS Academics have long argued that there is a symbiotic relationship between countries’ environmental policies and the degree to which companies pollute. But the causality between these two factors could be bidirectional: countries may adopt lenient environmental policies to attract foreign companies, and/or companies may transfer polluting operations to those countries. Either way, the idea is that polluting activities are more likely to be performed in countries with loose environmental policies; economists call this hypothesis the pollution haven hypothesis, or PHH.

Until now, this hypothesis was typically tested using data at the country or industry level, mostly without access to direct measurement of pollution. For example, several studies correlate aggregate industrial activity (e.g., foreign direct investment as a proxy for pollution) and the stringency of environmental laws in home countries compared to foreign countries. And studies that use firm-level data do not observe pollution activities directly and often infer them from other variables (e.g., a firm’s location or manufacturing decisions). We used a unique data set of CO2 emissions to see whether companies actually pollute more in countries with weak environmental laws and enforcement. Our data includes information for over 1,800 international firms and reports CO2 emissions in each country where the companies operated between 2008 and 2016. Although the emission figures are self-reported, they are frequently audited and used by institutional investors who monitor the firms. We combined these data with information on the stringency of national environmental policies from the World Economic Forum. We conducted various tests to investigate the implications of the “pollution haven” hypothesis. In particular, we looked at whether companies tend to pollute less at home, but more abroad, given the strictness of environmental policies in their home country. Also, we ex-

plore the effects of the “regulatory distance” between a firm’s home country and each foreign country (in other words, the difference between the strictness of the environmental regulation), based on the likelihood of that firm polluting in that foreign country. We documented a number of important correlations. Our findings reveal that in countries with tight environmental regulation, companies have 29% lower domestic emissions on average. On the other hand, such a tightening in regulation results in 43% higher emissions abroad. Importantly, although companies appear to emit more CO2 abroad, stricter environmental policies at home are associated with lower global pollution overall. Tightening of environmental policies in the home country (a one standard deviation increase in environmental regulation within the sample of investigated countries and companies) is associated with about 15% lower global CO2 emissions overall. We also explored different factors that might make companies more or less likely to pollute abroad. For companies that are considered to have good governance (using a standard governance scoring that is often used in the literature), we found that the observed effects are generally weaker; when the home country sets strict environmental policies, companies commonly considered to have good gover-

nance structures produce fewer emissions at home and export fewer emissions to foreign countries. Thus, it is predominantly the firms with weak governance structures that behave according to the PHH and conduct their polluting activities abroad. This is interesting, as companies can face a trade-off between pollution and value. At least in the short run, companies may prefer to pollute in order to save on the costs associated with clean production. But good governance mechanisms, such as strong shareholder monitoring, may dissuade managers from pursuing such short-term goals and push them toward production with lower emissions. Good governance is generally associated with an investor base that values corporate responsibility practices and puts pressure on management to pursue socially and environmentally responsible goals, including lower emissions. We also found that some industries are more prone to exporting pollution abroad than others. The heaviest polluters are firms in industries such as electricity, gas and refineries, steam and air conditioning supply, air and water transport and mineral and metals producers. Our study shows that companies in these industries do not reduce their emissions at home, while at the same time they export more pollution abroad. We argue that this is because strict environmental policies are costly for companies in high-polluting industries, causing them to attempt to mitigate some of that cost by exporting pollution. Consequently, policymakers might have a greater impact on global emissions if they target these highpolluting industries. Where do companies “export” their pollution? By drawing on empirical methods used in the international trade literature we found that companies pollute more in the foreign countries with the least regulation, whose standards fall far below that of their home countries. For example, Trinidad and Tobago, Bosnia

c 2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate

Expertise It’s in our DNA www.ﬁrstbanknigeria.com

FirstBankofNigeria

In an ever changing economy, with 125 years of serving YOU, we remain strong, trustworthy, dependable, safe and consistent. You can be conﬁdent that we will continue to deliver innovative banking products and services which seamlessly and conveniently suit your lifestyle needs.

Visit www.ﬁrstbanknigeria.com to learn more about us.

@FirstBankngr

Firstbankngr

FirstBankofNigeriaLtd

@ﬁrstbanknigeria

+FirstBankNigeria

and Herzegovina, Slovakia, Suriname and Barbados are frequently among the top five countries that annually receive most exports of direct CO2 emissions relative to their own . They are also among the countries with the weakest environmental regulation. Overall, we find support for the idea that companies perform their polluting activities outside their home country when domestic environmental policies are becoming relatively stricter. Strict environmental regulation is associated with lower company-level emissions at home, but companies then seek to continue those polluting activities elsewhere. Fortunately, we also find that companies pollute less on a global level when their home countries impose strict environmental policies. Our findings suggest that national regulation can be beneficial, but it can only do so much to effectively combat pollution and climate change. Because of the potential for regulatory arbitrage, countries need to take concerted action to ensure that the overall CO2 balance will not increase. If no coordinated effort is undertaken to address climate change, major stakeholders, such as large companies, will find ways to at least partially circumvent strict environmental regulations and move their CO2-intensive activities elsewhere. Future research should explore the effects of whether changing regulation could alter firm behavior locally and in foreign countries.

Itzhak Ben-David holds the Neil Klatskin Chair at the Fisher School of Business at Ohio State University. Stefanie Kleimeier is a professor at the Open University in the Netherlands. Michael Viehs is associate director at Hermes Investment Management in London.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

In Association with

‘We are exploring ways to reduce cost of funding’ Concerned by high interest rates charged by banks and other financial institutions, Kayode Falasinnu, chief executive officer of Boston Advisory Limited, an investment banking firm which recently won the Fastest Growing Boutique Investment Banking award, in this interview with Hope Moses-Ashike and Bunmi Bailey, gives an insight into how the firm is currently exploring ways to reduce the cost of funding significantly for private infrastructure. Excerpts. Give a general opinion on the financial sector in Nigeria speaking from your position as a stakeholder in the sector. What provisions do you feel are necessary to be provided in the finance sector to ensure it performs better? he financial sector is plagued by several issues which weigh on its effectiveness in the economy. Primary among the issues is the excessively high cost of funding. To put this in context; let’s assume I own a company achieving 20 percent PBT margin without any debt, no one would say the company is doing badly. However, if I need some leverage to significantly expand capacity or operations and I have to pay interest at a rate as high as 23-25 percent, that will potentially harm my business to a point where I will begin to report PBT margins that are negative or within the low single-digit margin. So, until we look at how we can resolve the cost of funding problem, we are not going to see the growth that we want as a country. There is a need to create incentives for financial institutions to fund capital expansion of industries, especially in the real sector at interest rates that support growth and don’t stifle business. Nigerian entrepreneurs are always cautious to expand capacity, this should not be so, given the size of the market and our consumption potential. Working with institutions like InfraCredit, we are currently exploring ways by which we can reduce cost of funding significantly for private infrastructure Give us a brief history of Boston Advisory Limited and how it has evolved since it started operations. Boston Advisory Limited was incorporated in 2010 and began full operations in December 2013. Starting out, the company focused on middlemen-type brokerage transactions. For instance, when there were issuances in the market, we would assist in raising funds in exchange for a fee. Alongside, we also focused on private investment transactions for unlisted companies. However,

in 2016, which was the year I came aboard, we began to look for opportunities for collaborations with capital market players on transactions. We also delved into what we called the non-typical transactions which are essentially innovative private solutions for our clients. In addition, we worked on some of the foremost state bond deals, including the Niger State and Gombe State Bond Restructuring. What were the major challenges Boston Advisory Limited had last year and how did you survive? We began 2018 with high hopes, given the recovery in the economy experienced in 2017 and the expectations that the economy would kick off in 2018. Unfortunately, the year did not go as expected, as the market witnessed few issuances. However, with our aggressive stance, Boston Advisory was able to secure a good share of the few bond issuance transactions in the market and also executed some bond restructuring deals. Some of the transactions we executed last year include: the Lagos State Government Series 2, Tranche 3 & Tranche 4 Bond Issuance under the state’s N500 billion Debt Program, on which we were a joint issuing house and C & I Leasing Plc N7 billion bond issuance, where we also acted as underwriters. In addition, we were the issuing house on the restructuring transactions for some states like Bauchi and Plateau States. These were in addition to several private transactions. So, despite the slow pace of activity in the market, we were able to undertake these deals with the collaborations with other issuing houses, with the goal of seeking innovative value creation opportunities for our clients and executing flawlessly to ensure their objectives were achieved. Five years after operations, what would be your greatest achievements so far? We measure our achievement by how we have been able to grow our brand in such a short period of time, where we are now recognised in the market for not only participating in

Kayode Falasinnu

regular transactions, but also creating solutions and adding value to our clients. In my view, our biggest achievement is the confidence our clients have in our ability to execute, deliver timely on transactions, and ensuring a successful close. Our clients are happy with results we have achieved for them, especially given the tough market. As long as we continue to ensure that we are creating innovative measures to ensure client satisfaction, I believe we will be able to achieve much more. What makes Boston Advisory Limited the fastest growing boutique investment banking firm, different from its other competitors? The award not only speaks to our operations in 2018, but also reflects the trajectory of the company and how far we have come from an investment banking boutique that was hardly known, to one which now participates in landmark deals and transactions in the market. A very important point to note is that we have closed a significant number of stand-out deals where our participation was pivotal in terms of the amount of money raised for the clients and the value added. When I initially joined, the firm was largely unknown by industry players, with

most confusing us for the international firm, Boston Consulting Group. But we see less of that today; people are beginning to identify, commend, and appreciate us. When we compare ourselves with smaller boutique investment firms in the Nigerian space over the last few years, it is obvious why we were chosen as the fastest growing boutique investment banking firm in Nigeria by the International Finance Magazine. I attribute it to the transactions, collaborations in the market, our engagement with market players such as the Securities and Exchange Commission (SEC), FMDQ OTC, Nigerian Stock Exchange (NSE), rating agencies and other financial and advisory firms. In a nutshell, our eligibility for the award is a function of what we have been able to achieve in a short period of time. Where do you see this business in five years? Critical for us is that we keep doing what we do – continuously seek ways to ensure that we make our clients happy and help them achieve their objectives, such as implementing financing options and alternatives that ensure that they can run their businesses optimally.

Sterling Bank extends access to online lending

terling Bank, Nigeria’s leading commercial bank, has extended access to its online lending platform, known as Specta, to people who are engaged in personal businesses. Divisional Head, Retail and Consumer Banking of Sterling Bank, Shina Atilola, who disclosed this at a press conference marking the first year of operation of Specta in Lagos, said the extension is due to the platform’s capacity to pre-screen borrowers and safely provide them with faster approvals and funding. He said Sterling Bank is keen to position Specta as Nigeria’s fastest lending platform as part of its strong desire to empower businesses and enable startups. Also speaking, Benedicta Sadoh, Head of Value Chain Baning, said the bank was able to offer about N10 billion in loans to more than 11, 000 customers while also introducing credit cards, among others, to customers last year. She added that the bank is looking at giving out N40 billion in loans to 50, 000 customers this year. Responding to questions from journalists on how Sterling Bank hopes to attract and accommodate more customers of the bank on Specta, Atilola said the bank plans to achieve this through the use of social media while relying on a credit bureau to ascertain the customer’s character and capacity. He said the bank decided to expand the coverage of the product to accommodate more customers outside the bank’s customers because of the yearnings of other potential customers. Sadoh explained that all the loans granted through the platform are performing well, adding that the second anniversary of the product will be flagged off this week and any customer that joins the scheme between February 4th and 14th would enjoy a discount interest rate of about 1.29 percent. Specta is an instant lending platform that offers consumer loans of up to N5 million in five minutes. The lending platform uses proprietary data and analytics to process and disburses consumer loans to salary earners who belong to preapproved communities in less than five minutes without paper work and collateral.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

In association with

a g @ bu s ines s dayo nl ine. co m

Nigeria’s agric sector records lowest growth rate since 2010 Josephine Okojie and Bunmi Barley

he Nigeria agricultural sector has recorded its lowest growth rate of 2.12 percent in 2018 since 2010, an indication that the sector is still largely limited by lingering issues, data from the country’s GDP report states. On a year on year basis, growth in the sector declined by 1.77 percentage points from 4.2 percent in the fourth quarter of 2017 to 2.5 percent in same quarter in 2018. On a month on month basis, the sector grew marginally by 0.55 percent from 1.9 percent in the third quarter to 2.46 percent in the fourth quarter of 2018. Despite the potential of the agricultural sector to change the fortunes of the Nigerian economy, with attendant exponential gains by way of earnings, employment and other spin-offs, the country is yet to boost farmers’ productivity. Over the years, government has mouthed support for agriculture, saying it is serious with making the sector one of the largest employers of labour and a major foreign exchange earner. But this is yet to go beyond the talking stage as the sector is still largely limited by fundamental issues. As a result, yields have continued to remain low and progress made initially is now on a downward trajectory. This is evident in the country’s Gross Domestic Product (GDP) report. “We have increased our crop

production of various commodities but the government has still not done anything in addressing fundamental issues. We still do not have sufficient seeds and seedlings, nothing in place to increase mechanisation,” said Abiodun Oyelekan, chief executive officer, Farm Fresh Agric Ventures. “The only thing the government has done is shifting attention to the agricultural sector. People now want to invest in the sector than before and this is why there is increase in production,” Oyelekan added. A l s o, l o t s o f y o u t h s t h a t invested into the sector through entrepreneurship are diverting

into other sectors, owing to the high failure rate caused by some underlying problems in the country’s agricultural sector. In the last three and a half years, the Buhari- led government had devoted a lot of energy at deepening agriculture with initiatives like the Anchor Borrowers Programme (ABP) without addressing fundamental issues of mechanisation, irrigation, seeds, extension services, insurance, research and development, among others. Similarly, critical infrastructure to aid growth for the agricultural sector is lacking. One of the greatest

Hunger on the rise in Africa, UN report says Josephine Okojie

new report published by the United Nations (UN) says that hunger is on the rise in Africa after many years of decline, threatening the continent’s zero hunger agenda and the attainment of the 2030 sustainable development goals. The report on food security jointly published by the UN Economic Commission for Africa (ECA) and the Food and Agriculture Organisation (FAO) recently in Addis Ababa, Ethiopia shows that the prevalence of undernourishment continues to rise in Africa and now affects 20 percent of the population, which is more than any other region. The annual UN report indicates that compared to 2015, there were an additional 34.5 million more undernourished people in Africa, of which 32.6 million were in subSaharan Africa and 1.9 million in Northern Africa. According to the report, there are

821 million undernourished people in the world, some 257 million of them currently living in Africa, of which 237 million are in sub-Saharan Africa and 20 million in Northern Africa. “Nearly half of the increase is due to the rise in the number of undernourished people in Western Africa, while another third is from Eastern Africa,” the report states. The report also notes that at the regional level, the prevalence of stunting in children under five is falling, but only few countries are on track to meet the global nutrition target for stunting. Similarly, it states that the number of overweight children under five continues to rise and is particularly high in Northern and Southern Africa. The report also shows that progress towards meeting the World Health Organisation’s global nutrition targets is slow at the continental level. The UN report called for more collaborative efforts to achieve the second goal of the sustainable

development goal and the global nutrition target, amid high youth unemployment and issues of climate change challenging the continent. “The worsening trend in Africa is due to difficult global economic and worsening environmental conditions and in many countries, conflict and climate variability and extremes, sometimes combined. Economic growth slowed in 2016 due to weak commodity prices, in particular for oil and minerals,” Abebe Haile-Gabriel, assistant director-general, FAO and Vera Songwe, executive secretary ECA, said in their joint foreword of the report. “Food insecurity has worsened in countries affected by conflict, often exacerbated by drought or floods. For example, in Southern and Eastern Africa, many countries suffered from drought,” they both said. A l s o, t h e re p o r t i d e nt i f i e d the opportunities for agriculture in developing intra-Africa trade, harnessing remittances for development and investing in youths.

problems confronting rural farmers and communities in Nigeria is the absence of critical infrastructure such as ‘motorable’ roads. Farmers continue to suffer low levels of agricultural productivity due to infrastructural deficit across the country, which reduces their profit and impacts their capacity to expand. “The problem with agriculture is infrastructure. It is not that we do not grow enough but the infrastructure to move, store and process what is harvested are not there,” said Aboidun Olorundenro, operations manager, Aquashoots Nigeria.

“Without critical infrastructure, agriculture will continue to suffer and our diversification through the sector would only be a dream,” Olorundenro said. He recommended the development of linkages between farmers and the market, stating that youths can only find agric attractive when such linkages are provided. Stakeholders say developing agriculture requires the rehabilitation of dams and irrigation facilities to boost farmers’ productivity and also motorable roads to aid access to the market. Also, some players who spoke to BusinessDay attributed the low growth to the combined issue of farmers-herder crisis and climate change. “When the farmers-herdsmen issue started, people underestimated the impact and I think that now, it is becoming clear to people that agriculture is a major source of development and what you are seeing now is slower growth,” Ibrahim Tajudeen, Head of Research, Chapel Hill Denham, said in a telephone interview with BusinessDay. “On the other hand all the agriculture polices by the government is going to take time before they will begin to bear fruit or have an impact. And the Boko Haram issue played a role to the slower growth,” Tajudeen further added. Emmanuel Ijewere, vice president of the Nigerian AgriBusiness Group (NABG) advised that the government that comes in after the elections must look at agriculture as the only source where the GDP relates and directly impacts on employment provision and poverty reduction.

Kogi loses N50bn from cashew nuts as poor quality control, adulteration take toll Victoria Nnakiaike, Lokoja

he Kogi State Government said recently that it has lost about N50 billion from the sale of cashew nuts in 2018 due to adulteration of the nuts by cashew dealers and lack of quality control. Kehinde Oloruntoba, commissioner for Agriculture disclosed this while addressing newsmen, saying the development has forced the government to

announce the immediate enforcement of Farm Produce Regulations Procedures, especially for cashew nuts across the three senatorial districts of the state. Oloruntoba emphasised that last year’s negative effects had likewise affected the state’s image in the cashew nuts market. “The cashew business in the state has become an all comers affair without regulation. In 2017, the state produced over 100,000 metric tons which drastically reduced in 2018,” he said. “In 2017 the state made N70 billion from the sale of cashew nuts, but this declined to N20 billion in 2018 due to the effect of adulterated nuts,” he added. He lamented that no serious government would watch and allow its most viable business collapse.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

ag@businessdayonline.com

Nigeria makes global record seizure of 14,833 tons of pangolin scales in 2018 Josephine Okojie

he Nigeria Customs says that 14,833 metric tons of pangolin scales meant for illicit trading and worth an estimated $900 million were confiscated in the country in 2018. This represents the biggest seizure of pangolin scales by value and weight globally in 2018, the Customs authority says. Mutalib Sule, assistant comptroller-Federal Operation Unit, Zone A of the Nigeria Customs, stated this at an event organised by the Pangolin Conservation Working Group Niger ia (PCWGN) and the Nigerian Conservation Foundation to mark the 2019 World Pangolin Day recently in Lagos. “The summary of pangolin seizure by FOU Zone A in 2018 was 14,833 metric tons. By my study, globally, this is the highest seizure of pangolins in 2018 worth over $900million,” Sule said. “Followed by Japan with a distant seizure value at $450 million,” he added. He stated that a total of four seizures were made in 2018 and all in Lagos, the country’s commercial centre.

L-R: Desmond Majekodunmi, an environmentalist; Muhtari Aminu-Kano, director-general, Nigerian Conservation Foundation; Olajumoke Morenikeji, coordinator of the Pangolin Conservation Working Group Nigeria and Sule Mutalib, asst. comptroller of the Nigeria Customs Service, at the 2019 World Pangolins Day event with theme as “Pangolins and Politics” held recently in Lagos

He identified the widespread dearth of knowledge about the mammals as the major factor fuelling the illegal trade in the country, while calling for the need to drive more public awareness of pangolin. Sule stated that dangerous terrains, poor reward system and weak law enforcement as well shortcomings in the judicial system were major challenges limiting Customs in its mission to seize and arrest culpable individuals

in connection with the illegal pangolin scales trade in the country. A kilogram of a pangolin scales cost $3,000, the meat cost $300 per kg while a kilogram of live pangolin is sold for $15,000 per kg. Ac c o rd i n g t o a 2 0 1 7 report from the international organisation TRAFFIC, Nigeria is among the top ten countries involved in the illegal wildlife trade. Pangolin, which curls up into a ball when frightened,

is the world’s most trafficked wild mammal. Despite sanction, the trade and hunting are still on the rise in Nigeria and experts say they are increasingly driven by the high demand from Asia. Olajumoke Morenikeji, coordinator of the Pangolin C o n s e r v a t i o n Wo r k i n g Group Nigeria (PCWGN), said that the conversation and protection of pangolins in Nigeria is the collective responsibility of all citizens.

Mo re n i ke j i s a i d t hat poachers have turned to Africa to supply tons of pangolins to the Asian market, and if left unchecked the mammal will go into extinction. “It is seen as a delicacy and sign of affluence in China and because of the huge demand from Asia, poachers have turned to Africa for pangolins to supply the Asian market,” she said. She noted that pangolins which are marked by large, hardened, overlapping platelike scales made of keratin— the same material as human fingernails—are important to both regional and global biodiversity as well as soil fertility because of the soil aeration they do. Speaking on the theme ‘Pangolins and Politics’ Muhtari Aminu-Kano, director general, Nigerian Conversation Foundation (NCF) said that money is the link between pangolin and politics. According to him a kilogram of pangolin scales cost between $10,000$15,000 in the United States. “A n y w h e r e y o u t a l k about the money involved in pangolin you know politics is involved. The people involved must be well connected and influential and in order to

stop the illegal trade we need to address the political dimension,” Aminu-Kano said. “There are several ways we can address the political dimension and the top among them is for us to better enforce the law on endangere d wildlife, create more awareness and education, provide alternative livelihood to hunters and address the issue of the porousity of our ports and borders,” he added. “Pangolin is less known among Nigerian and the main reason is because they are nocturnal. The pangolins use to be found all across Nigeria especially in the savannah but they are not easily found there now.” In Chinese traditional medicine, pangolin scales are believed to treat many ailments and diseases. These in clud e skin dis o rders, infected wounds and even heart disease. Similar beliefs also exist in some parts of Nigeria. The event which was organised by PCWGN and the NCF also had in attendance children and students from various primary and secondary schools in Lagos to educate and create awareness of pangolins in schools.

‘GOATTI has attracted N7m investments in six months’ Onifide Ifedayo is the founder of GOATI Nigeria - an online livestock platform that allows people invest in livestock business without having to own a physical farm. In this interview with JOSEPHINE OKOJIE, he spoke about the GOATTI platform and the Nigerian livestock industry. Can you tell us about the GOATTI and how it operates? O AT T I i s a n ap p l i cat i o n t hat is digitalising the Nigerian livestock industry by allowing more Nig e r ia n s pa r t i c i pate i n the subsector through their investments. It allows individual earn more money outside their paid employment w h i l e c re at i ng j o b s a n d providing finance for livestock farmers. The individuals can choose any plan of their choice on our platform to invest by making payments on our payment platform provided by the app. We realise that there are huge opportunities that are yet to be harnessed in the livestock industry so we believe that digitalising the industry will help the livestock sector realise its full potential. A goat on our platform cost N50,000 and the cost covers payment for the livestock, vaccination, feeding for six month and farm labour. After six months, the goat is sold

to our pool of customers who are already on our platform. Investors get 30percent return on every investment on our platform and we currently have over 300 investors. The GOATTI application that can be downloaded via android or IOS and immediately payments are made, a goat is credited to the accounts of our customers. We have made over N7million in less than six months. Does GOATTI have a farm or is it working with other livestock farmers? Yes. We have a livestock farm in Abeokuta, Ogun State were we are currently breeding over 300 goats. In the last five years we have been working to build our own market place for our livestock business before we decided to digitalise our platform in 2018. The entire South West, South East and South-South regions depend on the Northern region for the supply of the goats. To supply these regions, we have our own farm and also

aggregate from subsistent farmers across the country. All our livestock are insured by the Nigerian Agricultural Insurance Corporation (NAIC) against pest and diseases as well as theft. What is your marketing strategy for the goats on your platform? We have been able to expand our market beyond our quick service restaurants and we are currently in partnership with the biggest goat market in Lagos, where we have our own stand to sell live goats as well. Why goat farming and livestock in general considering the issues limiting the industry? We went into goat farming because it is a profitable business and they are stable animals that require less to manage. The meat is in high demand all year round and the livestock requires a short period of time to reach its full size than cow. It produces twice

in a year and number per birth of kidding increases at each birth. In the developed world, the livestock industry is a major foreign exchange earner because it is well developed. I believe that if Nigeria gets things right with developing its livestock subsector based on the ranching model, the industry has the potential to create jobs and drive economic growth. I believe the private sector has to drive

Onifide Ifedayo

the initiative using technology and innovations while the government provides the enabling environment. I believe GOATTI can address some of these issues structurally by driving more investment into the industry. How do you source for your livestock feeds? We buy Naiper grass and hay from the northern part of the country. We also source for groundnut mash, cassava peel, yam peel from factories that use these products as raw materials. Currently, to drive down production cost, we have planted our own leguminous plants and Naiper grass on our farm to allow our goats graze on them. We have over 100 hectare of land. We also have a processing facility, were we butcher and process between 60 and 70 goats a week to supply to top restaurants across Lagos. What are some of the challenges confronting your

business? One of the biggest challenges we faced was our feeding combination. Initially we thought that it was just grass we needed to feed our goats, but they were not growing well until we introduced other leguminous plants. Also, poor infrastructure across the country has impacted our business. We spend a lot transporting Naiper grass from the northern parts of the country to our farm in Ogun state. Similarly, we spend a lot transporting goats from framers we aggregate from to Lagos. What are some of GOATTI expansion plans? We plan to build GOATTI to more from retail to wholesale. We plan to divert into cattle farming and milk processing. We want to expand our value chain operations. We want to build the GOATTI ATM that is building a logistic business that transport livestock from the northern parts to the south.

BUSINESS DAY

Shipping

www.businessday.ng

Logistics

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

Maritime e-Commerce

Africa misses out as top 20 global ports handle 9.3 billion tons in 2017

…Germany, Denmark, China, Greece lead in container-carrying fleet in 2018 amaka Anagor-Ewuzie

tatistics have shown that the top 20 seaports in the world handled total global seaborne trade volumes of 9.3 billion metric tonnes of goods in 2017, which is an increase on the 8.9 billion metric tonnes of goods handled in 2016, according to industry forecast by the Nigerian Maritime Administration and Safety Agency (NIMASA). Sadly, no port in Africa, including the likes of Durban in South Africa; Apapa in Nigeria; Mombasa in Kenya, and Dar Es Salaam in Tanzania was listed among the 20 world’s leading seaports. This can be attributed to prevalent port inefficiency in the region as well as failure to industralise in order to compete favourably among exporting nations of the world. According to the forecast, after two years of weak performance, global port activity and cargo handling recorded it first expansion in 2017. Also, the United Nations Conference on Trade and Development (UNCTAD) estimated that 752.2 million twenty-foot equivalent units (TEUs) were moved at container ports worldwide in 2017. This figure mirrors the total volume of containers handled in a year through the port with the highest handling in the world recorded in Shanghai, China. Meanwhile, the NIMASA forecast revealed that the global 20 top owners of container-carrying fleet in 2018 recorded a total throughput volume of 20,231,559 TEUs, representing 97.25 of world container market share. Top on the table is Germany, which leads with 4,207,388 TEUs, representing 20.22 percent of the global

container market share; Denmark followed with 2,220,911 TEUs, controlling 10.68 percent global container market share; China emerged third with 2,150,700 TEUs, showing 10.34 percent global container market share; Greece stood at fourth position with 1,891,234 TEUs of containers, which represents 9.09 percent market share, and Hong Kong took the fifth with 1,583,036 TEUs, representing 7.61 percent market share. With a total of 1,455,580 TEUs of containers, Japan emerged the sixth largest container port, controlling 7 percent market share; Switzerland stood at seventh position with 1,260,807 TEUs, which represents 6.06 percent market share; France, which controls 1,038,824 TEUs took the

eighth position and handles 4.99 percent of the market share; Taiwan, which took the ninth position handled 985,495 TEUs and controls 4.74 percent market share, while the UK which handled 870,632 TEUs, emerged the tenth largest container carrier and controls 4.18 percent of the market. Singapore stood at 11th position with a total volume of 658,654 TEUs and 3.17 percent market share; Korea, which handled 532,670 TEUs, was named the 12th largest container carrier with 2.56 percent market share; Cyprus followed with 253,392 TEUs throughput volume and 1.22 percent market share; Norway stood at the 14th position with total throughput of 208,262 TEUs and 1 percent market share while United States took the

15th position with a total of 207,894 TEUs equivalent to 1 percent market share. Others include Indonesia which handled 172,711 TEUs of container volume and controls 0.83 percent of the market; Israel followed with a total of 170,434 TEUs and 0.82 percent market share; Turkey, which recorded a total of 159,855 TEUs, controlled 0.77 percent of the market; UAE took the 19th position with 110,265 TEUs container volume with 0.53 percent of the market while the 20th largest container port was Netherlands with a total of 92,815 TEUs and market size of 0.45 percent in 2018. The NIMASA forecast further stated that the outlook for global port-handling activity remains positive overall, supported by projected economic

growth and port infrastructure development plans. “However, downside risks weighing on global demand and related uncertainty continue to diminish global port activity. Additionally, global ports and terminals need to track and measure their performance in order to allow for better strategic planning and decision making as well as reporting on investments and future financing. “Ports remain the fundamental link in the supply chains of countries as well as integrators of the global economy, hence the importance of monitoring and measuring operational, financial, economic, environmental and social performance,” the forecast stated. Stating that the maritime industry remains a very vital

aspect of the Nigerian economy, the forecast said that though the Nigerian economy remains an oil story (an oil producing and exporting nation), Nigerians are heavily dependent on foreign goods which are mostly imported through the seaports. “Hence, the maritime sector holds the key to the country’s growth and development. The maritime value chain plays a crucial role in the Nigerian economy, such that around 80 percent of Nigerian trade is transported by sea and via ports. In today’s highly interdependent world economy, business and societies depend on the efficient clearance of vessels and goods in ports worldwide to function, develop and prosper,” the forecast suggested.

Ocean & Cargo takes over Warri Terminal as NPA seeks community support amaka Anagor-Ewuzie

cean and Cargo Terminal Services Limited, the concessionaire of the Warri Port Terminal B, has formerly taken possession of the terminal after the formal handover by both the Nigerian Ports Authority (NPA) and Bureau of Public Enterprises (BPE). The handover was done by

Hadiza Bala Usman, managing director of the NPA, who was represented by the executive director, Marine and Operations, Sokonte Davies, and Alex Okoh, director general of the BPE. Bala Usman, while pledging the support of her agency to the concessionaire, urged the host communities to cooperate with the new concessionaire in order to enable them operate successfully at the port and greatly impact

the local economy around. “It is our duty as NPA to achieve an efficient and profitable port management in the country. We are delighted that another milestone is recorded today with this hand over to Ocean and Cargo Terminal Services Limited, the winner of the competitive bidding process for the terminal. The NPA will provide the necessary support to help you settle down and operate successfully,” he said.

On his own part, Alex Okoh described the bidding process that led to the concession as very transparent, adding that the best bidder eventually emerged as the winner. He further urged the concessionaire to abide by the terms of the contract while reiterating the stance of BPE to monitor the company’s operations for strict compliance to the terms of agreement. “Ports constitute strate-

gic gateways to the country and the nation’s economic prosperity depends to a large extent on how efficient the maritime industry fares. That is the major reason the industry has received great attention from this administration. We also recognised that port efficiency can best be achieved with private sector involvement. That is why we are delighted that this terminal will soon enjoy the level of efficiency that other conces-

sioned terminals across the country have been exposed to over the years.” Adekunle Oyinloye, group managing director, SIFAX Group, the concessionaire’s lead partner, promised that the company will deliver on the mandate of running an efficient port that will be a pride of all Nigerians. He anchored his confidence on the pedigree of the partners that has spanned over three decades in the maritime industry.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

Shipping

Logistics

Maritime e-Commerce

FG to declare 1.2million TEUs Onitsha River Port as origin, destination for cargo …Move gives fresh hope to Eastern shippers Stories by amaka Anagor-Ewuzie

he Federal Government is perfecting arrangements to declare and gazette Onitsha River Port as Port of Origin for cargoes coming into the country from any part of the world and Final Destination to those going out of the country as export, Nigerian Inland Waterways Authority (NIWA), has said. This process is commencing nearly seven years after the Federal Government, under the then administration of ex-President Goodluck Jonathan, invested over N4.6 billion in rebuilding the abandoned Onitsha River Port, without serious business activities taking place at the river port. At the completion of the process and upon the declaration, Onitsha River Port, will be recognised by the United Nations Conference on Trade and Development (UNC-

TAD), as a port to which goods came be consigned from, and from where goods can also be consigned to, from another destination, which could be sea or inland port located anywhere in the world. According to NIWA , Rotimi Chibuike Amaechi, Minister of Transportation has granted the approval for the commencement of the declaration and gazetting process, which if completed is expected to give some measure of comfort to shippers. As part of the process, the port which has the capacity to handle about 1.2 million twenty-foot equivalent unit (TEUs), is expected to be provided with the Nigeria Customs Service (NCS), Nigeria Immigration Service (NIS), Port Health Services (PHS) and other relevant agencies of government to enable clearance of import and export cargoes upon arrival. Olorunnimbe Mamora, managing director/CEO of NIWA, who disclosed this in an advert publication in the Nation newspaper, de-

scribed the move as part of the Federal Government’s efforts to decongest Lagos Ports, extend shipping services to the hinterland, revitalise inland waterways transport and promote intermodal transport connectivity in the country. Mamora said that when the process is completed, it will also boost the image of NIWA, stimulate economic activities and encourage patronage of the Eastern ports apart from enhancing the productivity and revenue

drive of the government. Recall that NIWA in July 2018 said that it has finally secured a concessionaire (name yet to be known) to manage the river port for 25 years and make it viable for business activities to take place. The long awaited concession of the Onitsha River Port holds huge economic implications to businesses located in the commercial Eastern cities of Onitsha, Nnewi and Aba, which would as a result of the concession, have the privilege to forgo the trans-

portation cost of coming to Lagos to take delivery of their consignments. Pundits believed that this move when completed, will also save as much as over N1.1m to N1.2 million put into cargo clearance as haulage cost of transporting cleared consignment from Lagos ports to the states in the East and also help to decongest the already stretched Lagos port. Also, NIWA said it plans to purchase some barges for the transshipment of

bulk cargos from Lagos Ports to Onitsha. The plan, the authority said was to drive transshipment in a sector that has been neglected for a long time. It was on record that the authority was also perfecting arrangements with about three companies to move cargo from Apapa, Tin-Can to Mile 2 (Festac) where trucks will be picking cargo, while the another will move cargo from Apapa; Tin-Can to Epe and there is another one that wants to move cargo from Warri, using the authority’s dockyard in Warri. The concession of Onitsha River Port lasted for a very long time, and according to NIWA, it was due to the fact that the Central Bank of Nigeria (CBN) took over funding of the concession exercise. “The apex bank was said to have come up with a methodology that was cumbersome, even as it also took over the responsibility of appointing a transaction adviser, which has the power to advertise for concession.

3.1 percent and 0.9 percent, respectively. The United Arab Emirate (UAE) handled 15 million TEU in 2018, down 2.7 percent year-on-year. At a consolidated level,

DP World’s terminals handled 36.8 million TEU in 2018, a 0.8 percent improvement in performance on a reported basis and up 1.4 percent year-on-year on a like-for-like basis.

DP World handled 71million TEU of containers across global portfolio in 2018

P World, a Dubaibased container p o r t o p e r a t o r, said it handled 71.4million Twenty-foot Equivalent Unit (TEUs) of container across its global

portfolio of container terminals in the full year of 2018, with gross container volumes growing by 1.9 percent yearon-year on a reported basis and 2.9 percent on a like-forlike basis.

A b reakdow n of th is shows that the company’s Asia Pacific & Indian Subcontinent terminals saw a container throughput of 32.9 million TEUs last year, a rise of 3.2 percent year-on-year

on a like-for-like basis. In addition, terminals in Europe, the Middle East and Africa handled 29.5 million TEUs, and terminals in America and Australia recorded 9 million TEUs, up by

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

LegalPerspectives

With

by Ikechukwu Nwakanma of Perchstone & Graeys

Nigeria copes with an evolving environment of international trade in the 21st century. But unlike them, Nigeria has failed to innovate and thus even with seemingly impressive annual revenue generation, much more can and should be received in revenue by the most populous black nation in the world. According to a report by allAfrica published on July 18, 2017, the Nigerian Senate Committee Chairman on Custom, Excise and Tariffs was quoted to have reported that over NGN 4.35 trillion worth of goods are smuggled into the country each year. The World Bank also disclosed recently that a staggering sum of NGN 750 Billion ($5 Billion) worth of assorted goods are smuggled into Nigeria through Nigeria’s border with Benin Republic every year.

Something must be done. The Nigerian government has made strides in enhancing the ease of doing business. When the NCS introduced ASYCUDA++ and the Nigerian Integrated Customs Information System (NICIS) into its operations in 2017, annual revenues skyrocketed by almost 500 billion Naira. ASYCUDA++ is a software developed in the early 80’s following the United Nations Conference on Trade and Development (UNCTAD) to automate the operations of

Wednesday 13 February 2019

Odunayo Oyasiji

A time to keep, and a time to automate order security and international trade are two sides of a coin that constantly present significant concern – due to the inherent risk and benefit traditionally associated with both endeavours. The UK has chosen BREXIT to retake control of its borders, immigration and trade autonomy. The longest government shutdown in American history was connected to protecting America’s borders from smuggling, illegal immigration and loss of government revenue from the Mexican border. In the Middle East, Dubai Customs recently launched “iDeclare” – a smart app which enables passengers into Dubai declare their belongings, if needed, in only 5 minutes, rather than 45 minutes which was the average required time prior to the innovation. The revenue generated by this innovation is better imagined. In Nigeria, the Customs Service (NCS) is second only to the oil sector, in revenue generation for the Federal Government, generating over NGN 2.3 trillion in the last 2 years. But the NCS is far from attaining peak revenue generation, and this portends both opportunities and risk. Opportunities to leverage private sector partnerships through a PPP arrangement, to finance the full automation of its operations, and the risk of being overtaken by ‘sister’ countries in Africa that have completely moved away from the manual operations of import and export surveillance to a full or semi automation of their customs operation, making them the international trade destinations in Africa. In 2016 the Malawian Revenue Authority introduced ICT innovations to its customs service which enables it to link the operations of its customs with road traffic development and the Malawi Police Services to improve efficiencies and speed up clearance of motor vehicles. Several years ago, Dubai’s customs service launched an automated project (Mirsal 2) that deploys technology to enhance customs operations and ensure more effective border management. Like these countries,

@Businessdayng

customs. Currently, about 80 countries use this software. A PPP partnership would however enable the deployment of cutting-edge ICT tools in Nigeria’s customs operations. Some of the automation tools that can be invested in, include infrared/ultraviolet tracking devices capable of detecting cargos or goods on land and water ways (to tackle smuggling and bring more revenue into government coffers); xray scanners for scanning cargos and goods (strengthening security); electronic clearance of goods using technologies such as block-chain (enhancing speed and efficiency); and technology that enables goods to be accessed and excise duties paid directly to the government, even without the physical presence of the importer at the ports and borders (enabling the fight against corruption). One can therefore see the need to completely automate the operations of the NCS, to reap the full benefits of international trade and block leakage of revenue suffered in the hands of smugglers which comes at a time of great financial need in the country. With a badly eroded security infrastructure and a diminished status in the eyes of the global community due to a ravaged economy, Nigeria has much to prove if she is to continue to enjoy the attraction of foreign investors. The government’s 2017 Economic Recovery and Growth Plan (ERGP) has demonstrated a policy resolve to build an economy that is less dependent on the oil sector, and to leverage other initiatives through the benefits of Science and Technology Innovation (STI). It is time that resolve is matched by action, innovation and new private sector partnerships.

LOCUS CLASSICUS

Dunlop pneumatic tyre Co vs. Selfridge Ltd (1915) AC 79

n this case, the plaintiff had an agreement with a dealer that he shouldn’t sell their product below a certain price. They also made the dealer promise to extract this same promise from other people they sold to. The dealer subsequently sold to the defendant and made him promise not to sell below the ascertained price. They even agreed that for every good sold below the ascertained price, 5 pounds would be paid to the

plaintiff. However, the defendant sold below the price and also didn’t pay the 5 pounds. Thus, the plaintiff sued to enforce the agreement between the dealer and the defendant. The court held that the even though the defendant breached the agreement between it and the dealer, the plaintiff was not a party to the contract and it did not furnish consideration for the promise. Hence, there was no privity of contract between them.

The principle of Pacta Sunt Servanda in commercial transactions

a c t a Su nt S e r va n d a m e a n s ‘a g r e e m e n t s must be kept’. Therefore, it deals with sanctity of contract. Whatever we agree upon must be followed by parties. Contractual obligations must be respected. It must be noted that parties have the freedom to contract and agree as they wish. The only exception is that they cannot contract to commit crime or illegalities. The freedom is limited to acting within the ambit of the law. Therefore, if parties agrees on anything and

reduce it into writing then the terms agreed upon automatically becomes binding on the parties. In a situation where there is dispute between the parties the court’s duty is to interpret the terms agreed upon. It is not the duty of court to introduce new terms or read unnecessary meanings into the terms of the contract. The court in interpreting the terms often adopts the literal rule of interpretation of law i.e. giving the wordings of the contract its ordinary meanings.

Difference between originating summons and writ of summons

hey are both means of commencing a civil action in court. Originating summons is mostly used in a situation where the matter boils down to the interpretation of law and it is not likely to be a contentious matter. In essence, you are presenting a provision of the law to a court and relating it to some facts and then asking the court for the interpretation of the provision as it applies to the facts presented. This process is

usually faster than the process under writs of summons. Writ of summons on the other hand is used when a matter is contentious and there is need to go through the process of trial. In this situation witnesses are called and parties tend to file and reply to many processes. Since business disputes are mostly contentious matters, lawyers tend to use writ of summons when instituting an action bothering on business transactions.

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

BUSINESS DAY

Tax Issues

PwC, Andersen Tax, KPMG comment as FIRS suspends directive to ‘freeze’ taxpayers’ bank accounts

Iheanyi Nwachukwu

he Federal Inland Revenue Service (FIRS) has directed banks to suspend its lien on bank accounts of alleged tax defaulters for a period of 30 days with immediate effect. This has attracted comments from many tax experts particularly those at Andersen Tax, KPMG Nigeria, and PwC Nigeria. The FIRS had recently directed banks to place a lien on the bank accounts of a number of taxpayers for alleged non-payment of taxes. This exercise had resulted in hardships for many businesses, including some tax compliant businesses, within the period. In its letter dated February 15, 2019, the FIRS noted that the suspension of the lien is due to the large numbers of taxpayers visiting FIRS offices for reconciliation and the resulting inconvenience. “There are key questions regarding the powers of the FIRS to place a lien on a taxpayer’s bank account and the lack of due process in doing so in many cases. We are of the view that the substitution power granted the FIRS under the relevant laws does not support the freezing of bank accounts in the way and manner the power is being exercised by the FIRS”, said PwC Nigeria. “Based on the letter written by the FIRS, taxpayers whose bank accounts were previously frozen pursuant to FIRS’ directive would now be able to

access their accounts for a period of 30 days”, Andersen Tax said. “Notwithstanding the controversies regarding the powers of the FIRS to freeze taxpayers’ bank accounts and the silence on whether such bank accounts would be frozen after the suspension, affected taxpayers should take advantage of the next 30 days to resolve their outstanding tax issues relating to pending assessments. They are also advised to engage their consultants and regularize their tax positions to avoid similar hardships on their businesses after the said period”, Andersen Tax

further noted. KPMG Nigeria expects that the FIRS will use the opportunity of the break to refine the process of exercising its statutory power of substitution in a manner that respects taxpayers’ rights and ensures that the sanctity of bank-customer relationship is not jeopardized. “Doing this will repair any damage that might have been done, and thereby revamp the credibility of the Nigerian tax system and restore investors’ confidence in the economy”, it said. “This is a welcome development as the suspension should allow the banks

to notify their customers of the directive so that they can engage with the FIRS to resolve their outstanding tax issues, and enable a positive outcome for all the parties”, KPMG Nigeria noted. “While it is doubtful that the 30-day window would be sufficient to resolve the disputes involving the acknowledged large number of affected taxpayers, it is a positive response by the FIRS to complaints from taxpayers and other stakeholders, and a demonstration of its willingness to engage with them when occasions demand”,KPMG noted further.

Tax transparency: four things every CEO should know about BEPS

rganisations should not ignore the Base Erosion and Profit Shifting (BEPS) developments and must be prepared to address necessary changes to increase transparency and build trust, says EY Global in this article. The political, social and economic fabric of many countries in recent months has been characterized by disruption, increased nationalism and seismic shifts that many thought were unimaginable. In such an environment of change, the tax system must functions effectively and, if needed, be adapted to meet the needs of governments, communities and taxpayers. What is BEPS? The Base Erosion and Profit Shifting (BEPS) project was initiated in 2013 by the G20 and the Organisation for Economic Co-operation and Development (OECD) to address political and public concern about the taxation of multinational companies and the perceived inadequacies in the global international tax system. In a cooperative environment between governments themselves and between businesses and tax authorities, a deeper shared understanding of the challenges faced by the international tax regime has been developed and policies to address those challenges have been identified. Broadly, BEPS policy outcomes are focused on building coherence between different countries’ tax laws – aligning taxable profits with the business functions that contribute to value creation – and providing tax authorities with greater insight into the global operations of taxpayers. Implementation, however, is going to be far from straightforward: even with all this cooperation, countries will still choose the tax system that suits them best and will have different tax policy and operational objectives in mind

Women, pivotal in building Nigeria’s new tax culture – SWIT

when deciding which of the BEPS recommendations to implement and how. So what are the key themes that the C-suite should understand when it comes to BEPS? How can the inevitable changes happening within the tax environment be used to create transparency and certainty instead of a regulatory headache? Here are four things CEOs will need to know. •You need to collect and manage the right data One of the things that will profoundly affect business across the entire enterprise is the collection – and analysis – of data. This is an essential element of BEPS and lies behind the requirements to file information with tax administrations. It will impact how the tax function is audited by the tax authorities in the future. Organisations need to monitor and review changes in legislation to help ensure that they are able to fully comply with all of the detailed filing and reporting requirements within the timeframes established by legislation. The ability of organizations to understand the data infrastructure, software, systems and process changes that will be required to accurately collect and manage large amounts of data is going to be critical if such requirements are to be met. This emphasis on collecting and retrieving the right data means that many businesses will need to review their data enterprise strategies to make sure that the data they collect aids transparency rather than creates a fog of confusion. Gathering the correct data, however, is only part of the story; the extra value for businesses lies in the insights that can be drawn from such data, rather than in the raw information itself. Organizations that possess the know-how to develop insights from these data, using analytics and cognitive technology, will be able to identify new market

opportunities and establish a sustainable competitive advantage, whilst also complying with legislation and establishing trust in the market. •You’ll need to face up to controversy Tax authorities will also receive information about organizations and the way their business is conducted via other tax authorities. Armed with this and the data they collect domestically, tax administrations can be expected to raise more questions over areas that have not been challenged in the past. Organizations must therefore be prepared to face up to any inconsistencies that arise as a result, and ready to deal with any questions and controversy that follows. Given this, the CEO needs to know the answers to a range of questions: where are the controversies of tomorrow likely to come from? What information should be shared with which tax authority at what time? Are data sets being considered holistically or from a country-only perspective? How ready is the organization for the shift in information asymmetry, whereby tax administrations know more about business activities than the company does itself? The appropriate response for each organization depends on a variety of factors, including whether it is a business-to-consumer or businessto-business enterprise, whether it has resources dedicated to corporate communications, which industry it resides in, its overall brand visibility and reputation, and in which geographies it operates. However, across the board, we are seeing companies rapidly changing the way they communicate about tax risk and controversy to their stakeholders, both internally and externally. •Your tax strategy will have an

impact on your brand’s reputation The approach that businesses take toward their tax planning is becoming increasingly scrutinized in public, whether by formal requirements such as the UK’s tax strategy publication requirement or through supra-national transparency initiatives such as the publication of country-by-country reporting, as adopted in Europe for banks and advocated by the European Parliament for all large companies. In Europe, such transparency is quickly becoming the new normal, and across the globe reputation risk is a permanent fixture. All things considered, robust transparency readiness processes to ensure that data can be sourced and presented in an effective, efficient and clear manner are becoming more and more important. •BEPS could change your business structure and operations A holistic approach to BEPS is essential and will require close cooperation between all the business functions. Tax has become more global and changes (and filings) in one country may affect outcomes in another, requiring a more centralized tax department. Thecorporatestructuresusedtodayfor operatingcross-borderwillshift,impacting the treasury function (with restrictions of taxreliefforinterest),thebusinessstructure (such as Commissionaire arrangements), and financing and capital structures (with changes to tax treaties). BEPS will likely drive up effective tax rates and increase the costs of the tax department (as it is faced with new rules and additional reporting), so CFOs need to be prepared to account for this. IT department costs will also increase, as automation for tax compliance and tax function support will become a necessity for organizations to swiftly respond to global tax authorities that are automating at top speed.

he importance of women’s contribution to Nigeria’s economic growth came to fore as the Society of Women In Taxation (SWIT) Lagos Chapter on Wednesday, February 13 convened to discuss the role of women in building a new tax culture in Nigeria. SWIT is an arm of The Chartered Institute of Taxation of Nigeria (CITN). The tax forum for Corporate and Professional Women in Lagos was graced by dignitaries and experts in the Tax industry, and Academics, including BMO & CO Chartered Accountants, Federal Inland Revenue Service (FIRS), Lagos State Internal Revenue Service (LIRS), PricewaterhouseCoopers, KPMG, Deloitte, and past presidents of SWIT. Special Guest of Ibukun Awosika, who chairs the Board of Directors of First Bank Plc, lit up the atmosphere with a video message of goodwill, expressing support for the cause although she was not able to make it in person. Dana Rose Ajayi, chairperson of SWIT who gave the welcome address, emphasised the need for women across all walks of life to brace up to the challenge of taxation in Nigeria. She further called for the propagation of the importance of taxation in state development as well as bringing to front burner the challenges of women in tax. Adebimpe Balogun, first female president of the Chartered Institute of Taxation of Nigeria (CITN) and initiator of SWIT in her welcome address asserted that women can effectively encourage a tax compliance culture even from homes and if efforts are put in spheres of control. In her Keynote address, Bolaji Akintola the Director of Tax Audit to the Board of LIRS explained that the abysmal state of tax compliance as she noted that only 14 million out of a taxable adult population of 70 million actually pay tax. She further pointed out that of the 943 people who paid taxes above N10million with the only 2 tax payers from outside of Lagos state, resident in Ogun state. Similarly, of the 217 that pay taxes of more than N20m, 214 were resident in Lagos State. She therefore called the promotion of tax culture across all states in the federation. The panelist which comprised experts from the Tax industry all resonated the need for government authorities to hold the elite accountable as tax is an obligation of all citizens to the nation. The experts brought to the fore, the need to reduce the cost of tax collection, integrate tax authorities and consolidate effort, reform tax laws so as to accommodate the growth of SMEs as well as encourage more Holding companies in Nigeria. The lack of political will to improve on the tax system was highlighted as the lack of effort on the part of government to leverage on the various data made available through the Bank Verification Number (BVN), Independent National Electoral commission and Nigerian Communication Commission (NCC) was inexcusable. Notably, Abiola Sanni, a Professor and Solicitor and Advocate of the Supreme Court of Nigeria encouraged Nigerians to see tax as an obligation and a fiscal instrument for the collective good of all. SWIT honoured His Excellency, Asiwaju Bola Ahmed Tinubu, with the Legacy Award for his work on improving the tax system in Lagos in his tenure as Governor of the state, between May 1999 and May 2007. The Special Guest of Honour, Ibukun Awosika was also honoured by the Society for her role in contributing to the Tax system in Nigeria. Other recipients of awards for the day include the Executive Chairman of Lagos Internal Revenue Service (LIRS), Ayodele Subair and the LIRS members and staff. In all, the society encouraged women to rise to the occasion and contribute their quota to Nigeria’s fiscal system.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

In association with E-mail: insurancetoday@businessdayonline.com

Technology changing insurance landscape as competition thickens Stories by Modestus Anaesoronye

he insurance sector is currently witnessing transformational changes that will not only affect operations, but also impact regulation and consumer choice. The change would disrupt growth trends of individual companies and those that fail to rise to the challenge will be over-taken by their peers in a competition, which analysts say would be very fierce. PwC at one of its Global

CEO Survey series had stated that insurers will face as much change in the next few years than they’ve seen in the past 50, but concerns are that many companies have been slow to respond to the transformational changes in the market, surrendering the advantage the more proactive competitors. The report also notes that insurers face the challenge of how to capitalise on the growth potential created by a wealthier and longer living global population, while grappling with the accelerating and potentially disruptive impacts of technology,

new regulation and fast changing customer expectations. Sector leaders however recognise the rapid changes in their marketplace, and so see technological advances as the trend most likely to transform their businesses over the next five years, followed by demographic changes, and then shifts in global economic power. What once seemed to be far in the future is becoming reality in today’s insurance marketplace? The digital experience is increasingly defining service standards and new analytical techniques are offering the opportunity

to more effectively price coverage and control risks. According to the analysts, the insurers who take advantage of these developments will have clear insights into how the marketplace is changing where they’re best able to compete and be agile and decisive enough to respond quickly to important challenges and opportunities. They also will use the latest developments in technology to enhance customer profiling, reduce costs, and improve customer experience. The urgency of responding to these challenges is heightened by

the extent to which the markets are witnessing aggressive competition from other financial services sectors and a new breed of nimble, tech-enabled entrants. In fact, half of the insurance CEOs see new market entrants as a potential business threat, far more than in any other financial services sector. Highlights Technology 86% of insurance CEOs believe technological advances will transform their businesses in the next 3 to 5 years – more than any other factor. As the impact of technology continues to gather pace, sensor, big data and other new analytical techniques could prove to be a critical differentiator by transforming insurers’ ability to understand and respond to customers’ needs. Management 31% of the Company CEO’s have completed or are executing change initiatives in the key area of data management and analytics. But new capabilities aren’t coming quickly enough as most CEOs are making plans for change, but most have yet to put them into action. Less than 40% of industry leaders believe that their sales, IT, HR, R & D and customer service are well prepared for the transformational developments ahead. Fewer than 40% have initiated plans to capitalise on these trends in the key areas of distribution, data analytics and innovation capacity. Regulations 86% of insurance CEOs see over-regulation as an organizational threat. This is a higher percentage than in any other sector, and is far ahead of other perceived threats.

Term Life Assurance enables you buy what you cannot save

detola Adegbayi, the executive director, Leadway Assurance Company Limited has charged Nigerians to subscribe to the Term Life Assurance product, saying, ‘people should form the habit of buying what they cannot save, through term assurance policy.’ Speaking at the Leadway Assurance Media Training for Insurance and Pension journalists, in Yaba, Lagos, Adegbayi stressed that with little premium, people can buy this unique product that has a minimum Sum Assured of N1 Million, urging the middle and low income earners to see this package as an opportunity to enrich their lives. Using Leadway Term Assurance product, as an example, she said, the plan is a simple but flexible life insurance product that pays out a lump sum if death occurs during the period of cover. You choose the amount of that lump sum and the length of cover and your premium is calculated accordingly, she said. For an additional sum, she said, an intending subscriber can extend cover to apply to critical illnesses or if he or she becomes permanently disabled because of an accident anywhere in the world. “You can choose to pay your premiums in a way that suits you best: you can pay a single one-off premium, or you can pay monthly, quarterly, half-yearly or annually. The premiums you pay qualify for tax relief and can therefore, reduce your tax bill,” she noted. He stated that a policyholder has the right to cancel his or her policy and receive a full refund of premiums paid if done within 30 days of receipt of the full policy documentation.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

Pension Today

@Businessdayng

BUSINESS DAY

In Association with

Why my former colleague on the same salary level gets higher pensions than me?

wo people, Josephine, female and Kayode, male, both worked in the Ministry of Works and Housing, a Federal Government institution and retired at the same time in 2014 on the same salary grade level. When they started receiving their monthly pensions, having signed for a programmed withdrawal with the same Pension Fund Administrator (PFA), Kayode was surprised that Josephine was getting a higher pay than he was. He had thought that having retired at the same salary grade level, they both would earn the same amount of money as pensions during retirement, but that was not the case. What happened to Josephine and Kayode is also happening to many other retirees out there, who think that they have been shortchanged by their PFAs or have been robbed of what is due them for pensions. The issue is not unique to public sector retirees, it also happens with retirees in the private sector who continue to call their pension managers all sorts of names. Expert in the pension industry, trying to provide insights into why there are differences in what retirees earn as monthly pension pay-outs, said these are based on some variables. Kabiru Tijjani, an executive director at Premium Pensions Limited had said that difference in benefits payment to retirees, either as lump sum or monthly pension varies for individual retirees. According to him, these are determined by some factors including age at retirement; Gender; RSA Balance; Size of Annual To-

tal Emolument (ATE); and retirees’ choices. Speaking on the theme “Benefits Administration – Processes, Lump sum Computation and Challenges with Payments, Tijjani listed the determining variables to include: Age at Retirement: Using two retirees with different ages and other variables being equal, the older retiree will get slightly higher monthly pension than the younger retiree because his expected life span is shorter. Gender: The mortality table assumes that women live slightly longer than men: Therefore, a male and female retiree with the same age and other variables being equal at retirement will definitely have differences in their pensions as the template makes provision for the extra years that the female retiree is expected to live. RSA Balance: Two retirees with different RSA Balance with other variables remaining the same at retirement will result to

RC634453

Diamond Pension Fund Custodian Limited 1A, Tiamiyu Savage Street, Victoria Island, Lagos State. Tel: 01-4613753, 2713680, 2713954 Fax: 01-2713955 Email: info@diamondpfc.com Website: www.diamondpfc.com

higher monthly pension for the retiree with higher RSA balance, while the reverse is the case for the retiree with the lesser RSA balance. The difference RSA balance is determined by three factors -size or accrued rights portion paid into RSA due to grade level and step as at June, 2004; total monthly contribution is based on individual grade level/structure from July 2004 to date of retirement; and the growth of the investment income is based on the duration in which the contributions stayed in the RSA. Size of Annual Total Emolument (ATE): Differences in ATE with other variables remaining constant will cause differences in monthly pensions and lump sum receivable. Retiree’s choices: Based on individual peculiarities, one can choose between zero lump sum and/ or maximum lump sum or any amount in between is equal to or lower than the recommended/maximum lump sum in the template in

order to boost his monthly pension. When all these factors have been taken into consideration, the Pension Fund Administrator who manages the fund computes the balance in the retirees RSA, using a standard template approved by the National Pension Commission (PenCom). With this standard template, no PFA will pay higher pay-out than the other given the same balance in the RSA and all the determinant factors above taken into consideration. Section 7 (1) (a) of the PRA 2014 allows for lump sum to be paid to a retiree provided that the amount left after the lump sum withdrawal will be enough to fund a programmed withdrawal over expected life span of not far from 50 percent of his/her annual remuneration as at date of retirement. This therefore makes computed monthly pension drawdowns over an expected life span to be a

first charge on the RSA balance while the residual will be paid as lump sum. Tijjani stated that the computation of the lump sum payment and periodic (monthly/quarterly) pension withdrawal is based on a Standard Programmed Withdrawal Template/Model issued by the National Pension Commission (PenCom) to all Pension Fund Administrators (PFAs). The inputs/variables in the PWT for the computation are based on the new definition of Annual Emolument (ATE) using the most revised template for calculating lump sum benefit released by PenCom. The objective of the Contributory Pension Scheme is to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory or Private Sector receives his retirement benefits as and when due; assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

This section is created to increase awarness and deepen knowledge about the contributory pension scheme. If you have enquiries or contributions, send to this e-mail: diamondpfcbusday@yahoo.com

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

E-mail: insurancetoday@businessdayonline.com

Jaiz Takaful, Noor Takaful yet to impact market as penetration drags Stories by Modestus Anaesoronye

wo Takaful companies already licensed in Nigeria by the National Insurance Commission (NAICOM) yet to impact the market, though still new, are expected to help drive penetration. The two firms are expected to drive sensitisation and make potential customers appreciate the difference between it and the conventional insurance providers. Jaiz Takaful during its launch expressed readiness to commence Islamic ‘Takaful’ Insurance in Kaduna, Kano, and Lagos states, with head office in Abuja. This was disclosed by the Chairman, Jaiz Takaful Insurance Plc, Umaru Abdul Mutallab. Mutallab, who also doubles as chairman, Jaiz Bank Plc explained that the insurance products give equal opportunity for customers to be owners of the company. He said: “The name Islamic notwithstanding, it is for all Nigerians, provided

they adhere to the principle of Sharia, urging individuals, groups and business people to take advantage of this rare opportunity. The National Insurance Commission (NAICOM) says it is planning to license more Takaful Insurance companies. The Commission, which has initially licensed two Takaful Companies, said this is major

expansion and penetration strategy under its Market Development and Restructuring Initiative (MDRI), targeted at reaching the uninsured population as well as those who avoid conventional insurance as result of their religious belief. Mohammed Kari, commissioner for Insurance/ CEO of NAICOM had as

it is presently processing applications submitted by some investors. Kari said the Commission introduced Takaful and Microinsurance products in the Country as an attempt to reach the segment of the market that is either hitherto reached or not comfortable with the conventional insurance products, stressing that so far, two wholly

Takaful companies have been licensed to operate by the Commission while the processing of other applications is on-going. Kari urged the people of Kano to embrace Takaful for their protection against risks, adding that Takaful is both ethical financing and cooperative risk protection methods that are superior alternatives, because they

reinvigorate human capital, human solidarity, emphasize dignity, community self-help and economic self-development, generating manifold benefits which appeal not only to Muslims but all. “The Commission is elated at this positive development which is a bold step towards the growth and development of the Takaful market in Nigeria. He noted that the development of Takaful operations in Nigeria could not have been achieved without the provision of an enabling framework for its takeoff, stressing that the Commission in collaboration with development partners such as Enhancing Financial Innovation & Access (Efina) and GIZ developed and released the Takaful Insurance Guidelines to enable smooth operation. The Commission in March 2015 inaugurated the Takaful Advisory Council of Experts (ACE) saddled with the responsibility of review, endorsement of policies and guidelines related to the principles underpinning Takaful insurance operation. The ACE is made up of eminent scholars with deep knowledge of Islam and Sharia,” he said

Allianz posts highest net income for 10 years, P&C performance improves

llianz Group has reported its highest net income of the past decade for 2018, of €7.5 billion ($ 8.5bn), helped by increased operating profit within its property and casualty (P&C) business, despite strong market volatility. A higher overall operating profit of €11.5 billion and reduced income taxes more than offset Allianz’s non-operating result decline, contributing to a 9.7% year-on-year increase in net income for the global insurer. Allianz Nigeria Insurance plc (Allianz Nigeria) formerly Ensure Insurance plc, it will be recalled was acquired by the Allianz Group in July 2018 and has commenced business as subsidiary of the group. Commenting on the firm’s performance in 2018, Allianz SE Chief Executive Officer (CEO), Oliver Bate, said: “I am very proud of

the global Allianz family for delivering such a great set of results. We reached the highest net income of the past ten years despite strong market volatility, especially in the fourth quarter. Our customers continue to rely on us, and it’s with them in mind that we are focusing on simplicity in the next iteration of our strategy.” The insurer’s 2018 result was boosted by strong performance within its P&C segment, which saw gross premiums written (GPW ) increase slightly to €53.6 billion. P&C operat-

ing profit jumped to €5.7 billion in 2018, mainly driven by a strong underwriting result, aided by a lower expense ratio and also a lack of high severity losses from natural catastrophe events. Furthermore, Allianz said that its P&C operating investment result also had a positive impact on the unit’s performance in 2018. As a result of the above, Allianz recorded a P&C combined ratio of 94%, which is an improvement of 1.2% when compared with the previous year. “I am pleased by our strong internal growth and our good operating performance in the Property and Casualty business segment. We reached our goal of a 94 percent combined ratio by our consistently disciplined underwriting and moreover by a substantially improved expense ratio,” said Allianz SE Chief Financial Officer (CFO), Giulio Terzariol.

Somewhat offsetting the strong P&C performance, Allianz’s Life and Health division saw its operating profit decline to €4.2 billion, although this is still within the mid-point of its range. The Life and Health unit continued to expand in 2018, with the new-business margin increasing to 3.6%, from 3.4% a year earlier. “Allianz achieved excellent results in 2018 with operating profit of 11.5 billion euros, reaching the upper end of the Group’s announced target range of 10.6 to 11.6 billion euros. “Our healthy and welldiversified business makes us confident that we will continue to deliver a strong financial performance again this year. The Group looks to generate an operating profit of 11.5 billion euros in 2019, plus or minus 500 million euros, barring unforeseen events,” said Terzariol.

Aiico celebrates Valentine at IDP camp

nternally Displaced Persons in the Abuja Camp were not left out in this years’ Valentine’s Day celebration as AIICO Insurance, Abuja office donated items to the IDP Support Booth Durumi, Garki 1, Abuja. It was an effort by the organisation to spread love to the IDP camp. The items, which were received by the Public Relations Officer, Golu Umar on Thursday

14th February 2019, include rice, clothings and other house hold items. AIICO Insurance Plc., a leading composite insurer in Nigeria, commenced operations in 1963. AIICO provides life insurance, health insurance, general insurance, wealth management and pension management services as a means to create and protect wealth for individuals, families and corporate customers.

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

BUSINESS DAY

@Businessdayng

PAN Centre graduates 78 UNDP TSAP trainees Pg 28

Nissan ICC Cricket WC Trophy ends Nigeria tour MIKE OCHONMA mikeochonma@gmail.com

he Nissan-driven ICC C r i c k e t Wo r l d Cu p Trophy last week concluded a two-day tour of Abuja and Lagos between February 11 and 13. Nigeria Cricket Federation (NCF) say the expedition was in continuation of an extensive journey around the globe, which began from the International Cricket Council Headquarters in Dubai August 27, 2018. Tagged #CWCTrophyTour, the ICC Cricket World Cup Trophy made its first ever stop-over in Abuja, where it was showcased at the Presidential Villa before proceeding to the governor’s Lodge in Ikeja, Lagos. Minister of Youth, Sports and Development Solomon Dalung received the trophy on behalf of President Muhammadu Buhari at the formal presentation to the diplomatic community and cricket enthusiasts in Abuja, while Lagos State Governor Akinwunmi Ambode received the trophy at the State House Alausa-Ikeja Lagos. The trophy was thereafter displayed in exhilarating scenery at the Cricket Oval of the Tafawa Balewa Square (TBS) Lagos, where fans took their turns to have their photographs taken against the backdrop of the coveted trophy while they also had a feel of what it is like to be at the Cricket World Cup in a unique in-stadia experience. Nissan recently signed an eight-year deal with the ICC, running through 2023 as the exclusive sponsor of the game, which also includes the ICC Champions Trophy and ICC World Twenty-20 as well as the Under 19 and Women’s Cricket and qualifying events. The trophy left Nigeria 14 February 2019 for France, Belgium,

Fitch puts JLR rating under review citing Brexit

the Netherlands and Germany before finally arriving in England and Wales on February 19, 2019 for a 100-day domestic Trophy Tour, having crisscrossed five continents, 21 countries and more than 60 cities around the world. President of NCF, Yahaya Ukwenya, a professor who spoke at the presentation of the trophy in Abuja said: the #CWCTrophyTour driven by Nissan was a conscious plan to raise the profile of the game by pushing its fan base well beyond a billion supporters it already has around the world. “It is a rare opportunity to get up close to the trophy and engage both new and existing fans while canvassing support for the game’s evolution in Nigeria,” Mr. Ukwenya remarked. He thanked Stallion NMN, the local Nissan Sales and Marketing Company for partnering with the NCF “on this ambitious journey that will build excitement around the country as we head towards the Cricket World Cup in England and Wales.” The NCF also received a unit each of select Nissan vehicles including the premium Patrol SUV, NV350 bus and B-Segment SUV Kicks to help the #CWCTrophyTour visit iconic and unusual

R-L: Lagos State Governor Akinwunmi Ambode (right) and President Nigeria Cricket Foundation - Professor Yahaya Ukwenya at the presentation of the trophy to the governor at the State House Alausa Ikeja Lagos recently.

Nigerian locations. Handing over the keys to the chairman Local Organising Committee (LOC) Kofi Sagoe, Stallion NMN Head of Sales and Marketing Amit Sharma said: “The Nissan slogan ‘Innovation that Excites’ is what drives everything we do at Nissan, and we are excited to be part of the global cricketing family and to support the ICC Cricket World Cup Trophy’’. The #CWCTrophyTour is travel-

ling not only to countries taking part in the tournament, but going beyond traditional cricket heartlands to connect with fans in a further 11 countries where cricket is growing including Nigeria, Nepal, USA and Germany. From the United Arab Emirates, the Trophy has visited Oman, the USA, the West Indies, Sri Lanka, Pakistan, Bangladesh, Nepal, India, New Zealand, Australia, South Africa and Rwanda before arriving Nigeria.

itch Ratings said it has placed Jaguar Land Rover’s (JLR) credit ratings under review for possible downgrades, citing increasing risks of a disorderly Brexit. JLR had said in January that, there would be a week-long pause in production in April due to potential disruption from Brexit and trimmed production. “The group has a significant trade imbalance and production bias to the UK and could be significantly affected by trade barriers and various logistic issues,” the credit rating agency said, placing JLR’s long-term ratings and senior obligations at ‘BB’ on “Watch Negative.” Fitch said the review was prompted by uncertainty ahead of Brexit, which could lead to lower sales and higher costs that could strain the company’s liquidity position. Recall that Prime Minister Theresa May’s Brexit deal was rejected in parliament last month and the government is trying to make changes to win the support of lawmakers even as the divorce date for Britain’s departure from the European Union looms less than two months away. JLR, based in central England, is also planning to prune its workforce as it battles to return to profitability amid lower Chinese demand and a slump in European diesel sales. The automaker and its parent Tata Motors had their credit pushed deeper into junk status in December by S&P Global as the agency cited weaker-than-expected profitability at the UK automaker.

Kia hands over Rio cars to Lagos marathon winners

t was a promised fulfilled last weekend following the presentation of two car Rio vehicles to the two lucky winners of the just concluded Kia Motors and Access Bank sponsored Lagos marathon in the 10 kilometers for female and 10 kilometers race for the male categories respectively. At the brief ceremony attended by representatives of Kia Motors, Access Bank and officials of the Lagos State government, Kia Nigeria handed over the keys of the branded Rio vehicles, automatic transmission to Hart Priscilla, a 23- year old final year engineering student of the River State University of Science & Technology and a fitness trainer who emerged tops in the 10 kilometers female category race and 26-year old Abdulateef Olufunmi, a Lagosbased businessman that deals in solar panelssales and installation as well as a footballer that came first in the all-men 10 kilometers

L-R: Olawale Jimoh, head of marketing, Kia Motors, Damilola Pedro, brand manager, Nilayo Sports Management Limited; Olufunmi Abdul-Lateef, winner, 10 km fun race in cthe male ategory; Kweku Tandoh, executive chairman, Lagos State Sports Commission; Hart Priscilla, winner, 10 km fun race, female category; and Olu Tikolo, vice president, Kia Motors, during the Kia cars handover ceremony for the Lagos city marathon winners held in the Kia Showroom, Victoria Island, Lagos .

category. One of the winners, Abdulateef Olufemi, was full of excitement saying the car is a challenge for

him to aim higher. He said he had the passion for fitness and trained for a week to achieve the feat and was not expecting the gift, which

came to him as a surprise. Speaking at the official presentation of the cars to winners of the race, Olu Tikolo, Vice President, Business Development, Kia Motors Nigeria, said the presentation of the cars was an opportunity for the Kia Motors brand to fulfil its promise. Tikolo said the marathon is a test of endurance and durability, which what the brand represents, adding that the cars are durable, reliable and the endurance level is high. Kia is associated with sport development across the world and is known for sports development worldwide. According to Olawale Jimoh, marketing manager of Kia Motors Nigeria Limited, the 10km race was deliberately designed and earmarked as part of renewed efforts to encourage local representation of Nigerians in the marathon. On her part, Oge Nwachukwu,

Head of Events and Sponsorship, Access Bank Plc, reiterated the bank’s commitment to partner with Kia Motors to render support for the marathon and foster integration, sportsmanship among Nigerians. “We cannot underestimate the success and impact the race as brought upon the country and the financial institution”. She said. The Lagos City Marathon is one of the most renowned marathons in Africa with over 400 professional athletes across the globe running in the race. In recent years, it has become the best-known marathon in Nigeria and one of the fastest growing in the world. At this year’s edition which is the fourth in the series of the marathon, it had over 120,000 local and foreign runners lined up at the start in both the elite race of 42Km and10 kilometer fun races respectively.

28 BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

PAN Centre graduates 78 UNDP TSAP trainees

L-R: Ibrahim Boyi, MD/CEO, PAN Nigeria Limited; Khardiata Lo Ndiaye, UNDP, Country Rep; Bennett Tagahar, TSAP coordinator; Dulyamba Yusuf, best graduate trainee, and Elizabeth Mordi, DG, PAN Learning Centre ( PLC).

of fault finding in modern vehicles, and consciousness in environmental protection to prevent environmental pollution through standard oil removal, as advocated by National Automotive Design and Development Council (NADDC) for ideal standard requirement in training world class technicians and mechanics. Amongst the graduands are 20 ladies, also trained in auto mechanics, auto mechatronics, panel beating, welding and spray painting. In her remarks, Elizabeth Mordi, director-general of

PAN Learning Centre, said “The institute is committed to equal opportunity and gender equality,’ the trainees went through compulsory ICT training to diploma level as well as FRSC accredited PAN driving school for defensive driving skill, PAN Learning Centre (PLC) has promoted the empowerment of young women and has trained over 300 in the past years, she added. T h e U n i t e d Na t i o n Development Program (UNDP), Country Representative Khardiata LO Ndiaye thanked the Norwegian

government for its continuous support to UNDP programs in Nigeria, she applauded. “The management and staff of PAN Learning Centre for their dedication, commitment and understanding to transform the lives of these young persons through impacting skills and knowledge in them and make them useful to the society.” The event ended with distribution of certificates, tools and equipment to the trainees and a guided tour of PLC for the UNDP Country representatives.

Wednesday 20 February 2019

Nissan adds outdoor package to 2019 Pathfinder line-up

MIKE OCHONMA mikeochonma@gmail.com

he PAN Learning Centre (PLC), graduated 80 trainees of United Nations Development Program (UNDP) Technical Skill Acquisition Program (TSAP) Batch B, in an elaborated ceremony attended by Khardiata Lo Ndiaye UNDP Country Representative at the PAN Learning Centre Body Works (BW) facility penultimate Tuesday. In his remarks at the ceremony, , Ibrahim Boyi, managing director and chief executive of PAN said, there are over 45,000 capacity job gap in the automobile aftersales, repairs and services value chain, requiring skills and competent modern auto mechanics with knowledge of technological trend in the auto industry. He described the graduating trainees as fortunate. “This is a unique opportunity for you because out of 750 that UNDP identified, you are among the chosen few. Make good use of it.” He highlighted that the program is well structured, and much targeted with youths trained in auto mechanics, auto mechatronics, auto spraying, welding and panel beating crowned with City & Guilds Certifications. It is also accompanied with standard knowledge

@Businessdayng

issan is making cosmetic updates to the Pathfinder aimed at the crossover’s outdoorsy customers. As a result, the automaker is introducing a Rock Creek Edition package for the midsize crossover at the Chicago Auto Show. The package will be offered on Pathfinder SV and SL variants, in both twowheel- and all-wheel-drive configurations. The vehicle will be available in the spring starting at a cost of $43,753 for the SV versions. The Pathfinder SL Rock Creek Edition has a starting price of $48,993. Both prices include delivery. “The Rock Creek Edition name was chosen to connect to Pathfinder’s family outdoor adventure-minded target customers,” Nissan North America Chief Marketing Manager Scott Shirley said in a statement. Special editions help bring attention to models late in their life cycles. Offering a package such as the Rock Creek Edition allows Nissan to put together desirable features at a lower cost rather than having them as standalone options, said Sam Fiorani, vice president at AutoForecast Solutions. “Tying the Pathfinder to an outfitter, such as Rock Creek, has the added benefit of appealing to the core buyer’s desire to get back to nature,” Fiorani said. In terms of upgrades, the

package features dark 18-inch wheels, black mesh grille, black roof rails, black door handles and outside rearview mirrors, black front and rear fascia accents and black molded overfenders. The interior includes twotone seating surfaces and badging, high contrast stitching on seats, door, console lid and steering wheel and premium metallic interior trim. The 2019 Pathfinder is powered by a 3.5-litre direct-injection V-6 gasoline engine that delivers 284 hp and cranks out 259 pound-feet of torque. With three rows of seats, it competes directly with the Honda Pilot, Hyundai Santa Fe and other midsize crossovers but also the slightly larger Toyota Highlander, Chevrolet Traverse and Ford Explorer. As minivans have fallen out of favour, three-row utilities have become today’s family wagons. Pathfinder sales plummeted 28 per cent in Canada in 2018, down to 7,099 for the year, the Murano, Qashqai and Rogue all outsold the Pathfinder in Canada last year. Meanwhile, U.S. sales of the Pathfinder fell 17 per cent to 67,550 last year, they still account for a significant portion of Nissan’s volume and an even higher percentage of the automaker’s profit. The Pathfinder received a major freshening in 2016, and a redesign is expected in 2020 or 2021.

Regular care as important as car ownership (1)

ervicing your car can sometimes feel like a bit of a chore. If your car feels healthy, is performing as usual and isn’t showing any warning signs, you’d be forgiven for not being particularly enthusiastic for paying to have it serviced, especially when you consider that the servicing doesn’t show any visible improvements. However, servicing is an important part of car ownership, and here are 10 reasons why you need to make sure you stick to your service schedule. Safety: The first reason you need to make sure your car gets its annual health check is for the safety of you, your family and other road users. A lot of things can go wrong with a car and some of them can have drastic consequences. Among other things, faulty steering, poorly aligned wheels, weak brake lines can all lead to accidents on the road which, as we all know, can sometimes be fatal. Do yourself and everyone around you a favour by ensuring your

car is running safely. Resale value: Money talks and so does a wellmaintained service booklet provided at the point of sale. There comes a time in our vehicle ownership cycle when we have to move on. If you’re selling your car privately or to a dealer, there is no doubt whatsoever that a regularly serviced vehicle will fetch more money than a similar vehicle with a less-complete history, it’s as simple as that.

The dealer knows they will have fewer problems selling the car if it is backed by a service history and they can be confident that the car is less likely to have underlying problems, they can, therefore, offer you more money for it. Performance: We all like to get the best performance out of our cars and if you have a clogged up air filter, dirty lubricant and air-bubbles in your brake lines, then you’re not getting nearly the

best your car can offer. A service will clear all these imperfections and get your car performing the way the manufacturer intended. Don’t compromise your car by skipping the annual service. Efficiency: Similar to the previous point, a car with a clogged up air filter or a tricky DPF filter is not going to be nearly as good on fuel as a car which can breathe properly. Similarly, clean oil is a considerably better lubricant for your engine than oil that’s been going around your car for years and years. A service cleans all this up and will help you achieve more pleasing running costs. Pollution: Often times, we have all seen it on the roads before when a clapped out old motor storms past leaving a cloud of noxious emissions as it accelerates away. Nobody wants to be that person, and nobody on the road wants to be breathing those exhaust fumes in. Having your car serviced frequently keeps your emissions (and your carbon footprint) as low as possible.

Renault criticises Nissan’s handling of Ghosn probe

enault’s lawyers have criticised the company’s alliance partner Nissan for its handling of an internal probe into the Carlos Ghosn scandal. In a letter to Nissan dated January 19, the lawyers said they had “serious concerns about the methods used” by the company and its legal team, including the way they treated some Renault employees, according to France’s Le Journal du Dimanche. Former head of the alliance Ghosn is being held in Japan on charges he under-reported millions of dollars in pay as head of Nissan. “Renault has gathered sufficient evidence to understand and regret the methods used by Nissan and its lawyers to seek interviews with Renault employees through the Japanese public prosecutor’s office,” they said. Nissan was seeking “evidence to support allegations against Carlos Ghosn after his arrest” and failed to consult its

French partner, according to the newspaper. The firm also tried to search Ghosn’s apartments in Brazil, Lebanon and the Netherlands without informing Renault, the letter added. So far the French car giant has said its internal probe into its former boss has found his pay was in compliance with French law. The executive’s arrest in November has exposed rifts between Renault and Nissan, which some analysts say was bristling at Ghosn’s efforts to bring the two carmakers’ operations even closer together. Ghosn was the lynchpin of the three-way alliance, which also included Mitsubishi, earning industry plaudits for driving together a sometimes fractious threesome with headquarters 10,000 kilometres apart. Much of the tension between the partners stems from a complex ownership structure that gives Renault 43 percent of Nissan, whereas Nissan owns just 15 percent stake in the French company and no voting rights.

Wednesday 20 February 2019

C002D5556

BUSINESS DAY

Again on Oriade crater-ridden roads Ambode must address 32

‘How to start a successful Amazon business’ 30

Support for small business financing more critical now than ever – CBN Governor

Budget 2019: The Hidden Monsters 30

Still on organic agriculture B

Global organic market has shown growth in the past few years. The rate has slowed since 2000 though; and there are several challenges that impede large-scale expansion of organic practices. SIAKA MOMOH revisits this evergreen food issue which he wrote stoutly on in The Real Sector, a monthly online magazine, in April 2016. industrialization was a product of technological improvement in agriculture and campaigning against new advances that hold the key to cutting down hunger and poverty in Africa, was synonymous to killing the golden goose that laid the golden eggs of new crop genetics and agronomic methods. Participants who included the press, food experts and food business people at the Lagos event which held at Golden Tulip, agreed we do not have the luxury of going organic food alone, that we must continue with the current culture of food innovation to suit our growing population and perhaps spice it with organic food production. New technological tools In a similar vein, African experts at a session at the International Institute for Tropical Agriculture (IITA) Ibadan agreed that taking Africa’s agricultural sector out of the woods would require the adoption of new technological tools. For Paul Ilona, IITA Senior Cassava Trials Manager, farmers needed improved seeds, fertilizer and other farm inputs such as pesticides to boost productivity. He said anything to the contrary was a disservice to farmers in Africa.

ack in 2004 in Berlin, this writer watched with interest how agriculture stakeholders across the globe, debated the good and bad sides of organic agriculture. That year, at the Berlin International Green Week, a oneof-a-kind international exhibition for the food, agricultural, and horticultural industries, there was a robust campaign for organic foods. A good number of pavilions displayed and sold varieties of these foods. The awareness campaign was strong and convincing. The Berlin event was an eye opener for Siaka Momoh. Rethinking agriculture Later on, here in Nigeria, William Masters, an agricultural economist of Tufts University, United States, opened the subject, arguing that America, Europe and Asia, had commenced rethinking agriculture. Rethinking agriculture is going back to the roots. It is organic agriculture, doing agriculture the way it was done by our forebears without the use of fertilizer and allied chemical inputs. The kind of agriculture that Prince Ilori Momoh (this writer’s daddy, a celebrated cash and food crop farmer, of blessed memory) and several of his contemporaries practised. Organic agriculture, according to the United States Development Agency (USDA) is a production system which avoids or largely excludes the use of synthetic compounded fertilizers, pesticides; growth regulators and livestock feed additives. Organic farming system rely upon crop rotations, crop residues, animal manures, legumes, green manures, off-farming organic wastes, and aspects of biological pest control to maintain soil productivity, to supply plant nutrients and to control insects, weeds, and other pests. William Masters, shared his thoughts on how Americans are rethinking agriculture, how they are rethinking what they eat and what is in their food, how they grow, market and distribute them. He explained that consumers in wealthy societies no longer “need higher farm productivity for their own prosperity”, but instead “are seeking foods that embody their cultural values”. Giving a scenario of killing the “golden goose that laid the golden eggs”, Masters expressed fears

that consumer preferences for organic, local and traditional foods in the US might “limit their support for the kind of agricultural innovations that are needed in Africa”. Killing the golden goose

This is where the problem is. America and Europe can conveniently go for organic food; they can be selective because they have no food security problem. Masters argument favours us. According to him, the agricultural revolution in America and Europe which sustained

Advertise here

Worldwatch Institute and organic agriculture Policy analyst E.L. Beck, in a Vital Signs Online release from the Worldwatch Institute, discussed organic agriculture robustly. According to him, in 2009, organic farming was practised on 37.2 million hectares worldwide, a 5.7 percent increase from 2008 and 150 percent increase since 2000. His definition of organic agriculture is borrowed from the International Federation of Organic Agriculture Movements (IFOAM). It states: “It is a production system that sustains the health of soils, ecosystems and people. It relies on ecological processes, biodiversity and cycles adapted to local conditions, rather than the use of inputs with adverse effects. Organic agriculture combines tradition, innovation and science to benefit the shared environment.” Beck argued: “Although organic agriculture

Continues on page 31

BUSINESS DAY

C002D5556

Wednesday 20 February 2019

Investment Opportunities

‘How to start a successful Amazon business’ Tom Huddleston Jr.

even years ago, Larry Lubarsky was unemployed and $100,000 in debt. Today, he’s a 38-year-old small business owner, running a company that brings in millions of dollars per year by selling thousands of different products on Amazon. “I didn’t have a career, I didn’t have any money to my name,” Lubarsky tells CNBC Make It. “I was living with my mom, I was severely in debt, I couldn’t afford my phone, my car.” His business selling products on Amazon “saved my life financially,” Lubarsky says. Lubarsky buys a wide variety of products in bulk — from electronics and kids’ toys to health and beauty supplies — and then he re-sells them on Amazon, all while trying to turn a tidy profit. He engages in a business model known as wholesale arbitrage, which sees him buying large quantities of products from wholesalers or large brands. As Lubarsky previously told CNBC Make It, he might see a Nerf gun available for $10 each from a wholesaler, but the product is selling for $20 apiece on Amazon. In that case, he knows that he can make about $5 profit on each Nerf toy after paying the fees that Amazon charges its third-party sellers. In 2017, Lubarsky’s business pulled in roughly $18 million in revenue, including a net profit of $4 million, from selling products on Amazon. Lubarsky only launched the business in 2014, and he brought in more than $3 million in that first year,

he tells CNBC Make It. So, how does Lubarsky do it? Here are a few tips from Lubarsky that reveal the basics of how to be a third-party seller on Amazon. Start with seed funding First things first. You’ll need money to get started, so you can buy wholesale products to sell online. Lubarsky told CNBC Make It that he pitched his Amazon selling business to a few friends and family members before one friend believed in him enough to invest $60,000. Lubarsky spent about $10,000 of that amount on renting a small office space and on shipping supplies (to ship the products he’d

sell on Amazon). He used the rest of the money to buy his first batch of inventory, including almost 100 different wholesale products that he knew would sell well on Amazon and return a respectable profit. How to get the products Lubarsky relies on wholesale companies, or even large brands, that are willing to sell products in bulk for resale. It’s the best way to get a large quantity of products at a discounted price, he says. “What I basically do is buy directly from big national distributors, or brands direct,” Lubarsky tells CNBC Make It. “I open wholesale accounts

with them and I basically have access to their products and to their catalogs, and I go through all those tens of thousands of products that I can get my hands on.” Do your research Of course, Lubarsky’s business only works if people are actually willing to buy the products he buys in bulk — otherwise, he’s left with unsold inventory. In order to decide what to buy, Lubarsky and his employees research extensively using Amazon’s Fulfillment by Amazon (FBA) site, which offers sales-tracking tools to third-party sellers that can tell Lubarsky how many units of a particular product are typically sold each day.

The second factor he considers is the expected return on his investment (or ROI). He wants any product he’s buying to give him at least a 30 percent ROI, so that if he buys something for $10 per unit, he’ll make about $3 on each sale. And Lubarsky requires a minimum of $3 profit per item, because otherwise the margin is too small to be worth the effort. “I won’t take a 30 percent ROI on a $2 product,” he says, because the profit would only be 60 cents. Plow profits back into the business Getting a 30 percent return on a big investment might make you want to kick back and enjoy spending your profits. But Lubarsky says the only way to scale this type of business is to continuously reinvest, which means buying more and more inventory. The $50,000 that Lubarsky spent on his first batch of inventory returned a $20,000 profit, for a total of $70,000, he says. He took that entire sum and bought even more inventory, which soon turned into a total of $100,000, and so on. Roll up your sleeves Of course, there’s nothing simple about starting and running any successful business — and, these are just Lubarsky’s tips on the basics of operating as a third-party seller on Amazon. But, if you’re looking to follow in the footsteps of someone like Lubarsky, he says his best advice is to be as dedicated to the venture as you would any other full-time business. This abridged story is sourced from CNBC.

How Non-Oil Sector faired in Q4 2018

‘The Non-Oil sector contributed 92.94% to real GDP in the fourth quarter of 2018, slightly higher than the 92.65% seen in Q4 2017’

he non-oil sector grew by 2.70% in real terms during the fourth quarter of 2018. This is 1.25% points higher than the growth rate recorded in Q4 2017, and 0.38% points higher than the growth rate recorded in Q3 2018. On an annual basis, the non-oil sector recorded a growth rate of 2.00% in 2018, performing considerably better than 0.47% seen in 2017. The key performing activities during the quarter were Information and communication, Transportation & Storage, Arts & Entertainment, Agriculture and Manufacturing. The Non-Oil sector contributed 92.94% to real GDP in the fourth quarter of 2018, slightly higher than the 92.65% seen in Q4 2017. For 2018, annual contribution was recorded at 91.40% against 91.33% in year 2017. Key performing activities on an annual basis include Transport, Information & Communication, Electricity, Water, as well as Arts & Entertainment. On the other hand, in the fourth quarter of 2018, average daily oil

production stood at 1.91 million barrels per day (mbpd). This was lower than the 1.95 mbpd recorded in the same quarter of 2017, and 1.94mbpd in Q3 2018. The oil sector recorded a real GDP growth rate of –1.62% (yearon-year) in Q4 2018, indicating a decline of –12.81% points relative to the growth rate recorded in the corresponding quarter of 2017. However, when compared to Q3

2018, growth increased by 1.29% points. On an annual basis, real GDP growth for the oil sector stood at 1.14% as against 4.69% recorded in 2017. The Oil sector contributed 7.06% to real GDP in Q4 2018, down from figures recorded in the corresponding period of 2017 and the preceding quarter, where it contributed 7.35% and 9.38% respectively. For 2018, the contribution of the oil sector to aggregate real GDP was 8.60%, slightly lower when compared with 8.67% in 2017. Nigeria’s gross domestic product grew 2.38 percent in the last quarter of 2018 compared with 2.11 percent in the same quarter a year before according to Nigerian Bureau of Statistics. Nigeria’s economy emerged from recession in 2017 and has been recovering largely because of higher oil prices, though growth remains fragile. Gross domestic product grew by 1.93 percent overall in 2018, more than the 0.82 percent in 2017, the statistics office said.

Wednesday 20 February 2019

C002D5556

Small enterprise

Support for small business financing more critical now than ever – CBN Governor

upport for MSMEs financing is more critical now than ever, given the need to boost Nigeria’s long-term growth trajectory since exiting recession in the second quarter of 2017, Governor of the Central Bank (CBN) Godwin Emefiele, said recently, at the opening ceremony of a workshop for judicial officers on Secured Transactions in Moveable Assets (STMA) Financing Law in Nigeria. Godwin Emefiele revealed that the estimated 17.5 million surviving small and medium enterprises in Nigeria are in need of at least N48 trillion to thrive and that 85 per cent of the Nigerian workforce is engaged by SMEs. Said he: “In real terms, our GDP grew by 1.8 per cent (year-onyear) in the third quarter of 2018, compared with 1.2 per cent in the corresponding period of 2017. As a matter of fact, the observed growth was largely driven by continued improvements in non-oil sector activities, such as agriculture, information and technology, manufacturing, transportation and storage, trade, and other services. According to the bank governor, 96 per cent of enterprises operating within these sectors are MSMEs while accounting for an estimated 48 per cent of Nigeria’s nominal GDP, seven per cent of our export, and about 84 per cent of the workforce. “Undeniably, MSMEs contributes enormously to job creation, utilisation of domestic resources, income generation, and improvement of local technology. Despite these contributions, however,

MSMEs across the country continue to face structural drawbacks, particularly due to their peculiar nature.” Emefiele argued, “Poor access to finance, the high cost of borrowing, inadequate infrastructure, non-conducive business environment, and weak capacity are some of the stylized challenges constraining MSME growth in Nigeria. “Among these factors, access to affordable and sustainable finance has been identified in the development space as the most constraining. Strongly related to this is lack of acceptable collateral and the inherent information asymmetries. MSMEs are typically deemed risk-laden, plagued with the high mortality rate, and often lacking adequate collaterals acceptable for conventional credit. “Accordingly, the estimated US$158 billion or N48.3 trillion financing gap which characterizes MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending.” He told the judges that CBN was moving towards enforcement of the STMA Act across all financial entities and thus solicited the full support of the judiciary and law enforcement agencies towards

providing a robust and resilient financial infrastructure. “This will deepen credit delivery to our productive sectors, especially among the MSMEs, and foster sustainable and inclusive growth.” He noted that by January 31, 628 financial institutions, comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies had been registered on the Registry’s portal. Acting Chief Justice of Nigeria (CJN), Ibrahim Tanko Muhammed described the workshop as timely and topical because access to finance was vital in the growth and development of any economy. For him, it is expedient to bring together Judicial Officers to harness ideas, experiences and opinions on the best possible ways to encourage the use of moveable assets as collateral for assessing loans. He said the workshop would involve trainings and discussions around access to finance, the legal regulatory framework for secured transactions in moveable assets as well as disputes that could arise there from.

BUSINESS DAY

Editor’s Note O rganic agriculture is a production system which avoids or largely excludes the use of synthetic compounded fertilizers, pesticides; growth regulators and livestock feed additives. Organic farming system rely upon crop rotations, crop residues, animal manures, legumes, green manures, off-farming organic wastes, and aspects of biological pest control to maintain soil productivity, to supply plant nutrients and to control insects, weeds, and other. Traditionally, we practise organic agriculture. Need for food security however has drawn us into embracing conventional agriculture - an industrialized agricultural system characterized by mechanization, monocultures and the use of synthetic inputs such as chemical fertilizers and pesticides, with emphasis on maximizing productivity and profitability. Are we on the right path? Read the rest of the story in our cover this month. Nigeria’s apex bank boss, Godwin Emefiele, says support for MSMEs financing is more critical now than ever, given the need to boost Nigeria’s long-term growth trajectory since exiting recession in the second quarter of 2017. He says that the estimated 17.5 million surviving small and medium enterprises in Nigeria are in need of at least N48 trillion to thrive and that 85 per cent of the Nigerian workforce is engaged by SMEs. He spoke at the opening ceremony of a workshop for judicial officers on Secured Transactions in Moveable Assets (STMA) Financing Law in Nigeria which held in Abuja. Do you know you can start a successful Amazon business if you follow the foot-steps of Larry Lubarsky? Larry Lubarsky was unemployed and was $100,000 in debt. Today, he’s a 38-year-old small business owner, running a company that brings in millions of dollars per year by selling thousands of different products on Amazon. Lubarsky buys a wide variety of products in bulk — from electronics and kids’ toys to health and beauty supplies — and then he re-sells them on Amazon, all while trying

Siaka Momoh to turn a tidy profit. He engages in a business model known as wholesale arbitrage, which sees him buying large quantities of products from wholesalers or large brands. The Non-Oil sector contributed 92.94% to real GDP in the fourth quarter of 2018, slightly higher than the 92.65% seen in Q4 2017. For 2018, annual contribution was recorded at 91.40% against 91.33% in year 2017. Key performing activities on an annual basis include Transport, Information & Communication, Electricity, Water, as well as Arts & Entertainment. As if the Apapa traffic gridlock nuisance is not sufficient heartache, another web of private oil jetties have swung up in Ijegun in Oriade Local Government Development Area of Lagos State, a multi-billion naira project built without consideration for road infrastructure that the tank farms in these jetties need for the right supply and logistics chain. Siaka Momoh in Enterprise Strokes calls on Governor Akinwunmi Ambode to intervene urgently. Read these and more in your delightful magazine this month. You are welcome on board. For advert placements, sponsorship, reactions, editorial contributions, please contact SIAKA through siakamomoh@ yahoo.com; 2348061396410; 23408023033988.

Still on organic... Continued from page 29 is practised around the world, certified organic agriculture tends to be concentrated in wealthier countries. The Group of 20 (G20), comprising both developing and industrialized countries, is home to 89 percent of the global certified organic agricultural area. But non-governmental organizations, including Slow Food International and ACDI/VOCA, are working with farmers to promote organic agriculture in developing countries as a means of bettering livelihoods and rejuvenating the land. “In western Tanzania, organic agro-forestry practices have helped rehabilitate some 350,000 hectares of desert land over the span of two decades. And in Ethiopia, coffee farmers are learning how to protect

wild coffee plants, fertilize them, using organic compost, and process them in a manner that retains the quality of the crop, without damaging the environment.” He said although the global organic market has shown growth in the past few years, the rate has slowed since 2000, and there are several challenges that impede large-scale expansion of organic practices. For him, the price premium on organic foods, for example, may dissuade many consumers from buying organic products, despite the potential environmental, ethical, and health benefits these products provide. A voice from Nigeria T.I. Olabiyi, PhD, of the department of Agronomy, Ladoke Akintola University of Technology, Ogbomosho, wouldn’t have anything to do

with industrialised agriculture. He is all for organic agriculture. In his presentation at the Nigerian Economic Summit Group-organised International Agribusiness Summit and Expo, which held in Ilorin, Kwara State, he argued: “We should note that chemical fertilizers and pesticides are poisons intentionally dispersed in the environment to augment soil nutrient and also control pests, but they also act upon other species causing serious side effects on non-target species. There should be awareness campaign and training for rural farmers on organic agriculture. Government (local, state and federal) should embrace organic agriculture. “Howbeit, if this is done, people in West African countries will have safe and healthy food to eat and even live longer.”

For Olabiyi, it is ‘no’ to conventional agriculture. He argued “Conventional agriculture is an industrialized agricultural system characterized by mechanization, monocultures and the use of synthetic inputs such as chemical fertilizers and pesticides, with emphasis on maximizing productivity and profitability. Industrialized agriculture has become ‘conventional’ only within the last 60 or so years, just since the end of World War II. Under conventional agricultural scheme, the use of pesticides and fertilizers has been bastardized as a result of their indiscriminate use. For him, “Fertile soil has lost its natural fertility through monocropping, erosion, leaching, crop removal and conventional tillage operation. Pesticides handling became major controversial issue in food and

water safety. There were evidences of food and water contamination. Farm and rural water supplies stand the risk of chemical residue pollution. There were casualties of human, livestock, wildlife and fish as a result of indiscriminate use of pesticides.” He argued that in the recent time, people now advocate for organic agriculture, just because its practices tend to be more natural, environmentally friendly and also sustains the health of soils, ecosystems and people. He also argued that our fathers and forefathers, who were traditional farmers, were the pioneers of organic farming, that organic agriculture is not new only that the western world and civilization has taken it away from us and replaced it with conventional farming where the use of chemical fertilizers and synthetic pesticides is the order of the day.

BUSINESS DAY

C002D5556

Wednesday 20 February 2019

Global Matters

National debt tops $22 trillion for the first time as experts warn of ripple effects

he national debt surpassed $22 trillion for the first time on Tuesday, a milestone that experts warned is further proof the country is on an unsustainable financial path that could jeopardize the economic security of every American, USA TODAY has reported. The Treasury Department reported the debt hit $22.012 trillion, a jump of more than $30 billion in just this month. The national debt has been rising at a faster rate following the passage of President Donald Trump’s $1.5 trillion tax-cut package a little more than a year ago and as the result of congressional efforts to increase spending on domestic and military programs. The nation has added more than $1 trillion in debt in the last 11 months alone. “Reaching this unfortunate milestone so rapidly is the latest sign that our fiscal situation is not only unsustainable but accelerating,” said Michael A. Peterson, chief executive officer of the Peter G. Peterson Foundation, a nonpartisan organization working to address the country’s long-term fiscal challenges. For Americans, the growing debt should be a concern, experts said, because over time it can push up interest rates for consumers and businesses.

Again on Oriade crater-ridden roads Ambode must address

The higher rates can ripple through the economy, nudging up rates for mortgages, corporate bonds and other types of consumer and business loans. A big national debt can also make it harder for the government to increase spending to combat the next recession or devote more money to retraining workers and helping the poor, among other programmes. Peterson attributed the growing national debt to “a structural mismatch between spending and revenues.” The biggest drivers are the aging population, high healthcare costs, and growing interest payments, combined with a tax code that fails to generate sufficient revenue, he said. The debt eclipsing $22 trillion “is

another sad reminder of the inexcusable tab our nation’s leaders continue to run up and will leave for the next generation,” said Judd Gregg and Edward Rendell, co-chairmen of the nonpartisan Campaign to Fix the Debt, a project of the nonpartisan Committee for a Responsible Federal Budget. With deficits rising and gross debt scheduled to jump by more than $1 trillion annually, Congress must take action to put the country on a more sustainable path, Gregg and Rendell said. “The fiscal recklessness over the past years has been shocking, with few willing to step up with a real plan,” they said. “We need responsible leadership to fix the debt, not a worsening of partisanship.”

Proshare’s comment on 2019 Budget

Budget 2019: The Hidden Monsters

s far as budgets go the Federal Government’s Budget 2019 is modest, mild and uninspiring; it has a number of broad flaws: It fails to excite vision, it fails to ignite passion and it simply tries to steady a course that has seen the economy stall to a growth rate of about 2% (max-out); a figure which the latest IMF estimates expect to be the growth index for 2019 (more of the same). Why and where will growth come from? The budget has rested on a cushion of figures rather than a philosophy of progress. Thinking outside the box or simply throwing the box away: The late Chief Obafemi Awolowo, one of South Western Nigeria’s heroes of modern fiscal management is credited to have succeeded in growing the economy of the South West in the mid 1950’s to late 1960’s on the basis of promoting a massive surge in human capacity development through free education. The intricate logic of the Awolowo social investment paradigm was that of building human capacity which in turn would raise local productivity on the one hand and increase incomes and tax naira to fund more human capacity development on the other. What most saw as free education was actually citizen productivity paid forward. It was a radical idea that had sound logic in economics. It is this type of bold and unconventional thinking that is absent in the 2019 budget, as it is in previous budgets and social intervention programmes built into

the fiscal frameworks (and open to political distortions from all sides even as the intent remains genuine – and since when did intentions trump consequential impact or/ and optics?). A large increase in educational spending would expand the earning capacity of Nigerians in productive areas such as: • Artisanship • Entrepreneurship • Science • Industry • Teaching • Engineering • Law • Architecture • Medicine/Pharmacy • Farming/Agriculture Educational spending would pay its way by raising Nigerian workers to higher levels of income which would eventually be taxed at higher marginal rates. Entrepreneurs with better skills and larger visions will generate higher revenues that would produce more tax earnings for government by way of higher CIT and PIT. The paltry 7% of revenue projected for the education sector in the 2019 budget clearly reveals the lack of radical reasoning amongst economic managers. Ghana, Nigeria’s neighbour spends about 23% of its budget on education, thereby

explaining why rich Nigerians spend about a $1billion annually training their children in that country. Budget 2019 does not in any creative way address the challenges of rising unemployment. Nigeria’s unemployment figure in Q3 2018 was estimated at 23.1%. The economy has grown the absolute number of unemployed people by 15 million in the last three years, meaning that an average of 5 million new jobs need to be created annually to keep unemployment rate at its present level. To do this the economy must grow by between 5 and 6% per annum or slightly lower than India’s recent 7% growth rate in 2018 (Nigeria’s recent growth rate was 1.9% in Q3 2018). Tope Fasua, the 47 year old presidential candidate of the Abundant Nigeria Renewal Party (ANRP) in the February 2019 elections argued in a well thought out piece that the 2019 budget should have shown stronger character by growing to at least N15trn or $4.92bln. He insists that a country with the unemployment levels shown by Nigeria ought to be thinking big, fast and smart. There are critics who have a contrary view but when we realize that the local currency slumped against the US dollar from N160/$ in 2014 to N305/$ in 2017, the real size of Nigerian budgets in dollar terms has actually been declining, despite nominal naira increases (until the 2019 budget which fell from N9.3trn in 2018 to N8.7tn in 2019, Nigerian budgets have risen annually in absolute size). Comment is abridged

have lost count of how many times that I have had to draw the attention of the Lagos State Government to the issue of Ijegun Oil Jetty and the network of crater-ridden roads that have become a worrisome menace to residents, and visitors also, of the Oriade Local Council Development Area of Lagos State {OLCDA). This council area, calved out of Amuwo Odofin Local Government Area is made up of Satellite Town and environ. My comments have become overkill. But I will continue to shout it out loud and clear until the issue is addressed. This is why I am asking that Governor Akinwunmi Ambode should address it and add it to its list of achievements before exiting office in May 2019. A recap of the story: Apapa traffic gridlock Apapa and its web of oil farm-tanks have made this nation’s vital economic axis difficult to access. As if the Apapa nuisance is not sufficient heartache, another web of private oil jetties have swung up in Ijegun in OLCDA of Lagos State, a multi-billion naira project built without consideration for road infrastructure that the tank farms in these jetties need for the right supply and logistics chain. If anything, the Apapa terrifying burden in the neighbourhood of Ijegun is enough benefit of hindsight to learn from. It is no longer news that ApapaWharf/Tin Can Island stretch of the Oshodi-Apapa Motorway has become a no-go-area. Reason? Traffic gridlock. Businesses have moved out of Apapa and neighbourhood and more are still moving out. They are moving out to more suitable places like Surulere, Ilupeju, Gbagada, and sane parts of the Oshodi-Apapa motorway. It is less business for commercial vehicles. Motorbikes have taken over charging cut-throat prices and commuters and consumers of products moving from one point to the other bear the brunt. Ijegun/Satellite messy roads OLCDA now has to bear this kind of pain; the kind of high risk Apapa community is currently subjected to. Who cares? A multi-billion naira business is established in a residential area – oil depot in a residential area with no consideration for suitable network of roads; with no thought of the risk involved! One may want to ask if any environmental assessment on this huge project was done at all. Who cares? Originally, passage was to be through Navy Town Road but the Navy authorities sensibly said ‘No’, arguing that the Navy Town would be endangered. The owners had recourse to the densely populated Ijegun community and its ramshackle network of roads. The roads are in very serious state of disrepair – strewn with craters that can cause oil-laden tankers to fall over. One would have expected building of a dedicated road for this big business and if not a reconstruction of an existing road – widened concrete pavement

road that is suitable for the Ijegun waterlogged terrain. But what is on ground now? An old rickety Marwa Road is home to the Oriade Council! Does the local government office care? Going by the way this arm of government is going about the issue, it is doubtful if it cares. Only recently, it shut down the road only to mend a few metres of the several kilometres stretch from the Fin-Niger end of the Marwa Road to the oil depot at Ijegun water front. Why not the entire stretch? Who cares? If the owners of this big oil businesses in Ijegun do not care, and our governors do not care, residents of the Oriade community who run a litany of small enterprises in this Lagos mainland area care. They care because they are tax payers. The small businesses pay annual rates to the local government. Civil servants and others who are in paid employments are hooked on to PAYE whose net they cannot extricate themselves from. Their cars are damaged regularly by the unmotorable Oriade road network; and this means regular visit to their mechanic workshop. They know what that means? So they care; very well, since they are feeling the pinch. Government must care. And the desired care must come now. Ambode should make it an emergency issue. Ambode’s 181 LGA inner roads Wait a minute, is Oriade not qualified to be part of the Lagos State Government 181 Local Government Area (LGAs)/ Local Council Development Area inner roads it planned to rehabilitate? It does. It can be recalled that Governor Ambode said the need to scale up the inner road improvement efforts arose from the fact that he had received many requests on rehabilitation of roads from residents, adding that many of the roads captured for 2017 were key roads that would have positive economic impact on the people. Going by the Governor’s words here, Oriade is highly qualified for attention. Project funding In fact, there should be a replication of the Dangote Industries/Flour Mills of Nigeria/ Federal Government PPP arrangement here. The fuel companies wouldn’t object, I believe. The points highlighted here, taken along with the case of the litany of small businesses that are doing business in Oriade, make Oriade qualify for special consideration. Political consideration Your Excellency, consider this: Oriade is largely populated by nonindigenes of Lagos State who claim the area is being sidelined because they do not vote APC. This claim is an open secret in the area – it is a popular street talk. It will therefore be politically wise if your government can urgently mobilize resources and shame its critics in Oriade. Recall Okota’s case – a similar case. You swung into action when the case was raised by one of my colleagues. You can do same for Oriade Gov.

Wednesday 20 February 2019

BUSINESS DAY

PrivateEquity & fundraising 34

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Wednesday 20 February 2019

Growth equity remains most popular investment strategy for institutional investors Stories by MICHEAL ANI

rowth equity or capital has been tipped to be the most popular form of investment strategy deployed by institutional investors, according to key findings from a survey by African Private Equity and Venture Capital Association (AVCA). The report showed that, of the 75 investors surveyed, 93 per cent said Growth equity is the widely held investment strategy for the directory population, while venture capital and mezzanine finance followed in the second and third spots as investors showed 64 per cent and 63 per cent preference for both kinds of investment strategies respective. Other forms of investment strategies including secondaries, others and buyout were ranked least with 25 per cent, 29 per cent and 51 per cent preference respectively Growth capital is a kind of private equity investment, in which investors invest in relatively mature companies that are looking for capital to expand or restructure operations, without a change of control of the business The report includes data from 75 investors including asset managers, development finance institutions (DFIs),

Source: AVCA

direct investors, endowments/foundations, family offices, insurance companies, pension funds, sovereign wealth funds, as well as thirdparty fund managers. “The investors featured in the report are based primarily in Africa, Europe and North America, who are collectively managing over $4bn and more than US$7trn in both global and African Asset under Management respectively“, AVCA, the panAfrican industry body which promotes and enables private investment in Africa said in the report. For Development Finance Institutions (DFIs), growth equity and mezzanine finance are their preferred ways of investing on the continent at 100 per cent and 86

per cent respectively with only a small proportion of their total assets allocated to venture capital. How e ver, for Endowments/ Foundations, venture capital at 60 per cent preference was their second most popular investment strategy after growth equity which 80 per cent of them say they prefer. According to the survey, the majority of the institutional investors included in the directory, such as Pension funds (90 per cent) and Third Party Fund Managers (75 per cent), said they have invested in less than 10 Africa focused or Emerging Markets funds with an allocation to Africa. However, DFIs have the largest exposure to Africafocused funds with almost

47 per cent of them have invested in between 11 and 50 funds and 29 per cent of them have invested in more than 50 funds. Insurance companies have also invested in a significant number of funds with all the respondents say they have invested in between 11 and 50 funds. In terms of Sector-specific versus Generalist funds, the report showed that 93 per cent of the directory population said they back generalist funds, while only 7 per cent said they are seeking investments in sector-specific funds. This trend is consistent across all types of institutional investors and all geographies. While only about 14 per cent of the directory population indicated that their allocation to PE in Africa is over

60 per cent of their total AUM, the figure rises to 43 per cent when compared amongst third-party fund managers. For Limited partners that are based in Africa, 21 per cent of them stated that their allocation to African PE is well above 60 per cent of their total AUM. This figure falls to 12 per cent and 7 per cent for their European and US peers, respectively. Nearly two-thirds of the directory population at 63 per cent indicated that they have a pan-African geographic focus. Pension funds have greater diversity in their geographic focus than other LP types. While 56 per cent of the pension funds in the directory have a pan-African focus, 13 per cent have a sub-Saharan Africa focus, 25 per cent have a regional focus, and 6 per cent have a country-specific focus. Direct investors are mostly targeting specific regions as well as sub-Saharan Africa. For most institutional investors in the directory, their investment strategy for Africa includes co-investments at 88 per cent and direct investments at 72 per cent respectively. Co-investments are particularly popular amongst development finance institutions (DFIs) and third-party fund managers, as they are pursued by 100 per cent and 82 per cent of their populations respectively.

Alibaba’s Ant Financial snaps up WorldFirst in $700m deal

libaba’s Ant Financial, a Chinese e-commerce giant has acquired a British payment company WorldFirst after the US government thwarted the start-up company’s chance in sealing a deal $1.2 billion with MoneyGram last year. The deal which was valued around $700 million will enable the Chinese firm to tap

into the UK market. The deal was confirmed by WorldFirst in a note to customers “We will continue to operate as a UK-headquartered and regulated business with global operations” while becoming a wholly-owned division of Ant Financial.” WorldFirst CEO Jonathan Quin said in a letter sent out to clients. According to Quin, World-

First will retain its brand and become a wholly-owned subsidiary of Ant Financial “The products and services of Alipay and WorldFirst are highly complementary. All your current customer and account information will also remain unchanged.” He added. WorldFirst has about 600 staff globally and has helped more than 160,000 individuals

and small businesses transfer 70 billion pounds ($90 billion) since its founding in 2004. Ant Financial says that the acquisition marks the Chinese company’s first big move into the U.K., although its Alipay service is accepted by some merchants there already. That should allow Ant to better serve smaller businesses worldwide, including in the

U.S. Ant Financial is best known for its Alipay service, which is China’s dominant mobile payment app with over 550 million registered users. Alibaba owns one-third of Ant, which is valued at as much as $150 billion, and it has been pushing to expand its empire outside of China and beyond the Asia Pacific, too.

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

Email the PE & F team loladeakinmurele@gmail.com

Continues on page 34

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

Financial Inclusion

& INNOVATION

‘The largest pool of farmers that produce the food we eat are the poorest and most financially excluded communities’ Ayodeji Balogun is the country manager for AFEX Commodities Exchange Limited and the regional director of Africa Exchange Holdings. In this interview with BusinessDay’s Endurance Okafor, he shares insights on how AFEX, a platform that provides innovative solutions for the agricultural sector in Nigeria is helping to include small farmers into the financial cycle. Excerpts: Tell us about yourself and how AFEX is able to include small-scale farmers into the financial cycle. y name is Ayodeji Ba l o g u n . I am the country manager for AFEX Commodity Exchange in Nigeria. We are a licensed commodity exchange and we provide access to financial and commodity markets for smallholder farmers; smallholder famers because basically they are the most underserved. So the market is there; on the buy side you have the processing companies, bluechip processing companies, and on the sale side, you have farmers, traders and merchants. Predominantly we ensure that our services reach smallholder famers because we think they are the core and foundation of the entire agricultural value chain. So until the system pays deliberate attempt to recognise and create a structure that works for them, we would hardly have a functioning agricultural sector and so it’s at the core of our strategy as a capital market institution that we are able to unlock financing for farmers to ensure that they produce competitively and then we would have a market to sell their harvested product.

Do you go in search of these farmers in some targeted states? Based on how we are configured as a commodity exchange, we have presence in over 40 locations across 14 states, mostly in the northern part of the country, but also as close as in Oyo as we will have operations there. These operations and warehouses

are set up within the production communities. What we then do is to map out the growing communities and areas, we then organise them by groups, co0rporatives and group them into sets, and then we link them to the warehouse. In that process of registration, on-boarding and training about the exchange is one of the core parts of what we do to ensure that they get financially included. So the warehouse becomes branches where they could come in and access financial services.

we have been running this programme for almost seven seasons across several states within the country. We have credit portfolio growing close to N10 billion in loans and last year alone, 25,ooo farmers accessed loans through our channels and we hope to grow the number to over 50,000 this year. Meanwhile, in the last four years of operation, 108,000 farmers have been financially served through our platform. Apart from your products tailored to farmers, are you looking at designing a similar one for some other sectors of the Nigeria economy? If you look at it, for us there are two markets on the exchange: there is physical market which ensures that producers produce comfortably and can sell efficiently and also make sure that the buyers, which are the processors from food and beverage companies, can easily buy the products from the sellers,. That’s one market. On the other side is an investment, cash market where an investor that is interested in investing in an alternative

So does AFEX give loans to these farmers? We do not give loans but we facilitate access. So, on one side, take for example we have 100 farmers, who we have their credit rating due to some several number of times they transacted with us, we know they are credible, and on the other side we go to negotiate a loan with either micro finance bank or a commercial bank or bundle the farmers into a capital market instrument and then issue a note for a willing financer. We have had several notes that we have issued in the past four years

‘

They are not just under served financially but they are actually short of the formal economy of the country

‘

So what are the step-bystep procedures you follow in unlocking finance and providing markets for these farmers? Like almost every other economy, the greatest thing you want to achieve is to make this guy an economic actor, and it starts by identification. It is always the Know Your Customer (KYC), so if it’s small farmer living in the rural area because that is the most viable place to produce food, there is very big chance that he is 60 kilometers from the closest bank and about 40 kilometers from the closest ATM service. Yes, we have a huge, wide and growing agent network but they are all servicing the cities and the banked. There is a very recent report that out of the over 30

million of BVN accounts that we have, less than 10 million of them are actually financially served, meaning that over 20 million of the people that even have BVN do not have access to normal financial services and so a lot of the solutions that are out there in the public are focused on the people that are banked than providing alternative banking journal. The customers and farmers that we work with on a daily basis are people that actually do not have bank accounts and when we do register them to have BVN and open bank account, either microfinance bank account or commercial bank account, for them, they happen to be the first in their generation or in their family to ever have a bank account. So that is the scale of impact. What makes it easy for us to do business with them is that it ensures that they have access to credit and loans to boost their productivity and increases their livelihood and access to build wealth. It also opens door for a number of people around them because it becomes a source of motivation for two or three other households.

asset class or looking at the new, different kinds of instruments that we invest in can invest in a commodity which is like equity type of instrument, that is commoditybacked, or he wants to invest in input loans. He could work through a number of broker partners that we have and then buy these instruments and then invest against them. So we are going to build a lot of investable agriculturebacked assets which we are launching just like some we have lunched in the past. We have our index which is published in BusinessDay every Wednesday, the first agricultural commodity index published in Africa, tracking the number of major commodities in the country. And through the published index, investors can also know their competence and say am I beating the market index. In your four years of operation in Nigeria, what would you say have been the challenges your company has had to manage? We have had a lot of collaborations with various stakeholders in the system. We have had tremendous success with micro finance banks, increasing with the capital market operator as well as a number of the crowd-funding platforms. We have had strong partnerships with them and we have invested heavily in technology which has made the system almost seamless to partner with us and have visibility on what transactions are. Commercial banks have naturally stayed behind. They are more risk averse, and are actually less configured to manage the operation that has to do with smallholder farmers’ very small transaction sizes as there is a lot of operation monitoring, leg walking required. That is where we have had challenges in the past but with the number of partnerships like those with CBN and a couple of programmes, a number of them are now supportive. Infrastructure has been the biggest challenge, and I think there is need for a business like ours, a commodity exchange, a critical infrastructure for any econ-

omy that is agriculture-based would help pull most of the problems of the millions of farmers it works with and create a business model that solves it. The road is a challenge because transport costs are high, double of what they should be. That is a very big challenge, as we restricted to dealing with agricultural products because if you go into the perishable, then power becomes the biggest nightmare. Telecommunication infrastructure is another source of challenge. Almost everyone thinks we have solved that problem in the country, but when you go into the farming areas you will find out that there are no networks even when you carry all four different SIM cards. Financial challenge is one, but there are a whole lot of others. If you look at the data, what they suggest is actually scary; the largest pool of farmers that produces the food that we eat as a country are the poorest community and the most financially excluded communities. That correlation suggests that they are not just under servedfinancially but that they are actually shut out of the formal economy of the country. Are there some other ways AFEX is helping to spur financial inclusion in the country? One other way is the fact that we partner with Verve. We do issue cards to the farmers. So even when they cannot go to the banks, they actually can use their ATM cards to withdraw from closest ATM or go to some of our registered and trained agents, who will use their structures. We are able to provide services for the farmers. The agents therefore act as intermediaries and also carry other transactions besides just registering them on the platform. One thing is to register them on the platform, the second thing is to have economic transactions that they are doing. The third is to have access to where they can execute these transactions. We have the convergence of the three elements.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday20 February 2019

Live @ The Exchanges Top Gainers/Losers as at Tuesday 19 February 2019 GAINERS Company

LOSERS Opening

Closing

Change

N72.6

N75

2.4

ZENITHBANK

N24

N25.35

1.35

GUARANTY

N36.5

N37.7

1.2

PRESCO

Market Statistics as at Tuesday 19 February 2019

Company MOBIL DANGCEM DANGFLOUR

Opening

Closing

Change

N170

N168.2

-1.8

N193.3

N192.5

-0.8

N9.6

N9.45

-0.15

DANGSUGAR

N14.55

N15.15

0.6

TRANSCORP

N1.54

N1.39

-0.15

CUSTODIAN

N6.05

N6.55

0.5

UNITYBNK

N1.14

N1.03

-0.11

ASI (Points)

32,406.17

DEALS (Numbers)

4,623.00

VOLUME (Numbers)

4.159

MARKET CAP (N Trn

FMDQ kicks off 2019 with listing of Sterling Investment Management SPV Plc Bond Stories by Iheanyi Nwachukwu

MDQ OTC Securities Exchange (FMDQ) has kicked off this year with the commemoration of the listing of Sterling Investment Management SPV Plc Bond. The successful listing of Sterling Investment Management SPV Plc N32.90 billion Series 2, 7-Year 16.50percent Fixed Rate Unsecured Bond, under a N65 billion Debt Issuance Programme follows the approval granted by the FMDQ Board Listings, Markets and Technology Committee. For the past five years since its inception, FMDQ OTC Securities Exchange (FMDQ) has progressively championed and effectively supported initiatives aimed at boosting the growth and development of the Nigerian financial markets, with focus on the debt capital market (DCM).

L-R: Niyi Omojola, Partner, head of Investment Banking Nigeria, Constant Capital Partners Limited; Bola Onadele. Koko, managing director/CEO, FMDQ OTC Securities Exchange; Abubakar Suleiman, managing director/CEO, Sterling Bank Plc, during the signing of the Bond Listing Register at the Listing Ceremony for the Sterling Investment Management SPV PLC Bond at Exchange Place, Lagos.

Consequently, credible issuers in the private sector have been able to successfully tap the DCM to access stable long-term finance to fund key activities that ultimately translate to the development of the Nigerian economy. To formally welcome this listing, FMDQ, in keeping with its tradition, held a prestigious Ceremony at its business complex, Exchange Place,

on Tuesday, February 19, 2019, and played host to the issuer, Sterling Investment Management SPV Plc, represented by the Managing Director, Sterling Bank PLC, Abubakar Suleiman, and other representatives of the bank. Also present at the ceremony were the sponsor of the Bond on FMDQ and the Registration Member (Listings), Constant Capital Markets & Securities

SEC shuts down Growing Circle over illegal capital market activities

he Securities and Exchange Commission (SEC) has sealed off the premises of Growing Circle in Lagos for engaging in illegal fund management activities. According to the Commission, the company was shut down for carrying out investment operations that falls within fund management without registration with the apex regulator. The commission had established that the company’s activities also constituted an infraction of the Investments and Securities Act (ISA), 2007. According to SEC, “They do not have regis-

tration with the SEC and the Commission has powers according to Section 13 (w) of ISA 2007, to shut

down any company carrying out capital market activities without due registration”.

Growing Circle Limited sealed off by SEC officials

361,820,576.00

VALUE (N billion)

Limited (Constant Capital), and representatives from the Joint Issuing Houses, CardinalStone Partners Limited, FBNQuest Merchant Bank Limited, FCMB Capital Markets Limited, FSDH Merchant Bank Limited and Stanbic IBTC Capital Limited, as well as the solicitor to the listing, G. Elias & Co, amongst others. Tumi Sekoni, Associate Executive Director, Capi-

tal Markets, FMDQ, whilst delivering the welcome address, congratulated the issuer for having successfully raised N32.90 billion from the Nigerian DCM. She commended the issuer for yet again joining the league of corporate entities whose debt profiles have been raised via the value-packed listings, quotations and noting service offered by FMDQ, for the second time. She further highlighted that this listing would contribute to the growth of the Nigerian corporate bond market, consistently injecting renewed confidence into the DCM. Sekoni went on to assure all parties that FMDQ will continue to innovate and provide efficient services, as may be necessary, to support issuers and investors, towards achieving a globally competitive and operationally excellent DCM. In delivering his special address, Abubakar Suleiman, commented, “We are pleased to list the Sterling SPV Bond on FMDQ.

12.084

Fidson N3bn Rights Issue to open March 6

he proposed N3billion Rights Issue by Fidson Healthcare Plc will open on Wednesday March 6, 2019; while the acceptance list will close on Tuesday April 9, 2019. Fidson is offering to existing shareholders 750 million ordinary shares of 50kobo each at N4 per share on the basis of 1 new ordinary share for every 2 ordinary shares held as at December 28, 2018. On Thursday January 31, Dealing Members of the Nigerian Stock Exchange were notified that Fidson Healthcare Plc (the Company) obtained the approval of the Securities and Exchange Commission (SEC) to issue a revised Rights Circular with respect to this Rights Issue.

Newrest ASL moves to delist from Nigerian Stock Exchange

ewrest ASL Nigeria Plc has through its Stockbroker, Helix Securities Limited, submitted an application to the Nigerian Stock Exchange (The Exchange) for voluntary delisting of the entire 634,000,000 ordinary shares of the Company from the Daily Official List of The Exchange. This decision to delist from the NSE results from the inability of Newrest ASL Nigeria Plc (formerly Airline Services & Logistics Plc), to meet up with the 20percent free float requirement of The Exchange. Companies listed on The Exchange are required to maintain a minimum free float for the set standards under

which they are listed in order to ensure that there is an orderly and liquid market for their securities. The free float requirement for companies on the ASEM Board is a minimum of 15percent of issued and fully paid up shares while that of the Main Board is a minimum of 20percent of the issued and fully paid up shares. Companies listed on the Premium Board are also required to have a free float of a minimum of 20percent of issued and fully paid up shares or the value of its free float is equal to or above N40 billion on the date The Exchange receives the Issuer’s application to list. In line with the provi-

sions of Rule 1.10 of the Rules for Delisting of Equity Securities from the Daily Official List of The Exchange which states that: “The Issuer shall set aside funds sufficient to purchase the interest of all shareholders who expressed their dissent to the resolution to de-list the Issuer; and the Funds shall be domiciled with a Registrar or a Custodian duly registered by and in good standing with the Securities and Exchange Commission”, the Company’s stockbroker has informed The Exchange that it has opened and deposited sufficient funds to settle minority shareholders in an Escrow Account with Zenith Bank Plc to be managed by Meristem Registrars Limited.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

38 BUSINESS DAY NEWS FinTech lending platforms fill credit gap... Continued from page 1 available, this is often subject to the credit rating of a potential borrower and could be as high as 60 percent when annualised. Ordinarily, such high interest rates would be discouraging for individuals or even businesses. “Speed to market and convenience,” said Adedoyin Onayemi, head, cognitive risk and innovation, Credit Direct, are why the platform continues to enjoy patronage. Established in 2007, Credit Direct, a subsidiary of FCMB, has provided N150 billion as loans till date, Onayemi said in response to BusinessDay enquiries. The platform, he said, has offered more credit to individuals

and has only a 10 percent default rate. A three-month loan on Zedvance, another lending platform, attracts about 13 percent interest, while a six-month loan attracts about 25 percent using the live simulator feature on the website. For those desirous of short-term loans for urgent needs, Zedvance, like its peers, could offer a way out. Commercial banks rarely lend money without collateral, which explains the preference for big organisations and high net-worth individuals. The result is that only 350 Nigerians are said to be responsible for more than 80 percent of the N5.4 trillion debt portfolio of Assets Management Corporation of Nigeria (AMCON).

C002D5556

The entry of firms that leverage digital technology to provide easy and convenient access to credit has proven that lending to small businesses (and maybe individuals) is not rocket science. Paylater, a two-year old credit company with a mobile app that has been downloaded one million times, disclosed in its newsletter last month that it disbursed 591,560 loans valued at N13 billion in 2018. This represents over 300 percent growth in loans compared to the previous year. Kiakia, another two-year-old company, also said in December that it has disbursed over $1 million in peer-to-peer loans. For Paylater, which is intended to meet urgent, short-term cash needs, loans attract interest rates starting at 5 percent monthly on the first loan. “Please do not take a Paylater

loan if you intend to service longterm debts,” the company advised prospective borrowers on its website. Maria Rotilu, general manager, Branch International, a digital lending company with offices in Nigeria, Kenya, Tanzania, India and Mexico, told BusinessDay that it has disbursed over 600,000 loans valued at over N5 billion to small businesses and households. The firm has so far secured over $100 million from international investors, including the World Bank Group’s International Finance Corporation (IFC) and Andreessen Horowitz. The latter is one of Silicon Valley’s venture capital firms, whose previous investments have included Airbnb, Instagram, and Facebook. The use of credit scoring has been a major breakthrough for the digital lenders. Credit scoring refers to a statistical analysis performed by lenders and financial institutions to assess a person’s creditworthiness. Without

Wednesday 20 February 2019

the encumbrance of collateral, these digital lenders increasingly rely on individuals’ credit scores to disburse loans. On its website, Lidya, one of the digital lending platforms, indicates it has disbursed over 3,000 loans and says it has built Africa’s first credit score system for small and medium businesses. According to Lidya, businesses looking for $500 to $50,000 in working capital are able to apply online or via their mobile phone and get a decision. To assess credit risk, Lidya says it uses close to 100 data points to evaluate businesses, build a credit score unique to each business, and disburse loans in 24 hours or less. For banks, it is mainly about the bottom line – safeguarding shareholders’ assets. For majority of the digital lenders, however, it is about filling a void left by banks. From the transaction reports released by some of the digital lenders, it is clear there is no problem of demand.

Zenith Bank declares N2.80 total dividend... Continued from page 2

L-R: Nkereuwen Ukpong, controller, Federal Ministry of Works, Akwa Ibom State; Kehinde Bakare, site manager, Julius Berger plc; Godwin Eke, director, Federal Highways (South-South Zone); Ndifreke Ukochio, project coordinator, Julius Berger plc Uyo, and Oladimeji Abdulkareem, senior quantity surveyor, Julius Jerger Plc, at the Calabar-Itu Road during the media tour of the project by the Federal Ministry of Power, Works and Housing in Uyo, Akwa Ibom.

PDP cautions against military intervention... Continued from page 1

and National Assembly elections

on Saturday, saying APC agents have been trained to use hand-held device that would slow down the card readers in PDP strongholds. This is as strong indications also emerged on Tuesday that President Buhari, at his meeting with service chiefs, may have reinforced his earlier directives to security personnel not to allow ballot box snatchers go scot-free. Prior to his return to the PDP in late 2017, Atiku was one of the APC stalwarts that helped Buhari, then APC candidate, win the 2015 presidential election. But speaking at the PDP NEC meeting yesterday, Atiku said voters in PDP strongholds in the South South, South East and North Central geopolitical zones were likely to have their card readers slowed down as against their counterparts in the North West. “We have just discovered that the APC have hired many of their operatives and have taken them to China to be trained, and they have been so trained, and they are back, and they are equipped with devices that are meant to slow or fasten our card readers,” Atiku alleged. “So, if you are in the South-South, South-East and North-Central, you are likely to get your card readers to be slowed by those APC operatives… But if you are from the North-West or North-East, the tendency is that they will use these machines to fast-track the readings of your card readers, so that many of their supporters can vote while disenfranchising the other three zones,” he said.

Atiku described Buhari’s directive to the military against ballot box snatchers as undemocratic, stressing that the military has no role to play in the conduct of elections. Senate President Bukola Saraki, who is also director-general of the PDP Presidential Campaign Council, warned the APC against ruining the nation’s democracy, accusing the ruling party of planning to scuttle the forthcoming election. “My message to them (APC) is that you won in 2015 because democracy was working in Nigeria. This democracy that worked for you is to work for generations yet unborn. Do not ruin Nigeria’s democracy because of your ambition. Democracy is bigger than you and as such it worked for you and it will also work for others,” Saraki said. “Nigeria is a country that is practicing democracy. Nigeria is a country that is governed by rule of law. What Mr President said yesterday (Monday) suggested that this country is governed by jungle justice. We in PDP are not for election rigging, we are against election rigging. We sign strongly that the law should be applied on anybody that carries out election rigging. We must operate as country with rule of law and democracy,” he said. Other speakers at the meeting, including Uche Secondus, PDP national chairman, urged the military not to obey the president’s order, while also calling on INEC to audit all the materials that have been collected and distributed in order to address issues that could lead to another postponement. But briefing State House corre-

spondents after a closed door security meeting with Buhari yesterday, Mohammed Adamu, Inspector General of Police, reiterated the president’s Monday statement to the effect that “whoever snatches ballot box on election day will have him or herself to blame”. Buhari, who spoke at the APC expanded caucus meeting in Abuja on Monday, had said directives had been issued to security operatives to deal ruthlessly with ballot box snatchers. “Today, members of the security community and intelligence community came and briefed Mr. President on the security situation in the country. We deliberated on the consequences and came up with the resolve to further provide adequate security within the country so that the electorates will come out and cast their votes without any fear of molestation,” Adamu said. “Every Nigerian is encouraged to comeoutonelectiondayandcasthisor hervotewithoutanyfearofmolestation. Aybody that feels that he can come out and disrupt process should have a rethink because that situation will not be allowed. If you plan and allow yourself to be used as touts, whatever happens to you, you will take it,” he said. Adamu added that “ballot snatching, ballot buying, thuggery will never be allowed”, adding that anybody planning to snatch ballot boxes or planning to be used will not go scot-free. “So, you better don’t allow yourself to be used,” he said. The meeting, BusinessDay gathered, had focused on the states that have higher-than-average security challenges than others. Four states were invited, including the governors of Yobe, Borno, Adamawa and Kaduna States.

estimate mainly on the back of lower Interest Expense and a significant reduction in Impairment Charge. The bank also put a rein on expenses as operating expense (opex) remained flat y/y. On the flip side, Interest Income remains pressured while the bank reported a loss on derivatives,” CSL Research noted. Basic and diluted earnings per share stood at N 6.15 in the review financial year as against N5.53 in 2017. The bank’s non-performing loan ratio increased to 4.98percent from 4.70percent in 2017. Interest and similar Income stood at N440.052billion in 2018 against N474.628billion in 2017 representing a 7.28percent decline. Net interest Income (NII) was N295.594billion in 2018 as against N257.991billion in 2017, representing an increase of 14.58percent.

The bank’s Impairment Charge for Credit Losses decreased by 81.30percent to N18.372billion against N98.227billion in 2017. Loans and Advances declined to N2.497trillion from N2.596trillion in 2017, down by 3.8percent. Zenith Bank Plc grew deposits by 7.3percent to N3.690trillion in 2018 against N3.437trillion in 2017. Cost to Income Ratio (CIR) increased slightly by 4.5percent to 47.4percent from 42.9percent in 2017. Loan to Deposits ratio stood at 67.7percent in 2018 against 75.5percent in 2017. ReturnonAssets(ROA)increasedto 3.25percentfrom3.11percent;whileReturn on Equity (ROE) rose to 23.71percent from 21.40percent in 2017. At the sound of closing gong on Tuesday at Customs Street, Zenith Bank was the second-most traded stock by volume as over 37 million units of shares valued at N925.54 million were traded in 691 deals.

Why Nigeria may not benefit from rising... Continued from page 2

minal also showed that combined crude and condensate shipments dropped to 1.78 million bpd in January, against 1.87 million bpd recorded in December 2018. On Tuesday, one of the single largest buyers of Nigerian crude since 2013, India Oil Corporation, signed its first annual deal to buy US oil, paying about $1.5 billion for 60,000 barrels a day in the year to March 2020 to diversify its crude sources, a move that could threaten Nigeria’s crude oil export. On Monday, spokesman of Nigeria’s Ministry of Petroleum Resources told Bloomberg by phone that Nigeria’s total crude output slipped to 1.66 million bpd in January 2019 compared to 1.78 million bpd recorded in December 2018. The spokesman for the ministry told Bloomberg that the country’s crude condensate output slipped to 2 million bpd in January 2019 compared to 2.08 million bpd recorded in December 2018. Nigeria relies heavily on earning from oil exports, and the recent output disruptions came as an additional headache for an economy that already suffers from the sharp drop in 2014. The news of rallying oil prices is even cheerier for OPEC members who have had to bear the brunt of oil production cut in the past in a bid to rally up prices. But, while countries with higher refining capacity may reap the gains of increased oil prices, same could

not be said of Nigeria as the country is heavily dependent on imported petroleum products due to the poor state of the its refineries. With such level of dependence on imported petroleum products, the gain that ought to have accrued to Nigeria is subsequently ploughed back into the payment of subsidies or what government has recently termed under-recovery. For Nigeria, a spike in oil prices would naturally translate to higher landing cost for refined products because once refiners buy crude oil at higher price, the cost of refining would equally rise, thereby eroding the gain for countries with little or low refining capacity. The Nigerian National Petroleum Corporation (NNPC), in its latest operations and financial report for November 2018, said with oil price averaging $79, 1.6 million litres of petrol were supplied into the country through the Direct Sale Direct Purchase (DSDP) arrangements as against the 1.7 million litres of premium motor spirit (PMS) supplied in the month of October 2018. On the other hand, the petroleum products (petrol and kerosene only) production by the domestic refineries in November 2018 amounted to 13.94 million litres compared to null production in October 2018. Though the exact volume of petrol consumed daily in the country has remained controversial in the past years, figures from NNPC put it at 50 million litres per day.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

Government Enterprise & Empowerment Program

@businessDayNG

@Businessdayng

BUSINESS DAY

Brought to you by

GEEP extends TraderMoni repayment scratch cards to MarketMoni …eyes national roll-out

ollowing a successful pilot and significant uptick in repayments after the launch of the TraderMoni repayment scratch cards in January 2019, the GEEP team have now extended the cards for MarketMoni loan repayments and have commenced efforts to roll them out on a national scale. According to the Bank of Industry, the scratch cards were developed because most beneficiaries of the scheme do not have access to banks. The nearest bank to some of the markets is sometimes 20 kilometres or more away. As such, collection channels with wide coverage are required to drive collection. The new method of repayment leverages vouchers or scratch cards sold at key cluster/ market locations with high numbers of petty traders. The cards are loaded the same way Telco recharge cards are loaded. Loading the card automatically credits the beneficiary’s loan account, and updates their loan position. Also, beneficiaries can pay back their loans at any commercial bank in the country through the PayDirect platform. All a beneficiary has to do is walk into any bank and tell the Teller they want to pay their BOIGEEP loan and give the teller their phone number and the repayment amount. With this, beneficiaries now have options for repaying their loans. In addition, based on the success of the scratch card pilot, BOI has confirmed its decision to roll out similar voucher/ scratch cards for MarketMoni loan repayments. MarketMoni loans start at N50,000 and are for traders with significantly more inventory size than their

TraderMoni agent in a market in Lagos state

TraderMoni counterparts. The criteria for MarketMoni loans include having a bank account (and BVN), and belonging to a market association or cooperative society. TraderMoni and MarketMoni are two of the three interest free, collateral free products under the Government Enterprise and Empowerment Program executed by the Bank of Industry. The third interest free loan program, FarmerMoni, is targeted at farmers within farming clusters. Each FarmerMoni loan goes from N100,000 to N300,000 depending on the crop being cultivated

TraderMoni loans, which range from N10,000 to N25,000, do not require any collateral for beneficiaries to participate. However, TraderMoni beneficiaries are required to have a mobile phone and must be active petty traders in a designated cluster/market location. This collateral free approach goes against conventional ‘loanwisdom’. As such, critics of the TraderMoni program often base their arguments on the feasibility of repayments and the sustainability of the program. BOI in their responses have often cited the Government’s preference for a carrot approach to

drive repayments; the carrot being that whereas the loan starts at N10,000, beneficiaries who pay back automatically qualify for N15,000. Those who pay back their N15,000 qualify for N20,000 and those who pay their N20,000 qualify for N25,000. Ultimately, beneficiaries who pay back the N25,000 get migrated into the N50,000 MarketMoni program. Over the course of this journey, successful beneficiaries would have received up to N195,000 in affordable credit hitherto unavailable to them and their businesses. BOI recognizes that there is a higher risk of default as a ben-

eficiary climbs up the ladder; however, to mitigate this risk, the GEEP team has introduced a new requirement for accessing the N20,000 TraderMoni loan: a bank account (and BVN). This helps the program achieve two broad goals: Financial Inclusion and Repayment Compliance. Whilst financial inclusion is easily understood – seeing as a significant portion of the 36 million financially excluded Nigerian adults are petty traders and artisans; we view the new concept of using the BVN as digital collateral to drive repayment compliance, if well implemented, as simply brilliant.

40 BUSINESS DAY NEWS

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

Experts canvass other financing options to support NMRC’s mortgage refinancing CHUKA UROKO

or the Nigeria Mortgage Refinance Company (NMRC) to be successful in its mortgage refinancing function that will lead to increase in the development and delivery of affordable housing in Nigeria, the government has to do something about other financing options, housingsector experts have canvassed. NMRC was incorporated on June 24, 2013 as a private sector-led secondary mortgage institution with public purpose of increasing liquidity in the mortgage system and catalysing the delivery of affordable housing in the country. It obtained its final operating licence from the Central Bank of Nigeria (CBN) on February18, 2015. Earlier on January 16, 2014, the federal government, under former President Goodluck Jonathan, launched NMRC. OkonjoIweala, the then finance minister and coordinating minister for the economy noted,

“this company is being set up to help lower the funding cost of mortgages and promote the affordability and availability of good housing to working Nigerians by providing mortgage lending banks increased access to liquidity and longer term funds in the market”. The then minister added that apart from ‘crashing’ interest rate on mortgage loans, NMRC would also catalyse the delivery of about 750,000 homes annually, and create an enabling environment for primary mortgage banks and other financial institutions to offer 15 to 20-year mortgages at affordable rates. These assurances raised people’s expectations from the new refinancing company. Five years down the line, though Kehinde Ogundimu, NMRC’s CEO, insists that the company has done well, experts say the company is yet to meet the expectations that greeted its launch. In July 2015, NMRC successfully issued a 15-year N8 billion 14.9 percent Series

1Bond under its N140 billion medium term Note Programme, backed by an unconditional Federal Government of Nigeria guarantee. In June 2018, the company completed its N11billion 13.80 percent Series 2 Bond Issuance under itsN440 billion Medium-Term Note Programme. In December 2018, it announced that it had refinanced mortgage loans totalling N18billion. It is on the strength of this that Ogundimu told BusinessDay in a telephone interview that they had been able to address the liquidity challenge in the mortgage system. Reminded that some primary mortgage banks (PMBs) were still struggling over liquidity issues, the chief executive noted, “PMBs that are not liquid are those that are not doing well who cannot access our funds,” adding that the high interest rate in the system is a function of the macroeconomy which is beyond their control. Besides liquidity, Ogundimu said they have also

succeeded in helping the PMBs to extend their loan repayment tenor from 10 to 20 years which is good for the borrower while the rate has come down from 25 percent when NMRC started to 17.4 percent. “We have done Uniform Underwriting Standard for the informal sector. We are working on the Mortgage Guarantee Company which will require borrowers to get loans at10 percent, down from 20 percent; the company will provide protection for both the borrower and the lender,” he assured. However, experts argue that if the total amount NMRC has raised over the last 5 years is N19 billion as against the entire bond programme, it is less than 5 percent which is not a high score. According to them, if the number of mortgages that have actually been refinanced with the amount raised is computed over Nigeria’s20 million housing gap, it will be discovered that it may not be up to500,000 mortgages.

L-R: Femi Adesina, special adviser to the president on media and publicity; Governor Kashim Shettima of Born State; Governor Nasir El-Rufai of Kaduna State; Governor Bindo Jibrilla of Adamawa State, and Ahmed Abdulraman, commissioner of police, Kaduna State, briefing State House Correspondents, after the Security Meeting at the Presidential Villa in Abuja, yesterday.

Nigeria’s planned refining capacity is world’s second largest STEPHEN ONYEKWELU

lobal refining capacity is set to increase in the next four years and Nigeria’s contribution will be the second largest after China’s, GlobalData, a data and analytics company, has said. GlobalData showed Nigeria is the second largest country in terms of refining capacity additions. The country is expected to add around 2,225 mbd of refining capacity by 2023. It has a planned and announced new-build capital expenditure of US$40.5bn to be spent on upcoming refineries during the outlook period. Investors and analysts see a coming boom in refining. Femi Otedola, chairman of Forte Oil Plc recently said he was selling his entire 75 percent shareholding in the com-

pany to explore and optimise business opportunities in refining and petrochemicals. “Refiners dictate the price” Ayodele Oni, energy partner at Lagos-based Bloomfield law firm said. Total global planned and announced refining capacity in 2023 will be 17.88 million barrels a day. Around the world, there are 158 new planned refineries to start operations between 2019 and 2023. This comprises a total new-build capital expenditure (capex) of around US$520bn expected to be spent globally on planned and announced refineries during the outlook period. China leads the field in terms of planned refining capacity additions during the forecast period with 3,121 mbd from 10 planned and announced refineries. The country has planned and an-

nounced new-build capex of US$53.2bn to be spent on the upcoming refineries over the next four years. “In Africa, the Dangote refinery is a huge story; one of the biggest refineries in the world being built in Nigeria, likely to supply most of or all of the Nigeria’s consumption,” said Andrew Bonnington, editorial director, Strategic Oil Markets Development, S&P Global Platts. Petrochemicals are set to drive growth in world oil demand. Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then. They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83 bcm by 2050.

@Businessdayng

Wednesday 20 February 2019

Custom Killings: FG cautioned on militarising airports …as arming FAAN officials will stifle tourism, passengers’ experience OBINNA EMELIKE & IFEOMA OKEKE

wo days after a Nigerian Customs officer shot dead a passenger traveling on Iyare Bus along the Benin-Ore Expressway over alleged N5,000 bribe, the Federal Government is being cautioned against its proposed licensing of the Aviation Security (AVSEC) of Federal Airports Authority of Nigeria (FAAN) to carry arms in airports across the country. The license to carry arms, which is said to be at the final stage of approval, will see AVSEC officials brandishing arms while in operation, and eventually coercing passengers to comply with security directives. Defending the reasons to arm the AVSEC officials, Hadi Sirika, the Minister of State, Aviation, referred to incidents when security operatives were over powered by passengers to access sterile areas of the airports, known as airside, which is a prohibited area of the airport. Sirika also said there were also occasions when aggrieved passengers had beaten up airline officials, defying security rules and regulations, and in the process brought chaos to the airport environment, which is against international security regulations. Beyond guns, the minister who said the president had given the approval to arm the airport security operatives, explained that AVSEC officials would use teasers, batons, sniffer dogs, and guns. “We got the approval to train AVSEC officers to bear arms in the next three months like the Transport Security Administration (TSA) in the

United States of America,” Sirika said. “They will get new uniforms, sniffer dogs and wear new looks. Safety and security are the primary concern of this administration; therefore, we are not leaving any stone unturned”, he said. “Security infractions like what happened with Turkish Airlines have given further rise to this decision to arm AVSEC and Turkish Airline has not stopped this. They still come with a smaller aircraft and do not bring people’s luggage back.,” Sirika explained. He added that this was what led to the Abuja infraction. “They didn’t return the luggage after day one, they returned a few and then the people got angry and frustrated and took laws into their hands and overpowered aviation security and entered the airside. However, that is one of the many security issues we are trying to stop as a deterrent.” “Also see what happened in Sokoto with former governor Wammako,” the minister said. Wammako’s aides embarrassed FAAN officials at the Sokoto Airport, which ordinarily should not have happened, if the FAAN officials were armed. “So the passengers will be cautious too and not at any provocation they beat up security personnel to access the secure area which in itself is a crime,” Sirika said. However, the stakeholders in the Nigerian aviation and tourism sectors, said the reasons offered by the leadership of FAAN for the licensing AVSEC to carry arms are issues that can be handled by the many security operatives already carrying arms at the airports.

Average cost of food commodities almost unchanged in January …price inched up 0.02% in month ISRAEL ODUBOLA

he average price of 43 food commodities including agric eggs, tomatoes, yam and garri was almost unchanged in the first month of the year, figures from National Bureau of Statistics have shown. The average price appreciated marginally by 0.02 percent month-on-month to N611.54 in January 2019 compared with N610.15 recorded in December 2018, the statistical agency has shown. On year-on-year basis, average price of the 43 commodities covered in the report declined by 6.75 percent from N624.84 in January 2018. The average price of a dozen of agric egg mediumsized rose to N469.85, indicating 0.62 percent expansion

over N466.97 reported in the previous month. Highest average price for this food item was recorded in Anambra (N551.17) and the least in Gombe (N412.27). The cost of brown and white beans in January stood at N382.76 and N336.72 respectively, the least prices in 12 months since January 2018. The cost of brown beans declined by 1.04 percent from N386.78 in December 2018, while white beans fell by 2.32 percent from N344.72 reported a month prior. Both types of beans were most expensive in Ebonyi. Bauchi (N278.57) and Kano (N225.01) recorded the least price in brown and white beans, respectively. Olayinka Olohunlana, a Lagos-based economic analyst believes that the slight increase in food prices reflected

the high cost of production on the part of farmers, driven by high transport cost and poor infrastructure. “Rising food prices reflect that transportation cost is still on the high side. This is a big issue facing farmers today. Our road networks are in deplorable condition, which makes it difficult for farmers to easily transport their products,” she said. “This is in addition to the traffic congestions. All these add to production cost, and definitely would reflect on price.” The cost of rice per kilogramme (agric sold loose, local sold loose, medium grained and imported sold loose) averaged N321.90 in January, indicating 0.26 percent marginal decline from N322.74 reported in December.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

INEC differs with Buhari on shoot-at-sight order JAMES KWEN, Abuja

n the countdown to Saturday’s rescheduled Presidential and National Assembly elections, the Independent National Electoral Commission (INEC) has differed with President Muhammadu Buhari on the shoot on sight order for electoral offenders during the rescheduled elections. Buhari, addressing the expanded National Caucus of the ruling All Progressives Congress (APC) on Monday ordered security operatives attached to polling units to shoot ballot box snatchers on sight. According to the President, “I do not expect anybody to make any disturbance, I have briefed the law enforcement agencies and the military to identify hotspots, flash points, they should be prepared to move. “They too would have made their own arrange-

ment as possible and resources provided as much as the country can afford it. And anybody who decides to snatch ballot boxes or lead thugs to disturb it (elections) maybe that would be the last unlawful action he would take. I have directed the police and the military to be ruthless. “I have given military and police order to be ruthless. I am not afraid, l am have moved around the country and have enough people to vote for me”. But Mahmood Yakubu, INEC chairman, while briefing journalists Tuesday, disagreed. He said, “the position of the commission is that all violators of the Electoral Act should be punished according to the provisions of the Electoral Act”. Yakubu noted that to avoid the mistake of delay in the movement of sensitive electoral materials that led to shifting of last Saturday’s polls, the commission,

“has already started moving some of the critical materials to the states. “Only two days ago, we delivered all the ballot papers for the north central geopolitical zone. As we speak, they are moving materials for us the northwest geopolitical zone. We are also moving materials for the State House of Assembly elections for the South West geopolitical zone either tonight or tomorrow”. While disclosing that INEC would publish the details of permanent voter’s cards, (PVCs) collection tomorrow, he said, “we will tidy up all the information today, tomorrow everything will be on the commission’s website. The total number of people registered, the total number of PVCs collected, and the breakdown of the number of PVCs collected.” On the preparedness of INEC for the rescheduled elections, Yakubu said, “by 4pm yesterday, all issues re-

lating to the delivery of the materials were identified and virtually addressed. Ballot papers, result sheets and a host of non-sensitive materials are now in location across the 37 States of the Federation and the Federal Capital Territory (FCT). “Our state offices commenced the process of inviting stakeholders to the Central Bank of Nigeria to examine the retrieved materials deployed last week and to witness the batching of materials according to Local Government Areas (LGAs). This is ongoing at the moment and is expected to be completed today Tuesday 19’’1 February 2019. “The movement of materials to LGAs for batching according to wards and polling units shall take place on Wednesday 20” and Thursday, 21st February 2019. All Registration Area Centres (RACs) are to be activated by 9.00am on Friday 22nd, February 2019.

@Businessdayng

Ortom to security agents: Kill ballot box snatchers, face ICC OWEDE AGBAJILEKE, Abuja

enue State Governor, Samuel Ortom, has warned that security agents who kill ballot box snatchers at the rescheduled General Election this Saturday will face prosecution at the International Criminal Court (ICC) in The Hague, Netherlands. This comes as he expressed concern that Nigeria was gradually drifting towards dictatorship. Ortom condemned what he called brazen disregard for the rule of law in the present administration, describing President Muhammadu Buhari’s death threat to ballot snatchers as unpresidential. In an interview with journalists in Abuja on Tuesday, the governor warned that anything that could disrupt the election must be avoided. While noting that he does not condone electron rigging, the governor, however, insisted that due process must be followed in dealing with those who commit infractions. “It is unfortunate for our own President to come out and disregard the provisions of the laws of the land and give orders for extra-judicial killings in the state and torture against innocent Nigerians. “Let me say unequivocally that I am completely against the rigging of any

CHANGE OF NAME

I, formerly known and addressed as Udoh Edidiong Blessing now wish to be known and addressed as Njoku Adanma Blessing. All former documents remain valid. General Public please take note. L-R: Yem Musa, Representative of the National Security Adviser; Mohammed Umar, chairman of the occasion; Adeniyi Osinowo, commandant of the National Defence College (NDC); Lawal Alao, commandant, Armed Forces Staff College, Jaji, and Victor Udoh, vice president of the Alumni Association of the National Defence College, at the 2019 National Security Seminar on Youth Bulge in Nigeria organized by the National Defence College in collaboration with Office of the National Security Adviser at NDC in Abuja, yesterday. NAN

Lending may improve as banks NPLs moderate to 11.68% HOPE MOSES-ASHIKE

he high level of nonperforming loans (NPL) in the Nigerian banking industry moderated significantly from a peak of 16.21 per cent in February 2018 to 11.68 per cent in December 2018. “This moderation in NPLs, if sustained, would encourage banks to increase lending to the economy, which has remained challenging during the year,” Sanusi Aliyu Rafindadi, a member of the Monetary Policy Committee (MPC), said in his personal statement at the last meeting. At about 2.0 percent, private sector credit (PSC) growth was significantly below the target of 12.4 percent. Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) notes the

unsatisfactory pace of PSC and continues to emphasise the importance of enhanced credit flows to strategic private-sector ventures through an effective collaboration of all stakeholders. “I remain aware of the risk aversion of banks to supposedly high risk real sector ventures”, Emefiele said in his personal statement. “Yet, improvements in banks NPL position and our continuing efforts at de-risking the target activities are steps in the right direction. “We expect that this could begin to bolster domestic investment, household demand, and aggregate productivity, while accelerating economic diversification, and ensuring strong and inclusive growth.” Members of the MPC noted in their personal

statements that the financial sector had been stable and resilient during the year. The total assets of the banking industry increased by N2.67 trillion, representing an increase of 6.55 per cent between December 2017 and December 2018. The unemployment rate has remained stubbornly high at 23.10 per cent as at the third quarter of 2018, compared with 22.73 per cent during the previous quarter. They were impressed that exchange rates were broadly stable in 2018. The average rate at the Investor and Exporter (I&E) window slightly depreciated from N360.53 per USD in January 2018 to N364.76 per USD in December 2018, representing a depreciation of 1.13 per cent. The exchange rate was even more stable at the BDCs seg-

ment where it depreciated by only 0.07 per cent from N363.20 per USD in January 2018 to N363.46 in December 2018. “I see sufficient scope and merit in a well-tailored capital expenditure in the key sectors of the economy, while reducing subsidies. Hopefully, the managedfloat regime will strengthen external reserves buffers, ensure greater flexibility of the exchange rate and guarantee foreign exchange liquidity,” Joseph Nnanna, deputy governor said in his personal statement. Edward Lametek Adamu, deputy governor, said the developments in the interbank market somehow suggested that the sterilisation actions of the Bank have remained very effective in reining-in excess liquidity.

41 NEWS

BUSINESS DAY

CHANGE OF NAME

I, formerly known and addressed as Ajibola Bolanle Racheal now wish to be known and addressed as Ahmed Bolanle Racheal. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Gazal Hibatul-haadi oladunni now wish to be known and addressed as Dauda Hibatul-haadi Oladunni. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Miss Okoro Joy Linda now wish to be known and addressed as Mrs Amah Joy Linda. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Oluchi Uzoma Ozulumba now wish to be known and addressed as Oluchukwu Uzoma Ozulumba. All former documents remain valid. General Public please take note.

form by any political party. It is wrong and we do not need that,” he said. “For me, I did not rig election to become governor. But the truth of the matter is that we have laws. And I expect that Mr President who is the chief custodian of the constitution of the Federal Republic of Nigeria should protect our constitution and the laws of the land. It is unfortunate that Mr President gave that orders,” Ortom said. “I was just reading from the social media the reaction of the military that they are going to obey the directives of Mr President to the letter. It is unfortunate. This cannot stand, this cannot hold.. The Governor condemned the President’s call on security agencies to ‘deal ruthlessly’ with ballot box snatchers, adding: “It will not be accepted and we are going to contest this.. Ortom also denied claims by the APC National Chairman, Adams Oshiomhole, that the electoral body colluded with main opposition party to abort last week’s national elections. He said the Benue State chapter of APC was in support of staggered election, as they had written a petition to the Independent National Electoral Commission (INEC), calling for the postponement of election in the state.

CHANGE OF NAME

I, formerly known and addressed as Chigozie Janet Okereke now wish to be known and addressed as Chigozie Janet Nwachukwu. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Miss Ogwum Juliet Ijeoma now wish to be known and addressed as Mrs. Ude Juliet Ijeoma. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Oluwadamilola Folorunsho Folarin now wish to be known and addressed as Oluwadamilola Folorunsho Olaseinde. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Miss Ibisagba Rebecca Olorunniji now wish to be known and addressed as Mrs. Olorungbon Rebecca Olorunniji. All former documents remain valid. General Public please take note.

CHANGE OF NAME

I, formerly known and addressed as Victor Ojimah now wish to be known and addressed as Victor Omerah Ojimah. All former documents remain valid. General Public please take note.

BUSINESS DAY

NATIONAL DISCOURSE

ODINAKA ANUDU

t was the Arabian Gazette, a United Arab Emirates news medium, which popularised the saying that when conscience dies, eyes go blind, and ears deaf. Another time-tested aphorism, which has almost become a cliché, is a quote attributed to Uthman Dan Fodio, a religious teacher and founder of the Sokoto Caliphate. The saying goes that conscience is an open wound and only truth can heal it. Vincent van Gogh, a Dutch painter and one of the most famous and influential figures in the history of Western art, added his voice when he said that conscience is a man’s compass. Dan Fodio and van Gogh’s apothegms are well-known truths, but, perhaps, their mistake is to both assume that all men’s consciences are alive and kicking. Psychologists and philosophers who study the mind-body problem know quite well that consciences can indeed be dead. USORO USORO

arly last year, in the first quarter of 2018, the Central Bank of Nigeria identified that in order to reach the goal of 80 percent inclusion by 2020, an additional 7.6 million adult Nigerians would need to be financially included in 2018. Factors such as illiteracy, security challenges and slow penetration of financial services in rural areas had slowed the growth of inclusion. By the end of the year, Enhancing Financial Innovation and Access (EFInA)’s biennial results illustrated that the progress made towards this goal had been modest, with only an additional 3.5 million individuals included between 2016 and 2018. As we draw closer to the 2020 target for the financial inclusion targets, let us take a pause and look at the developments that brought about some progress – albeit limited – and provide a strong indication of what to expect from the various industry players, as well as the most suitable next steps to help realise the expected results. The establishment of agent networks served as proxy channels for banks, in order to enhance their reach of marginalised communi-

www.

Wednesday 20 February 2019

When conscience dies, eyes go blind, and ears deaf People with dead consciences are heartless, selfish and many times inconsiderate. Their consciences are seared with hot iron and they do not care whose ox is gored as long as they have their way. If you are looking for people whose consciences are in the mortuary, then do not look further than Nigerian politicians—no matter their level of education and exposure. Once upon a time, there was a Central Bank governor who loved writing and teaching. At the dying days of Jonathan’s administration, this man wrote long diatribes on how the administration squandered N30 trillion. As of the time he was writing those letters, unemployment was 6.7 per cent; Nigeria was growing at 6 to 7 percent per annum; the country just emerged as one with the happiest people on earth (in 2013). But there was putrid smell of corruption too. However, four years after, Nigeria became poverty capital, with 87 million extremely poor people. Unemployment rose to 23.1 percent in the third quarter of 2018, and the country grew 1.9 percent the same year. Corruption too was yet to be obliterated, going by the report of Transparency International. Yet, this man

pretends that all is well. He has not written his letters to Buhari, but keeps mute because he is affiliated with a governor who is supporting Buhari. And he also wants to succeed the governor in his state. Similarly, the People’s Democratic Party (PDP) once had a chairman who boasted that the party would rule for 25 years from 2004. Today, this same man is a minister in the All Progressives Congress (APC) government and is working to exterminate the party he once boasted as alpha and omega. This same minister, now over 70, once accused Akinwumi Adesina, minister of agriculture under Goodluck Jonathan and now president of the African Development Bank (ADB), of being clannish in his programmes. This man said Adesina was cornering all the agric programmes to the South-West where he comes from. But today, the same man is vociferous in his support to use public funds to procure grass for Fulani herdsmen. He is also among the henchmen that are supporting funding herders—private businesspeople—to ranch with public funds. I am convinced that he is supporting these otiose policy to remain in the good books of President Muhammadu Buhari, who him-

self is a Fulani and herdsman. It does not matter to him whether Fulani herdsmen are wreaking havoc in Benue or not. And he is not advocating support for other sub-sectors like flour/wheat, which is almost 100 percent imported. There is another hypocritical governor of the North-West Nigeria, who once said that Buhari was unelectable in 2004. He was then a member of PDP government and could not imagine how he could lose his job. He once described Peter Obi, vice presidential candidate of PDP, as an ethnic bigot. Today, the same governor is threatening people, including election observers, and has caused ethnic and religious divide in the state which he governs. The people in one part of his state, who are mostly Christians, do not respect him because of his divisive comments and idiosyncrasy. For him, Buhari’s mismanagement of the economy does not matter. The country’s poisonous ethnic hiatus and divide do not matter as along as Buhari returns. Before you accuse me of being a PDP member, I will also tell you about one prominent man, who once tore his PDP card, but is now a tacit member of that party. Think about one PDP sena-

Financial inclusion in 2018: A review ties. Yet, despite having up to 10,000 agents in 2017, the impact of this reach is yet to be seen as most of these agents delivered their services in semi-urban or urban areas. The slow growth of this initiative led to the launch of the Shared Agent Network Expansion Fund (SANEF) Initiative – designed to introduce an extra 500,000 agents by 2020 to cater to an additional 60 million Nigerians in rural and underdeveloped areas. With the limited timeframe, there was some scepticism about how quickly the agents could be trained, on-boarded, licensed and begin to operate, especially as the process of establishing 10,000 agents had taken up to seven years. This initiative, while capable of enhancing access for the financially excluded, lacks the required trajectory that will enable Nigeria to meet the 2020 target. On the matter of Know-YourCustomer (KYC) requirements, the 2015 rollout of the Bank Verification Number had provided a way to achieve the primary objective of creating a unified national financial database, enhancing e-payments and reducing fraud risks. How-

FINANCIAL INCLUSION ever, even in 2018, the effective implementation of the tiered KYC requirements still required an additional review – the challenges remain for customers based in rural areas, who have limited access to physical bank branches, and the capital-intensive nature of BVN registration also reduces the ability for banks to ease this challenge. The enforcement of BVN registration for these groups of customers (usually Tier-1 account holders with the lowest verification requirements and account limits) potentially reduces the rate at which financial inclusion is achieved. With banks dominating the activities of the financial inclusion agenda, key stakeholders in other industries identified the need for collaboration to accelerate efforts. In this vein, Nigeria’s largest telecommunications operators – MTN, Globacom, 9mobile and Airtel – formed a coalition (within the umbrella of the Association of Licensed Telecommunications Operators of Nigeria). Collectively, they resolved

to leverage their vast reach and resources to deliver access to financial services to 90 million customers by 2020 and to deepen financial literacy across the country. This readiness for participation by nonfinancial stakeholders was timely, as it coincided with the CBN’s launch of the Payment Service Banking licence months after. This development was significant, considering that the licence would enable non-banks – including telecommunications companies, retail chains, postal and courier service companies, mobile money operators, and FinTechs – to obtain a licence to operate in the financial sector. These developments set the pace for the year ahead. While optimistic about the progress made so far, there should be an increased alignment between the need and the delivery of the required services. By ensuring that more seamless approaches to BVN registration and account opening processes are established expediently using agents, industry partners, and other available networks, and providing an enabling

tor, with questionable source of livelihood, who is repeating the gimmicks he played with Jonathan, who refused to open the national purse to him. He supported Buhari in 2015, but the 76-year-old President, like Jonathan, refused to recognise him. The President’s acolytes even punished him. Back to PDP, he now convinces us that Buhari is bad. Are we talking about one minister, who often waited for an opportunity to bash the Igbo people of the South-East. When he was in APC, he criticised Igbos and even cursed Professor Chinua Achebe. But now in PDP, which is a party loved and supported by Igbos, his language has changed. He is a friend of Igbos and has befriended Biafran leader Nnamdi Kanu. He also advertises that his wife is Igbo. In conclusion, we have a number of politicians and laymen whose consciences die whenever they are eating from public purse. At this time, they see no sin with their party and government. They hear no evil. But once they are out of government, they become human rights activists and Twitter chiefs. They sway the young who do not know them well and cause ripples. Once I see one, I know them. structure and environment for the participation of payment service banking licensees. As we approach the 2020 deadline for achieving the financial inclusion targets, our current position is prime for making significant headway towards 80 percent financial inclusion. The CBN recently launched a revised National Financial Inclusion Strategy which will tackle the challenges that have thus far hindered a quicker pace of inclusion – data privacy and security; a lack of transparency; and limited financial education and literacy. There might be need for additional policies to support these new entrants that are mobilised to address these challenges and bridge the existing gap in financial inclusion. The feasibility of a 20 percent financial exclusion rate over the next 11 to 20 months may appear doubtful, but if the participating stakeholders are able and encouraged to effectively leverage their positions in the national financial inclusion agenda for the ultimate good of the Nigeria populace, we just might be closer to seeing the needed changes that would enhance our economy and society.

• Usoro is general manager, mobile financial services at MTN Nigeria

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

Can INEC reshuffle RECs on order of the President, APC? OWEDE AGBAJILEKE, Abuja

s the rescheduled national elections in Nigeria inch closer, the Independent National Electoral Commission (INEC) has continued to come under pressure, especially from the ruling All Progressives Congress (APC). At the caucus meeting of the ruling party in Abuja on Monday, the electoral body came under fire once again for postponing the general elections by one week. President Muhammadu Buhari threatened that anyone engaging in ballot box snatching or other forms of electoral violence would do so “at the expense of his own life”. He also vowed to ensure that Mahmood Yakubu, INEC chairman, and other officials of the electoral body would account for their incompetence after the polls. “INEC had all the time and resources, didn’t have to wait six hours to the elections to announce postponement. Definitely, INEC must explain to Nigerians what happened,” Buhari said. On his part, Adams Oshiomhole, APC national chairman, insisted that INEC must be prevailed upon to immediately reshuffle state

Resident Electoral Commissioners (RECs) whom he alleged have been compromised. Some state chapters of APC, including Akwa Ibom, Adamawa, FCT Abuja, among others, also called for the immediate removal of RECs in their respective states, accusing the RECs of bias and allegedly recruiting members of the main opposition People’s Democratic Party (PDP) as INEC ad hoc staff. There were also reports that some RECs were implicated in bribery scandals involving PDP. In a swift reaction, however, Yakubu Dogara, Speaker of the House of Representatives, accused the Presidency and the APC of arm-twisting and intimidating the electoral body to do its bidding. The PDP, reacting on Monday, said intelligence available to it shows that the Buhari Presidency had directed the leadership of INEC to immediately reshuffle the RECs in order to deploy compromised officials to manipulate the electoral process in Buhari’s favour, as they did with the police shortly before February 16. But can RECs be reshuffled at the request of the President or other stakeholders in the electoral process? BusinessDay checks show that it is not exactly so.

The 1999 Constitution of the Federal Republic of Nigeria (as amended) as well as the 2010 Electoral Act (as amended) reveal that while RECs are appointed by the President, subject to confirmation by the Senate, they are sworn in and posted to states by INEC without interference from other quarters. To reflect its independence, INEC has the powers to reshuffle its RECs when the need arises without recourse to external forces. Section 15 (h) of the Third Schedule to the 1999 Constitution empowers INEC to “delegate any of its powers to any Resident Electoral Commissioner”. In the same token, Section 6 (2) (a) (b) of the Electoral Act provides that RECs “shall be answerable to the Commission” and hold office for five years. However, Section 6 (3) of the Act stipulates the procedure for removing a REC. According to the section, a REC can only be removed by the President subject to approval by two-thirds majority of the Senate. “The Resident Electoral Commissioner appointed pursuant to the Constitution may only be removed by the President, acting on an address supported by two-thirds majority of the Senate praying that

he be so removed for inability to discharge the functions of the office (whether arising from infirmity of mind or body or any other cause) or for misconduct,” the law states. What this implies is that 73 out of the 109 senators are needed

to approve the removal of a REC. Pundits, however, say this would be a tall order considering the frosty executive-legislature relationship and the division of the upper legislative chamber along pro-Buhari and pro-Saraki senators.

David Paradang, People’s Democratic Party (PDP) senatorial candidate for Plateau Central, at a campaign with supporters.

INEC must deliver on its mandate, says Babatope

GPAAN condemns shift in election, sues for voters’ commitment

…As Afenifere drums support for Atiku

embers of the Guild of Public Affairs Analysts of Nigeria (GPAAN), after an emergency meeting held on Monday in Ikeja, Lagos roundly condemned the postponement of the Presidential and National Assembly elections earlier scheduled for Saturday, February 16, 2019. A statement signed by the President of GPAAN, Ayo Oyoze Baje, said INEC’s decision, coming some six hours to the commencement of the election was a rude shock.

Iniobong Iwok

head of Saturday’s presidential and National Assembly election, former Minister of Transport, Ebenezer Babatope, has said that the Independent National electoral Commission (INEC) had no choice than to conduct a free and fair election acceptable to all Nigerians, warning that Nigerians could no longer allow their mandate to be stolen. INE C Chair man, Profess or Mahmood Yakubu, had said that the commission was facing several challenges which had made the postponement necessary. But Babatope in an interview with BusinessDay, Tuesday, noted that having received the required financial support from the Federal Government, the Commission should not give any excuse for conducting flawed elections. According to him, “INEC must conduct a free and fair election on Saturday; we are all watching; history will be on them if they do otherwise; gone are the days when the will of Nigerians was thwarted and people imposed on them. “INEC had four years to plan for this election and money has been

released; if they had problems before now, I expected them to speak out”, Babatope said. Babatope, who is a member of the Board of Trustees (BoT) of Nigeria’s main opposition party, the People’s Democratic Party (PDP), however, faulted the decision of the Commission to shift the election, stressing that the decision came as a shock, because it had always reiterated its readiness to conduct the polls. Meanwhile, leader of the panYoruba social-political group, Afenifere, Ruben Fasoranti, has urged Nigerians to vote for former vice president of the country, Atiku Abubakar, and presidential candidate of the PDP in the Saturday’s election, saying that Atiku was the only presidential candidate who will restructure the country. Fasoranti, who was speaking in an interview with BusinessDay, Tuesday, said the country needed a leader who understands the yearning of the masses. “Nigerians need a man who knows what the masses want; for we the Yorubas, we want restructuring; Atiku has said he would restructure the country and we would vote for him,” Fasoranti said.

“The electoral umpire had four good years to prepare for the election and therefore, the reasons of logistics and weather challenges were not tenable. It should have been more proactive to project some of the problems likely to occur and take preemptive measures to curtail them. “Furthermore, INEC should have taken into cognizance the negative effects such postponement would have on the national economy, individuals who travelled far to discharge their franchise and of course,

the image of the country at large,” the group said. The GPAAN called on the good people of Nigeria, especially the electorate not to despair but to “come out on Saturday to cast their votes.” Among those who attended the meeting were the Vice-President, Lekan Sote; the Secretary, Victor Anya; CEO of the Niche Newspaper, Ikechukwu Amaechi; the Financial Secretary, Steve Aya; Treasurer, Joseph Amaoru, and Oshiomhole Inumah.

Kano prepares for Saturday poll, over 600 political thugs arrested by Police Adeola Ajakaiye, Kano

s electorate in the Kano State prepare for the rescheduled Presidential and National Assembly poll slated for Saturday, the Kano command of the Nigeria Police says it has effected arrests of over 600 political thugs in the state. The arrest is coming amidst various calls by stakeholders, including the Emir of Kano, Muhammadu Sanusi, for the police leadership in the country to ensure a conducive environment for a smooth conduct of the poll. Before the postponement of the election earlier scheduled for last

weekend, Kano had experienced high wave of thuggery attacks which led to the death of some people, as well as snatching of handsets and other valuables by the thugs. Speaking to BusinessDay on the efforts being made by the leadership of the Kano Command of the Nigerian Police to address the challenge, State commissioner of Police, Mohammed Wakili, disclosed that over 600 thugs have been arrested in various locations in the state capital and its environs. According to him, the move was part of the determination of the command to create a stable atmosphere for the conduct of the

rescheduled poll, and to tackle the incidence of rising political thuggery in the state. “We have arrested over 780 individuals in connection with banditry, particularly, political thuggery in the past one week in the state. These criminal elements were particularly picked up over raising cases of pickpocket, harassment of innocent citizens and stealing of handsets. “So far, 600 out of the number have been fully investigated and they would soon be arraigned in court for prosecution. We want to assure the residents of the state that the police under my leadership in the state have zero tolerance for any form of crime.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

‘Allegations made against A/Ibom REC are false, baseless’ ANIEFIOK UDONQUAK, Uyo

kwa Ibom State government has described as false and baseless allegations reportedly made by Adams Oshiomhole, national chairman of the All Progressives Congress (APC) and Godswill Akpabio, former Senate minority leader, against the Resident National Electoral Commissioner (REC) in the state. While speaking at their party’s caucus meeting Monday, they both insinuated that there was an unholy alliance between the Akwa Ibom State Government and the State’s Resident Electoral Commissioner to the extent of influencing the placements of ad-hoc staff among other malicious allegations. In a statement made available to the media and signed by Charles Udoh, commissioner for information and strategy, the state government said the allegations were part of “an orchestrated script of the APC to actualise their much-vaunted plans of taking over power in the state through violent and sinister plots.” The state government noted

Godswill Akpabio

that at several instances, the former Senate Minority leader has boasted that he will capture Akwa Ibom State within three hours on Election Day. “His supporters have also repeatedly chanted that election results will be written and announced without recourse to the will of the people at the polling centres using federal

might. “A combination of these raises a lot of dust over the intent of the seemingly persistent and overt interest of Oshiomhole in the affairs of Akwa Ibom State to the extent of canvassing for the replacement of the electoral umpire. “It paints a graphic picture of

a man who is pulling the puppet strings for the former Senate Minority Leader. “It is worrisome that these two supposedly respectable former governors; who are expected to be role models to the younger generation, have taken the art of unguarded utterances and reckless actions to a new realm with impunity. “Against this backdrop, it is obvious that the ongoing desperate chant by the APC for the removal of the electoral umpire in Akwa Ibom State is an orchestrated plan to manipulate the electoral process. “We therefore, draw the attention of the International Community, Human Rights Organisations, Foreign Missions in Nigeria, Law Enforcement Agencies, and the general public to the nefarious plots being hatched against the government and people of Akwa Ibom State. “It is on record that at several instances, the APC in Akwa Ibom State has displayed flagrant acts of impunity that alludes to their desperate desire to actualise their hideous script. “At a rally in Ikot Ekpene, their governorship candidate; the former

How overlapping lapses from Allied Air, INEC bungled Presidential/NASS elections Innocent Odoh, Abuja

hile the Niger ian public was stupefied and angry at the news of the postponement of the Presidential and National Assembly Elections, initially scheduled for Saturday, February 16, by the Independent National Electoral Commission (INEC), details of the web of lapses and conspiracies that caused what many regarded as ‘national calamity’ have emerged. INEC Chairman, Mahmood Yakubu, announced the postponement of the election by one week just about five hours to the opening of the polls. He set a new date for the Presidential and National Assembly polls to February 23, and also announced that the governorship and state Houses of Assembly elections originally scheduled for March 2 will now hold on March 9. The Electoral Commission blamed the postponement on logistics and operational challenges but BusinessDay can authoritatively report how the INEC, contracted the distribution of sensitive electoral materials to the Central Bank of Nigeria (CBN). The CBN, BusinessDay gathered had also contracted the responsibility for the distribution of materials to Allied Air, a private airline, which has been a client of the CBN for the conveyance of sensitive and none-sensitive electoral materials since 2004. According to the INEC rules, all sensitive electoral materials

are supposed to be deployed to the CBN branches across the federation one week to elections for onward distribution to the about 120,000 polling units scattered all over the nation in order to have adequate materials for the commencement of the elections at least by 8am on Election day. Nigeria has 84 million registered voters and hundreds of contestants including about 71 Presidential candidates. These large figures required prompt printing and distribution of the requisite materials in a vast country like Nigeria with some very difficult terrains and landscapes. INEC Chairman, Yakubu, was on air a week to the polls and sounded confident about the readiness of the commission to hold the polls. His position was however, contradicted by the apparent failure of the Allied Air to distribute electoral materials to meet the stipulated time frame as many parts of the country could not get the required materials even on the Election Day. Facing dilemma of a botched exercise or at least a postponement, INEC and the CBN, BusinessDay gathered, had to call in the Nigerian Air Force to deploy their facilities to assist in the distribution, but it was too little too late. Questions are still being asked as to whether it was the delay by the CBN to contract Allied Air for the job, or the INEC that did not offer the contract to the CBN on time. This is the “tangle of the trio” that led to the postponement, which

experts said have cost the country about N700 billion, disappointed the International Community and caused widespread anger and disillusionment across the country. BusinessDay put a call across to Captain Val Tongo, managing director/CEO of the Allied Airline to respond to some of the issues but he declined comments and promised to speak later on the matter. At the time of writing this report, he was yet to respond. A source who wishes to remain anonymous said: “The truth is that the entire procurement and logistics security and operational support and value chain of INEC was hijacked by APC members, their families and friends. “The transport of sensitive cargoes was abandoned on Val Tongo of Allied Air to the utter exclusion of the NAF. The CBN became an outsourced service provider without a project manager at INEC. “The APC simply hijacked the process once the outsourcing took place and used simple blackmail strategy to deliver or fail to deliver materials as they deemed fit. You need to call for a full audit of the procurement process and logistics security value chain.” The source added that Nigeria should track the suppliers of services and the country will see the quantum of prebendal procurement and outsourced services delivery and why the whole game is skewed and unraveling. “They chose a single point of failure...a simple choke point through which they are able to

manipulate the system,” the source said. Meanwhile, Air Commodore Ibikunle Daramola, Director of Public Relations and Information, Nigerian Air Force said they were not the core contractors but invited to provide additional support to INEC logistics which they did according to instructions and as much as they could. He however, said it was not in their place to comment or even explain what happened but that of INEC, insisting that it was some private airlines that handled the job, but that their role was to provide additional support which they did. The Air Force had issued a statement about three days to the now rescheduled election that it had started airlift of electoral materials for INEC across the country, a time frame aviation experts told BusinessDay was too short for the huge materials to be moved around the country before Saturday election. The airlift exercise included day and night missions, during which both sensitive and non-sensitive electoral materials were conveyed in batches, with NAF C-130 Hercules aircraft from the Nnamdi Azikwe International Airport, Abuja to various airports across the country. BusinessDay also put calls across to the Director of Corporate Communications of the CBN, Isaac Okorafor, to respond to the issues but as at the time of writing this report, he did not pick his calls neither did he respond to text messages sent to him.

Managing Director of the Niger Delta Development Commission (NDDC), Nsima Ekere, proudly received and flaunted gifts of guns, daggers and machetes from his party chieftains who admonished him to be ruthless in utilising those instruments of assaults. “This was seen on National TV live broadcast and streamed live on several social media platforms. We are all living witnesses to the incessant threats by the former Senate Minority Leader to visit mayhem on the Government and people of Akwa Ibom State as part of his plot to wrest power at all cost,” the statement said. It urged the people to remain law-abiding and civil but never to compromise their legitimate rights addition that the state government remains firmly committed to the observances and protection of the rule of law in Nigeria with utmost integrity. “We must not allow the peace, safety and security we have enjoyed as a state since May 29, 2015 to be compromised by a few self-seeking individuals who lead a pack of misguided elements,” the statement stated.

Thumb-printing goingon in Government House, Nasarawa, PDP Chair alleges Solomon Attah, Lafia

he Nasarawa State chapter of the People’s Democratic Party (PDP) has raised the alarm that thumb-printing of ballot papers were currently going on at the State Government House by the All Progressives Congress (APC). Francis Orogu, the PDP chairman stated this while briefing newsmen at the party’s secretariat in Lafia. The State PDP alleged of existence of a command centre in the State Government House that controls and manipulates election figures of each polling units directly from the INEC’s website. He accused the ruling party in the state of using the command centre to commit atrocities in the state which include manipulating election results. He said that after discovering that they were unpopular to win the 2019 election, they decided to equip and to use the “Command Centre” to thumb print ballot papers and fill in result sheets as usual, saying that would no longer work for them in 2019. The chairman commended the state INEC for blocking all leakages and upgrading its website to forestall past experiences of hacking. He said that the recent protest by APC in the state was an indication that the party was frustrated to perfect its plans, thereby accusing INEC of taking sides with the PDP and favouring it in the recruitment of ad-hoc staff.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Donald Trump warns Venezuela’s military over supporting Nicolás Maduro US president says backers of regime are risking their lives as power struggle looms John Paul Rathbone

S President Donald Trump has warned members of the Venezuelan military who continue to support the regime of Nicolás Maduro that they are risking their lives and their future, and urged them to let desperately needed humanitarian aid into the country. Speaking in Miami to a cheering crowd of mostly Venezuelan and Cuban émigrés, Mr Trump said army officers who continued to “follow the path” of supporting Mr Maduro “will find no safe harbour . . . You will lose everything.” He said the US sought a peaceful transition of power but that all options remained open. In a preview of the rhetorical attacks that Mr Trump may use in his re-election campaign, he was fiercely critical of socialist regimes elsewhere, especially in Cuba and Nicaragua. Florida is a crucial swing state where the Hispanic vote, including Venezuelan and Cuban expatriates, forms a key bloc. “For those who would seek to impose socialism in the USA, we have a simple message: the USA will never be a socialist country,” Mr Trump said to wild cheers. De-

scribing Venezuelans as victims of a totalitarian ideology that has failed globally, he added: “Maduro is not a Venezuelan patriot, he’s a Cuban puppet.” Cuba has long provided Mr Maduro with intelligence and medical services in return for subsidised oil. Mr Trump said those days were ending. “A new day is coming in Latin America,” he said. Washington is considering ways to toughen the longstanding US embargo against Havana. Venezuela, however, was the main item on Mr Trump’s agenda. Last month, the US and more than 30 other countries recognised opposition leader Juan Guaidó as the country’s legitimate interim president, on the basis that Mr Maduro’s 2018 re-election was fraudulent. Yet despite international support and mass opposition protests domestically, the military has so far stood by Mr Maduro, thwarting opposition plans to instate free elections. Mr Guaidó also addressed the crowd at Florida International University by video link, and has offered an amnesty to those in the military who switch sides. In an interview in Caracas late last week, Mr Guaidó told the Financial Times that the vast majority of the army and their families — he estimated “around 80 per cent” —

Sixteen states sue to block Trump border wall emergency California leads challenge to circumventing of Congress on US-Mexico barrier funding Demetri Sevastopulo

ixteen US states have formed a coalition to ask a federal court to block Donald Trump from proceeding with the national emergency that the president declared on Friday in an effort to secure funds for his USMexico border wall. The states, which include California, New York, Maryland and Virginia, filed a lawsuit on Monday arguing that the declaration of a national emergency for the purpose of building a wall was unconstitutional. They argue the president does not have the power to divert funds, as the Congress controls spending. The sixteen attorneys-general said Mr Trump had acted against the will of Congress and “used the pretext of a manufactured ‘crisis’ of unlawful immigration” to secure funds that were intended for military construction, seizing narcotics and law enforcement measures. Mr Trump declared the emergency on Friday after Congress reached a bipartisan budget deal that provided only $1.37bn for the border wall that Mr Trump had vowed to build during his 2016 presidential campaign. The deal was struck in order to avoid a second partial government shutdown this year. Democrats refused to provide additional funding because they believe that the wall is a political gimmick and because they want to deny Mr Trump a political victory as the 2020 presidential race moves into a higher gear. In the lawsuit — which was filed in a San Francisco court that has blocked other Trump administration initiatives — the states said there was “no objective basis” for the emergency,

citing figures from the Customs and Border Protection agency which show unlawful border crossings hovering at a 45-year low. Following his announcement on Friday, Mr Trump repeated his claim that the situation on the border was dire as illegal immigrants pour in and commit crimes, and that terrorists were also entering the US. But he was unable to explain to reporters why his claims were not backed up by government data. “The state department recognises there is a lack of credible evidence that terrorists are using the southern border to enter the US. Federal data confirm that immigrants are less likely to commit crimes than are native-born Americans,” the 16 states wrote in their lawsuit. Republicans had also warned Mr Trump not to declare an emergency because it would be challenged in court. Nancy Pelosi, the Democratic Speaker of the House of Representatives, called the move “a power grab by a disappointed president who has gone outside the bounds of the law”. The Democrats, who hold a majority in the House, are gearing up to pass a resolution opposing the emergency. If they secure enough support in the Republican-held Senate, it would set the stage for Mr Trump to veto the resolution — unless it passes with a veto-proof two-thirds majority. Mr Trump announced the emergency to unlock $3.6bn in funds allocated to the Pentagon construction budget. Over the weekend, however, Patrick Shanahan, acting secretary of defence, told reporters at the Munich Security Conference that he had not spoken to the president about the emergency.

were opposed to Mr Maduro, but that they obeyed orders because there was “an important factor at work: persecution”. Mr Guaidó cited 27 guardsmen who rebelled last month “and were all tortured . . . That is undoubtedly one of the issues playing out at the moment in the heart of the armed forces.” He said he hoped that amnesties and the vital role the military would play in the rebuilding of the country would soon draw them across.

But the power struggle between the opposition and Mr Maduro’s forces may come to a violent head on Saturday when the opposition, helped by Colombia and the US, plans to bring aid, via trucks, into Venezuela from the Colombian border town of Cúcuta. Garrett Marquis, a spokesman for National Security Adviser John Bolton, posted on Twitter at the weekend that the US had pre-positioned almost 200 tonnes of aid. The international community, including

Canada, Germany and the UK, has pledged about $100 million in support of the emergency response. But the border bridge is blocked, and Mr Maduro has called the aid delivery a pretext for invasion that would be like a “second Vietnam”. In a political counter, Mr Maduro has also said his government would distribute aid to Colombia, without specifying how, and on Monday called Mr Trump’s speech “almost Nazi . . . He wants to impose white supremacist thought”.

Nigeria’s election delay sparks scramble for digital reboot Electoral commission recalls thousands of ID scanners for reprogramming Neil Munshi

igeria has been forced to collect and reprogramme nearly 200,000 electronic scanners as it grapples with a one-week delay to its presidential election, a stark reminder of the risks associated with a shift towards digital elections. The country’s electoral commission was on Monday collecting and reconfiguring 180,000 scanners deployed to verify voters’ ID cards after it emerged that the seven-day delay had neutralised their antifraud measures. The challenge of collecting the machines was a new logistical problem for the Independent Nigerian Electoral Commission (Inec), which announced the delay on Saturday because it had failed to surmount a host of other practical hurdles. “That is a Herculean task,” said one experienced international observer in Nigeria. The adoption of electronic voting has become controversial around the world in an era of digital malfeasance and organised hacking. Nigeria’s travails revived memories of the Democratic Republic of Congo’s December presidential election, which was delayed for seven days after fire destroyed 8,000 electronic voting machines. The use of evoting eventually created a trail of digital evidence that raised grave doubts about the legitimacy of the final result. In Nigeria the shift to new technology has been less ambi-

tious. The scanners will be used to authenticate Nigerians’ voter ID cards, but people will cast their votes with a fingerprint on a paper ballot. Observers have nonetheless praised the safeguards built into the design of the voting machines, which are location sensitive, in order to reduce the likelihood of fraud. Each machine was programmed to operate only in one specific polling place and only in a certain time period around election day. They cannot be reprogrammed from afar because they can only transmit data and are unable to receive it, a set-up that reduces the risk of hacking. Instead each machine must be sent back to one of the electoral commission’s main offices to be reprogrammed by hand before being reshipped back to its polling place. The postponement has become a source of embarrassment for Nigeria, which is Africa’s most populous nation and has the continent’s largest economy. The election observer said former senior African officials in Nigeria for polling day were “shaking their heads”. In the election — now due to be held on Saturday — President Muhammadu Buhari is facing a strong challenge from the main opposition candidate Atiku Abubakar, a former vice-president. Both candidates have condemned the delay and fuelled suspicions among some citizens that attempts to manipulate the result are under way in a country with a long history of vote rigging.

At a press conference on Monday Mr Buhari, who is running for the All Progressives Congress party, echoed widespread frustrations about the electoral commission’s decision to delay the election. “The reasons why such incompetence manifests itself has to be explained,” he said. He added that anyone who snatched ballot boxes “will do it at the expense of their own life”, and that he had ordered police and security services to be “ruthless” when dealing with those seeking to disrupt or rig the election. In December, Mr Buhari fed criticism that he was not fully committed to free and fair elections when he refused to sign a key electoral reform bill for the fourth time, citing drafting errors and arguing that its enactment just two months from election day would create uncertainty. The bill had been praised by good governance groups for, among other things, dealing directly with the scourge of vote buying and making elections more transparent. Idayat Hassan, head of the Abuja-based Centre for Democracy and Development, said no electoral bill could have prevented the “sheer incompetence” of the electoral commission. It has had to delay the previous two elections as well, in part because of logistical challenges. “I think they were just overwhelmed,” Ms Hassan said. “They did not realise they were organising the biggest election not just in the history of Nigeria, with 84m voters, but the biggest in the history of the continent.”

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Wednesday 20 February 2019

NATIONAL NEWS

FT Chinese hackers increase attacks on telecoms companies

How Japan’s farmers and fishermen backed the leveraged loan boom

State-backed groups have escalated espionage activity amid trade tensions, says CrowdStrike

Agricultural lender Norinchukin, burnt \a decade ago by debt products, piles back in

Robert Smith and Leo Lewis

David Bond

hinese hackers have increased attacks on global telecoms companies in the past year, suggesting an escalation in Beijing’s cyber espionage operations as the US pushes allies to block Huawei from future 5G networks. According to a new report from CrowdStrike, the California-based cyber security company that first attributed the 2016 hack on the US Democratic National Committee to Russia, 2018 saw an overall increase in Chinese cyber attacks, especially against US targets. The company said the increase was explained by growing tensions over trade between Washington and Beijing but added that the specific targeting of telecoms companies worldwide pointed to a wider surge in spying by Chinese state-backed cyber warriors. Dmitri Alperovitch, co-founder and chief technology officer of CrowdStrike, said Chinese cyber espionage was now back to the same levels seen prior to a US-China agreement to limit economic spying signed by the two countries in 2015. “In terms of volume, China is by far the most active [in 2018],” said Mr Alperovitch. “They are fully back and engaging in economic espionage across numerous industries of strategic interest to China.” According to CrowdStrike, in addition to China, Russia, North Korea and Iran were leaders in hostile state cyber activity in 2018. The US has been lobbying other western partners and fellow members of the Five Eyes intelligence alliance to prevent their telecoms companies from involving Huawei in the roll-out of fifth generation networks because of the risks posed by Chinese snooping and cyber disruption. Although Australia and New Zealand have responded by blocking or banning the Shenzhen company, the FT reported on Sunday that the UK’s National Cyber Security Centre was confident it could mitigate the risks posed by Huawei to 5G. Other European countries have also offered a mixed response, underlining the delicate balancing act governments face in weighing cyber security, public demands for super fast communications and trade opportunities with China. Telecoms companies and their employees are frequent targets of “spear phishing” attempts, where an employee is enticed into opening an email or downloading a document that can allow a hacker access to internal information. Government and corporate contracts operated by telecoms companies could contain useful information or hackers could be attempting to gain access to passwords. CrowdStrike’s annual threat report said Chinese hackers used a range of approaches to target telecoms groups, including spear phishing but also attacking supply chains. The risk from internet service suppliers exploited by malware was highlighted last year when the UK and the US attributed a series of attacks on IT companies to the Chinese state-backed hacking group APT 10, also known as Red Apollo or Stone Panda.

Huawei founder says US will not ‘crush’ company Ren Zhengfei says arrest of group’s CFO and daughter is ‘politically motivated’ Hudson Lockett and Louise Lucas

uawei’s founder and president Ren Zhengfei has hit back at the US campaign against his company, labelling the arrest of Meng Wanzhou, his daughter and the company’s chief financial officer, as “politically motivated” and asserting that Washington would not “crush” the Chinese group. “I object to what the US has done,” Mr Ren said in an interview with the BBC when asked about his daughter’s arrest in Vancouver on sanctions-busting charges and her pending extradition to the US. “This kind of politically motivated act is not acceptable.” The interview by the reclusive Mr Ren represents the latest step in a broad counteroffensive by the Chinese telecommunications group in response to US attempts to steer its allies away from using the company’s equipment. On Monday, the Financial Times reported that British intelligence has concluded it was possible to mitigate the risk from

using Huawei equipment in developing 5G networks. The UK is a member of the Five Eyes intelligence sharing network, along with the US, Australia, New Zealand and Canada. Australia and the US have banned Huawei from building their 5G networks and New Zealand has blocked the company from working with Spark, one of its telecoms networks, on 5G. Jacinda Ardern, New Zealand prime minister, said on Tuesday that the company could still operate there if it satisfied concerns raised by the country’s spy agency. Washington, which has long viewed Huawei as a lightning rod for much of its angst with China more broadly — including intellectual property theft, industrial subsidies, spying and the country’s rising tech prowess — has sought to impose its views on allies. A US delegation to Europe in November left the clear message that the UK and Germany must safeguard the security of their telecoms networks and supply chains, people familiar with the talks told the FT.

However, Huawei has in recent months come out fighting, taking to international media to make its case. Last month, Mr Ren denied that the company spied for China in a meeting with reporters at the company’s headquarters in Shenzhen, in what was only his third public interview. “There is no way the US can crush us. The world needs Huawei because we are more advanced,” Mr Ren told the BBC. “Even if they persuade more countries not to use us temporarily, we could just scale things down a bit. And because the US keeps targeting us, finding fault with us, it has forced us to improve our products and services.” Mr Ren also said his company would maintain and could potentially increase its presence in the UK, suggesting that any distrust from Washington would simply redirect investment across the Atlantic. “We will invest even more in the UK. Because if the US doesn’t trust us, then we will shift our investment from the US to the UK on an even bigger scale,” he said.

HSBC revenues ‘collapse’ after December markets turmoil Europe’s biggest bank warns on US-China tension in first results under chief John Flint David Crow and Don Weinland

SBC’s revenues “collapsed” in the final weeks of last year amid panicked sell-offs in global financial markets, pulling full-year results for Europe’s biggest bank below expectations just as its new chief executive is pushing to expand in Asia. The full-year results were the first set to be presented by John Flint, the chief executive and HSBC lifer, who took the helm in February 2018 with a pledge to bolster the bank’s growth by accelerating its “pivot to Asia”. Although Mr Flint told the Financial Times the US-China trade war had yet to have a significant impact on its trade finance business, the turbulent fourth quarter was exacerbated by uncertainty over global trade and fears that Britain will crash out of the EU. HSBC did increase profit and revenue last year, although its performance fell short of analyst expectations. The bank reported profit before tax of $19.9bn for the year, up about 16 per cent on 2017 but below the consensus estimate of $21.3bn, according to Refinitiv.

Reported revenues were $53.8bn, 5 per cent ahead of the prior year but below the consensus estimate of $54.7bn. Hong Kong-listed shares in HSBC dropped as much as 2.7 per cent following the release of the results, before pulling back to rest about 1.7 per cent down. The stock had risen almost 3 per cent since the start of the year. Mr Flint has staked HSBC’s future on fast-growing economies in Asia, where the bank derives almost 90 per cent of profits, although lending figures for the fourth quarter of 2018 pointed to a slowdown in growth. Loans and advances to customers in Asia grew 5.5 per cent year on year in the final three months of 2018 — a result that reflected a significant slowdown compared with doubledigit gains seen in 2017. “Growth rates are certainly lower on the balance sheet; we are seeing a softening in the asset side,” said Mr Flint in an interview. “Given the trade uncertainty, that’s not surprising but, yes, we’re seeing a reduction in the rate of growth.” HSBC is one of the world’s largest trade finance institutions, and analysts and investors had become con-

cerned that the trade spat between China and the US would damage it, although Mr Flint said the bank had yet to feel a significant impact. However, he warned that an increase in US tariffs on $200bn of Chinese imports, to 25 per cent from a current 10 per cent, could cause significant disruption. “Obviously, 25 per cent tariffs — if we got there — that would be a different order of magnitude, and that could really start to disrupt supply chains,” Mr Flint said. HSBC’s inability to grow while containing costs has become a persistent worry for investors, and the bank missed its target of raising income more quickly than expenses. Its adjusted “jaws ratio” for 2018 — which measures income versus cost growth — came in at minus 1.2 per cent, a figure that is likely to disappoint investors. “I was disappointed as well,” Mr Flint said, attributing the performance to the turbulent fourth quarter. “Revenue collapsed in the last few weeks of the year and you don’t have any [cost] levers to pull in the final few weeks of the year.” He said he expected a return to positive jaws as soon as the first quarter of this year.

fter a tough start to the year for the corporate debt market, many managers of specialist investment vehicles backed by risky loans believe that March will be make or break. This has little to do with the financial health of the companies whose leveraged loans end up in these structures, known as collateralised loan obligations. Instead, the CLO market is on tenterhooks because Japan’s largest agricultural bank is set to finalise its budget for the financial year beginning in April. Norinchukin Bank, which for nearly 100 years has managed the savings of farmers and fisherman from Hokkaido to Okinawa, has become a giant presence in the rapidly growing market for CLOs, which pool together loans to heavily indebted companies and use them to back a series of bonds of varying degrees of safety. The bank commonly known as Nochu has piled into the safest of these securities, which carry coveted triple-A credit ratings. Its holdings have more than doubled in just nine months to reach Y6.8tn ($61bn) at the end of 2018. Over the first six weeks of the year, Nochu bought up the top tranches of every European CLO raised, according to people familiar with the deals. As such, its appetite for the year ahead is critical. “Nochu is the only [Japanese bank] buying right now,” says one European CLO manager. A Norinchukin spokesman said the bank does not comment on specific products or markets. The spokesman added that the company invests in an international and diversified way and “we maintain a firm control on risk management”. US and European CLO managers regularly make the long pilgrimage to Nochu’s headquarters, housed in an imposing tower on the edge of Tokyo’s Ginza entertainment district, overlooking the Imperial Palace. The bank is one of many across Japan to have piled in to such debt structures, repelled by years of low and even negative yields on domestic assets such as Japanese government bonds. But the scale of Nochu’s investment in CLOs is striking, given its history. The bank had to raise emergency funds at the peak of the financial crisis, tapping its agricultural, fishery and forestry co-operative members for the equivalent of tens of billions of dollars, after placing big bets on asset-backed securities based on US subprime mortgages. In 2009 Nochu took what it termed “aggressive write-offs” across its Y6tn securitisation portfolio, which not only included collateralised debt obligations (CDOs), but also substantial holdings of the “CDO squared” product made infamous by Michael Lewis’s The Big Short. “Watching it over the years, there have always been positions taken in securities and FX and so on that have question marks all over them,” says Brian Waterhouse, a veteran analyst of Japanese banks. This experience is crucial to understanding Nochu’s big bet on CLOs. In contrast to the other threeletter acronyms that caused massive loses a decade ago, CLOs have never seen a default on a triple A-rated tranche.

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

China’s slow reforms stack odds against multinationals Trade talks can improve US access but local champions hold unassailable positions Tom Mitchell

t is hard to imagine now but when China acceded to the World Trade Organization more than 17 years ago, China UnionPay did not exist. The state-owned card payments monopoly was created in March 2002, three months after the WTO formally welcomed the country as a member. Almost two decades later, Visa and Mastercard’s wait to pass through the gates to enter the world’s largest card payments market seems set to end. It is inconceivable that US president Donald Trump would sign off on a trade deal with Beijing that did not finally resolve the impasse. But when the US card companies finally do enter China, they will confront a radically different market from the one that beckoned in December 2001. And unfortunately for many other multinationals, their frustrating China experience is not an unusual one. In industry after industry, foreign companies have been allowed in only after local champions have secured unassailable positions — or after new technologies and competitors have totally changed the market landscape. China’s moves over the past year to liberalise its financial sector, by raising or eliminating foreign-investment caps for insurance companies and brokerages, is a classic example. Ten or 15 years ago, such market access reforms could have given overseas finance companies a real opportunity to establish themselves in China. Instead, the delay gave their domestic competitors time to consolidate dominant market positions. As one senior western finance executive told the Financial Times: “I must be really bad at my job because I’ve been coming to China for almost 30 years and if our operations here disappeared tomorrow, it wouldn’t make a bit of difference to our global business.” Visa and Mastercard were doubly cursed. Had they been allowed to enter the Chinese market in 2002 — as the WTO later ruled they

should have been — they might have been able to give UnionPay a run for its money in the race to provide China’s emerging middle class with branded debit and credit cards. Instead the Chinese government protected UnionPay’s monopoly. It was not until 2010 that the Obama administration finally challenged Beijing’s discriminatory treatment of foreign electronic payment providers, with a WTO ruling in Washington’s favour coming two years later. China ignored the WTO ruling and seven years later, Visa and Mastercard are still locked out. And when they are finally let in, UnionPay will be the least of their problems. Since 2012 Alibaba’s Alipay and Tencent’s WeChat Pay “e-wallets” have become ubiquitous. It is not just millennials who pay for pretty much everything with a flick of their smartphones rather than using their UnionPay bank card, which involves a wait for the vendor to swipe it, entering a pin number and another wait for a printed receipt to sign. In China, using a card has become almost as quaint as writing a cheque. According to Worldpay, credit and debit cards accounted for less than 15 per cent of all online payments in China in 2017 compared with a 62 per cent market share for e-wallets such as Alipay or WeChat Pay. Even bank transfers, now done easily via smartphones, are set to overtake credit cards as China’s second most popular payment option by 2021, when the country’s e-commerce market will be worth an estimated $1.6tn. For foreign investors, the same dynamics are at work in the Chinese market for electric and other “new energy” vehicles. As part of the China-US trade talks, Beijing has highlighted its plans to eliminate government subsidies for domestic NEVs while also finally allowing foreign carmakers to wholly own China-based manufacturing operations.

Alibaba raises stake in China investment bank CICC Investment makes Alibaba third-largest shareholder behind rival Tencent Gabriel Wildau and Louise Lucas

libaba has joined rival Tencent as a shareholder in one of China’s most storied investment banks, in a highly unusual move for the tech duo who more often carve up the business landscape between them. Alibaba has raised its stake in investment bank China International Capital Corp (CICC) to 4.84 per cent, bringing it close to the 4.95 per cent level arch rival Tencent achieved when it invested $370m in CCC in 2017. The investment will make Alibaba CICC’s third-largest shareholder behind Tencent and Central Huijin, a unit of China’s sovereign wealth fund, China Investment Corp (CIC).

Tencent and Alibaba, China’s most valuable companies, compete fiercely in several areas, from ecommerce and entertainment to payments. Both have large investment portfolios in overlapping sectors — often leading to massive cash burn as seen in the battle waged in food delivery between Tencent-backed Meituan-Dianping and Alibaba’s Ele.me. Rivalry has also spilled over into the hiring of professional advisers, with bankers and lawyers griping about being told to pick sides: Ant Financial, the Alibaba payments affiliate, made a number of banks sign “very restrictive noncompete” agreements preventing them from working for Tencent entities.

EU agriculture commissioner Phil Hogan says the UK will not get the ‘same terms and conditions’ as the EU when it revisits trade deals post-Brexit

Wall Street set for weak open after long weekend Peter Wells

S stocks look set to drop at the open following a long weekend and as investors continue to wait for a breakthrough in trade talks between Washington and Beijing. Even a forecast-busting set of quarterly earnings from Walmart, the US’s biggest private employer, did little to turn the mood, although shares in the retailer were higher in pre-market trade. US and Chinese officials concluded another round of trade talks in Beijing late last week, and although there were few signs of significant progress, markets remained hopeful a deal could be hammered out before a March 1 deadline that would see new tariffs placed on $200m worth of Chinese imports. That optimism hung around

on Monday, helping boost Asian stock markets, although the US missed out on a chance to react owing to the President’s Day public holiday. On Tuesday, Asian markets retreated, and Europe was lower, setting Wall Street up for a weak open. Futures for the S&P 500 and Dow Jones Industrial Average were each down 0.2 per cent on Tuesday morning, while those Nasdaq 100 were down ⅓ of 1 per cent, respectively. Solid sales from Walmart, which was up 1.5 per cent in pre-market trade, may help to allay broader concerns about the health of the US consumer, which was questioned last week after national data showed retail sales fell in December by the most in just over nine years during what is a usually critical month for spending. US government bonds were

weaker, though, as yields ticked slightly higher. The yield on the benchmark 10-year US Treasury was up 0.4 basis points to 2.6698 per cent. The dollar was just keeping its head above water, with the DXY index less than 0.1 per cent higher to 96.939. Last week, the index, which tracks the buck against a weighted basket of global peers, hit a two-month high. Eyes were on the yen today, though, with the Japanese currency weakening to 110.75 in the wake of comments from the Haruhiko Kuroda, governor of the Bank of Japan, who cautioned that the central bank would consider easing policy if currency moves affect consumer prices. Brent crude was down 0.2 per cent at $66.36 a barrel, but the global oil benchmark is still hovering close to its highest in three months.

Globacom partners Huawei Technologies to empower 30 institutions, 150 students in Nigeria

igeria’s rising broadband penetration is changing the way Nigerians live and carryon with economic activities. A lot can be done online now – academic and corporate research, booking cabs, movie tickets, paying utility bills, mobile banking, publicity for businesses of all scales and sizes, to name a few. This creates the rising need for faster and better internet connectivity. Since 4G network arrived in Nigeria, Globacom (Glo), an indigenous Nigerian telecommunications service provider, popularly called the grandmasters of data, has been on the forefront offering Nigerian customers quality internet data services at a competitive price. This has been made easier with Globacom’s partnership with Huawei Technologies, the leading global ICT and Telecommunications equipment and service providers. The duo (Globacom and Huawei Technologies) have recently rewarded Nigerian students across

institutions in the country with a combination of high-end smartphones and super-fast internet service. This programme, targeted at thirty (30) universities and a hundred and fifty (150) Nigerian students, will be offering free Huawei smartphones loaded with six months unlimited Glo 4G data to five (5) students and five (5) Huawei routers with pre-loaded 60GB of Glo 4G data to the institution. Students to be rewarded are the top five (5) final year students in each institution. The plan is to aid fast and free internet Wi-Fi connectivity for research in schools and to enable students stay connected to good internet for academic tasks while outside of the school premises for free. The programme kicked off on Feb. 18 at the Babcock University, Ilishan, Ogun State, where the Deputy Vice Chancellor, Academics, Professor Iheayichukwu Okoro, led other members of the University to receive the routers.

The five outstanding final year students of Babcock University who received the Huawei Y5 smartphones were Dogo Edafe Bawa of Business Education, Olusoji Ifejesu Precious of Accounting Department, Ojutiku Toluwanimi Oluwaseun of Economics, Ajulibe Goziem Benjamin of Medical Laboratory Science and Anifowose Airat Morolake of Computer Science department. “We have always had faith in Globacom as we were part of the first set of post-paid lines and CUG users. Our students will continue to cherish this recognition of excellence. Thank you Globacom. Thank you Huawei”, a professor at Babcock said. Jonathan Nwosu, the Registrar of the University, alluded to the speed and reliability of Glo’s 4G network set up by Huawei Technologies said, “Glo is Babcock, Babcock is Glo. This is reward for hard work. Hard work pays. We thank you for rewarding excellence in academics.”

BUSINESS DAY

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Wednesday 20 February 2019

ANALYSIS Calvey’s arrest sends chill through Russia’s foreign investors US founder of Moscow-based Baring Vostok was seen as savvy operator Max Seddon

Kraft Heinz: hungry for growth after austerity diet With revenues flat and shares falling, the food group is cooking up fresh plans Guy Chazan

ornography is an unconventional subject for a family food company. But during commercial breaks from the Super Bowl earlier this month, Kraft Heinz used the idea of “food porn” to promote frozen meals to American football fans. Without ever mentioning the P word during the primetime broadcast, the advertisements for its Devour brand played on the theme of a young man becoming hooked after ogling online images of “steamy” mac and cheese. “This addiction can happen to anyone,” his girlfriend warns. The company went a lot further online: it even took out ads on an actual porn website. The Devour campaign is the latest sign from Kraft Heinz and its Brazilian investment backers, 3G Capital, that they are prepared to take risks to win back shoppers who have ditched the mass-produced foods that were household staples for generations. In the process, the company is trying to change the view of what has been one of the most influential and controversial business models of recent decades. 3G, whose brands range from Budweiser to Burger King, is known less for its marketing prowess and more for an intense focus on costs that has served as a model for corporate America in how to make money in mature markets. Yet almost four years since 3G engineered the $63bn megamerger of Kraft and Heinz, the company’s financial performance has stuttered, with the shares down around one-third since the 2015 tie-up. Wall Street has been left wondering if the lean-andmean approach it once applauded has gone too far and starved the brands of much-needed investment. “They were focused on cutting costs to the exclusion of other aspects of the business,” says Steven Davidoff Solomon, a former corporate lawyer at Shearman & Sterling who is now a professor at the University of California, Berkeley School of Law. “Companies today are run pretty efficiently, as compared to the 1980s. You can’t cost-cut your way to a new product.” Now, in a series of interviews with the Financial Times, Kraft Heinz executives describe how they are trying to reposition the brands for the future, harnessing product innovation, ecommerce and data-driven marketing. “This concept that ‘they cut too much’: I’m actually growing where I believe there is value and decreasing where I believe there is not,” says Bernardo Hees, chief executive of Kraft Heinz, at the com-

pany’s Chicago headquarters. “We started accelerating our growth agenda,” he says. “We decided to invest more.” Warren Buffett once described 3G’s co-founder Jorge Paulo Lemann, a former professional tennis player, as among the world’s most effective businessmen. In a series of debt-fuelled deals orchestrated with his partners Marcel Telles and Carlos “Beto” Sicupira, the billionaire took control of some of the world’s biggest consumer brands and squeezed higher profits out of them. At the heart of its philosophy is a capacity to nurture companies for decades, much longer than typical private equity firms. Hedge fund manager Bill Ackman and grand slam champion Roger Federer, as well as Berkshire Hathaway’s Mr Buffett, were among a host of wealthy luminaries attracted by the handsome returns 3G’s strategy produced at its portfolio of companies. But when Mr Lemann said last year that a rapidly changing market for consumer goods made him feel like a “dinosaur”, investors feared he may be right. “I’ve been living in this cozy world of old brands, big volumes and nothing changing very much. You could just focus on being very efficient and you can do OK,” Mr Lemann said. “All of a sudden we are being disrupted.” The combination of Kraft, whose portfolio includes Philadelphia Cream Cheese, Oscar Mayer hot dogs and Kool-Aid, with Heinz, another consumer staples stalwart that the Brazilians had bought two years earlier, promised to transform the food industry. 3G, whose partners had previously rolled up some of the world’s biggest breweries into AB InBev, planned to do with baked beans, jelly and ketchup what had already been done with beer. The new owners quickly implemented their “zero-based budgeting” regime, which forces managers to justify every item of spending, no matter how small, every year. As part of the integration they closed six factories and cut 4,900 jobs. Rivals from Kellogg to General Mills sought to emulate 3G’s frugality, which according to Chris Growe, managing director at the brokerage Stifel, pushed Kraft Heinz’s already-low overheads from 11.5 per cent of sales in 2015 to just 8 per cent in 2017. The ratio at other large US food companies averaged 14 per cent. “We’ve never really seen a company do that before, especially one as big as Kraft Heinz,” says John Baumgartner, analyst at Wells Fargo, of its margin improvement. But he adds: “They’ve been so focused on cutting costs they really hadn’t put a lot into top line.” Results due on Thursday are

forecast to show the group generated sales of $26.3bn in 2018, little changed from the year before and about 4 per cent lower than 2015. More consumers are shunning packaged foods in favour of fresh, natural and local alternatives. Avocado, kale and quinoa are in; processed cheese is out. Disrupters include Halo Top Creamery, which has upended the ice-cream business with its low-sugar and low-fat products, and Chicago’s RXBar, a protein bar maker which Kellogg bought for $600m just five years after it was founded. Kraft Heinz executives say there has always been more to 3G’s philosophy than cost-cutting. While the budget-trimming comes after the takeover, they say, there is an overlooked second phase that focuses more on investment and expansion. Supporters say evidence that they are prepared to invest is apparent at Restaurant Brands International, the vehicle 3G set up to bring under one roof the fast-food chains Burger King and Popeye’s and Canadian coffee shop chain Tim Hortons. “There is absolutely nothing in the model that prevents anything from growing or not growing,” says Mr Hees, who was chief executive of Burger King before he took charge of Heinz when 3G and Berkshire acquired it in 2013 for $23bn. “If you think you need to travel more because you’re going to have better results, then that’s easy; go travel.” Despite its reputation for austerity, the enlarged company has shown willingness to spend big. Within months of the tie-up, the enlarged Kraft Heinz group relocated from suburban Chicago to a glistening downtown high rise that overlooks Lake Michigan. Ad slots at the Super Bowl, during which the group also promoted Planters snacks, cost an estimated $10m. Echoing other consumer goods companies that are struggling for growth in mature markets, Kraft Heinz last year set out plans to invest $300m in the business. While 3G executives argue the shift in favour of investment has always been part of the plan, some on Wall Street sense a clear change in its approach. “The model has really done a complete 180,” says Mr Baumgartner. Kraft Heinz is deploying some of the funds to come up with new products. Recent additions to supermarket shelves include: Just Crack an Egg, a microwaveable cup of diced ingredients to which consumers do as the title instructs; O, That’s Good!, frozen pizzas launched last year with Oprah Winfrey; and MAX, an attempt to drag the 127-year-old coffee brand Maxwell House into the 21st century. The iced coffee is promoted in advertising by a young woman playing the drums.

remlin officials were touting Russia’s investment opportunities at a conference in the Black sea resort of Sochi on Friday when news trickled out that one of the country’s last remaining American investors had been thrown behind bars. Michael Calvey, the founder of Moscow-based private equity fund manager Baring Vostok, remained one of the last Russia bulls at a time when most of his contemporaries had left the country. Over 25 years, the fluent Russian speaker from Oklahoma gained a reputation as a savvy investor able to navigate the cut-throat Russian regulatory waters — attracting

whose firm was once the largest investor in Russian stocks, embarked on a global sanctions campaign against Russia when his auditor Sergei Magnitsky died in pre-trial detention after accusing the officials who arrested him of a $230m tax fraud. Bob Dudley, the head of British oil major BP’s Russian joint venture, fled the country in 2008 after claiming “sustained harassment” from security services. Both had taken on powerful interests. Mr Browder pushed for corporate governance change at Gazprom, the listed state-owned gas company, and Mr Dudley fell out with well-connected oligarch business partners in BP’s joint venture.

money from pension funds such as California’s Calpers and western institutions such as the European Bank for Reconstruction and Development. Now, the 51-year-old former mergers and acquisitions banker has become the most prominent western executive to face jail in Russia — up to 10 years on charges of fraud — casting a pall over an already fraught investment climate. “If someone who knows Russia so well can fall into this situation, then obviously less experienced investors, which includes everyone else, are going to be very cautious,” said Tom Adshead, research director at consultancy Macro Advisory. Since Russia annexed Crimea in 2014, a worsening political environment has spooked many foreign investors who, like Mr Calvey, arrived in Moscow in the 1990s. Foreign direct investments (FDI) shrank from $27.1bn in 2017 to $1.9bn last year, according to the Russian central bank. They stood at $79bn in 2013. The Kremlin under President Vladimir Putin has had some success in attracting pledges from state institutions from China and the Gulf. But private equity fund managers, including New York-based Blackstone and Texas-based TPG Capital, ended their attempts to invest in the country following Crimea and the subsequent sanctions on Moscow from the US and EU. “This is unprecedented. He’s a US citizen,” a longtime western backer of Baring Vostok’s funds said of Mr Calvey’s detention. “Once again [it’s] a new low.” Mr Calvey’s troubles bring back echoes of past clashes between Russian authorities and foreign businessmen. William Browder,

Instead, Mr Calvey had targeted small to medium-sized growing companies and surrounded himself with Russian nationals. “Michael has always taken a constructive, long-term view on Russia and investment opportunity in the country,” said Bernard Sucher, a former Russia director for Bank of America Merrill Lynch. “Throw in adjectives like cautious, balanced and thoughtful — they all fit.” A former Salomon Brothers energy banker, Mr Calvey founded Baring Vostok in 1994 and grew it into a $3.7bn fund management business. The firm’s diversified portfolio helped him weather storms that prompted many other western investors to leave, including the financial crises of 1998 and 2008 as well as Russia’s annexation of Crimea in 2014. In December that year, Mr Calvey told the Financial Times that he still saw investment opportunities. “We are practically the only people still buying Russian assets, so it seems like it could be a good cycle for investment,” he said. “Of course, we need to convince our (investors) to be patient.” Prosecutors suspect that he and five others, including three Baring partners, conspired to defraud Vostochny Bank, a Baring-owned top-30 lender that focuses on Russia’s Far East, of Rbs2.5bn ($37.7m). Mr Calvey denied wrongdoing, telling the court that the charges were part of a long-running dispute with minority shareholders Artem Avetisyan and Sherzod Yusupov over control of the bank. The arrest came less than a week after Mr Yusupov filed a complaint with the FSB, Russia’s intelligence agency. Mr Yusupov denied that the charges were linked to the dispute.

WEST AFRICA

ENERGY intelligence oil

gas

power

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

OIL

Ghana: Oil production to go up to 500,000 barrels per day by 2024

Page 52

GAS

Debrief

Egypt: Dana Gas to drill off Egypt in April/May Page 53 Market Insight

No new attack, yet palpable fears persist for Nigeria’s oil facilities FRANK UZUEGBUNAM

Oil prices hit 2019 highs amid supply cuts, trade talk hopes

Page 57

OPEC weekly basket price DAY

PRICE

15/2/19

64.87

14/2/19

64.28

13/2/19

62.94

12/2/19

61.88

11/2/19

61.40 Source: OPEC

here are palpable fears that fresh hostilities and attacks on the oil facilities in the Niger Delta region may resume with the tense atmosphere created by the upcoming elections. Already, the Niger Delta Avengers have threatened to resume attacks if President Muhammadu Buhari is re-elected. The Niger Delta Avengers, said they backed opposition candidate Atiku Abubakar because of his promises to devolve more power to the regions in his proposed “restructuring” policy that would enable oil-rich states to retain a greater share of the revenues generated from crude production. “We are adopting Alhaji Atiku Abubakar, as the sole candidate to be voted for by all the people of the Niger Delta as a result of his political ideology which is

in tandem with our agitation for equitable and fair principles of federalism,” the group said. About 15-20 Nigerian crude oil cargoes remained from the March programmes and a delay was expected on the issuing of April schedules depending on the outcome of the presidential election. Traders said the elections could delay the release of the April loading programmes and spot activity stayed on the sidelines because of uncertainty over potential violence in the oil-rich delta region as sellers awaited the new programmes. Attacks in the Niger Delta peaked in 2016, cutting Nigeria’s crude output from 2.2 million barrels per day (mbpd) to less than 1 mbpd, the lowest level seen by the country in at least 30 years. Combined with low oil prices, Nigeria went into recession as crude sales make up two-thirds of government revenue and 90 percent of its foreign exchange.

It will be recalled that militancy in the Niger Delta ended after the government on June 26, 2009 announced that it would grant amnesty and an unconditional pardon to the militants by late President Umaru Musa Yar’Adua. Armed youths surrendered their weapons to the government in return for training and rehabilitation by the government. The weapons surrendered by the militants include rocket-propelled grenades, guns, explosives, and ammunition. Even gunboats were also surrendered to the government in exchange for monthly payments, vocational training and in some cases lucrative contracts for guarding the pipelines. However, President Buhari saw the amnesty programme as a waste pipe for enabling corruption and discontinued it, a move that pushed restiveness in the region to overdrive. A February 2016 explosion in

a pipeline operated by Shell Petroleum Development Corporation, the Forcados export terminal, halted both production and exports. On May 11 2016, Shell closed its Bonny oil facility. A week earlier, a bomb attack had closed down Chevron’s Escravos GTL facility. On May 19, 2016, ExxonMobil’s Qua Iboe shut down and evacuated its workers due to militant threats. According to a report released by AON, a risk management and insurance provider, Nigeria recorded a total of 56 attacks on its oil and gas installation in 2016. This is almost more than double a total of 22 attacks recorded in Colombia. However, no substantial attacks on Nigeria’s oil facilities have been carried out since January 2017, allowing oil output to stabilise. But fears persist. Nigerians continue to hold their breath as the country struggles to hold an election free of rancor and violence.

52 BUSINESS DAY WEST AFRICA Outlook

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

years. “Overall, crude oil production is expected to increase from 196,089 barrels per day in 2019 to 420,020 barrels per day in 2023,” said Ofori-Atta. The projection is coming after Aker Energy ASA confirmed a significant offshore resource base in Ghana with a declaration to scale up new development in the Deepwater Tano Cape three points block (DWT/CT). First oil from the Aker fields is expected between the last quarter of 2020 and

Wednesday 20 February 2019

oil

Ghana: Oil production to go up to 500,000 barrels per day by 2024

hana’s overall crude oil production is expected to more than double over the next four years and hit 500,000 barrels per day according to Ken Ofori Atta, the country’s Finance Minister. The government of Ghana delegation led by Ken Ofori-Atta, Finance Minister, announced to investors in Oslo, Norway, that overall crude oil production from Ghana was expected to more than double over the next four

@Businessdayng

first quarter of 2021. “Going forward, the vision of government is to create an optimistic, self-confident and building a prosperous nation, through the creative exploitation of our human and natural resources, and operating within a democratic, open and fair society in which mutual trust and economic opportunities exist for all,” he added. Mohammed Amin Adams, Deputy Minister of Energy, noted Ghana’s production of crude oil is expected to reach half a million barrels by 2025. Recently, Aker Energy ASA announced the biggest oil find in Africa, of 450-550 million barrels, with potential recoverable reserves of nearly one billion barrels. Between 2012 and 2016, Hess, an oil and gas company, sought, unsuccessfully, to appraise the Pecan field (now with Aker as operator) and agreed terms with the government of Ghana on a feasible plan of devel-

opment for the discovery. Hess’s initial assessment indicated resources of 230 million barrels of oil equivalent. In 2017, following discussions with the Ghana National Petroleum Corporation, Aker announced its acquisition of Hess’s interest in the DWT/CT License. Aker and its partner, working closely in conjunction with the Petroleum Commission and GNPC, immediately undertook preparations for an expansive drilling programme, with Pecan 4A being the first of three planned wells. Based on existing subsurface data from seismic and wells drilled, including an analysis of the Pecan-4A well result, the existing discoveries are estimated to contain gross contingent resources (2C) of 450 to 550 million barrels of oil equivalent (mmboe). Aker Energy estimates that with the next two well targets, the total volume potential is 600 to 1,000 mmboe.

Brief

Libya: US presses for security deal to allow Libya to restart Sharara oil field

he US is concerned by ongoing tensions in southern Libya that have prolonged the closure of the 340,000 b/d Sharara oil field and other critical crude export infrastructure, US State Department said. “We call on all parties to urgently establish a mutually acceptable security arrangement that will guarantee the safety of National Oil Corp. workers and allow oil production at the Al-Sharara oil field to resume as quickly as possible for the benefit of all Libyans,” Robert Palladino, deputy spokesman said in a statement. “We reiterate that the NOC must be allowed to resume its work unhindered and that these vital Libyan resources must remain under the exclusive control of the NOC

and the sole oversight of the Government of National Accord,” he added. Sharara, Libya’s largest oil field, has been shut since December 8 after armed groups, with the help of local people, occupied the site in protest over economic conditions and frequent power outages in the south of the country. The field has become hostage to a battle between various rival groups, particularly the UN-backed Government of National Accord and the self-styled Libyan National Army. Libya’s oil production recovered in 2018 to 1.1 million b/d even though security and political challenges continued to impede the sector, but production fell to 850,000 b/d in January, the lowest since July, due to the Sharara outage.

Uganda: Uganda expects first oil production to be delayed to 2022

ganda expects to begin producing oil in 2022, Irene Muloni, its energy minister said, indicating a slight delay from the East African country’s revised target of 2021. “We are now looking at by 2022 for our first production, from Kingfisher and Tilenga blocks,” Irene Muloni said. Lack of infrastructure such as a transportation pipeline and a refining facility contributed to the delay. In April last year Uganda signed a deal with a consortium, including a subsidiary of General Electric, to build and operate a 60,000 barrel per

day refinery that will cost between $3 billion and $4 billion. The refinery is expected to be operational by 2023. “We are preparing for production. We have to build a pipeline for exports and a refinery to add value. So unless those two projects are done we cannot start producing,” she said. Muloni said land-locked Uganda, which imports refined fuel, would announce its next exploration licensing round in May. A final investment decision for the refinery will be taken by September 2020 and the project is expected to be completed in three years’ time, she said.

A crude export pipeline, which passes through Uganda’s neighbour Tanzania, with a capacity to transport 260,000 bpd oil will be built by 2022, Muloni added. Emmanuel Simon Gilbert, head of downstream operations at Tanzania Development Corp, said Tanzania expects to take a 15-25 percent stake in the planned 1500 kilometre pipeline, which he said was estimated to cost around $3.5 billion. Uganda will also take a stake in the pipeline project with the majority share being held by Total, he said, adding that the inter-governmental agreement between the two nations has to be

signed before moving to a next stage. “Ugandan oil is heavy and you need to install heaters along the way at 4 or 5 different locations. So it is a bit challenging,” he said of the planned pipeline. Uganda discovered crude reserves more than 10 years ago but production has been repeatedly delayed by disagreements with field operators over taxes and development strategy. China’s CNOOC and France’s Total and London-based Tullow Oil have the stakes in the two areas. CNOOC is the operator of Kingfisher area while Total leads the development of Tilenga.

Wednesday 13 February 2019

www.businessday.ng

www.facebook.com/businessdayng

gas

Egypt: Dana Gas to drill off Egypt in April/May

Britain’s Centrica in a joint deal, Royal Dutch Shell, Chinese state energy firm CNOOC, Tohuku Electric and French utility EDF. Anadarko hinted at further supply agreements when it issued its annual report and said “execution of SPAs representing 2.0 mtpa of additional contracted volume is anticipated prior to FID”. Anadarko had penned a non-binding supply agreement with PTTEP, the exploration and production arm of Thailand’s state energy firm PTT, which also holds 8.5 percent stake in the project. Rhymes said that deal still needed approval from Thai authorities. “Anadarko and its Area 1 co-venturers continue to work with PTT toward the conclusion of the SPA. However, we are not reliant on completing this agreement to take FID in

ana Gas will begin drilling this year in an area it says could become Egypt’s next giant Mediterranean gas field, after seismic data pointed to reserves as large as 20 trillion cubic feet. That data will be put to the test beginning in April or May, when it expects to start drilling an area that could hold 4-6 trillion cubic feet of gas, Patrick Allman-Ward, Dana Gas CEO said. “If the geology works out the way that we think it will, then in the success case it could be a 4-6 trillion cubic feet gas reserve,” AllmanWard said. “And that is just that one prospect,” he said of the area of a North Arish field located in the eastern Mediterranean Sea which is one of three Dana Gas has homed in on within its Block 6 after it was licensed to explore in 2014. “All three together could be as much as 20

A the first half of this year,” she said. Indian state energy firms Bharat, ONGC and Oil India hold a 30 percent equity stake in the project either directly or through subsidiary joint ventures but this is the first offtake agreement with an Indian buyer. India is the world’s fourth largest LNG importer after Japan, China and South Korea, a position it is expected to consolidate in years to come with growing imports.

trillion cubic feet,” Allman-Ward said. Such a reserve level would make it second only to Egypt’s Zohr field, a 30 trillion cubic feet find made by Eni in 2015 that made Egypt a major player in Mediterranean gas and which it is now hoping will become a regional re-export hub. Allman-Ward said

Dana’s investments are a modest $50-$100 million per year, but that it would invest as much as $5 billion to develop the three prospects in the best case scenario. “The $5 billion is the high end estimate of what the total block development costs might be in the case of success in all three prospects. Develop-

ment could start by 2023,” he said. Allman-Ward said the find could be key in solidifying Egypt as a gas hub for regional trade, boosting its supplies even as Zohr’s reserves begin to decline and Egypt faces the prospect of being a net-importer as soon as 2023 without big new finds.

Shutdown of historic field forces Dutch to look abroad for gas fter decades of supplying itself and its European neighbors with natural gas, an era has officially come to an end for the Netherlands. The country became a

has for the project to 8.5 mtpa out of a capacity of 12.88 mtpa, a level it has previously said would allow it to make the investment. “We anticipate announcing another SPA in the very near future,” Helen Rhymes, an Anadarko spokeswoman, said, reiterating that the final decision would come in the first half of this year. Other committed buyers, according to Anadarko, are Tokyo Gas and

BUSINESS DAY

ENERGY intelligence

Mozambique: Anadarko closes in on final Mozambique LNG decision

@Businessdayng

WEST AFRICA

Brief

S independent energy producer Anadarko moved closer to a final investment decision (FID) to build a giant liquefied natural gas (LNG) terminal in Mozambique after signing up an Indian buyer for the gas and saying another deal was imminent. Anadarko and ExxonMobil are expected to sanction two separate but neighbouring LNG projects in Mozambique this year after finding large offshore gas deposits, turning the African nation into a major global gas exporter. The company said it had struck a sales and purchase agreement (SPA) with India’s Bharat Petroleum Corporation Ltd for 1 million tonnes per annum (mtpa) for 15 years, the fourth such agreement this month. This brings the total commitments Anadarko

@businessDayNG

net importer for the first calendar year since it started production from the giant Groningen field in 1963. It joins European nations becoming increasingly reliant on sourcing fuel through

pipelines from suppliers such as Norway and Russia or via tanker ships from the US, Qatar and elsewhere. The shift was inevitable after the nation of 17 million vowed to close

Groningen following earthquakes linked to extraction from the deposit in the north. Production from what is left at the site will continue to earn billions for the Dutch state, Royal Dutch Shell and Exxon Mobil for a few more years at least. The Netherlands gets about 40 percent of its energy from gas. GasTerra, a venture between the state and the two oil companies, said its sales rose 17 percent to $12.6 billion in 2018. More than a third of the fuel came from Groningen, for which it has the exclusive sales rights, with the rest mainly from smaller offshore fields as well as imports from Norway and Russia. “Since the first molecules of natural gas flowed from Groningen, the Netherlands has been self-sufficient. No longer,” Annie Krist, GasTerra CEO said. “Natural gas is still badly needed,” partly to meet increased demand in power generation to back up renewable sources and replace coal.

54 BUSINESS DAY WEST AFRICA ENERGY intelligence www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

power

South Africa: Eskom split to minimise risks to South Africa

outh African President Cyril Ramaphosa said his plan to divide struggling state power firm Eskom into three units would minimise risks to the economy, as power cuts hurt businesses and drove the rand to a six-week low. Eskom, which supplies more than 90 percent of the power in Africa’s most industrialised economy, is technically insolvent, the government said, warning that an urgent bailout was needed to help it manage its $30 billion debt. “Restructuring will reduce the risk of a massive Eskom that at times has been termed ‘too big to fail’, placing government in a position where all our eggs are in one basket,” Ramaphosa said in a speech to parliament. “It is not a path to privatisation,” he added, promising that a financial support package for Eskom would be accompanied by a turnaround plan and that officials would consult with trade unions, which have expressed anger at the pro-

Egypt: PPA signed for 250MW wind farm

L posed split. Ramaphosa, who faces a parliamentary election in May, pledged to separate Eskom into units for generation, transmission and distribution to increase efficiency and prop up the country’s most important state company. Firms in the mining sector, the backbone of the country’s economy, are looking at alternatives to reduce their dependence on Eskom and monitoring the situation closely.

Eskom’s woes, which reflect the failure of successive governments to take on labour unions and tackle Eskom’s monopolistic structure, pose a potential threat to South Africa’s credit rating, with Moody’s the last of the top three ratings agencies to rate it investment grade. There is also the risk that unions could go on strike. The National Union of Mineworkers (NUM), the biggest union at Eskom, warned Ramaphosa’s African National Con-

gress (ANC) not to take its members’ votes for granted at the upcoming election. Senior NUM officials are set to hold talks with Public Enterprises Minister Pravin Gordhan to express their disagreement with the plan to split Eskom, which the union fears will lead to massive job losses further down the line but Ramaphosa said in parliament that cost-cutting at Eskom would not necessarily entail job cuts.

ekela Power has signed a power purchase agreement (PPA) with the Egyptian Electricity Transmission Company (EETC) for its 250MW wind farm project in the Gulf of Suez, near Ras Ghareb. Located 30 kilometres north-west of Ras Ghareb, the project is part of the government’s Build, Own, Operate (BOO) scheme. Once constructed, it will increase Egypt’s wind energy capacity by 14 percent. The project will produce more than 1000GWh a year, powering the equivalent of over 350,000 homes in Egypt. The total investment for the project is estimated at $325 million and leading Development Finance Institutions have been mandated to provide financing. The Network Connection Agreement with EETC has been

signed. The project will be constructed on a turnkey EPC basis and an announcement regarding the EPC contractor will be made at a later date. Financial close is expected to take place later this year, and the project is expected to be operational in 2021. “Egypt has a target of achieving 20 percent renewable power in its overall energy mix by 2022. Today’s agreement is a major milestone for delivering a 250MW wind farm to help achieve that goal. We would like to thank the Minister of Electricity and Renewable Energy, EETC, The Egyptian Electricity Holding Company (EEHC), Egypt’s New and Renewable Energy Authority (NREA), the Minister of Investment and all those people, both in Egypt and beyond the country, who have helped us get to this point.

Report: Smart cities to generate $100bn in revenue for utilities by 2027

tilities around the world are becoming increasingly integrated with smart city deployments, driven by the need to generate new revenue opportunities. A new report from Navigant Research examines global smart city business opportunities for utilities, providing market forecasts, segmented by region and smart city technology type, through 2027. Smart city applications such as electric vehicle (EV) charging infrastructure and services, smart street lighting, smart buildings, distributed energy resources (DER), and smart city communication networks all offer significant new business opportunities for utilities. “With increasing energy efficiency and utili-

sation of DER cutting into their bottom line, utilities must position themselves as innovators and generate new revenue streams to remain profitable in the 21st century,” says Ryan Citron, senior research analyst with Navigant Research. “Smart cities represent a significant opportunity for utilities to develop new business lines, extend their partner ecosystems, and establish new bonds with local communities.” While utility interest and involvement in smart city deployments is increasing, several key barriers to greater market participation remain, according to the report. These barriers include regulatory challenges, utility business culture and organisational structure, technical and operational

challenges, and the lack of a business case for some smart city applications. The configuration of these challenges is unique to each utility given its history, location, culture, and current asset base. However, there are many lessons to learn from early leaders already establishing their footprint in the smart cities market. The report, Utility Opportunities in Smart Cities, analyses the global smart city business opportunities for utilities. The study focuses on smart city use cases such as EV charging, smart street lighting, smart buildings, DER, and smart city communication networks. It includes a study of regional trends, utility case studies, and key barriers and opportunities in the market.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

POLICY

WEST AFRICA

ENERGY intelligence

Nigeria’s new gusher just made OPEC compliance a little harder ELISHA BALA-GBOGBO & JULIAN LEE

Snapshot

The extra barrels come just as the country is supposed to be lowering its output by 53,000 bopd in the first half of this year as part of a wider initiative by OPEC and allied nations to restrict collective supplies

igeria is about to ship the first cargo of crude oil from a new deposit about 90 mi

off its coast. The 1 MMbbl consignment, which will head toward the Dutch port of Rotterdam, comes at a tricky moment for the West African country, given a pledge it has made to OPEC and other oil producing countries to help them avert a glut of crude. The tanker, the Achilleas, will export from a mooring linked to the Total SA-operated Egina field. When fully up and running, the European oil company anticipates flows reaching about 200,000 bopd. The kind of crude is exactly the variety the oil market needs, but is also the kind that the Organization of Petroleum Export-

ing Countries doesn’t. It has an API gravity of 2.73° degrees, making it a so-called medium grade, and a very low sulfur content of 0.165%, according to Total marketing literature seen by Bloomberg. That will make

it invaluable for making fuels that comply with International Maritime Organization rules to restrict shipping’s sulfur emissions starting next year. The extra barrels come just as the country is supposed to

be lowering its output by 53,000 bopd in the first half of this year as part of a wider initiative by OPEC and allied nations to restrict collective supplies. It’s supposed to pump about 1.685 MMbopd in the first half of 2019. In January, it averaged 1.792 MMbopd, according to OPEC figures. Nigeria’s Minister of State for Petroleum Resources Emmanuel Kachikwu has suggested the oil might be classified as a condensate -- a much lighter, more gasoline-rich oil that’s not bound by the OPEC+ curbs. Condensates are hydocarbons that are gases at reservoir temperature and pressure, but condense into liquids at the surface. There is no simple way to distinguish crude and condensate once they have been extracted, as the definition relates to the type of field from which they are produced. Condensate comes from gas fields, crude from oil fields.

OPEC agreed a technical definition of condensates in 1988 that is based on API gravity, the ratio of gas to liquids in the production stream and the composition of that stream. Condensates normally have an API gravity above 45° (the higher the number, the lighter the oil). To put the 27.3 figure into context, even Brent and West Texas Intermediate crudes are both around 40 API, making them lighter than Egina. In its January press release announcing the start of production from Egina, Total made no mention of gas, suggesting that the gas:oil ratio may be fairly low. That would reduce the likelihood of Egina meeting OPEC’s requirements for classifying its output as condensate. If that is indeed the case, then Nigeria may have a decision to make when Egina really gets going: cut output elsewhere to adhere to its OPEC pledge, or not. Culled from Bloomberg

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

WEST AFRICA

ENERGY intelligence

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

finance people appointments

Brief KenGen to raise funds from the market this year, eyes green bond

he Kenya Electricity Generating Company plans to raise funds from the market later this year and it may opt to issue the country’s first green bond, Rebecca Miano, its chief executive said. KenGen has a 1,631 megawatt annual capacity and it supplies 70 percent of the East African nation’s electricity. Private investors hold 30 percent of the company while the rest is held by the state. Rebecca Miano, KenGen’s CEO, said the company would go to the market once it redeems its 10-year, 25 billion shillings ($250 million) bond in October. The bond was

heavily oversubscribed when it was issued in 2009. The so-called green bonds help to finance projects in the renewable energy, energy-efficiency, green transport and

wastewater treatment sectors. Kenya’s capital markets regulator is set to unveil regulations for private issuance of green bonds next week, paving the way for the first issue. Although Kenya has high consumer electricity tariffs compared with countries like Egypt and South Africa, the government’s policies had boosted investment in the sector, Miano said, helping it to avoid blackouts or schedule cuts. “Kenya was among the first countries in Africa to liberalise generation and it has its own advantages. You have many players and it brings competition, you have adequate power,” she said. KenGen has shifted its strategy in recent years to focus on renewable energy in order to reduce the risk posed by its hydro generation dams, which are normally susceptible to a drop in production when the rains fail. Geothermal steam, hot underground steam found in the Rift Valley which is used to drive turbines for electricity production, accounts for nearly a third of the firm’s annual production, Miano said. “Our geothermal-led strategy is bearing fruit,” she said, adding the company was developing capacity for an extra 720 MW in the next four years to 2022.

Aker Energy eyes IPO after submitting Ghana oilfield plan in March

orwegian oil company Aker said that its exploration start-up in Ghana will submit development plans to Ghanaian authorities in March and the parent will then decide whether to sell stakes via an initial public offering or other means. The subsidiary, Aker Energy, plans to develop the deepwater Pecan field off Ghana. “Depending on the

approval process in Ghana, we believe the first oil is achievable in late 2020 or early 2021,” Oeyvind Eriksen, Aker’s Chief Executive said during an earnings presentation. A recent appraisal had confirmed contingent resources of 450 million-550 million barrels of oil equivalent (mmboe) at the field, Aker said. Aker Energy plans to drill another two wells in February, expected to prove between 150

and 450 mmboe of additional resources, with preliminary results expected before the development plan is submitted, Eriksen told the presentation. Aker controls oil company Aker BP, 30 percent owned by BP, which has announced plans to triple its oil production by 2025 from 155,700 boepd in 2018. Expected production from Ghana, and potential acquisitions in Norway, support the plan of

Aker’s main shareholder, Norwegian billionaire Kjell Inge Roekke, to increase total oil output to over 1 million boepd by 2025, Eriksen said. Aker Energy operates and holds a 50 percent stake in the DWT/CTP block off Ghana, which contains several discoveries. Its partners are Russia’s Lukoil (38 percent), the Ghana National Petroleum Corporation (10 percent) and Fueltrade (2 percent).

months and upgraded in preparation for utilization across the globe under its new name Telford 30. The vessel will be ready for deployment later in 2019. The six offshore support vessels, which are all anchor handlers, will be deployed in Nigeria with Telford’s partner Afrimarine Charters. They will be prepared to commence work on projects during the first quarter of 2019 as Telford moves to increase its presence and commitments in Nigeria and West Africa. “Adding to our fleet

with these seven assets allows Telford to further enhance our presence in West Africa and elsewhere. The Telford 30 in particular will offer a unique combination of DP pipelay, moored pipelay, heavy lift and accommodation support from one asset. Telford is now even better placed to support IOCs and other contractors by offering cost effective multifunctional vessel solutions across a range of project activities,” Fraser Moore, Telford Offshore Chief Executive Officer, said.

Telford Offshore adds seven vessels

ubai headquartered offshore service company, Telford Offshore, said it has acquired an additional DP3 pipelay and accommodation vessel, and six offshore support vessels following a legal settlement between Sea Trucks Group (STGL in liquidation) and West African Ventures (WAV). The acquisition nearly triples the Telford Offshore fleet, up from four vessels to 11. The DP3 vessel Jascon 30 is set to be dry docked in the coming

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

marketinsight

@businessDayNG

@Businessdayng

BUSINESS DAY

WEST AFRICA

ENERGY intelligence OPEC Flakes OPEC, allies should remain firm in achieving output cuts

Oil prices hit 2019 highs amid supply cuts, trade talk hopes

il prices hit their highest levels since November 2018, lifted by OPEC-led supply cuts, US sanctions on Iran and Venezuela, and hopes that the Sino-US trade dispute may soon end. International Brent crude futures were at $66.66 per barrel, up 41 cents, or 0.6 percent, from their last close. Brent earlier climbed to its highest since November 2018 at $66.78 a barrel. US West Texas Intermediate (WTI)

crude oil futures were at $56.07 per barrel, up 48 cents, or 0.9 percent, from their close. WTI prices also rose to their highest since November, at $56.13 per barrel. Prices have been bolstered by a tightening market because of supply cuts organised by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers like Russia. The group of producer countries agreed late last year to cut output by 1.2 million barrels per day (bpd)

to prevent a large supply overhang from swelling. Further supporting crude prices have been US sanctions against oil exporters and OPECmembers Iran and Venezuela. Financial markets, including crude futures, were also generally supported by hopes that the United States and China would soon resolve their trade disputes, which have dragged on global economic growth. “OPEC production cuts and US sanctions on both

Iran and Venezuela are limiting supply. Trade tensions which have weighed on global growth are showing signs of easing boosting sentiment across markets and lifting oil demand prospects,” said Jasper Lawler, head of research at futures brokerage London Capital Group. Looming over oil markets in the near term, meanwhile, is the rise in US crude oil production of more than 2 million bpd in 2018, to a record 11.9 million bpd, with signs that US output will rise further.

South Korea resumes Iranian oil imports in January, but at lower level

outh Korea resumed imports of Iranian oil in January after a four-month hiatus, customs data showed, but shipments were down 76 percent from the same month last year. The world’s fifth-largest crude importer won a sixmonth waiver in November from US sanctions on Tehran’s oil exports, but did not immediately start imports, mainly due to payment and insurance issues. South Korea, one of Iran’s biggest Asian customers, imported 227,941 tonnes of Iranian crude in January, or 53,676 barrels per day (bpd), data from the country’s customs office showed. This was well down on 950,013 tonnes of Iranian crude a year earlier. Overall, South Korea shipped in 12.46 million tonnes of crude oil in January, or 2.94 million bpd, down 5.9 percent from 13.25 million tonnes from

a year earlier, according to the customs data. Oil shipments from Saudi Arabia, the country’s top oil supplier, fell 4.8 percent to 3.51 million tonnes in January year on year, as the kingdom continued to curb its output under a supply

deal led by the Organization of Petroleum Exporting Countries (OPEC). In January, OPEC’s oil output fell by about 800,000 bpd to 30.81 million bpd, and the biggest supply drop came from Saudi Arabia, de facto leader of the oil cartel.

Meanwhile, South Korea’s imports of US crude oil nearly tripled to 1.12 million tonnes in January from 394,331 tonnes a year earlier, reflecting a firm appetite for US oil on the back of tight Middle East supplies.

PEC Secretary General Mohammad Barkindo has urged members of the producer group and its 10 allies “to remain firm in achieving” their output cut goals. The comments come after reports of a lack of compliance with targets by some of the agreement’s key oil producers, notably Russia, Iraq and Nigeria. Barkindo acknowledged that initial production and supply data from the 24 participating countries showed “various levels of conformity” and urged them to implements these cuts “in full, and in timely fashion.” “No one party can perform the role of a ‘swing producer’,” he added in a statement. At the last OPEC meeting in Vienna, the group’s members agreed to slash output by 812,000 b/d, with Russia and nine other nonOPEC allies committing to a cut of 383,000 b/d for the first six months of 2019. Barkindo singled out

Saudi Arabia, which he said has “adjusted its supply by more than the required levels.” “Our primary objective is to ensure that the oil market remains in balance throughout 2019 and beyond in order to build on the success of the past couple of years,” added Barkindo. OPEC’s 14 members pumped 30.81 million b/d in January, down from 31.60 million b/d in December, according to the secondary sources used to measure the group’s output.

Shrinking demand may necessitate OPEC production cut extension

ven as OPEC begins implementing the output cuts they agreed in December, the world’s crude requirements are shrinking further, suggesting that they will need to extend the deal through the second half of the year. The latest forecasts from supply-and-demand studies of the oil industry’s most-watched organizations, the International Energy Agency, the US Energy Information Administration, and OPEC itself, show the need for OPEC crude diminishing as demand forecasts are trimmed and US supply outlooks are increased. The industry’s three main agencies are unanimous in reducing their assessments of the volume of oil the world will need from OPEC countries this year compared with what they were forecasting last month. The average level of the reduction from the January forecast is 300,000 bpd, which is about the combined production of OPEC’s two smallest members

Equatorial Guinea and Gabon. Of greater concern for producers, two of the three agencies see the world needing less OPEC crude in the second half of the year than the first. Only the IEA currently sees the demand increasing as the year progresses. The differences are not big, the EIA and OPEC see the need for OPEC oil falling by another 50,000-

60,000 bpd in the second half compared with the first. The IEA sees a similar sized shift in the opposite direction. None of the agencies sees the need for the group’s crude rising enough to allow them to end their current supply management deal.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

WEST AFRICA

Wednesday 20 February 2019

talking points

ENERGY intelligence

Price war: EU creates natural gas battleground for Russia, Trump STEPHEN ONYEKWELU

he European Union wants to increase demand for natural gas and help both Russia and US to supply more gas to the region but this has also setup

battleground for price war. Two weeks ago, the European Union successfully tweaked and introduced loopholes into the Union’s gas-market legislation that allow the construction of a controversial pipeline from Russia to Germany. Last week, Germany said it would build at least two terminals that open its market to seaborne imports, including

Snapshot

If you factor in the need for Russia to utilize the pipeline and how it will compete with US LNG and other pipeline exporters such as Norway, then it could set the stage for a price war in Europe in the not-so-distant future

from the US, a Bloomberg report stated. This move will drive direct competition between the world’s biggest gas producers and keep prices competitive, even as Europe needs to boost imports to meet ambitious climate goals. Representatives of EU governments and the European Parliament on February 12 approved a revision to its gas-market legislation to spur competition. While it included loopholes for the Nord Stream 2 pipeline to bring the fuel directly from Russia, bypassing Ukraine’s transport network, it was designed to play suppliers against each other. Donald Trump, president of the United States of America had on many occasions criticised the construction of Nord 2 Stream pipeline that is designed to transport natural gas from Russia to Germany. Trump thinks the pipeline system will make Europe’s biggest economy dependent on Russia for its energy demands. “Questions of European energy policy must be decided in Europe, not in the US,” Heiko Maas, Germany’s foreign minister had said on January 10. “To impose unilateral sanctions against Nord Stream 2 is certainly not the way to go.” Gas prices in Europe are more than twice the prevailing rate in the US, even after the contract for next-month delivery in the Netherlands fell below its five-year average. The cost is usually even higher in Asia, although oversupply there has crimped the premium that region usually offers to draw

in cargoes of the fuel in its liquid form. “If you factor in the need for Russia to utilize the pipeline and how it will compete with US LNG and other pipeline exporters such as Norway, then it could set the stage for a price war in Europe in the notso-distant future,” said Nick Campbell, a director at industry consultant Inspired Energy Plc in England. The plan will “remove some of the risk” of interruptions of supplies via Ukraine, with which Russia is in a territorial dispute, Campbell said. Russia and the US are vying to supply Europe with cleaner-burning fuel as governments from Berlin to Madrid grapple with coal phase outs. Vladimir Putin is seeking to buttress one of his nation’s biggest sources of foreign cash while Donald Trump wants to win the US a bigger share of a consumption boom. Nord Stream 2, a planned 1,200-kilometer (746-mile) undersea pipeline, has sparked controversy. Eastern European countries wary of Russia gained US support in opposing the project, whose chief political champion in Europe has been German Chancellor Angela Merkel. The region’s biggest economy is simultaneously seeking to phase out nuclear power, leaving a further gap for gas to fill. The critics of Nord Stream 2 also picked up backing from the European Commission, the EU’s executive arm, which said the bloc needs to become less dependent on Russian gas and which proposed the revised pipeline legislation in late 2017.

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

understanding the economy of nigeria’s 36 states

he purpose of this series is to present evidencebased picture of Nigeria vis-a-vis the current presentations by politicians and various interest groups which are not backed by facts and figures. Such presumptuous speculations have driven the various national discourses or debates on the future of Nigeria, including such thorny issues as restructuring, whether fiscal, political, geographical or administrative. Facts are sacred, they say, and as such must be given priority in our search for national viability and survival.

‘Understanding the Economy of Nigeria’s 36 States’ series presents such an objective, dispassionate picture of the state of the economy and so viability and sustainability of the various component parts, sub-nationals or federating units of the country going forward. This series will serve to either buttress or discountenance some of the claims made on both sides of the restructuring argument. The series, written by Cambridge-trained economist, Dr. Ayo Teriba, looks at each state at a glance in the

context of its geopolitical zone and as it compares to other states. The data present irrefutable facts about each region and its component states and raise the question: are they viable as constituted today and going forward? Each series examines a state’s realities from the perspectives of economy, resource endowment, state of wellbeing of its populace, and its budget (revenue and expenditure profile). Today’s edition covers an overview of Bayelsa State and Cross River State in the South South region.

Bayelsa Bayelsa State Summary • Economy Bayelsa’s GSP was 1.95 percent of Nigeria’s GDP in 2017, 4th in the South-South, 5th in the South, and 14th in Nigeria. Oil was 72 percent of GSP, Services were 22 percent, Industry (excl. Oil) was 4 percent and Agriculture was 2 percent. • Endowments Bayelsa State’s Land Area is only 1.0 percent of Nigeria’s land mass, the 5th in the South-South, 10th in the South and 27th in the country. The State has an Atlantic coastline to the south and is bounded by two States from its region, Delta and Akwa-Ibom. • Wellbeing Bayelsa’s population is 1.2 percent of national population, the least in the South-South and the South, 36th in the country. With the 5th land area, the State is the 21st most densely populated, 6th most literate and has the 14th life expectancy of 50 years in the country with a Per Capita GSP that is 2nd in the South-South, 3rd in the South and 4th in the country.

* Non-Oil Industrial output of N0.09 trillion in the State was 0.6 percent of all Non-Oil output in the country, 5th in the South-South, 10th in the South and 18th among the 36 States and the FCT. Manufacturing (mainly Food, Beverage and Tobacco, but also Textile, Apparel and Footwear) was 66 percent of the State’s Industry (excl. Oil), while Construction was 32 percent. * Bayelsa State’s N0.49 trillion Services output was 0.8 percent of Nigeria’s Service sector, 5th in the South-South, 14th in the South, and 25th in the country. Inter-State Comparisons With a Gross State Product (GSP) of N2.2 trillion or 1.95 percent of Nigeria’s GDP in 2017, the 4th among the 6 South-South, 5th in the South, and 14th in Nigeria. Bayelsa’s 2.4 million Population is 1.2 percent of national population, the least in the South-South and the South, 36th in Nigeria. The State’s Land Area of 9,100/km2 is 1.0 percent of Nigeria’s land mass, 5th in the South-South, 10th in the South and 27th in the country. Bayelsa’s Revenue of N134.6 billion was 4.5 percent of all States’ total revenue, 3rd in the South-South 5th in the South and among the 36 States and the FCT.

• Budget Bayelsa retained 4.5 percent of States’ revenue in 2017, the 5th in the country, expended 3.1 percent of States’ outlays, 9th in the country; maintained an overall surplus, and held 3.1 percent of total debt, the 11th in the country.

1. Economy Structure Bayelsa’s estimated Gross State Product (GSP) in 2017 was N2.2 trillion or 1.95 percent to Nigeria’s GDP, 4th in the South-South, 5th in the South, and 14th in Nigeria. Oil was 72 percent of the GSP, Services, 22 percent, Industry (excl. Oil), 4 percent and Agriculture was 2 percent.

2. Endowments Bayelsa State was created from Rivers State in 1996. It has an Atlantic coastline to the South, and shares its westward boundary with Delta State, and its eastward boundary with Akwa Ibom State. Towns and Cities in Bayelsa State are Brass, Ekeremor, Kolokuma, Nembe, Odia, Olugbobiri, Swali, Akassa, Atisa, Ogbia, Sagbama, Southern Ijaw and Yenagoa. Bayelsa State’s land area of 9,100 km2 or 1.0 percent of Nigeria’s land mass is the 5th in the South-South, 10th in the South and 27th in the country.

* N40 billion billion Agricultural output in Bayelsa State was 0.2 percent of all agricultural output produced by all States and FCT, the least in the South-South, 16th in the South, and 35th in Nigeria. • N31.3 billion in fishery was 84 percent of the State’s agricultural output, • N3.9 billion in crops was 11 percent and • N2 billion in livestock was 5 percent. * Bayelsa State’s N1.6 trillion Oil production was 15.5 percent of all Oil production in the country, 3rd among 6 Oil producing South-South States, the South and in Nigeria.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

understanding the economy of nigeria’s 36 states 3. Wellbeing

4th in the South-South, the South, and in the country. • Internally Generated Revenue of N7.1 billion was 0.93 percent of total, 6th in the South-South, 14th in the South, and 21st in the country. • Value Added Tax of N9.3 billion was 1.96 percent of States’ total, the least in the South-South, 16th in the South and 30th in the country. 4.1.2.2 Spending Bayelsa State’s actual total expenditure of N114 billion in 2017 was 3.1 percent of actual total spending by all States, 4th in the South-South, 6th in the South and 9th in the country. The spending components in 2017 were: • Recurrent Spending of N86.8billion was 3.3 percent of the recurrent outlays of all the States and the FCT, 3rd in the South-South, 5th in the South, and 10th in the country. • Capital Spending of N27.2 billion in Bayelsa State was 2.6 percent of States and FCT’s total capital outlays, 3rd in the South-South, 5th in the South and 8th in the country. 4.1.2.3 Deficits Bayelsa State is one of the only 11 States in Nigeria that had surpluses in 2017. The State made an overall surplus of N20.6 billion, the highest among the 3 States in the South-South that had surpluses, among the 8 States that had surpluses in the South and among the 11 States that had surpluses in the country. 4.1.2.4 Debt Bayelsa State’s total outstanding debts of N144 billion was 3.1 percent of the States and FCT’s total debts, 4th in the South-South, 8th in the South and 11th in the country. • Domestic Debt of N129.5 billion in December 2017 was 3.9 percent of States and FCT’s domestic debts, the 3rd in the South-South, 4th in the South, and 6th in the country. • Foreign Debt of N14.5 billion in December 2017 was 1.2 percent of the total foreign debts of the States and FCT, 6th in the South-South, 17th in the South, and 26th in the country. 4.1.3 2013-2017 Trends Total Revenue: Total Revenue declined from N190.6 billion in 2014 to N134.6 billion in 2017. The decline in revenue came from gross statutory allocations (GSA) while internally generated revenue and value added tax proved resilient in the face of global oil price slump and concomitant recession in the national economy

Bayelsa State’s population of 2.4 million is 1.2 percent of national population, the least in the South-South region and the South, 36th in the country. With a land area of 9,100 per km2, density in Bayelsa State is 267/km2 compared to the country average of 219/km2, 4th most densely populated State amongst the 6 South-South States, 14th in the South and 21st in Nigeria. In literacy, Bayelsa State is the 4th in South-South, 6th in the South and the country. Life expectancy of 50 years in the State is 2nd in South-South, 11th in the South, and 14th in the country. Female life expectancy of 53 years is 2nd in the South-South, 6th in the South and 12th in the country. Male life expectancy of 47 years is 3rd in the South-South, 12th in the South and 17th in the country. Bayelsa State’s Per Capita GSP of N912 thousand is 2nd in the South-South, 3rd in the South and 4th in the country.

Bayelsa’s Total Spending: Total Spending fell from N189.8 billion in 2014 to N114 billion in 2017. Recurrent spending increased by 55 percent from N80.6 billion in 2014 to N125.1 billion in 2015 but fell to N86.8 billion by 2017. Capital spending, instead, fell by 92 percent from N109.2 billion in 2014 to N7.9 billion in 2015 but grew to N27.2 billion in 2017.

4. Budget 4.1 Fiscal Realities of Bayelsa 4.1.1 2018 Aspirations Bayelsa State’s N318 billion 2018 budget is 3.4 percent of all State’s 2018 spending aspirations, 4th in the South-South, 6th in both the South and in Nigeria. 4.1.2 2017 Realities Revenue Use: In 2015, Bayelsa spent all revenue on recurrent headings, borrowing to partially fund recurrent spending and the full capital budget. This changed in 2016 and 2017 when the State went back to keeping something out of its revenue to fund capital outlays. The State’s current surplus was not enough to fund its capital expenses in 2016 and there was an overall deficit of N28.2 billion that year, which gave way to an overall surplus of N20 billion in 2017. Financing: • Revenue financing: overall deficit of 0.4 percent of total revenue in 2014 gave way to an overall surplus of 15.3 percent of total revenue in 2017. • Spending finance: overall deficit of 0.4 percent of total spending in 2014 gave way to an overall surplus of 18 percent of total spending in 2017. • Capital budget: overall deficit of 0.7 percent of capital budget in 2014 and 179.7 percent in 2015 gave way to an overall surplus of 75.7 percent of capital budget in 2017. Bayelsa’s Debt • Foreign debt stock grew threefold from N4.5 billion in 2013 to N14.6 billion in 2017; from 1.9 percent of revenue in 2013, to 10.8 in 2017. • Domestic debt stock had doubled from N69.5 billion in 2013 to N129.5 billion in 2017, from 30.5 percent of revenue in 2013, to 96.1 percent in 2017. • Total debt stock rose from 32.5 percent of revenue in 2013 to 107 percent in 2017

4.1.2.1 Revenue Bayelsa State’s actual total revenue in 2017 of N134.6billion was 4.5 percent of all States’ actual total revenue, 4th in the South-South, 5th in the South and among the 36 States and the FCT. The revenue components in 2017 were: • Statutory Allocations of N97.4 billion was 6.66 percent of the total allocations to all States and FCT,

Wednesday 20 February 2019

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

BUSINESS DAY

understanding the economy of nigeria’s 36 states

Cross River Cross River State Summary • Economy Cross River’s GSP was 0.78 percent of Nigeria’s GDP in 2017, the least in the South-South, 12th in the South and 24th in Nigeria. Services made up 54 percent, Oil, 23 percent, Agriculture, 13 percent and Non-Oil Industry was 10 percent. • Endowments CRS’s Land Area is 2.4 percent of Nigeria’s land mass, the largest in the South-South, 2nd in the South after Oyo State and 19th in the country. Cross River State shares an eastward boarder with the Republic of Cameroon and has a Southward Atlantic Ocean coastline and bounded by four States: northward with the North-central Benue State, southward with fellow South-South State, Akwa-Ibom, westward with two South-eastern States, Ebonyi and Abia. Cross River State is one of only three Nigerian States with both a border and a coastline, Lagos and Ogun being the other two.

Inter-State Comparisons With a Gross State Product (GSP) of N886.2 billion or 0.78 percent of Nigeria’s GDP in 2017, the 6th in the South-South, 12th in the South and 24th in Nigeria. With 2.06 percent of national population, Cross River is the 5th most populated in the South-South, as only Bayelsa State has a smaller population in the region, 12th in South and 27th in the country. Cross River’s Land Area of 2.4 per cent of Nigeria’s land mass, is the largest in the South-South, second in the South (after Oyo State) and 19th in the country. Cross River got 1.82 percent of all States’ total revenue placing it 6th position among the South-South, 13th in the South and 25th among the 36 States and the FCT.

• Wellbeing CRS’s population is 2.06 percent of national population, 5th in the South-South region, 12th in the South and 27th in the country. With the largest land area in the South-South, CRS is the 26th most densely populated in the country, 3rd most literate and the highest life expectancy of 55 years in the country, with a Per Capita GSP that is the least in the region, 10th in the South and 22nd in the country. • Budget The State retained 1.8 percent of States’ revenue in 2017, 25th in the country; spent 1.7 percent of States’ outlays, 23rd in the country, incurred a deficit, and held 3.8 percent of total debt, 7th in the country.

1. Economy Structure Cross River’s estimated Gross State Product (GSP) was N886.25 billion in 2017 or 7.8 percent of Nigeria’s GDP, the least in the South-South, 12th in the South and 24th in Nigeria. Services accounted for more than half of the economy with 54 percent, oil accounted for nearly a quarter with 23 percent, agriculture accounted for a little more than an eighth with 13 per cent, while non-oil industry accounted for a tenth.

2. Endowments South-Eastern State was created from the former Eastern Region of Nigeria in 1967 before its name was changed to Cross River State in 1976 and Akwa Ibom State was carved from it in 1987. Cross River State is one of the six States in the South-South geopolitical zone of Nigeria with boundaries with four States: northward with the North-Central Benue State, southward with fellow South-South State, Akwa-Ibom, westward with two South-Eastern States, Ebonyi and Abia, it also shares an eastward border with the Republic of Cameroon and has a Southward Atlantic Ocean coastline. Cross River State is one of only three Nigerian States with both a boarder and a coastline, Lagos and Ogun being the other two. CRS’s land area of 21,800 km2 or 2.4 per cent of Nigeria’s land mass is the largest in the SouthSouth, second in the South (after Oyo State) and 19th in the country. It is also the largest among Nigeria’s nine coastal States, making it the coastal State with the biggest hinterland in Nigeria. Little wonder that real estate and agriculture combine to contribute more than any other sector to the State’s economy. The main towns and metropolitan areas in Cross River State are Calabar Metropolitan (Municipal South, Akamkpa Odukpani), Ugep, Obubra, Ikom Metropolitan, Obudu, and Ogoja Metropolitan.

* N114.5 billion Agricultural output contributed 15 percent of the GSP of Cross River State in 2017 and 0.5 percent of Nigeria’s Agricultural sector, 3rd in the South-South, 7th in the South and 25th in the country. • N69 billion in Crops was 61 percent of the State’s agricultural output. • N23 billion in Forestry was 20 percent. • N15.95 billion in Fishing was 14 percent and, • N5.8 billion in Livestock was 5 percent. * N209 billion Oil production accounted 23 percent of GSP. This was 2 percent of the country’s output, a sixth among the nine oil producing States. * N87 billion Non-Oil Industrial output contributed 10 percent of the GSP and 1.16 percent of Nigeria’s Industrial sector, ranking 6th in the South-South, 7th in the South and 8th in the country. Utilities (mainly electric power generation), Manufacturing (mainly Food, Beverage and Tobacco, but also Wood and Wood Products), and Construction were the three main nonoil industrial activities. * N475 billion Service output accounted for 54 percent of the GSP. This was 0.74 percent of Nigeria’s Service sector, 6th in the South-South, 15th in the South and 27th in the country.

BUSINESS DAY

www.businessday.ng

www.facebook.com/businessdayng

@businessDayNG

@Businessdayng

Wednesday 20 February 2019

understanding the economy of nigeria’s 36 states 3. Wellbeing

4.1.2.1 Revenue CRS’s actual total revenue in 2017 was N55 billion or 1.8 percent of all States’ actual total revenue, the least in the South-South, 13th in the South and 25th among the 36 States and FCT. The revenue components in 2017 were: • Statutory Allocations of N28.5 billion was 1.9 percent of the total for all States and FCT, 6th in the South-South, 11th in the South and 24th in the country. • Internally Generated Revenue of N13 billion was 1.7 percent of total, 5th in the South-South, 9th in the South and 15th in the country. • Value Added Tax of N9.7 billion was 2 percent of States’ total, 5th in the South-South, 13th in the South and 27th in the country. 4.1.2.2 Spending CRS’s actual total expenditure was N61.9 billion in 2017, 20 percent of the CRS’s budgeted total expenditure for the year, 1.7 percent of actual total spending by all States, 6th in the South-South, 11th in the South and 23rd in the country. The spending components in 2017 were: • Recurrent Spending of N43.5 billion, 1.6 percent of the recurrent outlays of all the States and the FCT, 5th in the South-South, 10th in the South and 14th in the country. • Capital Spending of N18.4 billion was 1.8 percent of States and FCT’s total capital outlays, 5th in the South-South, 10th in the South and 15th in the Country. 4.1.2.3 Deficits CRS’s overall fiscal deficit of N7 billion, was 3rd among the three States with deficits in the SouthSouth, 7th among the 12 States that recorded deficits in the South and 15th among the 25 States and FCT that had deficits (11 States had surpluses). 4.1.2.4 Debt CRS’s total outstanding debts of N176.5 billion was 3.8 percent of the States and FCT’s total debts, 5th in both the South-South and the South, 7th in the country. • Domestic Debt of N128.14 billion in December 2017 was 3.8 percent of States and FCT’s domestic debts, 5th in the South-South, 8th in the South and the country. • Foreign Debt of US$169 million or N50.9 billion in December 2017 was 4.8 percent of the total foreign debts of the States and FCT, the 2nd in the South-South, 3rd in the South and 4th in the country. 4.1.3 2013-2017 Trends Total Revenue: CRS’s Total Revenue declined from N70 billion in 2014 to N55 billion in 2017. Bulk of the decline in revenue came from gross statutory allocations (GSA) while internally generated revenue and value added tax slightly increased in the face of global oil price slump and concomitant recession in the national economy.

Cross River State population of 4.12 million in 2018 is 2.06 percent of national population, 5th in the South-South, as only Bayelsa State has a smaller population in the region, 12th in the South and 27th in the country. With a density of 189 people per square kilometre compared to the country average of 219 people/km2, Cross River is the most sparsely populated State in the region, sitting at sixth position in the region, 15th in the South, and 26th in the country. The result of the combination of the largest land area with the fifth smallest population in the South-South. Cross River State has the 2nd literacy in the South-South, 3rd in the South and the country. Cross River State has the highest life expectancy of 55 years in the country, driven by female life expectancy of 57 years, which is highest in the country, as Male life expectancy of 51 years is only the 4th in the Country and in the South but is still first in the South-South. Per Capita GSP of N215 thousand is the least in the region, 10th in the South and 22nd in the country.

Total Spending: CRS’s Total Spending fell from N80 billion in 2014 to N62 billion in 2017. Recurrent spending fell from N50.7 billion in 2014 to N43.5 billion in 2017, while capital spending fell from N29.1 billion to 18.4 billion in 2017.

4. Budget 4.1. Fiscal Realities of CRS 4.1.1 2018 Aspirations With announced budget of N1.3 trillion in 2018, up from N301 billion in 2017, the Government of CRS plans to spend 14 percent of the total spending plans of all the States, more optimistic than any of the other States in 2018. This desire calls for a reality check. The closest we can get to reality is to assess what the State had attained in revenues, borrowings and spending in the preceding year 2017 and compared those with what it announced for the year. 4.1.2 2017 Realities

Revenue Use: CRS maintains to keep something out from its revenue to fund capital projects but in the face of recession in 2015 and 2017, the State’s current surplus was flat that it accumulated more overall deficit during those years. Financing: • Revenue financing: overall deficits were 22.4 percent of total revenue in 2014, 48.765 in 2015, and 12.7 percent in 2017. • Spending finance: overall deficits as a fraction of total spending was one-fifth in 2014, one-third in 2015, and a little over one-tenth in 2017. • Capital budget: overall deficits as a fraction of the capital budget was 50 percent in 2014, 98.8 percent in 2018, and 38 percent in 2017. CRS Debt • Foreign debt stock rose from N22.4 billion in 2014 to N51.3 billion in 2017; from 27.5 percent of revenue in 2013 to 93.4 percent in 2017 • Domestic debt stock rose from N116.1 billion in 2013 to N125.6 billion in 2017; from 162.2 percent of revenue in 2013 to 228.5 percent in 2017. • Total debt stock rose from 193.7 percent of revenue in 2013 to 321.8 percent in 2017.

Wednesday 20 February 2019

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

BUSINESS DAY

Feature

How BASF is redefining Nigeria’s personal care industry KELVIN UMWENI

igeria has become a destination of choice for investments by international companies that aim to seize opportunities presented by the nation’s beauty and personal care industry. This is due to its huge market and impressive positive performance by the country’s beauty and personal care products sub sector. The Nigerian beauty and personal care industry is experiencing a rapid and dynamic growth, providing lucrative opportunities for beauty businesses from around the region and beyond. The market is currently worth an estimated US$3.4 billion, according to Euromonitor International, and its value is likely to rise to keep pace with an increasing number of working women with disposable income as well as sophisticated youth searching for new ways to care for and present themselves. “As one of the fastest-growing beauty markets in sub-Saharan Africa, Nigeria is well-suited as a regional hub for BASF’s personal care business,” BASF has aptly stated. The acronym “BASF” is derived from the initials of the German word, BadischeAnilin und Soda Fabrik (translated as Baden Aniline and Soda Factory in English). Headquartered in Germany, BASF is undoubtedly the largest chemical company in the world with operations in almost every country. BASF, which prides itself as the company that created chemistry for a sustainable future, started business on the African continent over 90 years ago. It focuses on key a portfolio which is organised into six segments: chemicals, materials, industrial solutions, surface technologies, nutrition & car, and agricultural solutions. Following a re-strategising of its operations in 2012, BASF made Lagos its West African regional office, a move that added impetus to the Federal Government’s effort of attracting foreign direct investment inflows for sustainable and inclusive growth prospect. BASF’s interest in Nigeria’s beauty and personal care subsector follows projections by globally acclaimed research outfits, including the Euromonitor which in 2015, predicted that trendy lifestyles and increasing adoption of Western culture among the growing young adult population coupled with a rise in incomes, beauty and personal care industry would lead to positive and significant growth in the country. This is further strengthened by a rise in the urban female population, which is also expected to further boost growth. With BASF solidifying its position in the personal care space in Nigeria by bringing along with it an in-depth industry knowledge with over 150 years as a global business entity, the market is ready for innovative disruptions and one thing remains certain: lovers of personal care products in Nigeria are set for the introduction of

exciting and tailored products. At an interactive section recently, the company stated that its return to Nigeria was to ensure effective positioning and maximisation of the nation’s potential within the emerging market space. “Africa is a huge continent with a wealth of raw materials and a growing population; at the same time, the dynamically growing economy has enormous potential for BASF. Through establishing a local presence in Nigeria, we will be able to understand our customers’ needs and enhance BASF’s market,” BASF said. As a demonstration of its commitment and confidence in the Nigerian economy, the company commissioned a new construction chemicals plant in Lagos in late 2015. This plant is part of its plans to address the demand gaps in the construction chemicals industry by providing its customers with admixtures for all cement and aggregate types, irrespective of where their construction projects are located. The expansion of the existing office and the construction of the chemical plant in Nigeria were a calculated move to increase the company’s footprint on the Africa continent and nurture partnerships and innovations geared towards sustainable growth. Recently, BASF West Africa Limited recorded another crucial milestone in Nigeria by adding a new, state-ofthe-art application technology laboratory to its regional office located at the Illupeju Industrial Estate in Lagos. The laboratory aims to service the sub-Saharan Africa (SSA) market and boost Nigeria’s personal care industry. “The expansion of BASF’s operations in West Africa, including the opening of this new Personal Care

Application Laboratory, clearly demonstrates BASF’s commitment to West Africa and the confidence we have in Nigeria and the whole region,” said Jean Marc Ricca, Managing Director for BASF West Africa. The new laboratory is expected to deliver local competence in application and formulation technology for SSA personal care market, offer synergistic service approach, including strengthening its network of local expertise in marketing, application technology and sales, and providing solutions to the specific needs of African hair and skin needs. The laboratory by BASF West Africa Limited is indeed a laudable project as it is coming at a time when job creation has become compelling in Africa’s largest and most populous economy.

‘

Africa is a huge continent with a wealth of raw materials and a growing population; at the same time, the dynamically growing economy has enormous potential for BASF

The new laboratory is expected to generate more employment opportunities hence helping to take a large number of the over 22 million unemployed Nigerians off the streets. Again, BASF’s new laboratory will reduce the amount of imported personal care products and therefore unnecessary pressures on the nation’s foreign exchange reserves. This is pertinent as the nation strives to become less imported-dependent and rising external reserves are needed to defend the naira. Speaking at the laboratory-opening event in Lagos, BASF vice president in charge of personal care solutions in Europe, Dirk Mampe, asserted that the new facility would ensure products that meet the specific needs of the skin and hair requirements of Africans are manufactured. Tailored products are crucial for the growth of businesses he noted. The new state-of-the-art Application Laboratory in Nigeria is designed to offer formulation support and, based on BASF’s insightful global expertise in hair and skin care performance testing, to expand and develop consumer-relevant claim support for the needs of consumers in subSaharan Africa. “Customized solutions meeting the specific requirements of consumers in different markets are key for business growth. With our broadened presence and the investment in a new Application Laboratory in SSA, we can provide on-site technical expertise and market insights to our customers and support the local development of tailor-made products for the specific needs of African hair and skin,” he said. BASF reiterated the fact that there

is need for the provision of specialty products that best match diverse hair styles taking into account the core features of African hair which essentially include the kinks and coils along the hair shaft, an elliptical cross-section, and fewer cuticle layers. These unique characteristics essentially make such hair unyielding to most popular personal care products in the market today. As with hair, African skin types have distinct characteristics such as a relatively high amount of protective melanin, skin lipids and sebum secretion, and a comparatively large pore area. An intensive and gentle cleansing combined with suitable skin care products can improve the skin texture by supporting the balance between moisture and sebum production. Some of the high-performance product portfolios of BASF’s personal care business includes actives, cationic products & conditioners, lipid layer enhancers, opacifiers, pearl shine concentrates, waxes, performance wax dispersions, protein products, thickeners, chelating agents, UV light stabilizers, excited state quenchers, humectants/ hydrotropes, emulsifiers and cream bases, solubilizers, polymers, emollients, surfactants, neutralizers, hair dyes, pearlizing and consistency waxes. Each of these products has diverse usage ranging from hair colouring, conditioning, shampoo, styling (hair spray, mousses, gels, waxes etc.), baby care and cleansing, body/hand care, liquid soap, shower/bath products, face care, face cleansing, colour care (foundations, lip sticks etc.), after sun, self-tanning, sun protection, antiperspirants/deodorants (sticks, roll-ons and sprays), wet wipes, toothpaste/ mouthwash.

BUSINESS DAY

news you can trust I wednesday 20 FEBRUARY 2019

www.businessday.ng

https://www.facebook.com/businessdayng

@Businessdayng

Opinion

Atiku Abubakar wins a fair contest Opeyemi Agbaje

here are large incumbency advantages in Nigeria’s politics stemming from control of the electoral agency (inspite of it been nominally designed to be an “Independent” National Electoral Commission INEC), police, armed forces, Department of State Security (DSS) and NNPC! More than any of its predecessors, the Buhari Presidency (or more accurately the unelected clique led by Mamman Daura which has seized control of it!) has shown a willingness to pervert the institutions of state, including or especially security services to maintain an otherwise tenuous hold on power. In spite of these incumbency advantages, which are supplemented by the propensity of our elite to support (Any Government in Power) “AGIP”, our analysis suggests it is virtually impossible for incumbent President Muhammadu Buhari of the APC to win a free and fair elections against his main opponent, Alhaji Abubakar Atiku of the PDP! Our analytical model starts from the numbers of registered voters provided by INEC-13,366,070; 11,289,293; and 20,158,100 from the North-Central, North-East and North-West regions respectively and 10,057,130; 12,841,279; and 16,292,212 from the South-East, South-South and South-West respectively. In the absence of data on

numbers of collected Permanent Voter Cards (PVCs) from INEC, we proceed to make projections for voter turnout in each of the regions ranging from 60% in the South-East; 55% in the North-East; 50% in both the NorthWest and South-South; and 35% in the North-Central and South-West. These projections reflect historical trends and produce a national voter turnout of 46.6% which compares favourably with 2015 in which INEC recorded a voter turnout of 43.65%. These projections of voter turn-out also take into account our estimates and analysis of potential PVC collection, voter enthusiasm, voter roll inflation and socio-political conditions in each of the regions. We then estimate voting trends across the country based on a multiplicity of local, regional and national factors including party popularity, candidate popularity, ethnic/regional/ religious affiliation, voter sentiments and behaviour, political trends, campaigns and campaign feedbacks and our analysis. Based on these factors, we make very conservative assumptions about the performance of the two dominant candidates, marginal third-party candidates and undecided voters. In our model, the undecided portion has shrunk dramatically over the last 60 days from as high as 15% of the electorate to about 2.5% of voters. Third-party candidates perform poorly in the framework, scoring not more than 1% of overall national ballots cast, confirming that this 2019 election is a straight Buhari (APC) versus Atiku (PDP) affair. Votes for third-party candidates are negligible and they fare best in the South-East and South-West with 1.5% and 2.5% of votes cast.

Vox populi, vox Dei

FRANKLIN NNAEMEKA NGWU (PHD)

iven the pervasive level of distrust in our society, it is almost impossible to know the exact reason why the 2019 elections were postponed few hours to its commencement. While INEC’s claim that it was due to problem of logistics is difficult to believe due to the time and manner of postponement, the reasons given by APC and PDP are even more disappointing. The intriguing aspect of their accusations and counteraccusations is that both parties are blaming and accusing INEC of possible connivance. Irrespective of what is the truth, our leaders seem to be making a grave mistake. They appear to be living in denial of the true state and mood of our nation. INEC’s situation like almost everything in Nigeria is just a further affirmation of our flawed structural and governance system. Visiting and interacting with Nigerians in the last one month from Lagos to Kano, Abuja, Enugu, Benin and back to Lagos, one thing is evident and clear. Nigerians irrespective of tribe, religion, class and status want a better Nigeria. The awareness and eagerness to reject our pervasive poor leadership, flawed structure

and hardship is rapidly growing and widespread across the nation. Due to the inability of the PDP to provide the basic necessities of life for over 16 years that Nigerians entrusted them with their existence, they were rejected in the 2015 elections. With an alternative found in PMB and possibly convinced of his ability to positively turn things around, he was voted in and became the president in 2015. With similar sentiments, PDP lost many states and national assembly positions and consequently APC became the dominant party, took power in both the executive and legislative arms of government and PDP suddenly became the opposition party. Given the failures of PDP during their 16 years in government and the overwhelming support and goodwill Nigerians gave PMB and APC, only very few people will be interested in hearing or supporting the PDP if PMB and his APC led government properly listened to the pains and demands of the populace- the voice of the people! It should be a serious concern to APC that PDP is fully back and even predicted to win the presidential election just after four years in opposition. This is a party branded as deeply corrupt, inept and clueless. With the way things are going and the sudden reactive and combative mood of APC, it seems that the APC led government is very surprised at the turn of events. This is very evident in the current temperament of the national chairman, Adams Oshiomole, who is now behaving like the leader of an opposition party, just after about four years in power. While the turn of events might be surprising to APC, the opposite is

We project Atiku Abubakar to win in the North Central by 51% of votes cast to Buhari’s 47%. Buhari has lost the Middle-Belt of Nigeria, who have been the victims of the horrendous murders and pillage attributed to herdsmen. Buhari’s performance in the region should infact be weaker than we projected but for lower turnout by traumatised residents and pro-Buhari votes in some of the non-Christian parts of the North-Central. Overall Atiku scores 2,385,844 votes in the North-Central to Buhari’s 2,198,719. In the North-East, we award victory to Buhari by a margin of 52% to Atiku’s 46% translating into 3,228,738 votes for Buhari to Atiku’s 2,856,191 votes. We expect Buhari to win in Borno and Yobe, while Atiku is strong in Adamawa, Taraba and Gombe. We also award the North-West to Buhari even though we expect Atiku to also perform strongly in that region. Indeed recent campaigns especially in Kano (which were conducted after we completed our analysis suggests we may have underrated Atiku’s strength in the region and the impact of the Kwankansiya-Atiku affiliation. We project Buhari winning 55% of the votes (5,543,478) to Atiku’s 44% (4,434,782). Even though the total number of votes in the South-East and South-South are lower relative to other regions and particularly the North-West and NorthEast, they will be significant in this election because one candidate, Atiku Abubakar will have an overwhelming proportion of those votes. In the SouthEast we expect Atiku to get 83% of votes cast, and 80% in the South-South to Buhari’s 15% and 17.5% respectively. In terms of numbers these amount to over 10 million votes to Atiku in the

‘

Nigeria is at a tipping point and only that party that genuinely appreciates and takes lasting ameliorative actions on the problems of the common man will win and retain power for a long time

‘

Overall our analyses suggest victory for Atiku Abubakar of the PDP by 56.5% of the votes to Buhari’s 40.2% representing a healthy victory for the opposition candidate

the case with many Nigerians who cautioned them for four years just as PDP was warned for sixteen years with their cries, hardship, insecurity, joblessness, unprovoked killings and destruction of property. Unfortunately, APC did not listen or properly listen to the voice of the people just as PDP did not for 16 years. When an entire village is wiped out with hundreds of lives including women and children killed, it should not be lightly discussed and treated. When it is reported that Nigeria is now the poverty capital of the world with about 91 million Nigerians living in extreme poverty and life expectancy at 53 years, it should not be glossed over. Rather it should alarm us and trigger concerted short, medium and long term commitment and actions of the federal, state and local governments. That about 21 million Nigerians, our brothers and sisters, are unemployed is a very serious issue that should not be treated with levity. World Economic Forum describes it as a time bomb waiting to explode. When Nigerians die unnecessarily due to bad roads or generator fumes and explosions, it should concern and trigger us to action and not be described as an act of God with no preventive action taken. Those are the voices of the people that must be heard and genuinely addressed for any party to remain in power. As the voice of the people is the voice of God, these lamentable human inflicted hardships and pains cannot continue to be glossed over by a few that we entrust with our life and existence. When election is suddenly postponed, the priority of genuine leaders should be on the structural causations and impacts

two regions compared with just over 2 million votes for Buhari. The net differential from those two regions is large enough to offset Buhari’s modest advantage from the North-West and North-East in which votes are essentially shared. In the South-West, the percentage of undecided voters is the highest in the country, with 10% of South-West voters still undecided (as at January 31st 2019) with the region also giving the highest votes (2.5%) to third-party candidates such as Fela Durotoye, Kingsley Muoghalu and Omoyele Sowore. We project Buhari to win with the South-West with 47.5% (2,708,580) of the votes, but Atiku recording a strong 40% (2,280,910) of votes cast. It also seems the momentum is in favour of Atiku and he may secure a greater proportion of undecided voters. Overall our analyses suggest victory for Atiku Abubakar of the PDP by 56.5% of the votes to Buhari’s 40.2% representing a healthy victory for the opposition candidate. Our analysis is based on the assumption that the election, though not perfect, will be reasonably free and fair, and will reflect the will of the voters in each of the Nigeria’s regions. Our analyses will, of course, be irrelevant in the context of a blatantly rigged process! *This article is based on research and analyses conducted by Opeyemi Agbaje and Kehinde Ayanbadejo both of RTC Advisory Services Ltd based in Lagos, Nigeria. •This article was first published last week opeyemiagbaje@rtcadvisory.com

of such actions on the populace and not on who connived or colluded. No amount of accusation or counter accusation will save any party for long. Nigeria is at a tipping point and only that party that genuinely appreciates and takes lasting ameliorative actions on the problems of the common man will win and retain power for a long time. Central to the required ameliorative actions is the urgent need to restructure Nigeria. As the decay is deep and corrective actions urgently required, restructuring through devolution of powers to the regions and states provides the most effective curative option to deal with our varied socio-economic and political challenges and keep Nigeria as one country. The recurrent but shameful postponement of elections will also be significantly addressed under a restructured Nigeria. In my interactions with Ahmed in Kano, Jonah from Chibok, Mannaseh in Abuja, Ikechukwu from Enugu, Nosa from Benin and Kolawale in Lagos, they all in one voice demand a better Nigeria through restructuring. Ignoring this dominant voice of the people as PMB and APC are currently doing will not do any party and politician any good. Restructuring Nigeria is the peoples’ demand and voice that its time has come!

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.

Published by BusinessDAY Media Ltd., The Brook, 6 Point Road, GRA, Apapa, Lagos. Advert Hotline: 08034743892. Subscriptions 01-2950687, 07045792677. Newsroom: 08169609331 Editor: Patrick Atuanya. All correspondence to BusinessDAY Media Ltd., Box 1002, Festac Lagos. ISSN 1595 - 8590.