BusinessDay 20 May 2019 by BusinessDay

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Inside Nigeria’s scandal-plagued Export Expansion Grant scheme D

MARKETS

Firms increase dividends 15.31% to N597.86bn in 2018 BALA AUGIE

Promissory notes of 38 companies withheld by National Assembly since December Senator denies demanding ‘lunch’ before approval Companies overpaid, some underpaid

ODINAKA ANUDU

oor due diligence by Federal Government officials has turned the Export Expansion Grant (EEG) scheme into a theatre of the absurd, with allegations of corruption against legislators and questionable approval of non-exporters, including overpayment of companies. The EEG was originally established in 1986 to help Nigerian exporters to become competitive at the global market. It is a practice in many developing and developed countries Continues on page 38

ividend payment from Nigeria’s largest companies continued to climb in the last quarter of 2018 as they wooed shareholders even amid a tough and unpredictable macroeconomic environment. Among index members, 47 companies declared N567.86 billion cash dividends, a 15.31 percent increase from N493.78 billion paid to owners in 2017. Dangote Cement Nigeria plc, Continues on page 38

Inside Analysts expect CBN to adopt ‘wait and see’ as MPC meeting P. 2 begins today L-R: Isaac Igbanoi, director of administration, Neimeth; Roseline Oputa, executive director, sales and marketing, Neimeth Pharmaceuticals; Oscar Onyema, CEO, NSE; Matthew Azoji, MD/CEO, Neimeth Pharmaceuticals; Chris Mmeje, finance director, Neimeth; Florence Onyenekwe, GM finance/company secretary, Neimeth, and Adekunle Adebowale, head, plant operations, Neimeth, on their recent visit to Nigeria Stock Exchange at the closing gong ceremony.

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news Low internal revenue generation leaves 21 states vulnerable to oil shocks ISRAEL ODUBOLA & SEGUN ADAMS

ith the continued United States sanction on Iran and Venezuela, and the OPEC cut which has mopped up excess supply of crude oil, sending prices above Nigeria’s budget benchmark of $60 per barrel so far in 2019, many of the states in the country have managed to stay afloat. The story would, however, be different if the prices of crude oil, Nigeria’s major revenue earner, were to plunge today, as happened in 2014. Abouttwo-thirdsofNigerian states are still very much dependent on Federal Government’s lifeline – Federal Accounts Allocation Committee (FAAC) disbursement – to make ends meet. This underscores the need for states to devise strategies to expand revenue streams. A state is considered to be economically resilient if its Internally Generated Revenue-Total Revenue ratio exceeds 25 percent, according to Lagos-based advisory firm, Financial Derivatives Company Limited. In other words, if three-quarters of a state’s aggregate revenue comes from FAAC, it depicts a case of heavy reliance. Analysis of IGR-total revenue ratio revealed that 21 Nigerian states are below the 25 percent mark, with Yobe, Kebbi, and Taraba as the mostdependent states on Federal

Government’s support in 2018. Like the Federal Government,stateshavetheirindependent budget which shows their fiscal plan for a year – what they plan to earn and what they outline to spend. Revenue for states typicallycomesfromthevarious taxesleviedoneconomicagents in their jurisdiction. In Nigeria, however, the Federal Government distributes proceeds from petroleum productsamongits36states,774local governments, Federal Capital Territory,andextrarewardsgiven to oil-producing states. FAAC disbursement and oil prices tend to swing in a similar direction, and the fact that nearly 67 percent of Nigeria’s sub-nationals are heavily reliant on FAAC funds confirms the position that the broader economy is still oil-driven. The high-dependence rate requires states to devise other means for raising income other than petrodollars, as a precautionary measure should oil prices drop tangibly. In 2018, Nigeria’s sixthlargest state by land area, Yobe, had a total revenue figure of N57.3 billion. 92 percent of this figure came from FAAC, implying that the state could not even raise 10 percent alone. Kogi generated 8 percent of its N64.7 billion total revenue internally, with 92 percent or N53.4 billion coming from FAAC.

•Continues online at www.businessday.ng

Saudi Arabia energy minister downplays oil disruption fears

audi Arabia’s energy minister says global oil supplies were “plentiful” and inventories needed to shrink, signalling the kingdom‘s reluctance to rapidly raise production despite escalating geopolitical tensions and the threat of potential disruptions. The comments come as fraught US-Iran relations, attacks on the kingdom’s oil infrastructure and volatile supplies in big producer countries have put energy investors on alert. “The market is in a delicate situation,” said Khalid al-Falih on Sunday ahead of a meeting of oil officials in Jeddah to discuss the effectiveness of a deal between Opec and Russia to curb output by 1.2m barrels a day. “On the one hand there is a lot of concern, and we acknowledge it, about disruption and sanctions and supply interruptions. But on the other hand, we see inventories rising [and supplies are] plentiful,” Mr Falih said. Mr Falih spoke ahead a formal ministerial meeting in Vienna next month when officials will decide whether or not to maintain these curbs that have been in place since January and exceeded expectations. They were originally intended to stop oil stockpiles from

swelling and to alleviate a drop in prices. Brent crude, the international oil bench which fell to $51 a barrel in December, has since risen to above $72 a barrel. But Mr Falih told reporters that oil stockpiles around the world were still rising. “My recommendation to my colleagues will be to drive inventories down,” he said, adding that a final decision would be made in June. “We are not fooled by current prices. We think the market is fragile”, he said later in the day, adding that the kingdom would prefer that producers maintained the cuts policy in the second half of the year. Mr Trump has repeatedly called on Opec and its defacto leader Saudi Arabia to release supplies into the market and keep oil prices in check, as the full impact of US sanctions on Iran’s economy and energy exports is felt. The kingdom’s production dropped to around 9.7m b/d in April, which is down around 1m b/d from levels reached at the end of 2018. Oil ministers are meeting as Saudi Arabia and its Gulf allies have backed the US’s more aggressive foreign policy against Tehran, sparking fears of a military conflict in the region. www.businessday.ng

L-R: Adamu Lawani, GM, Zenith Bank plc; Pascal Dozie, chairman, MTN Nigeria Communications plc; Ferdi Moolman, CEO, MTN Nigeria Communications plc, and Gbenga Oyebode, board member, MTN Nigeria Communications plc, at the signing of a N200 billion medium-term loan facility in Lagos. Pic by Pius Okeosisi

Benin, Togo, Ghana lead in efficient port services as Nigeria fails to embrace technology …Importers pay more as longer cargo dwell time persists AMAKA ANAGOR-EWUZIE

hile Nigeria continues to foot-drag in automating cargo clearing procedure at the ports through the adoption of single window clearing platform and use of scanners for cargo inspection, its West African neighbours Benin Republic, Togo and Ghana have reduced the number of days it takes importers to get the authorisations needed for clearing containers out from the port. Nigeria’s failure to automate cargo clearing procedure means that cargo dwells longer at the ports. Currently, it takes a minimum of 22 days to clear a consignment and take delivery of cargo from the port to the importers’ warehouses. Longer cargo dwell time, invariably, translates into higher costs for importers, including manufacturers, using Nigerian ports who cannot take delivery

of their consignments as and when due and so have to pay demurrage to shipping companies and storage charges to terminal owners. Instructively, the significant improvement in service delivery at Cotonou Port in Benin, Tema Port in Ghana and Lome Port in Togo has been aided by the introduction of technology-driven cargo clearing procedure such as single window. Single window is a platform that brings all facilities and parties involved in cargo clearing together in one place, with the aim of reducing the time and efforts involved in getting approvals from different layers at the ports. Hameed Ali, comptroller general of Customs, had in 2017 promised that the electronic single window would be introduced in port operations before the end of 2017 and that there were plans to replace the scanners at the port to improve ease of doing business at ports.

Over 24 months down the line, port users are yet to see these promises come to fruition. “Before the introduction of single window in Benin Republic, cargo dwell time was more than 18 days but since the port embraced single window, cargo dwell time crashed to less than seven days and revenue for government also jumped up by 33 percent,” said Cajetan Agu, director, consumer affair, Nigerian Shippers Council (NSC). Agu said cargo dwell time in Togo’s Lome Port also dropped from over 22 days to three days after the introduction of the single window technology. BusinessDay findings show a similar trend in Ghana’s Port ofTema,wherecargodwelltime came down from 24 days to 15 days due to the introduction of technology that improved service efficiency at the port. “Technology eliminates human to human contact and gives the right service once the importer does the right thing.

These are all Nigeria is losing as a country because it failed to adopttechnologylikeneigbouring West African ports,” Agu said while speaking on the challenges of trading across borders at a recent workshop in Lagos. Whereas the adoption of technology would have eased processes, importers and their agentsaregoingthroughvarious kinds of challenges in the hands of the different taskforces institutedintheportsbygovernment agencies, including Customs, while clearing their goods from the ports, said Tony Anakebe, managing director, Gold-Link Investment Ltd, a Lagos-based clearing and forwarding firm. These taskforces, according to him, must grant approval before the importer would be allowed to move a container out from the port, thereby making documentation processes very clumsy and cumbersome for importers.

•Continues online at www.businessday.ng

Analysts expect CBN to adopt ‘wait and see’ as MPC meeting begins today …External reserves reach $45bn

HOPE MOSES-ASHIKE

he Central Bank of Nigeria (CBN) will need to adopt a wait-and-see approach in its monetary policy decision as the two-day Monetary Policy Committee (MPC) meeting begins today, according to financial analysts polled by BusinessDay. The analysts expect the CBN to maintain the Monetary Policy Rate (MPR) at the current level of 13.5 percent at the end

of the meeting on Tuesday, on grounds of inflation rate and imminence of the new minimum wage implementation. “We expect that the MPC will adopt a wait-and-see approach and hold the current rates at its 20-21 May 2019 meeting,” said analysts at FSDH Research, an arm of FSDH Merchant Bank. The CBN in the last meeting of its MPC on March 25-26 cut its benchmark interest rate to 13.5 percent, from 14

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percent it had maintained since July 2016. “We expect the MPC will maintain status quo and assess the impact of the last rate cut. In addition, more emphasis will be to advise government to implement policies that will spur growth and generate employment,” Ayodeji Ebo, managing director, Afrinvest Securities Limited, told BusinessDay in an emailed response. The analysts say they ex@Businessdayng

pect no change partly because of inflation rate, which is one major pointer to the direction the MPC may go. For the first time in 2019, inflation rate rose in April to 11.37 percent, from 11.25 percent in March. “The rise in inflation is an indication of inflationary pressure and suggests that the MPC adoptsacautiousapproachand maintains rates,” said FSDH Research analysts headed by

Continues on page 38

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For First Bank of Nigeria, 125 years is not just a number

Bashorun J.K Randle • Continued from last week

he founding fathers of Bank for British West Africa deserve kudos for forging ahead regardless of the mischievous scheming and cynical tunnel vision of Lord Macaulay as conveyed in his address to the British Parliament on 2nd February 1835: “I have travelled across the length and breadth of Africa and I have not seen one person who is a beggar, who is a thief. Such wealth I have seen in this country (sic), such high moral values, people of such calibre, that I do not think we would ever conquer this country (sic), unless we break the very backbone of this nation (sic), which is her spiritual and cultural heritage and therefore, I propose that we replace her old and ancient education system, her culture, for if the Africans think that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native culture and they will become what we want them (to be) – a truly dominated nation (sic).” What was most remarkable about the Bank is that right from its inception, the managers were close to the powers that be – from the colonial administrators to

kings, emirs, politicians etc. but they were careful to draw the boundary in order not to appear to be rivals (or contenders) of the power brokers. They were also adept at managing crisis or dislocation. A case in point is the Civil War that engulfed Nigeria from 1967 to 1970. Igbo officers of the Bank who were trapped in the North and the SouthWest (particularly Lagos) fled in droves to the East and sought the assistance of the Bank for survival. How the Bank coped with the tragedy of closing its branches in Biafra while dealing with refugees is a matter for another book. Even more challenging was the enormous burden which the Bank had to shoulder as it strove to resuscitate its abandoned branches and rehabilitate Igbo managers/staff who had lost everything on account of the war as well as the change of the Nigerian currency which left them mostly destitute, homeless and helpless. The Bank of British West Africa evidently maintained a professional relationship with the colonial government and its civil servants. Fortunately, the Civil Servants were obliged to adhere to the Code of Conduct which was enshrined in the “GO” (General Orders) and “FI” (Financial Instructions). Consequently, the system provided a formidable bulwark against what we are now witnessing on a regular basis whereby corruption has run riot with reckless abandon combined with nauseating impunity. In the old days, the Bank would have mounted huge pressure on the government in order to ensure that the budget was passed by the parliament well before the commencement of the financial year

in addition to ensuring proper co–ordination between the Ministry of Finance and the Central Bank in order to ensure cohesion between fiscal policy and monetary policy. Prudent management of the economy was paramount and it was anchored on the balanced budget. What now prevails is unrealistic budget projections whereby revenue expectations are not aligned with the realities on the ground. Inevitably, the government has been piling up huge local and foreign debts leaving a trail of unsustainable debts, massive unemployment (especially amongst women and youth) and wobbling economy. On CNN, the Minister of Finance, Hajia Zainab Ahmed solemnly declared: “We intend to fund the 2019 budget through borrowing locally and internationally with a spread of 50:50. Our focus is on concessionary long-term loans.” It was more or less the same narrative when her predecessor Kemi Adeosun was on Aljazeera: “The first thing to note is that there are no quick fixes, but our strategy is clear and the expected outcomes are pretty compelling. Our immediate economic imperative is to provide a Keynesian stimulus to reflate the economy. The 2016 focus is underpinned by a desire to radically reposition Nigeria’s economy. The 2016 budget is being debt funded and the borrowings are targeted at the financing of capital projects to address the infrastructure deficit, create jobs and build the platforms for optimisation of the non-oil economy that will see Nigeria prosper. Our borrowing policy will remain conservative and will see us access the lowest available funds, hence our deci-

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We intend to fund the 2019 budget through borrowing locally and internationally with a spread of 50:50. Our focus is on concessionary long-term loans

sion to approach multilateral agencies in the first instance, for budget support at concessional rates as low as 1.5% per annum.” From totally unexpected quarters a bombshell or nuclear weapon was launched at the Bank. The consequences and aftershock of the earthquake were sufficiently grave to compel the Bank to suspend any further celebration of its one hundred and twenty-fifth anniversary. The Government delivered a huge snub to its long-standing advisers – First Bank of Nigeria Limited: There it was on the front page of “Daily Sun” newspaper of April 4, 2019 “Federal Government appoints Zenith Bank, Access, UBA as advisers For N3.4 Trillion Notes Issue” On account of the Bank not “making the cut” (to borrow a golfing expression) with regard to the deal on the table by the Federal Government of Nigeria, social media has gone into a frenzy with wild speculations about why and how Zenith Bank, access Bank and United Bank for Africa [UBA] – “the new generation banks” – supplanted First bank of Nigeria. Some shareholders are insisting that the Bank should suspend any further celebration of its 125th Anniversary. Fortunately, more sober minds have called for restraint and sober reflection. They argue that the disappointment should be regarded as a wake-up call which requires a recalibration of the Bank’s strategy. Fortunately, “Business Day” newspaper of April 10, 2019 carried the following front-page report Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Reducing the cost of governance in Nigeria Ejeviome Eloho Otobo and Oseloka H. Obaze

igeria suffers from democratic overload. Governance expenses are hugely disproportional to its developmental strides and democracy dividends. This is reflected in the high recurrent expenditure relative to the capital expenditure at the federal, state and local government levels. Since the return to civil rule in 1999, the share of recurrent expenditure in federal budget have hovered slightly above 70 percent and accounted for 78 percentage of 2018 federal revenue. It was not always thus. Nigeria had relatively lean governance structures under first civilian administration in the post-independence era as well as under the military regimes, which were marked by conspicuous absence of bloated parliamentary structures. Whilst military regimes are aberrations and cannot serve as a useful model for assessing governance costs, tackling the problem of high cost of governance requires a deep understanding of its genesis. The prevailing high cost of governance in Nigeria is attributable to both structural and operational factors. The structural factors include a pervasive mentality of “national cake” sharing; the federalization of several standards, in particular as it relates to payment of wages, salaries and pension entitlements; constitutional principles mandating the application of federal character or ethnic balance; the high level of pensions for some elected officers codified into law; the huge number of institutions provided in the constitution and several national legislations; the inability of most states to meet their recurrent

expenditures from internally generated revenue despite federal government bailout; and the bourgeoning cost of campaign financing – a sectoral expense poised to outpace public administrative costs. There is a myriad of operational factors in the high cost of governance. One such operational factor, especially at the federal level, is the large number of MDAs – ministries, departments, agencies, many with overlapping mandates. Another important operational factor is the huge expenditure arising from the opaque high salaries and benefits for members of the national assembly. Comparatively, Nigeria’s federal legislators earned more than their U.S., U.K., German, South African and Brazilian counterparts, as evidenced in The Economist in July, 2013 review of lawmakers’ pay in 29 countries. Yet another major operational factor is the large size of the federal cabinet coupled with an equally large number of advisers and special assistants at the federal and state levels. In an effort to address this issue at the federal level, the Transitional Committee led by Ahmed Joda, which was appointed by then President-elect Buhari in March 2015, recommended the reduction in the number of federal ministries from twenty-eight to nineteen. But this proposal was not adopted. Still another operational factor is the significant duplication in the establishment of institutions at the federal and state levels with overlapping functions and with no unique added value at either level. This can be attributed partly to the constitutional design of concurrent list of items shared by the federal and state levels. Then, there is the factor of inflating and splitting of contracts as well as padding budgets as a means to siphon www.businessday.ng

off public resources for private gain. This practice represents huge opportunity cost to the socio-economic development of Nigeria. It’s no surprise that Nigeria’s “democracy has been described as the most expensive in the world with minimal evidence in terms of infrastructure development, poverty level and pace of general economic growth.” The disconcerting paradox, is that despite the high cost being expended on Nigeria’s governance, she has earned the dubious distinction of being the poverty capital of the world. Indeed, fewer Nigerians are rising above the consumption poverty line, and it’s most unlikely that the newly introduced thirty thousand-naira minimum wage will help in cracking that ceiling. Whereas GDP growth and rising consumption are considered validating corollaries of high cost of governance, experts warn that “making GDP growth and rising consumption the central objective of public policy” amounts to “self-undermining concept of prosperity”. While the number of members of the national Assembly and States’ Houses of Assembly may not be easily reduced, their salaries and perks can. This requires statesmanship and placing national interest above vested interest personal privilege. Whereas section 147 (3) of the 1999 Constitution provides for appointing a minister from each state of the 36 states, it does not stipulate the number of ministries. The constitution made no distinction between a Minister and Minister of State: an 18-member cabinet can satisfy the constitutional requirement by having a minister and minister of state appointed to each ministry. Significant cost savings can also come from abolishing the non-constitutional post of Chief of Staff in the presidency and the Governors’ office, with consolidation of

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the functions around the Secretary to the Government of the Federation and Secretary to the State Government. This was the situation that prevailed during the first and second civil administrations as well as in a brief period of the Umaru Yar’Adua administration. The current number of advisers and senior special assistants can also be reduced significantly both at the federal and state levels, with much of their tasks consolidated into relevant line ministries. A thorough review of the current structure and functions of ministries, departments, commissions and parastatals at the federal and state level is required. At the federal level, such an effort has been made. This is reflected in the findings of The Presidential Committee on Restructuring and Rationalising of Federal Governmental Parastatals, Commissions and Agencies. The failure to act on the recommendations of this panel explains the persisting high cost of governance at the federal level. Cognizant that constitutionallycreated institutions will be difficult to fold up or merge, the same cannot be said of governance bodies created by decrees or executive fiat. What is needed is the political will and commitment to implement the recommendations in that report and initiate actions on other measures herein proposed. The growing resort to borrowing to cover the cost of recurrent expenditure and the increasing debt service burden are warning signals for the political leadership at all levels to act fast to ensure that Nigeria does not fall off the fiscal cliff and plunge into a debt peonage. Otobo is a Non-Resident Senior Expert at the Global Governance Institute, Brussels. Obaze is a public policy expert and MD/CEO Selonnes Consult, Ltd. Awka.

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Like Microsoft, Like MTN?

Patrick Atuanya

TN Nigeria (MTNN) last week (Thursday) crossed another major milestone on its journey to provide telecoms services to millions of Nigerians since its entry in 2001, with a listing on the Nigerian Stock Exchange (NSE). Valued at N2.16 trillion ($6 billion) , at the close of trading on Friday, MTNN is now the second largest company listed on the NSE, overtaking the likes of Nestle, Nigerian Breweries and Guaranty Trust Bank (GTB). Demand for the shares has been robust and the stock has gained some 20 percent in just two trading days. It is not hard to see why investors are bullish on the stock. MTN Nigeria reported solid first quarter (Q1), 2019 numbers, with service revenue increasing by 13.4 percent year on year (YoY), led by a 32.4 percent increase in data revenue and a 12.7 percent increase in voice revenue. Growth in data revenue was supported by an increase in smartphone penetration, improved network quality and a 9.1 percent increase quarter on quarter (QoQ) in active data sub-

scribers to 20.4 million people. Total subscribers increased by 3.6 percent to 60.3 million, between December 2018 and March 2019, while EBITDA margins hit 53.3 percent. Later, on the night (of the listing), there was a dinner party where shareholders, investment bankers, the MTNN Chairman Pascal Dozie, the CEO Ferdi Moolman, members of the board, the Chief Operating Officer, MTN Execs, GM’s, dignitaries and many others in attendance, gathered to celebrate a truly historic occasion. However it is easy to forget that just a few months ago this listing was nearly made impossible by accusations from the Central Bank of Nigeria’s office that MTN Group Ltd., illegally withdrew $8.1 billion from the country and an order was issued to repay the sum. The Attorney General of the Federation, not to be left out of the show, also alleged that MTN was owing $2 billion in back taxes, demanding instant payment. MTN has had other run ins with Nigerian regulators, including a huge fine of $5.2 billion imposed by the Nigerian Communications Commission (NCC) for allegedly failing to meet a deadline to disconnect 5.1 million unregistered subscribers. MTN Nigeria settled for about $1 billion but its profitability took a hit and growth slowed after it cleaned up its subscriber numbers. However despite all the recent troubles MTN has continued to execute excellently, and growth is accelerating once more. The success of MTN Nigeria reminds one of Microsoft (MSFT),

which recently overtook Apple to become the world’s most valuable company, when its valuation crossed the $1 trillion mark last month. Like MTN, Microsoft is a large mature company (whose best years were thought to have been long gone) that continues to grow fast. Microsoft was famously in the crosshairs of anti-trust regulators in the U.S, over the browser wars, and it almost got broken up by the Clinton administration. Failed products like Zune, the windows phone, Bing (the search engine) writing off $7.6 billion from the purchase of Nokia Corp., combined with the decline of Windows, which achieved a market share of more than 90 percent at its peak, led analysts such as Jim Cramer (of CNBCs Mad Money fame), to derisively nickname the company ‘Mister Softy.’ The company’s turnaround under new CEO Satya Nadella involved cutting funding to Windows and building a huge cloud computing business— with about $34 billion in revenue over the past year—putting it ahead of Google and making progress in key areas against the dominant player, Amazon Web Services. Today, MTN is also quietly building up its cloud capacity, in the process blurring the lines between being a telecoms company and a Technology Company. Going forward the growth of MTNN is expected to be powered by Voice, Data, Rich Media Services, Mobile money (E- Commerce), Enterprise (Business to Business), and wholesale. The opportunity in Voice is still

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I predict that in 18 months or less MTN just like Microsoft (MSFT), will leapfrog Dangote Cement to become Nigeria’s largest listed Company

particularly striking, for such a seemingly mature Telco. Today some 20 million people in Nigeria live in places where MTN is the sole provider, and management believes there is still growth in voice. The firm was awarded a SuperAgent license on an approval in principle basis, while it has applied for a Payment service Banking (PSB) license from the CBN. All these point to another major growth phase about to kick off for MTNN and I predict that in 18 months or less MTN just like Microsoft (MSFT), will leapfrog Dangote Cement to become Nigeria’s largest listed Company. Beyond that there is a lesson to be learnt in MTNN success in terms of strong corporate governance, sound management teams, a competent regulator (the NCC) that shepherded the sector especially at inception, and capitalism and free markets. The MTNN listing has already minted numerous (liquid) Naira billionaires, even as the firm effectively provides a vital service to millions of Nigerians. Compare this to the billions of dollars in value destruction wrought by the defunct NITEL, which had the whole of Nigeria to itself but could not muster the ability to provide the population with Telecommunications services or make a profit while doing so. To the MTNN listing I proffer a toast; God Bless Nigeria, God Bless Capitalism and God Bless MTN! Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

The Nigerian code of corporate governance, 2018 Principle 3–the board chairman

Bisi Adeyemi

he Chairman of the Board is Primus Inter Pares (the first among equals or first among peers) on the Board of Directors and typically elected by the Board of Directors who also determine the period for which he/she is to hold office. The Nigerian Code of Corporate Governance, 2018, launched in January 2019 as a Code of Best Practice is a Principles based Code, comprising 28 Principles, intended to institutionalize Corporate Governance in Nigeria. Principle 3 provides that:“The Chairman is responsible for providing overall leadership of the Company and the Board and eliciting the constructive participation of all Directors to facilitate effective direction of the Board.” The Chairman is required to facilitate the constructive participation of all Directors and effective direction of the Board. He/she is to ensure that the Board works as a cohesive team towards achieving the Company’s strategic objectives and enthrone a culture of collaboration in the Board. The hallmark of an effective Chairman is the ability to create an ambience that engenders contribution to Board deliberations by all Directors – even when they disagree with the popular

perspective. An ineffective Chairman is that who typically dominates discussions and seeks to push his/her point of view through all the time. Whilst the ideal situation is to arrive at decisions via consensus, the Board Chair should not attempt to muffle dissenting voices as the Board should benefit from the diversity of its composition. The Chairman should be a good listener and encourage Directors to express underlying concerns. In this regard, the Code recommends that the Chairman should interact with the Non-Executive Directors periodically. It is good practice for the Non-Executive Directors to meet at least once annually without the Executive Directors. This will provide a platform to discuss whatever concerns they may have objectively. Due care should however be taken to ensure that this does not create an “Us” versus “Them” scenario. The Chairman should not be involved in the day-to-day operations of the Company. The concept of the separation of the role of the Chairman from that of the CEO implies that the Chairman should be independent of Management and free from any business interest or other relationships which could interfere with his/her ability to make independent judgment. The emerging trend is for the Chairman to be an Independent Non-Executive Director. It is in this regard that the Code provides that the CEO or an Executive Director shall not go on to be Chairman. It however goes on to provide that “if in very exceptional circumstances the Board decides that a former MD/CEO or an ED should become Chairman, a cool-off period of three years should be adopted”. The CBN Code of Corporate Governance for Banks and other Financial Institutions requires a cool-off period of 5 years. The thinking is that a cool-off period of 3(or 5) years is sufficient for www.businessday.ng

the perceived influence of the MD/CEO on the Board to have waned. However, where the CEO never really “left”, the cool-off period will not achieve any useful purpose. More importantly, the caliber of and mode of appointing the other Directors, will to a large extent determine the kind of influence a CEO returning as Chairman will have on the Board. The Chairman plays a pivotal role in guiding and being available for regular communication and consultation with the MD/CEO. To be effective in this regard, the Board Chair is expected to have extensive business leadership experience, including crisis leadership, be collaborative and retrained in style, resilient, possess complete candor and have an expectation of same in others. He/she is expected to, serve as a trusted counselor of the CEO. To ensure an efficient use of the Board’s time, the Chairman should oversee an annual Board Agenda under which Board meetings have specific focus. The Chair should ensure that Directors receive timely and adequate information ahead of Board meetings to engender robust deliberations. Ensuring that the Board and its Committees are composed of individuals with relevant skills, competencies and desired experience underscores the need for the Chairman to be aware of the skills and experience each director brings to the Board. The Chairman should oversee induction programmes for new Directors, identify skill gaps and work with the Company Secretary to recommend appropriate continuing education programmes for Directors. The Chairman should also take the lead role in Board and Director performance evaluation. In relation to shareholders and other stakeholders, the Chairman is to ensure effective

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communication with the Company’s shareholders and other stakeholders. In this regard, a major role of the Chairman is presiding at Annual General Meetings. Presiding over the AGM of a public company in Nigeria is not a tea party! The Chairman will lean very heavily on the competence, professionalism and organizational efficiency of the Company Secretary. A detailed step-by-step Order of Proceedings (rehearsed in advance if possible) and a firm yet amiable disposition are key success factors in presiding over a successful AGM. It is always refreshing to watch an experienced Chairman preside over and take charge of proceedings at an AGM, as it is painfully embarrassing to watch rabble rousing shareholders make mincemeat of a not so experienced Chairman. Whilst the Chairman is the leader of the Board, he/she needs the support of his/her peers and should avoid a dictatorial or overbearing leadership style, while being assertive. “A Chairman holds the most power and authority on the Board of Directors and provides leadership to the company’s officers and executives. He[she] ensures that the firm’s duties to shareholders are being fulfilled by acting as a link between the Board and upper management- that is the bottom line. Together, management and the Board of Directors have the ultimate goal of maximizing shareholder value. The shareholders are the boss and where their investment is failing, the Chairman is failing.”- Troy Segal, March 2018 Edition of the Investopedia- Dotdash Corporate Publication. Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng

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Monday 20 May 2019

BUSINESS DAY

COMMENT

Nigeria’s economy is comatose, endless insecurity can kill it off global Perspectives

OLU FASAN

he combination of economic fragility and national insecurity is deadly for any nation. When a country’s economy is weak, unattractive for private investment and prone to shocks with little resilience, the last thing it needs is to be gripped by violence. Insecurity would, to say the least, cripple that country’s economy. Sadly, that’s Nigeria’s situation today. By common consent, Nigeria’s economy is extremely weak and volatile, entirely susceptible to the vagaries of world oil prices and the predilections of foreign investors. Yet, its policy and regulatory environments are acutely unattractive for private investment and business growth. To make matters worse, Nigeria faces multiple, almost perpetual, threats from organised non-state violence. In a report on state fragility, the London-based International Growth Centre, jointly run by Oxford University and the London School of Economics, noted that “Lack of security lies at the heart of fragility”, adding that: “Fragile states are ill-equipped to respond effectively to security threats. Citizens are therefore exposed to personal risks from violence”. That, precisely, is the current situation in Nigeria, with the spread and impunity of Boko Haram, the marauding herdsmen and the rampaging activities of bandits, kidnappers, cultists, suicide bombers and other violent groups. Of course, this has been going on for several years, but things were supposed to be different under the administration President Muhammadu Buhari, who came to power on a firm promise to tackle the insecurity in the country and make Nigeria safer. During the 2015 presidential election, Buhari, a former military

dictator, lambasted the then president, Goodluck Jonathan, for failing to show leadership in fighting insecurity, and vowed that, if elected, he would “spare no effort” to defeat terrorism and insurgency in Nigeria. After winning the election, Buhari devoted much of his first press conference to the issue. The New York Times reported that Buhari “did not smile” when he talked about insecurity, brandishing his military experience as he repeated his vow to defeat terrorism. Four years later, President Buhari’s administration hasn’t made Nigeria safer. If anything, human life in Nigeria is, to use Thomas Hobbes’s famous phrase, nasty, brutish and short. Last year, Nigeria was ranked the 5th most dangerous (i.e. least safe) country in the world, according to the Legatum Prosperity Index for Safety and Security. Although, Boko Haram is not as powerful as it used to be; yet, despite repeated claims that the terrorist group has been “technically defeated”, it remains very potent and dangerous. Indeed, in February last year, just two weeks after the government announced that Boko Haram was on its death throes, the group struck, abducting 105 schoolgirls in Dapchi, Yobo State, just as they did in 2014 when they kidnapped the 276 Chibok girls! But, as if the Boko Haram insurgency isn’t bad enough, there is also the phenomenon of killer-herdsmen, who regularly raid villages and kill innocent farmers across the country, but particularly in the North Central. In 2016 alone, the herdsmen’s criminal rampage led to the deaths of 2,500 people, according to the International Crisis Group. Since then, several thousands more have also been killed, with the attendant humanitarian calamity of more than 200,000 internally displaced people. Over the past few weeks, stories of rampant insecurity and loss of lives and properties have dominated Nigerian newspapers. Last Thursday, the Vanguard newspaper screamed on its front page: “Worsening insecurity – 34 killed in four states”! The paper reported that cult war claimed 11 lives in Edo State; Boko Haram attacked military base and a community in Borno, killing 11 people; herdsmen killed 11 people in Taraba State; and gunmen stormed a community in

Sokoto State and killed the traditional ruler. The incessant attacks have forced many residents to flee Sokoto State to the Republic of Niger. In his book Leviathan, Hobbes described the state of human nature as unbearably brutal, a state in which everyone is always in fear of losing his life to another; where even the strongest man could be killed in his sleep. Nothing brought that home more than the report that over 200 heavily armed bandits attacked a village in President Buhari’s home State, Kastina, killing several people and destroying properties. In fact, even more Hobbesian was another report that gunmen stormed Buhari’s hometown, Daura, and kidnapped a senior traditional title holder. In the state of nature, according to Hobbes, even the strongest man could be killed in his sleep, and, yes, even a president’s hometown is not safe! It would seem that the utterly brutal state of nature that Hobbes describes now exists in Nigeria. But what are the consequences of all this? Well, apart from the enormous human costs, the widespread insecurity is also causing huge devastation to Nigeria’s economy. As the BBC puts it, “Nigeria’s insecurity has added to its economic woes, hindering foreign investment”. But before we come to the impact on foreign investment, let’s consider the socio-economic consequences of the disruptions that the insecurity is causing to internal trade and farming. Surely, when farming is disrupted, food security is affected; and, especially for a country that is also banning food imports, poverty and hunger would increase. In a recent editorial, entitled “The looming hunger, poverty time bomb”, the Vanguard newspaper (April, 25, 2019) noted that “The widespread hunger verging on famine has been exacerbated by an escalation of insecurity across the land”, pointing out that “the entire food belts of Nigeria have been under siegeby violent armed groups”, resulting in the displacements of “many farming communities”. Alarmingly, the newspaper warned that “Insecurity is fuelling poverty and hunger in a way never seen before, not even during the Nigerian Civil war”! Things are that bad! But the impact on farming and food security apart, the dire security situation

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Even without the security challenge, Nigeria’s is an unattractive investment destination due to its adverse policy and regulatory environments, especially the distortionary exchange rate regime. But insecurity has made the situation worse

is also harming Nigeria’s ability to attract long-term foreign investments, which are major sources of economic growth and job creation. Even without the security challenge, Nigeria’s is an unattractive investment destination due to its adverse policy and regulatory environments, especially the distortionary exchange rate regime. But insecurity has made the situation worse. Several studies show a strong relationship between Nigeria’s Terrorism Index and FDI inflows, with FDIs falling as terrorism rises! Indeed, the Nigeria Investment Promotion Commission (NIPC) attributed the decline in FDIs by 21.26% in 2017 to, in large part, insecurity. In one of its World Investment Reports, the United Nations Conference on Trade and Development (UNCTAD) noted that foreign investors were even avoiding the oil sector, which had always been the biggest pull for FDI in Nigeria, partly due to security challenges. Of course, this shouldn’t be surprising, given that very few foreign companies would want to jeopardise the lives of their employees or the safety of their assets by investing in a violent country, which is how many see Nigeria. In its 2019 World Factbook, the US Central Intelligence Agency (CIA) said that “Nearly half of all reports of vessels being fired upon occur in Nigerian waters”. There is also the regular kidnapping of foreign workers. China is actively engaged in the Nigerian economy, but more Chinese workers have been kidnapped, even killed, in Nigeria than in any other African country. Given China’s priority to protect its investment and people abroad, it is unlikely to tolerate that situation for too long! To be sure, Nigeria faces a quandary. Unless it grows its economy and tackles poverty, it can’t stop the widespread insecurity, which is caused by joblessness and other social ills. Yet, without tackling the insecurity, it can’t attract the investments to grow its economy. The solution lies in a comprehensive, holistic and joined-up response. But the buck stops with President Buhari!

Dr. Fasan, a London-based lawyer and political economist, is a Visiting Fellow at the London School of Economics. e-mail: o.fasan@lse.ac.uk, twitter account: @olu_fasan

On secret recordings and monetary policy ECONOMIST

NONSO OBIKILI

irst of all, a disclaimer. I am not a fan of espionage in real life. In books and television shows it can be exciting but in real life it can be a bit unnerving, and probably illegal. It’s not great really. Earlier in the week there were reports of all WhatsApp users being vulnerable to malware that basically granted the attacker access to everything on your phone. Cueglobal paranoia. I don’t have anything particularly incriminating on my phone, but I still got a bit paranoid. Imagine if your private conversations were published for the world to hear. Long and short, I don’t approve anyone being secretly recorded. Secondly, you don’t need to be a fan of conspiracy theories to know that the timing of the release of the recording was not accidental. A purportedly damaging recording released shortly after the governor was nominated for a second

term and before his confirmation at the senate? He obviously has some very powerful friends who were not happy with his reappointment. Friends who were fortunately not smart enough to actually know what was going on in the recordings. News flash: there was no N500bn theft being covered up. All disclaimers aside, the recordings shed some light on what was, and still continues to be, problems with the central banks monetary policy strategy. Monetary policy over the last five years has been almost solely focused on one thing: managing the exchange rate. After the central bank abandoned its attempt to maintain an exchange rate of N199 per US dollar by force, it changed strategy towards a more “flexible” exchange rate system with investors allowed to buy and sell dollars on a willing buyer willing seller basis. However, to entice investors to bring foreign currency to Nigeria it sold open market operations (OMO) securities at juicy rates. OMO securities are very similar to treasury bills and essentially work by investors loaning money to the central bank for interest payments. Ordinarily the CBN would buy and sell treasury bills instead of selling its own securities but the federal government has tried to limit its own sales of these short term securities because they were getting very expensive. Also, the scale www.businessday.ng

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it is giving interest free loans to the federal government. It has to fulfill its obligations to banks and foreign investors, but the federal government is unlikely to clear its overdraft

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of the CBNs OMO sales has reached unprecedented levels. The thing is, when the CBN buys and sells treasury bills issued by the federal government, it is the investor because the federal government is the party that issues the securities and is liable for interest payments. But when the CBN issues its own treasury bills then it is the borrower and is liable for interest payments. If you add its determination to keep exchange rates fixed then the CBN is essentially taking foreign currency loans from foreign investors at very juicy interest rates. Interest rates so juicy that Nigerian carry trade is currently the most attractive in the world. As at the third quarter of 2018 there were about N12.7tn worth of CBN bills in circulation which translates to roughly $5bn in interest payments annually depending on how you calculate it. It has helped stabilize exchange rates, but the interest payments have wrecked havoc on the CBNs balance sheet. Then there is the small matter of the CBNs budget support to the federal and state governments. Technically these are loans but if anyone thinks the government is going to pay back anytime soon then I have a bridge to sell you. The “loans” are not insignificant too. In the three quarters from January 2018 to September 2018 the CBN essentially gave the federal government N1.1tn worth of @Businessdayng

interest free loans, mostly through overdraft facilities. That is roughly $3.2bn. So, you see the problem here. On the one hand the CBN is taking expensive loans from banks and foreign investors. On the other hand, it is giving interest free loans to the federal government. It has to fulfill its obligations to banks and foreign investors, but the federal government is unlikely to clear its overdrafts. If you’ve ever run a business or done some basic accounting classes then you know this is disastrous for the CBNs balance sheet. So, what is going on in the recording? It’s basically the CBN officials trying to make it work somehow. “Making it work somehow” is allegedly very common in the financial sector and this is just CBN officials doing what their peers on broad street do all the time? Is it illegal? I don’t know. In more honest environments it would count as misleading the shareholders, but this is Nigeria. The real question however is not whether it’s illegal or not. The real issue is that it demonstrates the currently unsustainable path of monetary policy. Monetary policy that is still fixated on maintaining a fixed exchange rate at all costs. On this exchange rate matter as far as the CBN is concerned; we die on the line. Dr. Nonso Obikili is Chief Economist at Business Day.

Monday 20 May 2019

BUSINESS DAY

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, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua ASSIST. SUBSCRIPTIONS MANAGER Florence Kadiri GM, BUSINESS DEVELOPMENT (North)

Comparing Nigeria and Brazil at 200m population marker

igeria recently entered the 200 million population milestone, underscoring the high rate of population growth over the last 20 years. At the beginning of our Fourth Republic in 1999, the Nigerian population was 119.3 million. At 200m, Nigeria now stands on population shoulder to shoulder with Brazil, also classified as a developing country. On all relevant economic indices, however, Nigeria is miles behind the South American country. Comparison of the statistics clearly shows that Nigeria should worry about poverty and growing immiseration and commence long-term national plan to tackle the coming anarchy. Population brings many challenges. It also represents opportunities. For Nigeria, thus far, a high population seems to spell only poverty as our figures keep going south. It is thus an issue that calls for serious national introspection. Brazil houses 208million people with estimates of 212.39million people for 2019. The Federative Republic of Brazil is the largest country in South America and Latin America. It is ranked fifth in population and size globally. Analysts describe Brazil as an economic powerhouse, one

of the world’s largest democracies and a country successfully raising millions out of poverty over the last five years. On the contrary, in that period, Nigeria has continually deepened poverty. One more Nigerian falls into the poverty ranks of persons earning less than $1 a day every six days. Our population is growing at a faster pace than production and income. Compare the numbers. Nigeria’s 2019 budget provides for N8.9trillion or approximately US$30billion. Brazil’s budget for 2019 is a humongous US$257billion. Dividing the budgets by the population shows which country can better serve its citizens with the 2019 budget. For many years, the World Bank and other multilateral institutions warned about the large numbers of Nigerians earning less than $1 day. It is clear now that they were obliquely referencing Nigeria as a one dollar a day economy. That is what simple division of the budget by our population depicts. Of course, economies are more complex matters, but this thumbnail picture is sobering. Take GDP figures. Annual GDP is US1.8billion for Brazil and US397million for Nigeria. Per capita GDP in 2018 was US$8926 compared to Nigeria’s US$2081. Nigeria is number 31 in the ranking of GDP of the 196 countries the

Financial Times tracks. In terms of GDP per capita, we stand in the 147th position. Brazil’s GDP places it in the ninth position out of 196 countries. Its per capita GDP of US$8, 873 puts it at 77th position. For many years, Nigeria prided in its ostensible wealth. Officials believed the country had enough resources from its oil to live the life. A former Head of State claimed incorrectly that the country’s challenge was not lack of money but how to spend it. The country has entered the Malthusian trap from such incorrect thinking. We utilised the abundance such as offered by the surge in oil prices for seeking and maintaining a national preference for ostentatious living rather than building and maintaining a high standard of living. Nigeria is a poor country and would get poorer if we do not do something with the population bulge. A Malthusian cloud hangs over the country. The uncontrolled growth of population over the years demands strategic actions that would turn the vast numbers into an asset rather than the current liability the figures show. Nigeria requires policies that would stimulate the economy and indeed lead it to leapfrog current developments in many areas. Reordering priorities is one of the key measures. Nigeria al-

locates low quotas from its budget to the most critical areas of health, education, infrastructure and agriculture. Education has always received less than ten percent of the federal budget. In Brazil it is an average of 16 percent. Similar figures apply to health. Technology was central and contributory to the West overcoming the initial population challenge identified by Thomas Malthus. Technology fuelled a revolution in industry, agriculture and infrastructure. Job creation was a natural concomitant. Technology remains the child of education. Education focused on human development is the furnace of technology. Nigeria needs to reform its educational paradigm and pedagogy to focus on problem solving on the foundation of Science, Technology, Engineering, Arts and Mathematics (STEAM). The youth bulge should be a competitive edge rather than an albatross. Nigeria does not need to look too far for a holistic development paradigm. The nation could work to implement the United Nations Sustainable Development Goals. Implementing its 17 goals as Nigerian goals and scrupulously monitoring at federal and state levels will change our trajectory and deliver excellent results by 2030. We could marry it with the African Union’s Agenda 2050. Get going now.

Bashir Ibrahim Hassan

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

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Monday 20 May 2019

BUSINESS DAY

In Association With

Strange manoeuvres

Too many challengers Over the rainbow

Tensions between America and Iran worsen A mysterious attack raises war jitters

HEN DONALD TRUMP hired John Bolton to be his national security adviser, he reportedly joked that the mustachioed hawk was “going to get us into a war”. It is easy to see why. When serving under George W. Bush, Mr Bolton embellished intelligence on Cuban and Syrian weapons and lobbied hard for the invasion of Iraq. After leaving government he argued that America should bomb Iran to set back its nuclear programme. Now he is back in government, and on the warpath. It was Mr Bolton, not the commander-in-chief, who announced on May 5th that America had dispatched an aircraft-carrier strike group to the Persian Gulf. This was in response to undisclosed intelligence which, unnamed officials claimed, showed that Iran and its proxies were planning attacks on American forces or their allies. On May 9th Mr Bolton reviewed war plans, updated at his request, that call for deploying up to 120,000 troops if Iran attacks or restarts work on nuclear weapons, according to the New York Times. Such planning is not a sign of imminent conflict. But Mr Trump is reported to be telling that joke again, now with more seriousness, as Mr Bolton also ratchets up pressure on Venezuela. Some fear Mr Bolton is looking for a provocation by Iran, adding ominous undertones to recent events. On May 12th four oil tankers were damaged in a “sabotage attack” off Fujairah, part of the United Arab Emirates (UAE). Gulf officials claim the ships—two Saudi, one Emirati and the other Norwegian—had holes blown in their hulls, near the waterline. The incident remains murky; as The Economist went to press, investigators were still looking into the blasts. But unnamed American officials quickly fingered Iran or its proxies as the likely culprit, without presenting evidence. Fujairah lies just outside the Strait of Hormuz, a choke point that Iranian officials have threatened to block. That was not the only flare-up. This was meant to be a moment of optimism in Yemen. The UN said

South Africa’s election results reflect widespread disillusion Many voters stayed home; extremists gained ground

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HIS IS A vote that reminds us of 1994,” said Cyril Ramaphosa as he cast his ballot on May 8th in Soweto, a township on the edge of Johannesburg. According to South Africa’s president, voters “were just as excited as this” 25 years ago. If so, they have a funny way of showing it. The first election after the end of apartheid in 1994 saw 86% of adults go to the polls. In his autobiography Nelson Mandela recalled: “The mood of the nation during those days of voting was buoyant.” But in 2019 just 46% of South Africans over the age of 18 bothered to vote. The

on May 14th that the Houthis, rebels who control much of the country, had left Hodeida, the largest port. The pullout was a condition of a ceasefire reached last December. On the same day, though, the Houthis attacked two oil-pumping stations for the East-West pipeline in Saudi Arabia. The damage was limited, but the blasts were a worrying sign of vulnerability in the kingdom’s vital oil industry. The facilities, more than 700km north of the Yemeni border, were probably hit with long-range drones the Houthis acquired last year. They are fighting a Saudi-led coalition, supported by America, that backs the Yemeni government. The coalition promised to retaliate. Meanwhile, fighting resumed in Hodeida. America and Saudi Arabia accuse the Houthis of being Iranian puppets. Although that is an exaggeration, the Houthis have received arms from Iran, which has a record of supporting allied militias—and of attacks on ships. The so-called tanker war between Iran and Iraq ravaged international shipping in the 1980s. But the timing of the incident in Fujairah, and the speed with which American officials blamed Iran, has raised eyebrows. Max

Boot, a hawkish foreign-policy scholar, wondered whether Mr Bolton was “trying to provoke Iran into striking first”. He and others are reminded of the Gulf of Tonkin incident—a murky naval skirmish in 1964 used by America as a pretext for expanding its involvement in Vietnam. Some officials have urged calm. John Abizaid, America’s ambassador to Saudi Arabia and a former general, called for a “thorough investigation to understand what happened [and] why it happened”. Mr Abizaid says it is not in America’s interest to have a conflict. Many officials in the Gulf quietly agree. It is not in theirs, either. European officials are nervous. Germany and the Netherlands suspended training operations in Iraq. Spain withdrew its frigate from the American strike group heading towards the Gulf. Major General Christopher Ghika, Britain’s senior officer in the American-led coalition against Islamic State, said: “There’s been no increased threat from Iranianbacked forces in Iraq and Syria.” His comments drew an unusual rebuke from America’s central command. On May 15th America ordered many of its diplomats to leave Iraq.

Tensions are unlikely to abate. Last year Mr Trump pulled out of a deal, made in 2015, that curbed Iran’s nuclear programme in return for economic relief. Now he wants to undermine what remains of the pact. He has restored crippling sanctions on Iran. On May 8th President Hassan Rouhani said Iran would abrogate parts of the deal and gave the remaining signatories—Britain, China, France, Germany, Russia and the European Union—60 days to help Iran’s oil and banking sectors do business abroad. If they fail, Mr Rouhani warned that Iran could resume enriching uranium to higher levels of purity, which would shorten its path to a nuclear bomb. Mr Trump, for his part, runs hot and cold on Iran. He has told Iran’s leaders to call him (Mr Rouhani has spurned many such requests). He said the Fujairah incident would be “a bad problem for Iran” if it was involved yet dismissed the reported war plans as “fake news”. If America did go to war, he added, it would send “a hell of a lot more” than 120,000 troops. Such language may cheer Mr Bolton. But it leaves many feeling nervous about a cycle of escalation that looks hard to control.

overwhelming emotion was neither excitement nor buoyancy, but despondency. The rainbow nation has suffered a lost decade and a disappointing quarter-century. Under Jacob Zuma, Mr Ramaphosa’s disastrous predecessor from 2009 to 2018, corruption became endemic and the economy stagnated. Average income is lower than in 2013. Levels of unemployment and inequality are among the highest in the world. Many young people feel disillusioned with the post-apartheid settlement. All of which could have meant disaster for the African National Congress (ANC), which has ruled since 1994. But Mr Ramaphosa, who, opinion polls suggest, is more popular than his party, helped the ANC to its sixth successive victory in national elections. He also ensured that the ANC kept control of eight of South Africa’s nine provinces in regional ballots. In Gauteng, the most populous province, the ANC’s victory was so slim that Mr Ramaphosa’s appeal almost certainly made the difference. Yet the ANC’s performance was still its worst ever. The party won Continues on page 15

Monday 20 May 2019

BUSINESS DAY

In Association With

China v America

A new kind of cold war

How to manage the growing rivalry between America and a rising China

IGHTING OVER trade is not the half of it. The United States and China are contesting every domain, from semiconductors to submarines and from blockbuster films to lunar exploration. The two superpowers used to seek a win-win world. Today winning seems to involve the other lot’s defeat—a collapse that permanently subordinates China to the American order; or a humbled America that retreats from the western Pacific. It is a new kind of cold war that could leave no winners at all. As our special report in this week’s issue explains, superpower relations have soured. America complains that China is cheating its way to the top by stealing technology, and that by muscling into the South China Sea and bullying democracies like Canada and Sweden it is becoming a threat to global peace. China is caught between the dream of regaining its rightful place in Asia and the fear that tired, jealous America will block its rise because it cannot accept its own decline. The potential for catastrophe looms. Under the Kaiser, Germany dragged the world into war; America and the Soviet Union flirted with nuclear Armageddon. Even if China and America stop short of conflict, the world will bear the cost as growth slows and problems are left to fester for lack of co-operation. Both sides need to feel more secure, but also to learn to live together in a low-trust world. Nobody should think that achieving this will be easy or quick. The temptation is to shut China out, as America successfully shut out the Soviet Union—not just Huawei, which supplies 5G telecoms kit and was this week blocked by a pair of orders, but almost all Chinese technology. Yet, with China, that risks bringing about the very ruin policymakers are seeking to avoid. Global supply chains can be made to bypass China, but only at huge cost. In nominal terms Soviet-American trade in the late 1980s was $2bn a year; trade between America and China is now $2bn a day. In crucial technologies such as chipmaking and 5G, it is hard to say where commerce ends and national security begins. The economies of America’s allies in Asia and Europe depend on trade with China. Only an unambiguous threat could persuade them to cut their links with it.

It would be just as unwise for America to sit back. No law of physics says that quantum computing, artificial intelligence and other technologies must be cracked by scientists who are free to vote. Even if dictatorships tend to be more brittle than democracies, President Xi Jinping has reasserted party control and begun to project Chinese power around the world. Partly because of this, one of the very few beliefs which unite Republicans and Democrats is that America must act against China. But how? For a start America needs to stop undermining its own strengths and build on them instead. Given that migrants are vital to innovation, the Trump administration’s hurdles to legal immigration are self-defeating. So are its frequent denigration of any science that does not suit its agenda and its attempts to cut science funding (reversed by Congress, fortunately). Another of those strengths lies in America’s alliances and the institutions and norms it set up after the second world war. Team Trump has rubbished norms instead of buttressing institutions and attacked the European Union and Japan over trade rather than working with them to press China to change. American hard power in Asia reassures its allies, but President Donald Trump tends to ignore how soft power cements alliances, too. Rather than cast doubt on the rule of law at home and bargain over the extradition of a Huawei executive from Canada, he should be pointing

to the surveillance state China has erected against the Uighur minority in the western province of Xinjiang. As well as focusing on its strengths, America needs to shore up its defences. This involves hard power as China arms itself, including in novel domains such as space and cyberspace. But it also means striking a balance between protecting intellectual property and sustaining the flow of ideas, people, capital and goods. When universities and Silicon Valley geeks scoff at nationalsecurity restrictions they are being naive or disingenuous. But when defence hawks overzealously call for shutting out Chinese nationals and investment they forget that American innovation depends on a global network. America and its allies have broad powers to assess who is buying what. However, the West knows too little about Chinese investors and jointventure partners and their links to the state. Deeper thought about what industries count as sensitive should suppress the impulse to ban everything. Dealing with China also means finding ways to create trust. Actions that America intends as defensive may appear to Chinese eyes as aggression that is designed to contain it. If China feels that it must fight back, a naval collision in the South China Sea could escalate. Or war might follow an invasion of Taiwan by an angry, hypernationalist China.

A stronger defence thus needs an agenda that fosters the habit of working together, as America and the USSR talked about armsreduction while threatening mutually assured destruction. China and America do not have to agree for them to conclude it is in their interest to live within norms. There is no shortage of projects to work on together, including North Korea, rules for space and cyberwar and, if Mr Trump faced up to it, climate change. Such an agenda demands statesmanship and vision. Just now these are in short supply. Mr Trump sneers at the global good, and his base is tired of America acting as the world’s policeman. China, meanwhile, has a president who wants to harness the dream of national greatness as a way to justify the Communist Party’s total control. He sits at the apex of a system that saw engagement by America’s former president, Barack Obama, as something to exploit. Future leaders may be more open to enlightened collaboration, but there is no guarantee. Three decades after the fall of the Soviet Union, the unipolar moment is over. In China, America faces a vast rival that confidently aspires to be number one. Business ties and profits, which used to cement the relationship, have become one more matter to fight over. China and America desperately need to create rules to help manage the rapidly evolving era of superpower competition. Just now, both see rules as things to break.

South Africa’s election results... Continued from page 14

57.5% of the vote, down from 62.2% in 2014. It was the first time that support for the ANC fell below 60% in a national ballot (see chart). The decline can be explained by two trends, says Dawie Scholtz, a psephologist. The first is that, compared with the previous national election, turnout fell by even more in townships, which are mostly black, than in suburbs, which are disproportionately white. Since the vast majority of ANC support comes from the 81% of South Africans who are black, its overall share of the vote was squeezed. The second reason is that the ANC won a lower share of the black South Africans who did vote. Mr Scholtz estimates that the party took 79% in 2014, but just 73% in 2019. Most of these “lost” votes went to the Economic Freedom Fighters (EFF), a far-left black-nationalist offshoot of the ANC. The EFF won 10.8% of the vote, up from 6.4% in 2014. It is now the second most popular party in three provinces. Given that its base is younger than the ANC’s, it is well placed to do better in future. These voters are not just uneducated young people, as is commonly assumed, but include many students and graduates, too. At a polling station near where Mr Ramaphosa voted, Tshego Kgasago, a 28-year-old office worker, explained that while she objected to some EFF policies, such as Zimbabwe-style land seizures, she was voting for the party because it best embodies the idea that black people still get a raw deal. So long as that sentiment endures, the EFF will be a political force. The EFF was not the only racebased party that increased its share of the vote. The Freedom Front Plus (FF+) won 2.4%, narrowly surpassing its previous high of 2.2% in 1994, when an earlier version of the party campaigned for an autonomous volkstaat (homeland) for white Afrikaners, the ethnic group that dominated the apartheid state. The party has a green, orange and white emblem, evoking the flag of the South African Republic, which lasted from 1852 to 1902.

Monday 20 May 2019

BUSINESS DAY

In Association With

After subsistence, what?

In Rwanda, farming competently is not enough Even good farmers are one bad harvest away from destitution

Y AFRIC AN STANDARDS, Rwanda is an agricultural success story. Yields of bananas, beans, cassava and maize—the four main crops by land area—have all risen substantially since the turn of the century. Over the five years to 2017, the country’s maize fields were more productive than those in neighbouring Burundi, Kenya or Tanzania, according to the Food and Agriculture Organisation, an arm of the UN. A third of Rwanda’s small maize farmers and more than two-thirds of small rice farmers plant improved hybrid seeds in the main growing season, which begins in September. Fertiliser imports are rising; in Western province, an agricultural hub, most farmers use it. Smallholders get sound advice from an army of governmenttrained “farmer promoters” and from One Acre Fund, a large charity. If you believe the government’s figures, extreme poverty is falling. Even if you do not, more houses have metal roofs and cement floors. But talk to Marie, who grows

beans and maize on steeply sloping land in the village of Ryaruhanga, and it becomes clear that this is not nearly enough. Although Marie has planted improved seeds and used some fertiliser, her crops have fared poorly. Some seeds rotted in the ground, while others grew slowly because of a lack of rain at a critical time. Necessity has driven her to work as an agricultural labourer, for which she receives a mere 800 Rwandan francs ($0.88) a day. She is struggling to keep her children in primary school.

Even competent farmers like Marie live close to the edge—a single bad harvest can drive them into destitution. That is partly because their farms are tiny. Rwanda is more densely populated than the Netherlands, with 490 people to each square kilometre. In contrast to the Netherlands, almost everyone is a farmer. Rural population growth means that land holdings are shrinking. A government survey in 2011 found that 52% of farms in Western province were smaller than 0.3 hectares. Six years later

the proportion had reached 63%. What are smallholder farmers to do? They could up sticks and move to a city. But that may not change their fortunes much. Researchers have found that African cities are less productive than Asian or Latin American ones, perhaps because they lack large industrial employers. A paper by Patricia Jones of Oxford University and others detected a significant wage premium in the biggest cities of Nigeria and Tanzania, but not in other cities in those countries. Only men received the premium. A smallholder can try to improve the soil. Like much of western Rwanda, Marie’s land is highly acidic. She has tried adding lime, which helped a little. But lime is expensive and heavy, and pays for itself only slowly. Nor can Marie add much organic matter to the soil, which would help it retain water. In the past she cut grass for a compost heap. Now her neighbours compete for the same tufts. The Rwandan government’s policy is to encourage smallholders to grow more valuable crops. It is promoting fruit trees, which can be

highly profitable, if slow to mature. One Acre Fund distributed 6m tree seedlings last year. Many were grevilleas, which grow fast and straight and can be used to make furniture or plant supports. Bean farmers can often boost productivity simply by growing the plants up taller poles, says Eric Pohlman of One Acre Fund. Not all farmers struggle. A few miles from Marie, Innocent Niyongira grows maize, beans, soya and tomatoes so successfully that he has taken on two workers. He has experimented with plant spacing, finding that sowing maize seeds farther apart produces bigger, more marketable cobs. Having acquired more land, he is thinking of getting into macadamia nuts. How did a man with only five years of schooling become such an excellent farmer? Innocent says that he has been influenced by inspirational stories on the radio, and that he works all the time. Some people are simply better at farming than others. The problem is that poor people in rural areas have almost no alternative.

Supremely wrong

A majority of Americans want abortion to be legal in the first two trimesters That is what the law should be

F THE ALABAMA legislature gets its way, abortion will soon become illegal there. A doctor convicted of performing an abortion could be sentenced to up to 99 years in prison. With no exemptions in cases of rape or incest, this would be the most restrictive such law in the country. But other states with Republican-controlled legislatures have passed “heartbeat” laws that are almost as absolute—they ban abortion from 6 weeks, at which point many women do not yet realise they are pregnant. These laws will be struck down by lower courts because they contradict Roe v Wade, the 1973 Supreme Court ruling that made abortion legal throughout America. At which point the court will have to decide whether it wants to look at Roe again. In the abortion argument, both sides long ago drove each other to extremes. The pro-life, fundamentalist view behind the Alabama bill is that a fertilised egg is no different from a person, and thus should enjoy the same legal rights. Accept that, and what right does a woman have to take a morning-after pill, or to end a pregnancy after a rape? The pro-choice extreme is that any restriction on abortion is an unacceptable attempt by government to control women’s bodies. With debate gridlocked, the focus is on the courts.

The latest abortion bills are about two things: preventing women from making a choice that is properly theirs, and getting a challenge to Roe to the Supreme Court where, campaigners hope, they can smoke out the new conservative majority. Were Alabama’s law to come into force, the price would be paid by women too poor or browbeaten to travel to where abortions are legal. Some of them will end up attempting to perform abortions themselves, with drink, drugs or worse. Compared with other Western countries, America is not such an outlier on abortion as it sometimes appears. The number of abortions is, thankfully, in long-term decline as the number of teenage pregnancies falls.

A large, stable majority of Americans favours keeping abortion legal in the first two trimesters and banning it thereafter, with some medical exemptions: a position that balances the rights of women with the intuition that a fetus able to survive outside the womb deserves some legal protection. This is roughly what the law says in Britain, where controversy about abortion is now largely over. Rather than reflecting public opinion, though, America’s lawmakers have for decades found it more useful to inflame it. Alabama illustrates how this happens. As in many other states, the only political competition most Republican members of Alabama’s statehouse face is during primaries and comes

from the right. In these races there is no political cost, and considerable advantage, in taking the most extreme position possible on abortion. Thus a fringe idea becomes a litmus test for primary candidates, handing power to a small but highly motivated group of cranks. Meanwhile in Democratic-run places, lawmakers have some reason to fear that anything short of the relatively permissive approach followed in some states since Roe will infuriate their own activists. Legislators should be aiming for a law that lives up to a decent ethical standard and commands general consent. But, because they cannot bear to compromise, the only way to resolve their disputes is for the courts to step in. That turns what should be a political decision into a legal one— as it also has with gay marriage and Obamacare. This does double damage to American democracy, first by absolving elected politicians of their proper responsibility to govern, and then by making the Supreme Court seem too politicised, which undermines its legitimacy. Whatever the fate of the new abortion laws in the courts, this cycle looks likely to become more destructive. If the five conservative justices voted to overhaul abortion law in a way that contradicted public opinion, then Donald Trump would have fulfilled a campaign promise to appoint jus-

tices who will overturn Roe, but at the cost of women’s freedoms and of the further politicisation of America’s highest court. If the justices take up a challenge but rule narrowly against the new abortion laws, activists will go back to their campaigns with the conviction that one more attempt or one more sympathetic member on the court is all they need to win.

Monday 20 May 2019

BUSINESS DAY

COMPANIES & MARKETS

Mojec, AEDC deepen prepaid meters retail financing option for Abuja, Kogi customers

COMPANY NEWS ANALYSIS INSIGHT

Pg. 19

OIL & GAS

11Plc declares 825k dividend records highest Return on Equity (ROE) among peers DIPO OLADEHINDE

espite a plethora of challenges bedeviling the sector, 11plc (formerly Mobil Oil Nigeria Plc), a player in Nigeria’s downstream space has taken its shareholders through the bright side as it approved N2.9billion for payment as dividend translating to 825 kobo per 50k share for the financial year ended December 31, 2018. The dividend represents 32 percent of profit after tax of N9.3billion which rose by 24 percent from N7.5 billion in 2017. Speaking at the company’s Annual General Meeting (AGM), chairman of 11plc Ramesh Kansagra said in spite of the uncertainties in the economy and challenging business climate, 11plc continued to maintain impressive volumes and post positive earnings in 2018. “11plc made significant strides during the year as we continued to experience some benefits of the investment we made from the second half of the year,” Kansagra said. 11plc’s chairman also raised concerns about the insecurity challenges facing the country with continued with sporadic activities of insurgents in the North East as well as conflict between farmers and herdsmen which had resulted in wanton destruction of lives and property across the country.

“This situation was further compounded by the crises of separatist agitation in the south east and militancy in the south and south zones of the country,” Kansagra told shareholders at the AGM. The business and economic space was characterized by several challenges during the year. The economy nevertheless maintained a positive growth trajectory driven by the recovery of oil price for the most part of the year. The chairman also narrated to Shareholders how successful its entry into the sales and marketing

of aviation Turbine kerosene (ATK) at ground Aviation Terminal (GAT), Lagos in the fourth quarter of the year under review had been. “From the lubricants perspective, our blending plant upgrade and increased warehouse capacity has ensured our ability to increase our production and hold more of our finished goods and raw materials,” chairman of 11plc said. This will guarantee an increase in the company’s market share and dominance in the premium lubricant segment. Last year, 11Plc recommenced

the sale and marketing of aviation jet fuel at the Murtala Mohammed International Airport and General Aviation Terminal (GAT – Domestic), in collaboration with Air BP. The company’s aviation business, which has been inactive for the past five years is being revitalized in the wake of the construction of a new 20 million litre Aviation Turbine Kerosene (ATK) tank, laying of new ATK pipelines linking the company’s facility at Apapa with the Apapa Jetty. Among its peers in 2018, 11plc recorded the highest Return on Eq-

uity (ROE) among peers operating in Nigeria downstream sector. What this means is that these firm are effective in turning the cash put into the business into greater gains and growth for the company and investors. The higher the return on equity, the more efficient the company’s operations utilizes available funds. Although, 2018’s ROE which is a measurement of profitability of how much profit a company generates with the money shareholders have invested, reduced averagely from 17.94 percent in 2017 to 13.13 percent in 2018. However, 11plc recorded the highest 2018’s ROE of 27.63 percent compared to 27.49 percent in 2017 while Total Nigeria another downstream firm had the second ROE of 25.90 percent in 2018 compared to 28.41 percent in 2017. Our analysis reveals that all the six oil and gas firms considered were affected by shrinking operating margins worsened by declines in operating profits in some of the companies. But in spite of this, 11 Plc shed 2.41 percentage points to generate 8.04 percent return on its sales in 2018, overtaking Oando with 6.48 percent as company with the highest operating margin. Only Forte Oil and 11 Plc grew operating profits in 2018. Forte Oil’s earnings before interest and taxes surged 1.52 percent to N2.68 billion, while that of 11 Plc was up 1.15 percent to N13.24 billion, the highest in the subsector after Oando’s N44 billion.

OIL & GAS

Seplat assures shareholders of capital appreciation, production growth BALA AUGIE

eading indigenous Nigerian oil and gas company, Seplat Petroleum Development Company Plc has posted N73 billion profit for the period ended, December 31st, 2018, with an assurance to grow production, drive increased shareholder yield and capital appreciation. The Company reiterated its commitment to stronger growth in the oil and gas sector as it holds its sixth Annual General Meeting in Lagos. Seplat also announced N228billion revenue in its full-year 2018 financial result ended 31 December 2018. The figure represents an increase of 65 percent from the ₦137billion the company made in 2017. Seplat, listed on both the Nigerian Stock Exchange and London Stock

Exchange, also recorded N73 billion profit before differed tax, indicating 480 percent increase from ₦13 billion which the company made over the same period in 2017. A review of Seplat 2018 results indicates positive performance across all financial indices, confirming the Company’s position as one of the well managed indigenous oil firms in Nigeria. The gross profit for the period grew by 84% to N120billion from ₦65billion reported in December 2017. Operating profit stood at ₦95billion, representing a growth of 177% over ₦34billion recorded in the corresponding period of December 2017. Seplat’s net profit after tax dipped by 45% from ₦81billion recorded as at December 2017 to ₦45 billion in December 2018. In his address to shareholders, the Chairman, Seplat Petroleum, Dr. A.B.C. Or-

jiako, said the company’s 2018 operational and financial performance reflected the significantly higher year-on-year levels of production uptime at its core oil producing assets combined with a firmer, albeit still volatile, oil price and increased contribution from the company’s gas business. He added: “As you are aware, our results from the previous two years were characterised by the extended period of force majeure at the Forcados terminal from February 2016 to June 2017. “As we enter 2019, our reliable production base, low unit cost of production and discretion over capital, commitments will allow the business to remain highly free cash flow generative and profitable. In the absence of any major interruption or force majeure event, this will enable Seplat to honour its dividend policy and pro-

vide an attractive yield to our shareholders in addition to the potential for capital appreciation.” According to Orjiako, the company will selectively invest in low-risk oil production drilling opportunities within the existing portfolio and the continued expansion of the gas business, with 2019 set to be the year that activity intensifies at the large scale Assa-North and Ohaji-South (ANOH) gas and condensate development. He added: “Seplat remains an ambitious growth-orientated company that is in a position of strength to capture inorganic opportunities where we can leverage our competitive advantages to seek out carefully considered, price disciplined and value accretive acquisitions. Finally, I would like to thank all our employees and wider stakeholders for their efforts and

continuing support and I look forward to updating all of our stakeholders on our progress throughout the year ahead.” Also speaking at the AGM, the Chief Executive Officer of Seplat Petroleum, Mr. Austin Avuru, said: “Seplat has delivered an excellent operational and financial performance resulting in robust profitability

and cash flow generation providing us with an extremely solid foundation for growth in the coming years. At our core assets in the West, OMLs 4, 38 and 41, the extension of the license to 2038 means that we can confidently plan and invest long into the future to realise the full potential of those blocks.

Editor: LOLADE AKINMURELE (lolade.akinmurele@businessdayonline.com) Graphics: David Ogar

Monday 20 May 2019

BUSINESS DAY

COMPANIES&MARKETS Only market forces will deliver stable power, not govt interference – Century Power CEO (part 2) When Century Power Generation (CPG) was birthed, it had its gaze on scaling up electricity generating capacity at utility scale, backing government’s drive at privatisation. Maintaining focus, it is currently developing a 1500MW gas-fired power plant in Okija, Anambra State. CHUKWUELOKA UMEH, its chief executive officer says Nigeria’s ambition to generate sufficient power for its economy will be realised quicker if the government allows market forces prevail. TEMITAYO AYETOTO brings his excerpts from an interview with journalists at Nestoil office in Lagos.

o where does the knowledge gap lie for consumers and government? The bigger problem is that ordinary masses do not understand these dynamics. That is why they continue to pressure government for lower tariffs. To address this issue, we can start by educating people through local leaders. This was done in the past. They should go to the Emirs, Obas, Imams, and the leaders in different communities before they raise the tariff. People understood if they see how it benefits them in the long run. Let us educate the masses if we need to, get in the masses and then we’re not charging for the power people do not use, the people will welcome it. Some still believe that the unbundling of the power sector was a error by the government of the day then as people can’t see the difference promised then. How do you see this? The government did a very good job in unbundling this industry. However, these licensees will profit from the government deregulating the market even more. Think about it. You already own the assets. All you need to do is optimize your asset. Invest money to optimize your market to your assets. And with that investment, you will be able to make more money at the end of the day. Even though competition is coming, you’ll still be able to make money and I said to private companies today they’re currently issued. Currently, there’s no competition. We are all partners right now because we’re seeing that Nigeria needs 20 gigawatts. Nigeria doesn’t need to integrate. You probably need about 60 gigawatts. I mean South Africa has a fraction of the population that Nigeria has but South Africa currently produces about 50 gigawatts of power and is still not enough. Nigeria has a population of 180 million at least and every month we produce less than 4 gigawatts of power. So as far as I’m concerned there’s no competition. We’re not competitors. Where we should all be partners. There’s a lot to go around and year in year out we will be struggling to meet the demand. But the problem is that you don’t really seem to see the demand because every Nigerian that can afford it has a generator on their own. So you don’t really know what the real demand in Nigeria is. When MTN came to Nigeria they thought that 500,000 lines were too much but now it is still struggling to meet the demand just like every other cellphone company. When private GENCOS and private Discos start working properly, they

will struggle for many years to come to meet the demand and this is real. This is not speculating, this is real. A lot of us today generate our own power and pay a much higher tariff than what we can get from the grid system. How will all these combine to stimulate the economy to grow? Let’s start with when we generate 500 megawatts and industries are able to now start producing goods at affordable prices. Currently, we export timber from Nigeria but we import toothpicks. Does that make any sense to anybody? Guess what, because of our power situation, it is probably easier to import tooth picks than to produce them here. But if we are selling power from Century power and we give power 24 hours a day, seven days a week reliably at an affordable price. Companies will start producing goods and as they’re producing goods they’re hiring people. Nigerians are hiring Nigerians. They’re providing direct and indirect employment. It means more people will have jobs and can buy more goods produced here. Don’t forget we have the population. It is that simple. Think about it today with the homes that use gas to cook. You buy gas in cylinders. You shouldn’t be doing that. You should have gas pipelines run into your houses just the same way it is in other countries. I lived in America. All I need to do is open the line and gas is going on; I get billed as I use. We should have that in Nigeria as more gas is produced. You know we import fertilizer in Nigeria today because we don’t really have the gas available to produce that fertilizer. But the government is doing a fantastic thing in forcing the people to get into agriculture which is a very good thing but they are importing fertilizer. We should produce fertilizer here. We have gas. We shouldn’t import bottles. We should produce bottles here because we have gas. We shouldn’t import plastics because we have the gas to produce plastics here. www.businessday.ng

So there’s an add-on effect. So it goes round and round. So Century power cannot go to sleep from producing power. There used to be excitement in the industry but not now as banks are careful to support the industry due to risks. Do you believe the excitement can return and banks will live up to the billing to help investors in the power industry thrive? So there used to be a lot more excitement in the industry from the banks and the private investors. There’s still a level of excitement because they know it’s a matter of time for us to get it right. Again we’ve been talking about the potential of Nigeria. We must move from potential to reality. Private citizens, private companies are starting to understand that this industry can actually work. So they are asking for the industry to work. Government is getting under increasing pressure to allow the industry to work so the banks know that this will happen. And so they’re gearing up to make sure it does happen. And when it happens that they have a piece of the pie so they’re not rushing to give money to you but they’re saying let’s see the government do what it needs to do and then we’ll give you money to make sure that we don’t lose money gambling. Nobody wants to lose money essentially so we’re waiting for the government to do some of the things it needs to do to make the industry work. So far, what challenges has the journey brought? The journey has been tougher than expected. Regulations in the country have changed many times in relation to the energy industry. You know the privatization started in 2011 and the rules were clear but along the lines, the rules changed and keeps changing. Private investors have had to also change their own rules of https://www.facebook.com/businessdayng

engagement. Some investors have left the country, foreign and some local companies that initially got involved also left and have gone to do other things but we are still at it. We are still at it because you can sit in your house or in your office and point fingers that the government is not doing what it’s supposed to or you can be part of the solution. So the journey has been very tough because each time the regulations change, we have to work with a new set of regulations and a new set of regulators and while you’re doing all this you’re spending money as it’s very expensive to hire the people that do this work. You know the lawyers, the technical people and the commercial people, are very expensive. We invested a lot of money, millions of dollars of our hard earned money in this. However, we believe that the government wants to do the right thing. But what we keep asking for is for the government to see private companies like ours as partners in this journey because the government alone cannot do it. The private companies alone cannot do it. We need the government to create the enabling environment for private companies to do what they need to do. The government must provide the enabling environment and we’re here to advise them to do it properly and for the good of the populace and it is our prayer that the government will listen more, that the government will create more avenues to listen to private companies to help them get along. When is Century Power going to deliver the 1500MW of electricity facility in Okija, Anambra? Our current schedule shows that the project coming online by the second or third quarter of 2022. Now that is assuming that we can get to financial close by the first quarter of the next year 2020 and for us to get to financial close, there are several things that the government needs to do. There are several critical documents that they have to approve and you know things have changed in the government. You know the will seems to still be there. Several of the people in the regulatory bodies are different. Several people have changed and any time there’s a change, you need to bring the new people up to speed and justify why things have to be done in a certain way. This is what causes a lot of delays. I mean the government has to do what they do. People have to change every now and then so that’s understandable. However, what we ask is that the learnings that were achieved by people in office should not be lost whenever there’s a change in the office. And if the learnings @Businessdayng

are lost, which we’ve seen happen several times, it’s almost like we’re restarting again. So you have to restart over and over and over again and you have to keep paying your consultants to do the same thing over and over. Don’t get me wrong; some of the people, some of the regulators are very intelligent people. Some of them are very capable; they have very smart lawyers; they have very some very smart engineers and some very smart economists. You know when you talk to them and see they understand the industry, some know what needs to be done. However for them to do the job, there are certain things that the government needs to put in place, certain things that the Minister of Finance has to agree to, certain agreements that the Minister of Justice has to approve and so on and so forth. So for us to get the financial close by the first part of next year which was shown on our schedule, some of these documents need to be signed in a timely fashion. And the government has to be in support. Otherwise, we can’t achieve this and what happens is the people continue to suffer because, at the end of the day, it is the people that the government wants to protect are the ones that still get to suffer at the end of the day. Do you think a nuclear source of power is the next thing for the country? Is Nigeria ripe for nuclear power? I don’t think Nigeria should be looking at nuclear energy at this point. You know we should focus on what we have an abundance of, which is natural gas. It’s clean, it’s efficient. We should focus on natural gas where it is doing some hydro plants. Keep doing what you’re doing in hydro. There a lot of people that are trying to do renewables. There is a place for a small quantity or small amount of renewables in the country. They should do that. Nobody should talk about nuclear right now because for nuclear plants, you have to do them carefully. And the potential problems that you can have from nuclear plants is not something that Nigeria can handle at this point. We’re not set up to handle that. You saw what has happened in Japan. You know when they had the nuclear disaster inflicted. There was a big problem. We can’t afford that in Nigeria and we’re currently not set up to do that. So we should stay very far away from nuclear power as a country. Gas is easily done. It’s much more easily done. Companies are flaring gas today. We should capture the flares, right. And we should drill associated gas wells and produce a lot of gas. That’s what should be our focus today not nuclear. We’re many years away from nuclear

Monday 20 May 2019

COMPANIES&MARKETS

BUSINESS DAY

Business Event

POWER

Mojec, AEDC deepen prepaid meters retail financing option for Abuja, Kogi customers KELECHI EWUZIE

ojec Meter Assets Management Company as part of its readiness to kick start Meter Asset Providers (MAP) scheme has entered into a partnership with some banks on retail financing which would offer electricity consumers under Abuja Electricity Distribution Company (AEDC) access to prepaid meters. MAP is a scheme app rov e d by t h e Ni g e r i a n Electricity Regulatory Commission (NERC) through a regulation meant for the provision, supply, installation, and maintenance of end-user meters by Meter Asset Providers with a view to fast track closure of the metering gap and end estimated billing in Nigeria. Chantelle Abdul, managing director, Mojec International Limited, while

speaking at the press launch to commence the scheme said that the company is fully ready to bridge the metering deficit with MAP within the AEDC and other coverage areas by ensuring that electricity consumers get access to top quality, smart electricity meters. “Mojec is fully on ground to provide high-end quality smart, pre-paid meters to customers within these areas. With this partnership, we believe that electricity consumers who have been angling to get smart meters will now heave a sigh of relief ”, she said. Abdul said the partnership with AEDC and partner banks which include Polaris Bank, First Bank, Wema Bank, Unity Bank, Jaiz Bank, Keystone Bank, Zenith Bank, Sterling Bank, and First Option Micro Finance Bank was to consolidate on its initial launch to ensure that electricity consumers in specific

coverage areas get the opportunity to have access to meter through the financing scheme provided by the banks. James Momoh, chairman, Nigerian Electricity Regulatory Commission (NERC), lauded Mojec for taking the lead in driving the process that ensures that electricity consumers are relieved of the untold hardship brought about by estimated billing which is clearly evident in its role towards the full implementation of the MAP Scheme that allows all customers easy and direct access to meter assets. Momoh who was represented by Shettima Abdulkadir, general manager, Finance and management services, NERC, commended Mojec International for their aggressiveness in the procurement process which had seen the company become a big partner with virtually all the DISCOs in the implementation of the MAP scheme.

????????? L-R: Abigail Sholanke, director of projects, Nigeria Communication Commission; Funke Atanda, senior manager, product portfolio, Vodacom Business Nigeria; Ufuoma Emuophrdaro, convener, Girls in ICT, and Chimdinma Adugen, business development manager, hospitality, education and large enterprise, Vodacom Business Nigeria, at the International Girls in ICT Day event held in Lagos.

FINANCIAL SERVICES

Asset Custodians reiterates optimism on Nigeria’s economic potentials MODESTUS ANAESORONYE

takeholders at the 8thAnnual Nigerian Investors Day in London, organized by the Association of Assets Custodians of Nigeria (AACN) have reiterated their optimism about Nigeria’s economic potential and its capacity to attract foreign investments. At the end of the one-day conference, with the theme, ‘Nigeria: The Economics of the Capital Market,’ participants were positive that Nigeria could lead the rest of Africa as an investment destination. The mood at the London event on Thursday, May 9, 2019, took a bullish mode when news filtered in that Godwin Emefiele, Governor

of the Central Bank of Nigeria (CBN), who was present at the event had been re-nominated for a second term in office. Setting the ball rolling, AACN president, Taiwo Sonola, emphasized that the Association is committed to the promotion of portfolio investments in Nigeria, noting that “The potentials of the Nigerian economy are enormous and it is important that the opportunities are showcased globally.” She assured that the Association would maintain the reputation of the Annual Nigerian Investors Day as a veritable platform to promote the Nigerian economy, adding that the next edition would be reinvigorated and focused on a salient issue on Africa’s

biggest oil producer, with the purpose of unlocking opportunities in such an area. 2019 conference focused on investor confidence, processes, infrastructure, products, governance, regulations and market developments. “The aim is to build foreign investor confidence and provide a platform for foreign investors to network with the Nigerian capital market regulators, operators with particular focus on custodians, fund managers, broker-dealers, and regulators and also provide a forum for the promotion of custody business in Nigeria. It also provided opportunities for participants to air their views and challenges,” Sonola said.

Transsion Holdings launches ‘Joga Comedy App’ JOSEPHINE OKOJIE

ranssion Holdings, a Chinese firm has launched ‘Joga Comedy App’ to provide unlimited funny jokes, videos, memes street interviews and loads of pranks to Nigerians. The app is the latest comedy app for smartphones users in Africa and Nigeria in particular. It is completely built and designed to give a maximum high definition of hilarious content. “The Joga app is like our Nigerian Instagram that allows you post only comedy and funny contents. It is a three in one package that allows pictures, text and video post unlike other social media apps,” Joana Achoba, team lead, Joga said. “The unique thing about the Joga apps is that it allows direct and easy download of any content without having to down-

load another app,” Achoba said. She stated that the app, unlike other apps, allows you to download and share videos and pictures directly, explore hot and trending topics and also provide the opportunity to connect with other users. She noted that the app allows influencers post and earn money for every quality content. According to her, Joga users are of all ages because comedy and fun, in general, is embraced by both the young and old. Since its launch, the app has recorded over 100 thousand active users monthly. Also speaking, Louis Awode, content operations specialist, Joga, said that users can customise their Joga experience by clicking on tags that are most important to them to create a personalized feed content. “We understand the fact www.businessday.ng

that suicide cases are on the rise in Nigeria because the country is in distress. With the Joga comedy app, Nigerians can forget their worries as it brings comedy directly to them by just a single click,” Awode said. “Most of our active users currently are, youths, comedians and upcoming influencers” he added. The app recently, partnered with one of Africa’s biggest news aggregator, Scooper to have its channel created on its platform in a bid to increase its reach across Africa. As a way of reducing the rate of unemployment in the country, the Joga App has opened its platforms to intending content creators to earn as they post. JOGA other ecological chain consists of products such as Boomplay, Tecno, Infinix, Itel amongst others.

L-R: Damola Akindolire, MD, Alpha Mead Development Company; Alaba Fagun, head of facilities, Union Bank Plc; Femi Akintunde, GMD, Alpha Mead Group; Olusesan Ogunyooye, head, marketing and corporate communications, Alpha Mead Group; Anne Rinu, head of properties, Nigeria and West Africa, Standard Chartered Bank Plc; and Babatunde Green, MD, Alpha Mead Healthcare Management Service after one of the expert panel at the Nigerian Facilities Management Roundtable.

L-R: Scott Casad, former president, International Society for Performance Improvement (ISPI); Rose Noxon, president ISPI; Lucy Surhyel Newman, MD/CEO, Financial Institutions Training Centre, and Nancy Crain Burns, treasurer ISPI, at the presentation of the Thomas F. Gilbert Distinguished Professional Achievement Award to Newman, at the ISPI 2019 Annual Conference, in New Orleans, the United States of America.

L-R: Pius Olanrewaju, national treasurer, Chartered Institute of Bankers of Nigeria (CIBN); Bayo Olugbemi, 1st vice president/chairman, board of fellows, CIBN; Uche Olowu, president/chairman of council, CIBN; Yakubu Gowon, former head of state, Federal Republic of Nigeria; Ken Opara, 2nd vice president, CIBN and Seye Awojobi, registrar/ CEO, CIBN, at the CIBN Extraordinary Fellowship Investiture in Lagos

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Monday 20 May 2019

BUSINESS DAY

INTERVIEW

‘Anybody still flaring gas, is actually burning petrodollars’ Seplat Petroleum Development Company Plc held its annual general meeting last week. Over the last three years, the success of the indigenous oil and gas company has earned the admiration of investors and other Nigerians. In this interview, A.B.C. ORJIAKO, Seplat’s chairman throws light on the operations of the company and the Nigerian oil and gas industry in general. He spoke with OLUSOLA BELLO, excerpts. How was Seplat able to recover from the oil slump that happened few years ago? rankly, our business is not based on the volatility of the oil market. Our business is focused on the effective and efficient delivery of projects and operations. Therefore, we pride ourselves to be a low-cost biooperating company and therefore, in spite of the volatility and low oil price, our business continues to remain comfortable and that is really what we have demonstrated in the results you are seeing and we will continue to build on that.

Your investment in the gas sector is enormous. Will we see you in the midstream soon? Are you going to drill more gas wells to support your gas processing plant? We are already in the gas midstream business. Last year, we spoke about two main things in terms of our gas business. We spoke about what we have been able to do in our gas growth, we added the capacity to process that gas and we are able to increase that processing capacity to 525 million scf a day and that was phenomenon. This year, you are also conversant that we are taking the first investment decision for our next gas business, which is the ANOH Gas Processing Company, and is more like an addition to our midstream business. That will add another 300 million scf in the first phase. On the question of whether we will drill pure gas well, it is just a function of what we have to do to meet the capacities of what we have installed. Now, the existing gas reserves we have, have a

combination of associated gas and non-associated gas. When we have the need, we will drill the wells as the need arises. That is precisely what we will be doing, but we are making sure we are maintaining our leadership position in being the number one gas supplier to the domestic market. Thirty (30) per cent of gas to power the Nigerian market is a quite significant aspect of what we are doing.

the Azura Power plant, which other companies are you looking to partner with when the ANOH gas project becomes operational? The best way to describe Seplat, which tallies with a lot that has been spoken about our differentiation, is that we have created a race in this competition that only us are running and frankly, by the time the others come, we will create other races. Our gas development is one of those types. We have demonstrated the ability to do willingbuyer/willing-seller supply of gas and in addition to meeting our domestic supply obligations. There are not many companies that have met this and what I will like to say about Azura is that it is a willing-buyer/willing-seller arrangement and it is a take or pay arrangement. The people around there are happy that Azura has come on stream and it is actually one of the successful Independent Power Projects (IPPs) in the country and we are happy to be associated with it. The truth of the matter is that the demand is high and it is growing so we are not indeed short of the market. Gas is one market where supply creates demand, but in this case, we have a situation where demand is already existing before the supply; so, we can only do one thing and which is continue to grow that business and if you look at the infrastructure gap in Nigeria for power alone, you can only say that the future is bright and we can only grow that business.

How would you assess the security situation in the NigerDelta? Are you comfortable with the present situation and what do you think could be done to make things better? Frankly, I must say that overall, the Niger Delta security situation has improved tremendously, but there is always room for improvement and the only thing we can do is that all hands must be on deck; the communities will play their role, and to get them to play their role, the operating companies must play their roles. We will like to see a situation where the relationship continues to improve between the operating companies and the communities. Secondly, the government must also keep to their promises and once you put all of this together, you can only see improvement and more calm in the Niger Delta. Infrastructure development, employment creation especially among the youth, are the key instruments to maintaining long term peace in the Nigeria Delta

On the Assa-North Ohaji-South gas project, when are we expecting it to come on stream and what impact will it create to the nation’s economy?

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Orjiako

I think from Seplat’s point of view, we have contributed more than $100 million. The government contributed its own $100 million and we are expecting that we will be contributing about $50 million in the near term. This project is already on track and we have taken the first investment decision and we are going down with three contracting processes and our guidance is that we will have the first gas by the first quarter of 2021 and we believe we will be able to deliver on that. With respect to the impact on the national economy, 300 million scf a day of gas by conversion, translates to about 3000 megawatts of power and that is 50 per cent of installed capacity in Nigeria. It will have a phenomenal

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impact and we are expecting that once this comes on track, it will enhance the demand in the western Niger Delta and more importantly, it will create demand in the eastern Niger Delta and we have already began to see that happen. We have seen a lot of people in the eastern states and even the south-south coming to make inquiries about buying this gas and this is a very welcome development. Apart from power, there are also other aspects of the economy that this will impact - the agricultural sector, industries and overall; as well as the manufacturing sector will be impacted. Therefore, when we say that Seplat is a company that is well keyed into the economic development of Nigeria, we mean that we are extremely @Businessdayng

impactful with employment and empowerment key in our operations. So, apart from gas to power, the real trickle-down effect or the real multiplier effect in the economy will be a phenomenon and I

am looking forward to the entire country to be extremely happy with what we are doing and for other companies to emulate. As one of the major suppliers of gas to

‘

We are not only committed to the gas business just for revenue, because we pride ourselves as a company that keeps very high in our priority, environmental stewardship, and we see that the gas development will not only take away flare from the environment but will also bring cleaner energy in the environment and that is key

It is assumed that the commercial and financial framework for gas-to-power is weak. Is it still cheaper to flare gas despite the recently passed law on gas flaring? That is not really correct. It used to be the case that domestic gas price was less than 50 cents per thousand scf; this is very important and many people must know this. If you have that kind of pricing and the time the international gas price was over $10 and the domestic price was less than 50 cents; really, investment is like water flowing downstream, it is not going to flow upstream. Therefore, it became very difficult for people to invest in the gas business and the second thing that happened was that by 2012, the government took a bold step and came out with its gas revolution plan and that gas revolution plan has various components to it. One was the price and they imwww.businessday.ng

mediately moved gas prices - the domestic market price from less than 50 cents per thousand scf to structured increases, $1.50, $2.50 as well as addressing the processing fees and tariff. Therefore, at the back of this programme, we immediately launched our gas expansion and commercialisation programme. By the time we started investing, we already had the market at the right price that was also increasing, so it was not quite correct to say that the gas price in the domestic market is low. When prices at the domestic market was less than 5 cents, transfer price to NLNG was $2 so there was obviously no incentive to invest in the domestic market at that time, but all of that has changed. The Nigerian domestic price is in $3 range and above. Transfer price at NLNG is still at $2.So, there is a lot more incentive to put gas in the domestic market and more so, the domestic market is increasing so it is a no brainer. In respect to the gas flare, it is really a true statement that anybody who is still flaring gas today, is actually burning petrodollars because the penalty that has been revised will mean that you will pay as much penalty as you would have received revenue for investing in the gas. So, that by itself is an investment for people to invest. From my own perspective, we are not only committed to the gas business just for revenue, because we pride ourselves as a company that keeps very high in our priority, environmental stewardship, and we see that the gas development will not only take away flare from the environment but will also bring cleaner energy in the environment and that is key. The other aspect of this business will include LPG. In fact, somebody raised the issue in our AGM and one of the things we do with LPG is to take people away from burning bushes and firewood to take cleaner ways of cooking, so it has a very multifaceted advantage to the society and that is why we are doing it. Are you saying the current arrangement under the new law will encourage investors to come into the sector? Yes, that is the point. The core domestic gas price is adequate to attract investments in Nigeria and it is comparable to international gas price and people should be able to invest and that is why we

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are investing and we are making money. Can’t you see in our report that gas revenue is almost getting to 50 percent of oil revenue and it speaks for itself? Are you venturing into petrochemicals in the future? Obviously, our business is in the energy sector which is a broad@Businessdayng

band and we will definitely take one step at a time. Today, we are concentrating in our oil and gas business where we are consolidating our upstream business in production. We have now launched the midstream and will like to see how we progress with that. We consolidate before we take other options and we are very focused.

Monday 20 May 2019

BUSINESS DAY

real sector watch

Nigerian pharmaceuticals eye 70% of local drug market …target new investors, technology in biggest medicines expo ODINAKA ANUDU

igerian drug makers are planning to take 70 percent share of the local medicines market, leaving the remaining 30 percent for importers. They are upgrading their production facilities and strengthening capacities to reverse the trend where 70 percent of the medicines market is controlled by importers while the remaining 30 percent is left for them. “With strategic collaborations with local and international partners, we can reverse the trend of 70 percent :30 percent ratio of medicine importation against local manufacturing ,” Frank Muonemeh, executive secretary, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), said at a press briefing in Lagos at the weekend. Nigerian manufacturers have invested over N400 billion in the last 20 years in upgrading facilities to acquire the World Health

L-R: Frank Muonemeh, executive secretary, Pharmaceutical Manufacturers Group (PMGMAN); Abibu Adekunle, financial secretary/chairman publicity committee, Pharma Expo 2019; Fidelis Ayabae, chairman, management board, PMG-MAN; Agboade Degun, member ,PharmaExpo committee 2019 and Jacob Kurian, member, at a press conference on the forthcoming 2019 Nigerian Pharma 2019, 5th edition, in Lagos weekend . Pic by Pius Okeosisi

O r g a n i s a t i o n ( W H O ) ’s prequalification needed for international competition. Fidson Healthcare has pumped between N20 and N25 billion into its facilities in Lagos and Ogun states, said Fidelis Akhagboso Ayebae, founder and chief executive officer, who doubles as chairman of PMG-MAN. Speaking at the press briefing, Ayebae said though the local pharmaceutical industry is challenged, it is

doing its best to stay afloat. “Nobody can make our lives so bad that we would want to sell,” he said. He explained that the Nigerian manufacturing sector is the most challenged due to man-made, not-too-good conducive environment in which firms operate. “Those of us that have the courage to set up manufacturing plants, produce and create jobs are the ones being punished by the system,”

he said. He said rent seekers— including foreign exchange dealers and portfolio investors— benefit more from the Nigeria while manufacturers, who invest directly in the economy, bear the brunt of harsh environment. On the forthcoming 5th expo tagged ‘Strategic Collaboration for Medicine Security, Affordability and National Sufficiency’, which will take place on June 28

and 29 in GRA Ikeja, Lagos, Ayabae said this year’s event promises to be better than those before. He said the focus is to bring new technology from across the world to expose local manufacturers to revolutions happening so that they can continue to produce efficacious and quality drugs. “Nigerians will have the benefit of buying madein-Nigeria products at discounted rates,” he said. He further explained that it will enable local drug makers to have new partnerships with foreign investors. “Some of us today have foreign investors. Fidson today is owned by foreign investors to the tune of 25 percent,” he disclosed. He further disclosed that the Bank of Industry (BoI) and NEM Insurance are key sponsors. Muonemeh, executive secretary, explained that the expo will attract 200 international pharma machineries exhibition firms from six countries and nearly 10,000 pharma and related sectors. He stated that special buyer-seller sessions will happen and will bring to-

gether over 500 pharma and allied products manufacturing companies in close business discussions to generate active business relationship. Speaking further on the benefits of participation, he said participants will meet West and Central African leading market place for pharma machinery, with an opportunity to access N300 billion intervention fund for upgrade and capacity building meant for local drug makers. Orimadegun Agboade, chairman and CEO of Orfema Pharmaceutical Industry, said Nigeria can produce all of its malarial drugs, urging government to check donor agencies who sell foreign drugs at lower prices. Adekunle Abibu, managing director of Pharma Deko, said local drug makers need soft loans. “You cannot build a factory with loans from commercial banks that charge high interests and expect you return to them as soon as possible,” he said. “When you patronise us, we increase local vale addition and create jobs,” he added.

Nigeria wants China to set up local manufacturing plants ……As China Homelife Trade Fair attracts manufacturers, buyers Gbemi Faminu

igerian experts say China should consider establishing local manufacturing plants as the country has the raw materials and human resources needed to run successful industry. Speaking at the opening ceremony of China Homelife, which showcased the products of the world’s fastest-growing country, Anayo Agu, special adviser to the Enugu State governor on SMEs, said Nigeria has been and remains the choice market in Africa for foreign investors, because of its population, strategic location, allocation and abundance of resources that can be used for production. He

said the country represents an incredible opportunity for companies that intend to explore opportunities in West Africa and Africa as a whole. “We are no longer interested in importing goods, rather we want to localise what is consumed in the country, especially if we want to help the SMEs in Nigeria grow and also create jobs for Nigerian citizens,” Agu said. “We have the raw materials and skills to produce most of the goods presently imported, so we encourage those in other countries to establish businesses in Nigeria or enter into a partnership with Nigerian companies,” he added. He said the problem of most investors is their scepticism towards longwww.businessday.ng

term investment plans in the country and advised the participants to seek opportunities to localise their products and establish themselves. He added that the government is capable of ensuring measures to create an enabling environment for them, including

use of tools such as tax waivers, land provision, enabling policies and government intervention. He urged the government to move the country to the next level and incorporate economic growth from subsistence to industrialisation while fostering policies

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that will improve citizens’ standard of living. The 2019 exhibition, which started on May 16, was the second year in the series, and was graced with over 2,500 participants from China as well as Nigeria, with 160 exhibitors showcasing various products in the manufacturing sector, including machines, furniture, appliances, and leather goods. Binu Pillai, chief operating officer of Meorient FT, said there are various factors that make Nigeria attractive to business owners, including its population, opportunities, strategic location and the dynamics of the market. He said the turnout for the second edition of the exhibition was greater than the first edition, which was encouraging. @Businessdayng

Jude Chime, organising coordinator for the exhibition, said the exhibition was aimed at promoting business relationships between China and Nigeria, improving industrial partnership as well as reducing Nigeria’s reliance on importation, adding that the exhibition offerred consumers a platform to purchase standard products at competitive prices. Onwordi Emeka, one of the participants, who was already on his way to becoming a partner to one of the firms, expressed his excitement and said, “Leveraging on this platform, I just got myself an international business partner. This will be a boost for my business as I engage in importation, buying and selling of products.”

Monday 20 May 2019

BUSINESS DAY

real sector watch

Negative margins show why Nigeria must protect palm oil makers Gbemi Faminu

t is bad times for palm oil makers as poor border policing hits the margins and prospects of industry players. The government must now protect local players to save their huge investments and encourage more direct investments. Okomu’s first-quarter (Q1) financial statement shows that revenue declined by 42.5 percent to N4.2 billion, from N7.3 billion in same period in 2018. Similarly, profit after tax declined sharply by 71 percent to N1 billion in Q1 2019 from N3.5 billion in Q1 of 2018. The loss is further reflected on the company’s shares on the exchange board as it dropped by four percent in trading during the course of last week and a year-to-date loss of 2.89 percent. Presco has not released its result, but experts are not optimistic. Smaller players are also hard hit by the state of the market. Romanus Oguegbu, managing director of a palm oil

mill in Uburu, a community in Imo State, is cutting down production. He owns a machanised mill and usually produces 400 gallons (of 25 litres) each week. But this has dropped by half. This has also affected the number of workers he employs. The number of workers has fallen to eight, from over 15 during peak demand. Santosh Pillai, managing

director, PZ Wilmar, a big palm oil producer, told BusinessDay that there are illegal and questionable imports into the country, meaning that genuine investors do not have a level playing field. “It discourages further investment by investors like us and creates unhealthy competition in the market,” Felix Nwabuko, managing director of Presco, said.

According to a report by the Food and Agriculture Organisation of the United Nations, “It is estimated that Nigeria has lost $10 billion in annual export opportunity from groundnut, palm oil, cocoa and cotton alone due to continuous decline in the production of those commodities”. Palm oil is currently the most consumed edible oil in

… Govt has equipment to factcheck Chinese claims - Lawanson

he China International Auto Products Expo (CIAPE) and Lagos Chambers of Commerce and Industry (LCCI) hosted the 8th Auto Parts Expo earlier in May. Speaking at the pre-exhibition conference, Zhang Yazhu, vice chairperson of CIAPE, said that for four consecutive years, she has brought manufacturers of auto parts from China to exhibit their products at Lagos auto parts show. She explained that some of the renowned Chinese auto brands that Nigerians are familiar with were represented at the auto show. She also explained that the Chinese version of the auto fair would take place in Shanghai, China, in October, 2019. She assured Nigerians not be scared to transact business with the Chinese companies, as they are good and trustworthy companies.

Ladi Lawanson, commissioner for transportation, Lagos State, who acknowledged that one of the challenges facing Nigeria is the ability to maintain existing equipment, added that maintaining vehicles would be sustainable. “A good well-conceived and well implemented maintenance is important in terms of sustainability,” he said. Lawanson said the government has adequate instrument, infrastructure and technically experienced personnel to checkmate the quality of the products the Chinese have claimed to have. “This is the reason for bringing them (the Chinese) to the ministry to interface with them, and not just bring them to the tuckshop,” he said. Adegbangbo Adebowale, chairman, LCCI Automobile Group, encouraged the automobile spare parts companies to leverage market opportunities in Nigeria due to the population of the www.businessday.ng

country. He said the millions of vehicles on Nigerian roads need to be serviced and m a i n t a i n e d w i t h s p a re parts, saying that Nigerians are ready to partner with the manufacturing companies for the purchase of their spare parts. He said although some basic spare parts are being produced in Nigeria, the population and the number of vehicles on Nigerian roads provide opportunities for Chinese spare parts manufacturers. “The millions of vehicles on Nigerian roads will need spare parts. The parts will be created by you. So, look for opportunities to partner with Nigerians,” Adebowale advised. Chris Deng, representative of Chongying Endurance Zhongyi Co., China, said his company produces shock absorbers for different vehicles and different models. He said, being the first time of coming to Nigeria to showcase their products,

Okomu oil, one of the industry’s big players in 2018, disclosed that it was planting 11,400 hectares at a new Extension 2 Plantation in Ovia North East Local Government Area in Edo State. This is after acquiring two additional machines that produce 30 metric tons per hour mills, valued at $50 million. Experts say poor performance was due to weaker palm oil prices and consumer demand as well as the country’s porous borders which encourage smuggling of the product. Influx of the foreign product into the market has diminished the sales of indigenous producers who despite battling high cost of production and operating cost incur losses which make their business suffer and as a result reduce contribution to economic development from the sector. “The industry needs to be protected to ensure investors keep creating jobs and adding value to the natural resource,” Remi Emeh, CEO of Remi Emeh Enterprises, a smallscale palm oil maker, said.

EPA will support local manufacturing sector — Amato

How CIAPE, LCCI collaborated on Lagos Auto Part Show JOSEPH MAURICE OGU

the world, with Malaysia and Indonesia being the top major producers. Palm oil is on the list of Central Bank of Nigeria (CBN)’s 41 items, but it is still being smuggled into Nigeria through Kano. Local sales peaked in 2016 during the foreign exchange crisis in Nigeria, but the product is now seen everywhere, including those that are adjudged substandard. According to WorldAtlas, Nigeria is ranked 5th position among the top palm oil producing countries in the world with 970,000 metric tonnes out of the 2.1 million metric tonnes of local demand. Indonesia and Malaysia are ranked 1st and 2nd, with 36 million metric tonnes and 21 million metric tonnes respectively, leaving them as major exporters of palm oil. Ninety percent of palm oil consumption comes from the food industry while the nonfood industry accounts for 10 percent. Products such as noodles, vegetable oil, biscuits, margarines, shortenings, cereals, baked items and cosmetics are made from palm oil.

he would do proper market survey to determine if there is a market for their products. But he was optimistic that with the population of Nigeria, there exists a booming market for the products because they produce and supply high-quality materials from China. “We think this is a very good market w ith huge capacity and people in Nigeria are looking for better quality,” Deng said optimistically. Deng, who looks forward to building a plant in Nigeria, said doing so will be the second phase of their enterprise with Nigeria. But first, he is looking for trustworthy partners who appreciate their quality products. Jack Wang, company representative of Hengshui Luxian, China, manufacturers of brake pads and brake shoes, said his company makes quality products that do not produce much noise. The Lagos Autopar ts Expo took place at the Federal Palace Hotel, Victoria Island, Lagos.

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Odinaka Anudu

ilippo Amato, trade counsellor and head of Trade Economic Section of the European Union Delegation to Nigeria and ECOWAS, says the Economic Partnership Agreement (EPA) will support Nigeria’s manufacturing sector. Speaking at a roundtable discussion of the Manufacturers Association of Nigeria (MAN) held in Kano State recently, Amato said it would boost trade and attract investments to Nigeria, contributing to economic growth and job creation. The EPA is a trade agreement which promises to open the West African market to the EU and vice versa. MAN opposes the agreement as one with unequal partners. But Amato thinks otherwise. “The EPA would need @Businessdayng

a focused session to be explained in detail, and I hope we will soon have an occasion to organise a focused dialogue with MAN in this respect,” he said. He said the EU has been working on the implementation of European Investment Plan (EIP), adding that the European Investment Bank (EIB) has also made significant investments in the country. “Since 2010, the EIB has disbursed €296 million under seven facilities signed with nine Nigerian banks, of which €210 million was disbursed to 50 sub-projects for on-lending in foreign currency, averaging €4.5 million per project. The sectors covered include wholesale & retail trade, education, manufacturing, construction, transportation, accommodation, human health, information & communication, electricity & gas, agriculture, scientific & technical activities,” he added.

Monday 20 May 2019

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

Old Mutual pushing innovative strategies to enhance ON THE MONEY Tips to manage personal access, deepen insurance penetration in Nigeria debts successfully

…partners Newhomes.Ng on digital solutions Stories by Modestus Anaesoronye

ocused on deepening insurance penetration in Nigeria by increasing accessibility, Old Mutual General Insurance Company Nigeria Limited, a subsidiary of pan-African Insurance Company and leading global financial services group, Old Mutual Limited has embarked on strategic partnerships that will enable the underwriting firm reach the mass market. The company understands that lack of access and poor knowledge about the benefits of insurance are major challenges that must be addressed to attract a larger population of the Nigerian people into taking protection in insurance. Old Mutual General poised to accomplish this target recently partnered Newhomes.Ng to provide an innovative online real estate market hub, on innovative digital insurance products for the industry. Meanwhile, the life subsidiary had also recently entered into partnership with Roche and Hygeia to expand offerings in the healthcare sector to address the lack of critical illness cover. The collaboration the company said serves as an opportunity for Old Mutual to provide insurance protection for property owners and homeowners. Through the newhomes.ng platform Old Mutual will be providing a Premium Home Insurance package to existing and prospective property owners with benefits including; Building fire and peril, Household goods and per-

Alero Ladipo

sonal belonging, Burglary, Fire Insurance, Alternative accommodation cost in event of home loss, Personal Accident cover and Personal Liability cover. Commenting on the partnership, Alero Ladipo, executive head, Marketing and Customer Experience, Old Mutual, said; “This partnership signals our strong commitment to Nigeria and her growing industries such as the real estate markets. As Nigerians invest their hard earned monies and investments in bridging the huge supply gap in the provision of housing for the citizens, it is imperative to recognise the risks that threaten these investments and put a financial protection plan in place. This is where Old Mutual comes in. “This is another proud moment for us because through this partnership, Old Mutual

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will leverage Newhomes. ng customer base to directly reach homeowners in Nigeria, who are in need of financial protection for their investments.” “Not only does this enable us to reach more customers but these customers will also be able to access premium insurance services that allow them to enjoy the benefits of their investment without worrying about loss or destruction.” She said “We have taken it upon ourselves, as insurers with over 170 years of experience, to enter into this exclusive partnership with Newhomes.ng, to provide innovative technology led solutions aimed at delivering the right insurance services for homeowners in Nigeria and at the same time bridging the gap of access to basic financial insurance.

“Our partnership with Newhomes.ng provides the customers (whether individuals, investors or corporates) can access an array of property and home insurance products at just a click from a mobile device or computer. In other words, from the Newhomes. ng platform, Nigerians would be able to calculate their premium in seconds, complete seamless transaction end to end and obtain their policy certificate, all from the comfort of their homes or offices.” As Africa’s foremost insurers with over 170 years’ experience in wealth creation and financial protection, we understand the risk that Nigerians face, especially homeowners, and it is our duty to help them carry these risk and help them protect their investments. “Understanding that access to insurance is a problem that affects a Nigerians decision to purchase insurance, it become expedient for us come up with an innovative solution to bridge this access gap between Nigerians and insurance. “ “It is to this end that we entered into this exclusive partnership with Newhomes.ng, to provide innovative technology led solutions aimed at delivering the right insurance services for homeowners in Nigeria and at the same time bridging the gap of access to basic financial insurance, Alero stated. Old Mutual General Insurance Company Nigeria Limited and Old Mutual Nigeria Life Assurance Company Limited are part of Old Mutual Limited which provides protection, savings, investment and lending services to 11.3 million customers in 17 countries across Africa, Asia and Latin America.

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ebt is a common issue almost everyone grapples with in personal finance. At some point we have acquired debts that need to be managed before it gets out of control. Simply put, debt management is a delicate endeavor because it involves making smart plans that helps you gradually decrease and eliminate debt successfully. On this edition of On The Money, we will be explaining four simple steps you can take to help manage your personal debts. 1. Know how much you owe: Start by creating a list of what you actually owe, this helps you to easily identify your debt without missing out on anything. It also helps you reduce the possibility of missing payments and can help determine which debt to pay first. This list will also

ing this, you can plan how to pay off debt faster. 3. Make early payments: Late payments are a sign of inadequate debt management. Pay on time unless you acquire new debts. If you are forgetful, keep a reminder to inform you before the due date or employ the use of an auto payment methodto avoid any delays. 4. Avoid more debts: While managing debts, it is important that you avoid acquiring more debts. Remember that you need to cut back on your expenses and stick to your budget. Although there might be unexpected emergencies, it is necessary to have an emergency fund or an insurance plan in place that can be used to address such issues instead of getting another loan. Debt management can be daunting but with the

serve as a constant reminder. 2. Review your budget: To manage debts, you also need to have a proper understanding of budgeting and the role it plays in successful debt management. Bad debt arises as a result of improper balancing of your income and expenses. Reviewing your budget helps you assess your financial situation, allowing you plan what to spend your money on. If your expenses exceed your income you might need to create a new budget. By do-

right financial advice, you can be on your way to being debt free. For more financial education, you can call Old Mutual on 01-2719393 to arrange a free financial education session for your team, or on a one-on-one basis. Our financial advisers can help you with the right kind of financial and insurance advice. For more information, visit your nearest Old Mutual branch or go to www. oldmutual.com.ng. We look forward to helping you with your money matters

@Businessdayng

Monday 20 May 2019

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

Allianz Q1 profitability driven by property, casualty business lines Stories by Modestus Anaesoronye

lobal insurer Allianz has announced that the strong performance of its property and casualty (P&C) business in the first-quarter of 2019 significantly contributed to a 7.5 percent increase in overall operating profit, to €3 billion. The P&C segment produced robust results in the opening three months of the year for Allianz, recording a 14.2 percent operating profit increase to €1.5 billion, when compared with the same period in 2018. The insurer attributes the increase to strong premium growth coupled with a lower level of losses from natural catastrophe events, and also an improved expense ratio. Within P&C, gross written premiums jumped 6.2

percent to almost €19 billion, while the expense ratio improved to 27.8 percent, and the loss ratio improved to 65.9 percent, year-on-year. The combined ratio for the segment strengthened to 93.7 percent in the first-quarter of 2019. Giulio Terzariol, chief financial officer (CFO) of Allianz, said: “I am pleased by the healthy revenue growth of the Property-Casualty business segment in the quarter, which reflects the good positioning of our global franchise. The strong combined ratio is well supported by our ongoing efforts to improve productivity.” The firm’s P&C unit also recorded higher total revenue in the first-quarter of 2019 when compared with the previous year, of €19.5 billion, with internal growth recorded in many countries, driven by AGCS, Germany, and Allianz Partners. Combined with a slight

increase in operating profit in its Life and Health business segment to €1.096 billion, the P&C segment performance in Q1 helped Allianz report operating profit of €3 billion, and net income of €2 billion. At the same time, total revenues at Allianz increased by more than 9% in the first-quarter of 2019 to €40.3 billion. Oliver Bäte, Chief Executive Officer (CEO) of Allianz, commented: “Allianz achieved strong results in the first quarter putting the group on track to meet its 2019 full-year targets. “Our customers continue to seek quality and service, both of which we are consistently focusing on. Despite economic and political volatility, we are very well positioned to further develop our franchise.”The insurer also revealed that its third-party assets under management (AuM) increased by €112 billion in the first-quarter of 2019.

L-R: Femi Asenuga, managing dirctor/CEO, Mutual Benefits Life Assurance Ltd.; Kayode Thomas, managing /CEO, Rifugio Communications; Akin Ogunbiyi, group chairman, Mutual Benefits Assurance Plc; and Rantimi Ogunleye, executive director, Operations, Mutual Benefits Life Assurance Ltd, at the commissioning of Rifugio’s New Experience store and the unveiling of Rifugio’s partnership with Mutual Benefits to provide Free Life Cover powered by Mutual Benefits to its numerous customers.

FBNInsurance drives sales Universal Insurance takes CSR to university, donate books to IMT with Ember Championship

s part of her corporate strategy to motivate outstanding staff and increase performance in terms of policy uptake, sales persistency and new businesses, FBNInsurance Limited, an FBNHoldings Company associated with the Sanlam Group SA, recently rewarded winners of her annual MD/CEO, Ember Championship Award. At the 2018 award presentation which held recently in Port Harcourt, Rivers State, Odinakachi Umekwe, head, Retail Distribution, in his statement, reiterated that the MD/CEO Ember Championship was designed to push new premiums and increase persistency between September and December every year. “We know how hard it is to get people to buy insurance, especially as the year ends. To encourage sales and get new businesses, this competition was set up to reward the Sales Area that meets certain sales criteria

during this period,” he said. For ease of administration of the award, the country was divided into Areas. Port Harcourt Area won the best performing Area while Benin and Enugu came second and third respectively for the period under review. While presenting the winning Area with a cash reward for its effort and exceptional performance, Valentine Ojumah, managing director/CEO FBNInsurance Ltd, commended the area and charged them to do more for a greater reward and to retain the trophy next year. He also promised to continue to adequately support them to ensure they meet their sales target just as he enjoined other areas to step up their performance in order to join the league of the winners. FBNInsurance operates a robust retail structure of over 2,000 retail agents operating out of 42 sales outlets nationwide.

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o further deepen insurance education and awareness in Nigeria, Universal Insurance Plc has donated insurance books worth over N2 million to Institute of Management Technology (IMT) in Enugu, Enugu state in the South Eastern region of Nigeria. The ceremony which was performed over the weekend attracted the top echelon of the institute including the Rector, Austin Nweze. Speaking at the event, Ben Ujoatuonu, the managing director and chief executive officer of the company, said that the gesture was part of the firm’s commitment in ensuring insurance education in the environ. He said as a socially responsible corporate citizen the company had deemed it necessary to support insurance education across the country. For him, insurance as career means much for the volatile economy of Nigeria and the only way to shift the paradigm is to educate the young minds on the need to embrace insurance as a course of study, which in turn would impact positively

on the economy through practice. “We are here today to tell you that insurance is a career and indeed a social tool capable of lifting the country’s economy from the web of collapse if it is given a rightful place and conducive environment.

“Insurance plays significant role in the economy and as a catalyst for it growth you the young minds do have a lot to know about it as a course of study and in practice a way to contributing to the economic stability. “This donation is a token of our contribution to the

knowledge base of this wonderful institution which of course, is my Alma Mata. The books are of various areas of insurance that would boost your knowledge base as students of insurance,” Ujoatuonu said while addressing the students of insurance department of the institution.

L-R: Benedict Ujuoatuonu, managing director/CE, Universal Insurance Plc presenting set of textbooks to the HOD, Insurance Department on behalf of the school in Enugu recently.

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Monday 20 May 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

Preparing for a recession KEVIN LACZKOWSKI

any executives are already anticipating a recession in the next few years and quietly gearing up for it. The question for these executives isn’t whether to prepare, it’s how. What does it mean to be a resilient company in a recession? During the last downturn, resilient companies weren’t protected from the market because they had better products or services. In fact, most lost nearly as much revenue as industry peers during the recession; the outliers were from a few sectors that didn’t experience the

downturn as strongly. But by the time the recession had reached its lowest point in 2009, the “resilients” had increased their earnings before interest, tax, depreciation and amortization by 10%, on average, while indus-

try peers had lost nearly 15%. The resilients seem to have accomplished this by reducing operating costs earlier in the recession cycle, and more deeply. Their

willingness

move early made them more likely to successfully weather economic shock. As the effects of the downturn became more and more apparent, resilient companies focused on building more flexibility into their investment-

planning and operations in addition to pursuing continued earnings expansion. The upshot is that resilients were entering the trough of the recession in much better shape than industry peers, with far more cash. Resilient companies also focused on maintaining loyalty among high-value customers that were central to the company’s growth post-recession. Future recessions, however, will look different. For a start, today’s CEOs are more constrained in their ability to cut costs. Activist investors, pressure from Wall Street and other factors have already driven companies to become as lean as possible. Given the current debate on income inequality, combined

with the increase in employee activism, cost cuts can create second-order consequences — hits to the brand, for instance, or political backlash, or reduced company morale. Slashing costs may end up being an inadequate tool for earnings growth. As our research suggests, getting ahead relative to peers (even slightly) during a recession gives companies an advantage that is tough to reverse when the economy improves.

(Kevin Laczkowski is a senior partner in McKinsey’s Chicago office. Mihir Mysore is a partner in the Houston office.)

Voice recognition still has race and gender biases JOAN PALMITER BAJOREK

oice AI is becoming increasingly ubiquitous and powerful. Forecasts suggest that voice commerce will be an $80 billion business by 2023. But speech recognition has significant race and gender biases. As with facial recognition, web searches and even soap dispensers, speech recognition is another form of AI that performs worse for women and nonwhite people. Here’s a thought experiment: Let’s consider three Americans who all speak English as a first language. Say my friend Josh and I both use Google speech

recognition. He might get 92% accuracy and I would get 79% accuracy. We’re both white. If we read the same paragraph, he would need to fix about 8% of the transcription and I’d need to fix 21%. My mixed-race female friend, Jada, is likely to get 10% lower accuracy than me. Dialects also affect accuracy. For example, Indian English has a 78% accuracy rate and Scottish English has a 53% accuracy rate. Amazon and Google teams are working to improve that accuracy, but the problem has not yet been solved. Disparities exist because of the way we’ve structured our data analysis, databases and machine learning. The underlying

ter of social injustice. And companies should be aware that the accuracy of speech recognition also affects customer purchasing decisions. What can companies do? Be more transparent about your voice statistics, and encourage competition in the area. Remember that women and minorities have huge purchasing power — why wouldn’t you want to solve this problem?

reason may be that databases have lots of white male data, and less data on female and minority voices. AI is therefore set up to fail. Machine learning is a

technique that finds patterns within data. When you use speech recognition, the system is answering the question “Which words best map onto this audio data, given the patterns and data in the data-

base?” If the database has mostly white male voices, it will not perform as well with data it sees infrequently, such as female and other more diverse voices. This is absolutely a mat-

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(Joan Palmiter Bajorek is the founder of Women in Voice.)

Monday 20 May 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

In association with

Improving health care by ‘Gamifying’ it study, family members in the gamification program walked on average nearly a mile farther each day (1,661 steps) than they had at baseline, about 1,000 more than people in the control group. While their activity dropped somewhat after the game ended, they continued to walk more than members of the control group. Subtle changes to program design and communications can have an outsize impact on how patients behave. That’s why embedding behavioral insights into gamification could represent a significant opportunity to improve health and well-being.

MITESH S. PATEL, STACEY CHANG AND KEVIN G. VOLPP

hysicians often struggle to help patients change their health behaviors. Combining behavioral economics and “gamification” — putting game elements such as points and achievement levels into nongame contexts — holds promise for driving behavior change when a doctor’s advice, and patient’s good intentions, are not enough. Members of our group recently evaluated 50 of the most popular smartphone applications for health and fitness and found that while nearly twothirds of the apps used game elements in their design, none incorporated several key insights from behavioral economics. Most programs invite patients to join, framing their choice as an opt-in decision. But we have found that opt-out framing significantly improves participation. Another common feature of gamification programs is goal setting. We have found that it

is more effective for programs to establish a baseline for each individual and then engage him or her in personalized goal setting, with goals that gradually become more demanding and that adapt to ongoing performance. In a test of gamification, 200 participants over 18 years old enrolled with their families and used either a smartphone or

wearable device to track their physical activity as measured by how many steps they took each day. First, they signed a precommitment pledge in which they agreed to try their best to achieve their goal. Second, they received points that were allocated up front, which they stood to lose if they failed to achieve their goal. Third, we re-

plenished participants’ points each week to give families a fresh start. Finally, we incorporated social incentives. Each day one member of a family was selected at random to represent the entire family. If that person achieved his or her goal, all family members kept their points; otherwise, everyone lost points. During the three-month

(Mitesh S. Patel is the director of the Penn Medicine Nudge Unit and an assistant professor at the Perelman School of Medicine and Wharton School of the University of Pennsylvania, where Kevin G. Volpp is the Founders’ Presidential Distinguished Professor. Stacey Chang is the executive director of the Design Institute for Health at the University of Texas at Austin.)

How Investors’ reading habits influence stock prices is sophisticated processing of the information. Publishers exercise discretion over which news to print and where; investors read and trade on these public releases. Both sides are vitally important for financial markets’ stability and efficiency, especially at a time when daily news releases number in the millions.

ANASTASSIA FEDYK

nformation drives financial activity, and ensuring equitable access to that information is seen as critical to a well-functioning marketplace. But does the mere action of placing a piece of financial news in the public domain make it readily seen and efficiently reflected in stock prices? According to my and others’ research, not necessarily. The positioning of news, not just its newness, plays a pivotal role in how financial markets incorporate information. In my research, I find that news articles placed on the front page or at the top of news websites garner more reads. Readers also pay more attention to news about larger and better-known companies, to news published earlier in the week and to negative news. And reprints of old news continue to spur market reactions, challenging the idea that financial markets absorb all news equally, based only on finan-

cial relevance. Broker dealers and hedge funds are much quicker, on average, to click on any given piece of news than banks or large investment management companies. Hedge funds are also much more likely to be the first to get a piece of news. Hedge fund readers, along with family offices, private equity firms and some broker dealers, are

also among the least likely to read a piece of news that reprints old content. And they read far more news than any other group of finance professionals. Does the more sophisticated consumption of news translate to more impact on the market? Yes. These market swings occur because news consumption creates disagreement

among investors about an investment’s prospects. In “Disagreement After News: Gradual Information Diffusion or Differences of Opinion?” I show that a large portion of disagreement around news is driven by people getting the news at different times. Bringing information into the public domain is extremely important, but so

Brought to you courtesy of First Bank Nigeria

(Anastassia Fedyk is an assistant professor at the Haas School of Business at the University of California, Berkeley.)

Monday 20 May 2019

BUSINESS DAY

Access Bank Rateswatch Market Analysis and Outlook: May 17th – May 24th, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.38

Q4 2018 — Higher by 0.57% compared to 1.81% in Q3 2018

Broad Money Supply (M2) (N’ trillion)

34.80

Increased by 3.22% in Feb’ 2019 from N33.71 trillion in Jan’ 2019

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

24.16 22.41

Increased by 5.37% in Feb’ 2019 from N22.93 trillion in Jan’ 2019 Increased by 4.75% in Feb’ 2019 from N21.40 trillion in Jan’ 2019

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

11.37

Increased to 11.37% in April 2019 from 11.25% in March 2019

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

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

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

44.98 72.72 1.82

May 15, 2019 figure — an increase of 0.42% from May start May 17, 2019 figure— no change from the prior week April 2019 figure — an increase of 5.27% from March 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

NSE ASI Market Cap(N’tr)

Friday

17/05/19

10/05/19

28,871.93 12.72

28,847.81 10.82

Volume (bn)

0.27

0.24

Value (N’bn)

7.52

1.36

MONEY MARKET NIBOR Tenor

Friday Rate (%) 17/05/19

Friday Rate (%)

Change(%)

Indicators

17/05/19

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) 13.86 Agriculture Cocoa ($/MT) 453.21 Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Change Gold ($/t oz.) Silver ($/t oz.) (Basis Point) Copper ($/lb.) 0.08 17.51

1-week Change

YTD Change

(%)

72.72 2.63

0.00 1.54

12.81 (13.94)

2368.00 91.15 66.48 11.69 471.00

2.02 0.77 (5.20) (1.02) 9.28

22.31 (29.99) (14.22) (23.74) 8.65

1285.42 14.47 273.75

(0.03) (2.16) (1.62)

(2.44) (15.82) (16.49)

10/05/19

4.5700

9.1400

(457)

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

O/N CALL 30 Days

5.2900 5.0714 12.1336

10.0000 9.1667 11.8263

(471) (410) 31

Tenor

90 Days

12.1889

12.7224

(53)

1 Mnth 3 Mnths

11.29 10.54

10.07 11.97

122 (144)

6 Mnths 9 Mnths 12 Mnths

12.76 13.52 13.87

13.48 14.12 14.39

(72) (61) (52)

OBB

FOREIGN EXCHANGE MARKET Market

Friday (N/$)

17/05/19

Friday

1 Month

(N/$)

Rate (N/$)

10/05/19

17/04/19

Official (N) Inter-Bank (N)

306.95 360.50

307.00 360.88

306.95 360.42

BDC (N) Parallel (N)

0.00 361.00

0.00 360.00

Friday

Change

(%)

(Basis Point)

17/05/19

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

(%)

BOND MARKET AVERAGE YIELDS Tenor

10/05/19

(%)

17/05/19 Friday (%) 17/05/19

Friday (%)

Change (Basis Point)

10/05/19

3-Year 5-Year

0.00 14.04

0.00 14.25

0 (22)

7-Year 10-Year 20-Year

14.49 14.31 14.34

14.17 14.34 14.34

32 (4) 0

30-Year

14.69

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

Change (Basis Point)

10/05/19

Index

2,890.46

2,885.27

0.18

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

8.70 5.42

8.68 5.42

0.18 0.02

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

17.67 -38.14

17.46 -38.38

0.21 0.24

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

Date

91 Day 182 Day

28,018.96 10,615.40

10 12.549

05-May-2019 05-May-2019

364 Day

71,074.82

12.77

05-May-2019

Global Economy In the US, consumer inflation as measured by the Consumer Price Index (CPI) slowed to 0.3% month-on-month (m-o-m) in April, from 0.4% in March, the US Bureau of Labour Statistics reported. The biggest contributor to the monthly change was gasoline prices which advanced by 5.7%. In contrast, food prices registered its first decline since mid2017. On an annual basis, the headline CPI rose by 2.0% - the fastest rate since November 2018. Core inflation (which excludes food and energy) registered a monthly gain of 0.1% and 2.1% y-o-y. Elsewhere in China, the trade surplus narrowed to $13.84 billion (bn) in April, from $32.42bn in March, customs data showed. The smaller surplus was due to a monthly contraction of 2.3% in exports, while imports surged by 8.5% m-o-m. China's trade surplus with the US widened to $21.01bn in April as shipments to the US declined by less than imports from the US. Early May, US President Donald Trump announced that an existing tariff of 10% on $200bn worth of imports would increase to 25%. Already, total trade between the US and China (the sum of exports and imports) is down by $8.34bn compared to April 2018. In a separate development, UK GDP growth regained momentum to 0.5% growth in Q1 2019 after slowing to 0.2% quarter-on-quarter (q-o-q) in Q4 2018. On an annual basis, economic activity increased by 1.8%, from 1.4% in Q4 2018. Key to the faster growth was a noticeable build-up of inventories (+£5.2 billion). This stockpiling was likely as a result of the uncertainty regarding Brexit. Growth was also boosted by fixed investment – largely by government – and to a lesser degree, household consumption. Domestic Economy The Consumer Price Index (CPI) which measures inflation rose by 11.37% year-onyear in the month of April 2019, which is 0.12% points higher than the 11.25% recorded in March 2019. This is the first time it has risen since January 2019. The food index increased by 13.70% (year-on-year) in April, slightly higher than 13.45% recorded in March, thus indicating increasing pressure in the prices of food items. The core sub-index, which excludes prices of farm produce decreased to 9.3% from 9.5% recorded the prior month. During the month, the highest increases were seen in the prices of potatoes, yam and other tubers, bread and cereals, fruits, milk, cheese and egg, vegetables, fish, meat, oil and fats. Others are tobacco, garments, dental services, cleaning, repair & hire of clothing, medical & hospital services, vehicle spare parts, actual & inputted rent for housing and major household appliance. In a separate development, The Minister of finance disclosed that The Federal Government will soon release the sum of N649.43bn as the final refund for the Paris Club debt to state governments during a media briefing on the activities of her ministry. The finance minister said the amount had already been verified by the ministry as the outstanding balance to be refunded to the state governments in due course. The payments made by the Central Bank of Nigeria as of March 2019 is N691.56bn according to the Minister. The increase in CBN payments partly arose from the exchange rate differential at the point of payment. Although some states still have outstanding balances, they will be refunded in due course. Stock Market The Nigerian Stock Exchange turned bullish following the listing of MTN Nigeria Communications Plc 20.35 billion shares at

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

N90 per share. The All Share Index (ASI) gained 0.08% to close at 28,847.93 points from 28,847.81 points the preceding week. Similarly, market capitalization jumped by 17.51% to settle at N12.72 trillion from N10.82 trillion the prior week. This week, we expect the local bourse to maintain its bullish momentum as investors look to extend trade in MTN's fundamentally sound stock, and stable domestic macroeconomic fundamentals Money Market Last week, improved market liquidity arising from an inflow of N107 billion in Open Market Operation (OMO) maturity resulted in lower rates. Short-dated placements such as Open Buy Back (OBB) and Over Night (O/N) rates trended lower at 4.57% and 5.29% from 9.14% and 10% respectively the previous week. Likewise, the 90-day NIBOR settled at 12.19% from 12.72% the previous week. This week, our expectations lean towards relatively higher rates because of anticipated retail Secondary Market Intervention Sales (SMIS) auction. Foreign Exchange Market The naira appreciated against the greenback across most market segments. At the official window it ended at N306.95/$, a 5 kobo appreciation from the previous week. Similarly, at the NAFEX window the local currency witnessed slight appreciation of 38 kobo to close at N360.50/$. However, the parallel market depreciated to N361/$ from N360/$ the previous week. The relative stability of the local currency continues to be supported by the intervention of the apex Bank across various market segments. This week, the naira is expected to remain around prevailing levels due to the apex bank's sustained supply of liquidity. Bond Market Average bond yields further declined in the week ended May 17, 2019 due to demand witnessed on the short and long end curve of the curve. Yields such as the five- and ten-year debt instruments settled at 14.04% and 14.31% from 14.25% and 14.34% respectively. Consequently, the Access Bank Bond index rose marginally by 5.19 points to close at 2,890.46 points from 2,885.27 points the previous week. This week, we expect client flows to continue to dictate market direction in the short term. Commodities Oil prices rallied as increased tensions between US and Iran in the Middle East continues to underpin the price of oil . OPEC benchmark crude, gained $2.95, or 4% to $72.61 per barrel. In contrast, precious metals prices slipped as strong rebound in the U.S. stock market boosted trader and investor risk appetite, which is bearish for the safe-haven metals. Gold lost 43 cents, or 0.03%, to $1,285.42 an ounce. Silver also declined by 32 cents or 2.2% to $14.47 an ounce. This week, we expect prices to remain buoyed by growing fears of supply disruptions and outages For precious metals, prices are expected to rise due to ongoing geo-political tensions.

MONTHLY MACRO ECONOMIC FORECASTS Variables

May’19

Jun’19

361

362

Inflation Rate (%)

11.30

11.23

11.21

Crude Oil Price (US$/Barrel)

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

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Jul’19

Exchange Rate (Interbank) (N/$)

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Monday 20 May 2019

BUSINESS DAY

Start-Up Digest

In association with

Aisha Ajidagba: Shaping Nigeria’s traditional cap industry Jonathan Aderoju

n the midst of the unending unemployment among Nigerian graduates, Aisha Olaposi Ajidagba has refused to become part of the jobless party. She is the CEO of Tangaranaffairs, an online store that trades in traditional caps. A graduate of Computer Science from Tai Solarin University of Education, her love for traditional caps and desire to become an entrepreneur prompted her to establish Tangaranaffairs in 2017. The young entrepreneur was also motivated to set up the business by her father’s love for traditional caps. “I will say I am walking in my father’s shoes,” she says. “My late dad would never leave the house without a well-tailored cap. He was the ultimate model for me growing up,” she says. She often looked forward to what her father would wear. “He had caps sent to him from Borno and Sokoto, and on some Sundays would put one of them on and wear the ‘Abeti Aja’ or handmade cap from ‘Aso Oke’. Sometimes he would put on the traditional red cap. He was the ultimate culture ambassador for me,” she explains. She says Tangaranaffairs was founded out of her love for culture and fashion, but mostly influenced by my father’s love for caps. The Computer Scientist-turned-entrepreneur had worked in the beauty industry to gain experience before starting this business. Aisha has created a lot of milestones in the industry. “The major milestone for me is being able to rebrand culture, birth other businesses and create employment,” she tells Start-Up Digest. “So, for me, apart from making our traditional caps look cool again, helping other people to earn a living is a major milestone.” Aisha says culture is her main driving force. “My major drive is culture. I believe that culture is our greatest export. I have always been a firm believer of showcasing the real Africa to the world— the beauty of our culture, our attires and great scenery. It’s also great to see a well-dressed man, but for me,

Aisha Ajidagba

it’s a greater feeling to know you dressed that man. It’s such a gratifying feeling when I get feedbacks and pictures of men wearing Tangaranaffairs caps with pride,” she says. She reveals that good quality has helped her to keep clients and attract more patronage for the business. “Quality, being attentive to consumers’ style and needs, prompt delivery and excellent customer service are keys to my success. I keep telling anyone that’s willing to hear never to compromise quality. Everyone that has ever got a cap from me will know that what they saw is what they get— original, handmade and stored in proper conditions. That’s my standard for Tangaranaffairs and it won’t be changing any time soon.” She compares the Nigerian market with

others and concludes that the local market is competitive enough. “The Nigerian market is highly competitive and saturated, to say the least,” she describes. “But that doesn’t mean you can’t thrive if you don’t work hard. In neighbouring countries such as Benin Republic and Ghana, cultural items are profitable because of the thriving tourism, unlike in Nigeria. So I believe that if they do not come to us (tourists), we should go to them. Our exports can bring about massive improvement in our tourism sector. If a white man is in love with an artefact, they will want to know the history of such a beautiful piece and that’s what informs most of their travels.” The entrepreneur was fascinated with the

culture of the people of Northern Nigeria— the fashion, the music and even the food while growing up. “While growing up, I got to visit other parts of Nigeria and got familiar with other cultures too. So my influence is basically culture. So I always imagine my caps complimenting brands such as Mai Atafo, Ugo Monye, or a Vanskere.” She believes her business is helping to reduce unemployment in the country. “Because my caps are handmade, I believe I am renewing the love for craftsmanship in an industry that was almost forgotten,” she says. “The caps are made by people who genuinely love the craft and have the talent passed down from generations before them. So they do not do it for money, per say, but what’s better than making money from your passion?” she asks. “So now I have an army that grow day by day doing what they love and getting well deserved pay for what they do,” the entrepreneur adds. Speaking on some of her challenges, she says, “Like every other new business, our major challenge is visibility. That is how to make the brand known, how to convince people of its authenticity.” Aisha says there were times she almost gave up on her dreams but got back on her feet within the shortest time. “There were lots of times I almost give up,” she confesses. “Starting something is never easy; capital, sourcing authentic raw materials and getting clients are not easy. At first I was discouraged, but now I have upped my game, and I never compromise standards.” She says Tangaranaffairs dreams of having a factory in Nigeria. The outfit also looks forward to having showrooms and making its products exportable. “I also wish to add a wide range of culturally inspired styles to our collections,” she tells Start-Up Digest. The young entrepreneur wants other entrepreneurs to be authentic and do proper feasibility studies about every venture before moving into it. “It’s suicidal for one to go into a business because a certain person is thriving at it. Find what works for you and be the best at it. It may seem slow in the beginning but hard work and dedications always pays,” she adds.

Deal Day: SSE Angel Network opens application for start-ups Josephine Okojie

he South-South and Eastern Angle Network has called on start-ups in the region to summit application for its first deal day meeting scheduled to take place in Port Harcourt. Deal Day by SSE Angel Network is a special event where network members and others get the opportunity to invest in startup team on the spot. Start-ups for the Deal Day will be prevetted to ensure only those who meet SSEAN Investment criteria are shortlisted, according to the organisers. Speaking about the upcoming Deal Day meeting, Emeka Okoye, co-founder and chief operating officer of Auto Mail Service Limited, in a statement, encouraged startups to make good use of the opportunity to link up with investors and most especially mentors. Okoye stated that in the ecosystem, startups need to ensure they are connected in

the experience and knowledge which can be found at the Deal Day. Also speaking, Julia Oku Jacks, member of

the SSEAN board of trustees and lead consultant of Julia Jacks Consulting, expressed her pleasure on the existence of the network

Facilitators and participants at a knowledge-sharing session for SMEs organised by EY in Lagos recently

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and encouraged more female-led start-ups to join the SSEAN ecosystem and capitalise on the opportunities of Deal Day to learn how to build, sustain and scale their businesses better “Deal Day gives an expanded view of available business and financing options that no serious entrepreneur should miss” Jacks said. Start-ups operating within the SouthSouth/South-East are advised to apply via the link bit.ly/ssean. Members of the public interested in attending the Deal Day should kindly use this link bit.ly/join-ssean. SSEAN was setup in 2018 by a group of professionals to invest, mentor and support Start-ups in the South-East/South-South region of Nigeria. It has made two investments to date of $25,600 to - Alphotazi Farms - a modular cassava processing company currently operating out of a village in Benue but based in Nsukka, and Greenage Technology - an inverter and solar panel original equipment manufacturers based in Enugu.

@Businessdayng

Monday 20 May 2019

BUSINESS DAY

Start-Up Digest

How economic reforms can transform start-ups Josephine Okojie

or Nigeria to boost investment and ensure the survival of start-ups, experts say government must reform rail transportation, power supply and foreign exchange. Nigeria’s roads and rail system are insufficient to facilitate the movement of goods and services as the country is badly hit by huge infrastructural decay with a deficit estimated at well over $300 billion. Energy remains a big infrastructural challenge in Nigeria, with its deficit increasing operational cost for start-ups and reducing their survival rate, analysts say. Businesses are made to pay higher electricity bills from the Discos without regular power supply, and demand for diesel is rising higher with per litre price of the product now beyond N200. Beside this, firms are taking out huge budgets to buy new generators, with SMEs the worst hit. “The poor power supply in the country is so frustrating for businesses and its killing a lot of start-ups,” Femi Egbesola, national president, Association of Small Business Owners (ASBON), said in a telephone response to questions.

“With stable power supply, start-ups survival rate will increase tremendously because power alone constitutes about 50 percent of their operational cost,” Egbesola said. He noted that countries in the world where start-up survival rates are high are those with adequate power supply. He called on the government to intervene to mitigate the plight of small businesses by providing

adequate power supply. Adeola Abdulrasdeed, founder of Cameraman.ng, in an interview with Start-Up Digest, stated how inadequate power supply has limited his automated photography business. “Poor power supply remains the major challenge limiting my business. It continuously erodes my production cost as I run my generator daily to run my business,” Abdulrasdeed said.

L-R Wole Idowu, CEO, Siren Consults; Funmi Oyebola, account associate, Phyllion and Partners; Temi Ophylia Ibekwe, CEO - lead strategist, Phyllion and Partners and Ayeni Adekunle, CEO- black house media, during the 2nd year anniversary of Phyllion and Partners Limited, held in Lagos recently.

LSETF partners IBM to enhance digital skills of Lagos youths … ATC Nigeria builds fully equipped centres for digital learning Josephine Okojie

n actualisation of its mandate to build and raise the capacities of young people in Lagos State and enable them become globally competitive in digital competences, the Lagos State Employment Trust Fund (LSETF) has partnered IBM and ATC Nigeria to unveil digital centres in Lagos State. As part of the partnership agreement, the LSETF will, in connection with local experts and partners, build digital capacity for youths in Lagos State through the implementation of the IBM’s Digital - Nation Africa initiative. This initiative will help the youth of Lagos not only to gain the key knowledge required for today’s digital world, but will also open

He urged the government to provide key infrastructure such as power, good road network, affordable office spaces and forums for learning and collaboration, especially for start-ups. Apart from poor power supply, transport infrastructure is also a major challenge for start-ups. Road network is in a terrible state while the railway system is in a bad shape across the country, making it very difficult for start-ups

their minds to innovation and experience designing their first digital solution. This will help to ensure that industries and businesses have access to a digitally skilled labour force, and the programme is available for all. To implement the DN-A programme in Lagos State, LSETF will use ATC Nigeria’s digital centres to ensure more young people can effectively access the programme. Digital centres are computer-equipped centres that use the uninterrupted power supply and broadband link from ATC Nigeria’s communication tower sites to provide local communities with free education and training in ICT to increase computer literacy and help create digitally empowered societies. LSETF has started to run the DN-A programme through Digital Centers at various centres in Lagos.

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In light of this level of preparedness, youths within the age group of 18 and 35 years, who are interested in learning new digital skills, can visit the digital villages to take the free intensive IBM training for a period of 3 to 16 weeks. “We are very pleased to have globally renowned tech corporations working with us to build the capacity of our youths to be digitally competent for today’s fast-evolving, tech-driven solutions,” Teju Abisoye, acting executive secretary of the LSETF, said. “I am particularly pleased with the prospect of building our young workforce for the future of work needed for tomorrow and provided by IBM,” she said. She explained that beneficiaries of the initiative will, on completion of the programme, be eligible for an open badge issued by IBM. This badge is a cross-industry digital recognition of technical skills which can be shared with their social and professional network. “We at the LSETF are very keen to have this programme executed successfully and to see more young people embrace this rare opportunity to be globally competent in tech and join forces with local innovators to consolidate the place of Lagos State in Africa’s emerging tech market”, Abisoye added.

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to get their produce to the market. “We need to stimulate the economy with massive investments in roads and rail transportation. It facilitates market access for startups,” said Bamidele Onibalusi, founder, Deloni Enterprise. “With effective rail system, I can easily access the northern market but due to the poor rail system, I only sell my goods in Lagos and its environs,” Onibalusi said. Similarly, Ope Olanrewaju, founder of Kennie-O Cold Chain Logistics,, suffered from a major loss from his poultry business owing to the country’s poor road infrastructure. “The poor states of our roads have continued to elongate our delivery time, making us incur additional costs,” Olanrewaju said. Foreign exchange volatility has also played a major role in hampering the growth of start-ups and small businesses. Nigeria is a high import dependant country and this makes volatility in the exchange market impact heavily on the business environment. Friday Opara, director, strategic partnership, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) said, “The FX issues have made the Nigerian business environment tougher.”

Ministry of Niger Delta Affairs trains youths on vocational skills at Tech-U REMI FEYISIPO, Ibadan

he Ministry of Niger Delta Affairs will this year train over 1000 youths in various vocational skills as well as empower them. Usain Uguru Usain, minister of Niger Delta Affairs, disclosed this at the closing ceremony in which154 youths from the region were trained in poultry and fisheries at the First Technical University in Ibadan The two-week intensive youth empowerment training was a partnership between Tech-U and Dosmark/ CJ Oil and was sponsored by the Ministry of Niger Delta Affairs. The Niger Delta states include: Akwa Ibom, Rivers, Delta, Bayelsa, Cross River, Ondo, Abia, Imo and Edo States. Speaking at the closing ceremony in Ibadan at the weekend, Usain said the empowerment was put in place to develop the manpower capacity of the Niger Delta region and stop restiveness so as to make the region economically viable. Usain, represented by Ibrahim Akanya, director of Economic Empowerment Directorate of the ministry, explained that the programme was designed to encourage the youth of the region, saying the ministry plans to train 1000 youths in the region. “The training of the youths are tailored towards the peculiar nature of the states and beneficiaries are selected from each of the states in the region,” he said. While saying that some recent returnees from Libya were part of @Businessdayng

training in Ibadan, he urged the participants to put to good use the skills they have acquired at the University. He also advised the participants to judiciously use the take-off grant of N300,000 given to them to kick-start a truly rewarding entrepreneurial life. The minister said that there are other opportunities ahead, stressing that they can approach the Bank of Industry for loan if they excel as well as can consult for the ministry. Segun Osobajo, chief executive officer of Dosmark and CJ Oil, commended the beneficiaries for their exemplary performance in the course of the training. He noted that the idea is to raise movers and shakers of the Nigerian economy through the empowerment programme. He pledged his continuous support to the participants as they build thriving businesses along the poultry and fisheries value chains. In his address, Ayobami Salami, Tech-U vice-chancellor, a professor, said the institution is on a mission to spearhead a silent revolution that would ultimately disrupt Nigeria’s economy for good, adding that the youth empowerment programme is one of the institution’s flagship interventions aimed at fighting frontally the rising scourge of unemployment in the community. “We therefore call on other wellmeaning citizens and agencies to work with us as we seek to create a brighter future for our nation,” Salami said. Amadi Osaroni, a beneficiary from Ikwere, Rivers State, appreciated the minister for the transparency in the selection of participants and for the quality of the training.

Monday 20 May 2019

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Single mums and money matters MONEY MATTERS

Nimi Akinkugbe

oday’s high cost of living presents challenges for most families. However, for the single parent, particularly the single mother, there is an additional strain on an already stretched budget. Single mums face unique financial challenges as they simultaneously try to provide for the family, take care of their own financial needs, whilst ensuring that should anything happen to them, the children will be taken care of. When there is only one income to support a family, budgeting takes on a whole new meaning. Set a realistic budget and try to stick to it as this will form the basis on which you can confront any financial pressures. Your priorities are likely to include your mortgage or rent, utility bills, food, clothing, childcare, vehicle expenses, insurance and savings. How much is going to each category, and is there anything you can cut back on? Paying close attention to how you spend over a period of a month or two is good preparation for establishing a budget that will help you to plan systematically to meet your immediate needs and long-term financial goals. Build an Emergency Fund The vast majority of single mums raise their kids with little or no financial other support from their children’s fathers. With no second income to fall back on, single mothers could find themselves in a difficult situation in an emergency. Children fall ill, or there may be car or home repairs to worry about; it is impossible to predict such unexpected events so set aside about six months of expenses in a money market account in anticipation of this. Find Secure, Affordable Housing One of your priorities should be to find a secure and affordable place to live. It can be tempting to try to maintain an expensive home that may have relied upon two incomes to sustain it. Of course, there must be a balance between the need to live in a decent home in a safe environment versus having to put up with substandard housing. Be sure that you can afford to live where you choose to live; it is better to “downsize” in the short term, than to jeopardize the future financial security of your family. Invest in Yourself With the huge responsibilities you face, it can be easy to put yourself at the bottom of the priority list. Bring yourself to the top because that is important not just for yourself, but for your child. Get the skills, qualifications, certifications that

you need to perform at your best and earn those salary increases and promotions that you deserve or be in a position to set up your own business. Invest in a network of proactive ambitious people that encourage you and help you grow. You are your greatest asset so keep investing in yourself. Protect your Family with Insurance Even if you feel confident that your children would be well cared for by their father, grandparents, or other your family members, there are so many major financial considerations to plan for should anything happen to you so don’t ignore insurance. As a single mother, health, life, education and disability insurance are crucial. As morbid as it may sound, if you are the primary breadwinner with dependent children, it is your responsibility to try to ensure that there will be some financial cushion should you lose your job, become ill or in the event of your untimely death. A life insurance policy will help to replace and protect your income and can help to prevent your children from becoming totally dependent on the goodwill of relations or friends. It can also provide legal guardians with the resources to care for your children and to ensure that they have the opportunities you would have wished for them. An educational policy will also provide benefits for the payment of their school fees and other incidentals. By putting in place the right type and amount of insurance, you will have peace of mind in the knowledge that you are securing your children’s future. A rough rule of thumb is to buy coverage of eight to ten times your salary. Seek advice from a reputable firm; an agent will help you to determine how much

and what type of insurance coverage will best meet your particular needs and situation. Invest for the Future Even with the huge demands of single parenthood, you cannot afford to prioritize only the financial future of your children and ignore your own financial needs and goals. By starting to plan and invest early, even a little amount put aside regularly over several years will accrue over time into a significant sum. The earlier you start saving for your retirement, the more you will have set aside to ensure a comfortable and secure retirement. Write a Will An estate plan is more important than ever for a single parent. A will provides clear directions about who will inherit your personal property, bank accounts and investments and who will execute your affairs after your death. Carefully determine who would be capable and willing to assume responsibility for your children and that they understand the full implications including the significant financial responsibilities that accompany legal guardianship. Verbal instructions carry little weight; if you die intestate, that is, without a written will, everything involving your estate and your children will be decided by a probate court and might not be in accordance with your wishes. You may also want to consult with a lawyer about setting up a living will which expresses your wishes if you become terminally ill or incapacitated, and a durable power of attorney to empower someone you trust to carry out your express wishes. Don’t Overindulge your Children As parents, it is generally our desire to see our children content. For single mothers, there is often the additional pressure to do everything possible to keep them hap-

‘

Don’t feel guilty about not providing all their “wants”. When appropriate, have an honest discussion with them regarding the family’s financial picture. As children get older, encourage them to start to save and earn some of their own spending money.

py. With pressure from TV, radio, social media and competitive parents, it can be difficult to navigate the minefield of excessive buying and spending, particularly for your children. This can be very damaging to not only your finances but to theirs as well. The last thing you need is a spoilt, entitled child along with all you have on your plate. Don’t feel guilty about not providing all their “wants”. When appropriate, have an honest discussion with them regarding the family’s financial picture. As children get older, encourage them to start to save and earn some of their own spending money. Don’t Feel Pressured to Live a Lifestyle You Cannot Afford. It is so easy to compare yourself to others and start looking at all the two-parent families at PTA meetings and social events and stretch yourself to ensure that your children have everything and more. Stay focused on your own goals and don’t get swayed by a need to keep up appearances; yes, even for your children’s sake. There will have to be some conversations to help them with expectation but keep them involved with the family goals and the great things that you are working towards. Whilst single parenthood tends to feature high up on the list of life’s major challenges, with careful planning, a solid financial plan and proactive action to reach your goals, you can be confident in your ability to provide a comfortable and secure lifestyle for yourself and your family well into future. Financial security is a key ingredient for your ability to be the best that you deserve to be. Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. Follow Nimi Akinkugbe on: Twitter and Instagram: @ MMWithNimi, Facebook: ‘Money Matters With Nimi’ Send an email to info@ moneymatterswithnimi.com Or visit her Website www. moneymatterswithimi.com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi.com Twitter: @MMWITHNIMI Instagram: @MMWITHNIMI Facebook: MoneyMatterswithNimi

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Monday 20 May 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 14 May 2019

Top Gainers/Losers as at Friday 17 May 2019 LOSERS

GAINERS Company

Opening

Closing

Change

MOBIL

N174

N170

-4

N31.5

N28.35

-3.15

GUARANTY

N31

N30.6

-0.4

0.15

FCMB

N1.7

N1.55

-0.15

0.15

FLOURMILL

N15.85

N15.7

-0.15

Opening

Closing

Change

N99

N108.9

9.9

N68.95

N69.7

0.75

OANDO

N4.5

N4.8

0.3

CUTIX

N1.65

N1.8

UBN

N6.85

MTNN BETAGLAS

Company

ASI (Points)

28,871.93

DEALS (Numbers) VOLUME (Numbers)

3,684.00 267,838,055.00

VALUE (N billion) MARKET CAP (N Trn)

7.523 12.716

NSE ASI gains 0.08% as MTN Nigeria remains toast of stock market Stories by Iheanyi Nwachukwu

he Nigerian stock market advanced by 0.08percent in the trading week to May 17, 2019 as investors continued to show interest in stocks of newly listed MTN Nigeria Communications Plc. The Nigerian Stock Exchange (NSE) on Thursday May 16, 2019 listed by introduction 20.35billion ordinary shares of MTN Nigeria Communications Plc at N90 per share. It was listed on the Premium Board.

This Board features Dangote Cement Plc, FBN Holdings Plc, Zenith International Bank Plc, Access Bank Plc, Lafarge Africa Plc, Seplat Petroleum Development Company Plc and United Bank for Africa Plc. On its second trading day being Friday May 17, 2019, the shares of the telecom giant gained N9.9 or 10 percent (the maximum permissible increase) to occupy the topmost position on the gainers table. The stock closed higher at N108.90kobo. Only on Friday, the stock market gained 1.53percent. MTN Nigeria listing by introduction brought

forth N1.83trillion ($6billion) worth of equities to the Nigerian Bourse. The value of listed stocks on the NSE increased from N10.842 trillion at the beginning of the review week to N12.716trillion. Likewise, the All Share Index (ASI) moved up from 28,847.81 points to 28,871.93 points. The stock market’s negative year-to-date (ytd) return moderated to -8.14percent. “MTN Nigeria Communications Plc remains the sole market catalyst, driving market to its highest gain in the 12th of February, 2019. We expect market to close positive at week open as the in-

dex continues to rally on the back of the new listing”, according to equity research analysts at Vetiva Capital. Barely 24 hours after its shares were listed on the Nigerian Stock Exchange (NSE), telcom giant MTN Nigeria Communications Plc has signed N200billion medium term loan facility with seven Nigerian Banks. The banks are Access Bank Plc, GTBank Plc, Zenith Bank Plc, Fidelity Bank Plc, FCMB, UBA, and First Bank. In a notice to its shareholders, MTN Nigeria said Citibank acted as the coordinator while Quantum Zenith acted as the Facility Agent.

LR: Oluwaseyi Abe, immediate past president, Chartered Institute of Stockbrokers (CIS); Adedeji Ajadi, registrar and chief executive; Dapo Adekoje, president CIS; Frank Aigbogun, publisher, Businssday Newspaper, and Olatunde Amolegbe, first vice president, CIS, at inauguration of CIS’ Scholarship for Financial Journalist in Lagos.

‘Loom Money Nigeria’ is a Ponzi Scheme, SEC warns

he Securities and Exchange Commission (SEC) has raised the alarm over the activities of some online fraudsters, who are currently running an online investment scheme tagged ‘Loom Money Nigeria’. Loom Money Nigeria, is taking over social media by targeting young people to participate in a pyramid

scheme. The warning was given by Mary Uduk, Acting Director General of the SEC during a press conference by the Minister of Finance in Abuja last Thursday. Uduk who was represented by Acting Executive Commissioner, Operations of the SEC, Isyaku Tilde said the fraudsters, carry out their illegitimate business activities via social media platforms www.businessday.ng

like Facebook and whatsapp luring young Nigerians to invest as low as N1000 and N13,000 and get as much as 8 times the value of the investment in 48 hours. Uduk said the venture had no tangible business model, describing it as a Ponzi scheme, where returns would be paid from other people’s invested funds. “We are aware of the ac-

tivities of an online investment scheme tagged ‘Loom Money Nigeria’. The platform has embarked on an aggressive online media campaign on Facebook and whatsapp to lure the investing public to participate by joining various Loom whatsapp groups to invest as N1000 and N13,000 and get as much as 8 times the value of the investment in 48 hours.

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Global market indicators FTSE 100 Index 7,348.62GBP -4.89-0.07%

Nikkei 225 21,250.09JPY +187.11+0.89%

Generic 1st ‘DM’ Future 25,889.00USD +22.00+0.09%

Deutsche Boerse AG German Stock Index DAX 12,238.94EUR -71.43-0.58%

Generic 1st ‘SP’ Future 2,876.00USD -2.60-0.09%

Shanghai Stock Exchange Composite Index 2,882.30CNY -73.42-2.48%

CIS awards scholarships to 31 journalists ...Urges professional reportage

etermined to invest in human capital for overall development of the market in the area of information dissemination, the Chartered Institute of Stockbrokers (CIS) has awarded scholarships to thirty one financial journalists to undergo its Diploma Two Programme in Securities and Investment Market. The programme will not only deepen the beneficiaries’ knowledge of the market but pave way for them to aspire to become professional securities dealers. Addressing the beneficiaries in Lagos yesterday, the Institute’s President of the Council, Adedapo Adekoje explained that it was part of the Corporate Social Responsibilities (CSR) to upscale the skills of those who cover the capital market for professional reportage. Adekoje underscored the high propensity for market information by the stakeholders in the capital market ecosystem and the roles of financial journalists in the process. “It is hardly contestable to say that investors, especially in Nigeria, form their opinion of the capital market from what they read in the mass media. In recent years, this has been further amplified by the social media. It is therefore critical that financial journalists are well- informed about the market such that they can give enlightened and balanced reporting. “ In recognition of the very important role of Journalists in the Securities and Investment industry, the CIS council recently approved a scholarship scheme that will enable outstanding financial journalists undertake the CIS Diploma in Securities and Investment (DSI) programme at no cost. The scholarship will cover registration fees, examination enrolment fees and study materials. “ The CIS Professional Diploma in Securities and Investment will give you immense opportunities to @Businessdayng

understanding the capital market better and position you just one step away from becoming Chartered Stockbrokers. I encourage you to make the most of this rare opportunity and make it count in your professional journey. “Domestic investors need education and enlightenment. They need to know the facts-behind the numbers that are unleashed on them every day. They need to appreciate that, over the long term investors in properly constructed stock portfolios will be net winners, as consistently reported by researchers. The youths must be educated, market operators must be assisted to continually upgrade their skills, and most importantly, investors must be given the right and adequate information to protect them from losing their hard earned money. In all this, financial journalists, play a major role. “They need to appreciate that the Chartered Institute of Stockbrokers, today, offers her students the choice of becoming a full-fledged omnibus broker or specialist in any of five stand- alone professional areas, such as fixed income dealing, investment advisory services, equity dealing, commodity trading etc. The question is, how will this information get properly disseminated to investors, the Nigerian youths and the general public? The answer is robust financial journalism.”, Adekoje said. The Guest Speaker and Publisher of BusinessDay, Frank Aigbogun, who spoke on the “Roles of Financial Journalism in Fostering Capital Market Literacy “urged the awardees to uphold the highest tenet of professionalism in order to contribute immensely to the growth and development of the market. He advised the beneficiaries to be on top of the global developments in the financial market and leverage on their professional and technical knowledge to drive debates on topical economic issues in order to influence public policy positively.

Monday 20 May 2019

BUSINESS DAY

MARKETS INTELLIGENCE

Supported by Asset Management Corporation of Nigeria (AMCON)

Stocks

Currencies

Commodities

Rates + Bonds

Economics

Funds

Week Ahead

Watchlist

MTN is undervalued compared to African peers duced commission-to-sales ratio, due to shift to digital airtime sales and there was a reduction in in Digital and VAS costs in 2019 due to optimisation process. Operating expenses margin (OPEZ) margin fell to 38.20 percent in March 2019 from 27.70 percent as at March 2018, while total operating expenses dipped by 22.67 percdent to N78 billion as at March 2019. MTN Nigeria has spent N67 billion on capital expenditure as at March 2019, and it intends to spend more on its future expansion plans. The telecoms giants’ ongoing capex plan is focused on the network superficially; 4G rollout in major cities across the country to improve network quality. 3G densification and expansion countrywide to improve availability, reliability, data speed and overall user experience. MTNN has historically maintained moderate leverage; remains in a comfortable position relative to covenants on current metrics: Interest coverage stood at 0.40 times (x), a figure that is benign given industry of 1.50 times (X). We view the growth potential of MTN’s business as huge considering mobile penetration rate of 86% (as at Q1’2019) which could help in driving voice (accounting for 74.9% of revenue as of Q1 2019) and data revenue (accounting for 16.6% of revenue as of Q12019). Nigerian favourable demographic also portend is upside for the company to tap into as The United Nations project that the overall population of the country will reach about 398 million by the end of the year 2050. Market capitalization of the company after Friday’s trading stood at N2.19 trillion (stock price rallied to N108), making it the second most capitalized firm in the country. Analysts at CSL Stock Brokers said they expect a recovery in consumer spending in the medium term to provide further boost to data bundle consumption. “This is premised on lower Average Revenue Per User (ARPU) for Nigeria compared to South Africa due to better living conditions (higher GDP per capita, higher minimum wage and lower unemployment level),” said analysts at CSL Stock Brokers Ltd.

BALA AUGIE

T N N i g e r i a ’s shares are attractive and undervalued compared to peers in SubSaharan African after it received regulatory approval from the Securities (SEC) and NSE to list 20.3 billion units of shares at a price of N90 per share. Based on a listing price of N90, and a market capitalization of N2.0 trillion and an EBIDTA of N150 billion, the telecoms giant’s listing implied forward EV/EBITDA prints at 3.4x, while forward P/E ratio for prints at 9.5x based on market capitalisation of N1.8 trillion and annualised net income of N193.8 billion, according to data gathered by analysts at CSL Stock Brokers Limited. That compares with African peer average (which includes MTN Group, Vodacom, MTN Ghana, Safaricom, Sonatel and TIM Participacoes forward EV/ EBITDA prints at 5.6x and while forward P/E ratio prints at 12.4x. MTN Nigeria has been magnifying revenue since the first quarter of 2018, as the top line increased to N285 billion in March 2019 from N275 billion as at March 2018. Earnings before Interest, Taxation, Depreciation, and Amortization (EBITDA) also followed the same growth trajectory as it moved to N150 billion in March 2019, from N123 billion in the fourth quarter of 2018, and N112 billion in the third quarter of 2018. MTN Nigerian is generating more in earnings before interest, taxes, depreciation, and amortization, as a percentage of revenue, which means it has a strong operating efficiency. EBITDA margin increased to 53.30 percent in March 2019, from 44.70 percent in the fourth quarter of 2014, 43.50 percent in the third quarter of 2018, and 44.30 in the second quarter of 2018. The telecoms giant’s core business activities are profitable without taking into consideration the indirect costs. Gross profit margin increased to 81 percent in March 2019 from 80 percent the previous year. MTN Nigeria is cost leader and its ability to curtail costs is responsible for improved margins and profitability. It successfully re-

P.E

SHORT TAKES US$17 billion Nigeria, Kenya, Ivory Coast and Sub-Saharan African countries raised over US$17 billion from bond issuances in 2018 according to the World Bank. Average issuances for the region rose nearly to US$3 billion in 2018, compared with US$1 billion between 2013 and 2017.

49.4 index points Emerging market composite banking lending conditions index increased by 1.3 points to 49.4 points in the first quarter of 2019, an uptick from 48.1 points in the preceding quarter. The uptick was buoyed by improvement in the five dimensions of the index namely credit standards, trade finance, nonperforming loans, demand for loans and funding conditions.

N324.59 billion Nigeria’s 36 states plus Federal Capital Territory generated a combined N324.59 billion in quarter four of 2018. This depicts 22.79% growth over N264.3 billion generated in the previous quarter, and 24.82% surge yearon-year.

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

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

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Monday 20 May 2019

BUSINESS DAY

MARKETS INTELLIGENCE Banks Impairment Charge improves in Q1 BALA AUGIE

igerian largest banks have seen a reduction in write offs that added impetus to profit, signalling the end of a recession that sent a predawn chill down the spine of investors. The combined impairment charge on financial assets of 11 lenders that have released first quarter results fell by 24.11 percent to N23.73 billion, this compares with N31.06 billion the previous year, according to data gathered by Markets and Intelligence. A breakdown of the figures shows Zenith Bank’s loan loss expenses were down 24.12 percent to N2.09 billion in March 2019 from N4.57 billion the previous year. Guaranty Trust Bank, the largest lender in Africa’s largest economy saw impairment charge reduce by 60.15 percent to N651.24 million in the period under review from N1.64 billion the previous year. First City Monument Bank (FCMB) Plc’s impairment charge on asset fell by 53.15 percent to N2.28 billion in the period under review from N4.85 billion as at March 2018.

Zenith, May& Baker outshines peers in dividend return per stock ISRAEL ODUBOLA

ividend yield for Nigerian stocks has risen on the back of low stock prices following the rout at the Lagos bourse which pushed a number of equities to new lows. However, the market ended its 8-day bearish streak last Thursday, thanks to the listing of telcom giant, MTN Nigeria Communication Plc, which saw the bourse gaining 153 basis points after Friday’s trading. Some analysts positioned that MTN enlistment will make the

market rally for a while, however, the bourse still need stimulating pro-economic policies to sustain recovery in medium-to-long term. Analysis of the dividend yield revealed that Zenith Bank, Rakunity, McNichols, Okomu Oil and May & Baker are the best-performing stocks in this regards in their respective sectors. Also known as dividend return per stock, it is the percentage value of the ratio of a company’s dividend per share to its market price. On the assumption that dividend remains unchanged, yield climbs when stock price depreciates, and vice-versa.

Dividend yield is not a veritable yardstick to evaluate stock fundamentals because it tends to be surprisingly high for stocks with a very low market price. Thus, investors seeking to take position in dividend-performing stocks need to complement yield with dividend profile of the company. Having a high dividend yield means that a company declared higher dividend or trading at low price on the bourse. Nigeria’s second most-capitalized lender, Zenith Bank outstripped peers in the financial services space with a yield figure of 14.29 percent as at Friday’s end

of trading, compared with UBA (14.17%), Guaranty Trust Bank (8.94%), Access (7.69%) and First Bank (3.71%). The lender excited shareholders with a final dividend of 250 kobo per share in addition to 30 kobo paid earlier as interim dividend, bringing dividend pay out to 280 kobo in 2018, 3.7 percent higher than 270 kobo paid in 2017. With a share outstanding of 31.4 billion shares, the lender delivered N87.20 billion to shareholders as dividend. McNichols Plc had highest yield at 10 percent in the consumer goods space owing to its low stock

price that traded last at half naira. The Lagos-based sugar maker is trailed by Dangote Sugar (8.09%), FMN (6.45%), and Nascon (5.57%) among others. The sugar company declared 5 kobo per share to investors in 2018, its highest in 3 years, translating a monetary value of N16.3 million as it has 326.7 million shares issued. Among the drug makers, May & Baker Plc top peers with a yield figure of 8.7 percent relative to GlaxoklineSmith (5.56%), Fidson (3.61%) and Pharmdeko (3.33%). The company approved 20 kobo or N196 million pay-outin 2018, the highest since 2014. In the agriculture sector, Okomu Oil Palm Plc with a yield of 4.48 percent outpaces its rival Presco (3.45%). Okomu declared for shareholder’s approval a N3 per share, translating to N211.8 million payout. Rakunity Petroleum Plc, the least-capitalized firm in the oil & gas sector, has a yield figure of 22.73 percent topping peers - Total (10.94%), Conoil (9.95%), Eterna (6.67%) and Seplat (2.23%), owing to its low stock price of 40 kobo which has been dormant for more than nine months. The oil firm failed to declare dividends in 2018, making it the second time of non-dividend payment in the last four years.

Monday 20 May 2019

BUSINESS DAY

cityfile Council boss imposes curfew over cult killings IDRIS UMAR MOMOH, Benin re m i y a u Mo moh, the executive chairman of Etsako East local government area of Edo State has imposed 8:00pm to 6:00 am curfew in Afokpella community following a cult related clash that left four death and 10 buildings set ablaze. Momoh, who visited the community after the incident said anyone found violating the curfew would be arrested and handed over to the security agencies for prosecution. He said the curfew would remain in force until the situation is brought under control. According to him, as the chairman of the council, I have imposed curfew between 8pm to 6am in the community and anyone found wanting at this hour would be arrested and handed over to the security agencies. “The cult crisis has led to killing of four persons and destruction of 10 buildings in the community. “The police have commenced investigation and very soon those who are found wanting will be brought to book. “The community is now devoid of its usual busy

L-R: Seni Adio, chairman, Nigerian Bar Association-Section on Business Law (NBA-SBL); Opeyemi Oke, chief judge of Lagos State; Adeoye Adefulu, chairman, 2019 conference planning committee; Abiola Soladoye, judge of the High Court of Lagos State, and Sam Aiboni, council member, NBA-SBL, during a courtesy visit by the council of NBA-SBL to the chief judge of Lagos State to announce the 13th annual business law conference in Lagos, at the weekend. Pic by Olawale Amoo

EFCC raises alarm over cyber crime in S/East

he Economic and Financial Crimes Commission (EFCC) says cyber crime is assuming frightening dimension in the country, especially the south east region. South east zonal head o f t h e E F C C , Us ma n Imam, stated this, Friday, in Enugu while briefing newsmen on the activities of the commission in the first quarter of 2019. Imam said that cases of cyber crime, popularly called ‘Yahoo Yahoo’ have become alarming. “From investigations so far made, it is unfortunate that some parents are not only aware of their children’s involvement but even abet such ter-

rible crime. What is very worrisome is that most of the perpetrators are either students of institutions of higher learning, graduates, youth corps members or secondary school students learning from their elders. “To think that these criminals are those who will in future take up the responsibility of leading this country makes it even worrisome,” he said. The zonal head said that the commission had within the period under review seized some exotic cars from the suspected ‘Yahoo Yahoo boys’ being investigated. He wondered how a student would own a car worth about N10 million, adding that the commission had been inundated

with such matters. Imam called on Nigerian youths to toe the path of honesty, adding that anybody convicted of cyber crime would live with such stigma for the rest of his life. “I want to appeal to parents to take up their God-given responsibilities of monitoring their children or wards. In the south east, the case of internet or cyber crime is alarming”. He said that the commission was currently investigating cases involving several Ponzi schemes portrayed as cooperative or empowerment schemes. Imam said that such schemes which promised up to 60 per cent return on investment within sev-

en days were milking the unsuspecting victims of millions of naira. He said that such schemes dealt in cash with returns made in either cash, or electrical appliances or even food items. He warned the public especially those in Aba, Abia, to beware of any transaction with the following organisations: Perfect Ladies, Unstoppable Ladies, Christian Ladies, Unlimited Ladies, Raising Lives and Ever Better Association. Imam called on government to play its role in reducing the chances of youths getting involved in the menace. The zonal head maintained that the fight against corruption was yielding positive results.

Five LGAs to benefit from stable water supply in Ekiti REMI FEYISIPO

esidents of five local governments in Ekit State, including Gbonyin, Ekiti East, Emure, Ise Orun and Ado will from September enjoy stable potable water supply. Bamidele Faparusi, the commissioner for infrastructure and public utilities, disclosed this during an on-the-spot assessment and visit to

Egbe Dam in Gbonyin local government area, at the weekend. Faparusi, who lamented the neglect of the water scheme since 2014, said that the administration of Governor Kayode Fayemi would restore the production capacity of the scheme to hundred percent, about 66 thousand cubic metre per day. The commissioner described the pace of work at the scheme as encouragwww.businessday.ng

ing and promised that the job would be delivered on schedule. Faparusi said that the water scheme upon completion would not only serve the five local government areas but would also supply some parts of Akoko in Ondo State. Amin Abdullah, the contractor handling the turn-around maintenance of the scheme, assured that the project would become operational by

September, this year. He explained that all civil and electrical works have been completed while the supply of pumps was being awaited from the manufacturer in Germany. The rehabilitation of the water scheme is co-funded by the European Union (EU) and Ekiti State government under the phase three of the water supply and sanitation sector reform programme.

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commercial activities as residents have gone into hiding for fear of attack while the police are on ground doing their investigation. When contacted, sp okesp ers on of Edo police command, Chidi Nwanbuzor, said that the command was not aware of the situation. “We don’t have that report in our command. I will have to get across to the Divisional Police Officer of Okpella on this development,” he said. Four persons were reportedly killed in the community while 10 buildings were also set ablaze. It was gathered that the crisis was as a result of reprisal attack. A resident of the community, Ahmed Seidu told newsmen that the Killing was as a result of misunderstanding between members of rival cults groups in the community. “The crisis escalated when one of the leaders of the cult group was shot dead, thereby causing a show of force by the rival groups. “Since on Monday we have been living in fear hoping that the situation will be brought under control by the security agencies,” he said.

Couple charged with kidnap of 14-year girl

couple, Oni Alege and Nimota Alege, have been charged before an Ile-Ife Magistrate Court in Osun, over alleged kidnap of a 14-year girl. Oni, 50 and Nimota, 58, are facing a three-count charge of conspiracy, kidnapping and abduction, to which they pleaded not guilty. Police prosecutor, Monday Ojiezele, told the court on Friday that the accused committed the offence in April at 10:00a.m. in Okerenbete villag, Ile-Ife. According to Ojiezele, @Businessdayng

the couple conspired and kidnapped the girl to an unknown destination. The offence, the prosecutor argued, contravened sections 225, 364 and 516 of the Criminal Law of Osun, 2002. The defence counsel, Sunday Olagbaju, urged the court to grant his clients bail in liberal terms, as they would not jump bail. The magistrate, Olukunle Owolawi granted the defendants bail in the sum of N100,000 with two sureties in like sum and adjourned the case till June 20.

Monday 20 May 2019

BUSINESS DAY

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BUSINESS DAY

Monday 20 May 2019

BUSINESS DAY

news Inside Nigeria’s scandal plagued... Continued from page 1

such as China, India and

Australia to provide concessions or cash rebates/grants to companies penetrating new markets or consolidating already established markets to enable them rival competitors. In Nigeria, companies that exported different kinds of products or commodities between 2006 and 2016 were owed billions of naira in claims as the Federal Government did not meet the obligation of settling them as promised. But the process of settling these companies has become convoluted, with allegations of the Nigerian Export Promotion Council (NEPC) not doing due diligence before sending the list of qualified exporters to the National Assembly for approval. For instance, at a Senate meeting held on May 2 this year, which was attended by many exporters, Mohammed Sabo, popularly known as Nakudu, who is a member of Senate Committee on Promissory Notes, asked a high-ranking officer of the NEPC whether there were beneficiary companies that were overpaid. The NEPC official acknowledged that what over 17 companies received from the Senate Committee were in excess of their claims. The NEPC official also acknowledged that over 15 were underpaid,

reliable sources who were at the meeting told BusinessDay. After being suspended seven times, Ngozi Okonjo-Iweala, the then coordinating minister of the economy, stopped the scheme yet again in early 2014. However, it was reinstated in 2017 by the Muhammadu Buhari administration. The government, through the NEPC, re-started the scheme in 2017 using promissory notes for settlement of qualified exporters, rather than the negotiable duty credit certificates used in the old scheme. Because the notes required monetary allocations, they were meant to be approved by a Senate Committee on Promissory Notes (an adhoc committee) and the House of Representatives Committee on Promissory Notes (permanent committee). A document seen by BusinessDay shows that the National Assembly committees approved the promissory notes of 269 companies worth N193.042 billion before publishing their names on December 5, 2018. Some of the companies approved were A&P Foods, African Glass Limited, African Textile Manufacturers Limited, Crown Flour Mills, Jebba Paper Mills, Deli Foods, Peugeot Automobiles, Procter & Gamble, Ajaokuta Steel Company, Olam Nigeria Limited, GZ Industries, among many others.

“The Senate approves a Promissory Note Program and a Bond Issuance in the total sum of N193,042,846,216.24 to clear the outstanding claims of the verified 269 companies i.e beneficiaries of the Export Expansion Grant (EEG) scheme,” the document, which contains the Senate resolution, said. But the list contains companies that have questionable export records. For instance, Ajaokuta Steel Company that has not produced a single sheet since its establishment in 1971, despite gulping over $8 billion, had N118.006 million approved as its share for the EEG. Experts wonder what Ajaokuta that has little local relevance to the steel sector would have exported between 2006 and 2016 when the public officers in charge of the complex said it was dead. “One of the major challenges why Ajaokuta Steel has not commenced full production has been the problem of infrastructure, like the railway for transporting raw materials to the plant,” Musa Mohammed Sada, minister of Mines and Steel Development, had said on December 24, 2014. In 2016, Kayode Fayemi, then minister for Solid Minerals Development, said while defending his ministry’s budget in February of that year that the Federal Government would need to clear all legal hurdles surrounding the Ajaokuta Steel Company Limited for it to begin

to function. Yet, money was allocated to this moribund complex as an exporter. Money was also approved for Peugeot Automobile, which specialises in car assembly. There was also an approval for Jebba Paper Mill, which has been struggling to produce papers for the country since 2009 when it came on board. BusinessDay could not immediatelycontactJebba,Peugeot and Ajaokuta for comments. “It will be interesting to know what all the companies exported and to where,” an exporter, whose company was approved, said. “You can also see that some textile companies are on the list. It will be interesting to know whether they exported textiles or cotton within the period,” the exporter said. Another leg of the story is that the legislators are yet to approve the grant for the remaining 38 companies, which include PZ Cussons, British American Tobacco, Okomu Oil, Lee Group (which has seven subsidiaries), and Sapele Integrated. Others are Nestlé Nigeria, De-United Foods, Beta Glass, Unilever, Dangote Agrosacks, among many others. Sources allege that legislators are demanding that the exporting companies offer them ‘lunch’ before approval. ‘Lunch’ used in this context means bribe (money). Many of the multinationals refused to offer bribes because it could dent their

image and attract sanctions from their headquarters, BusinessDay was reliably told. “It is also not a good business because no one knows what to get at the end of the whole exercise,” one of the affected exporters said. BusinessDay contacted Francis Alimikhena, chairman of the Senate Committee on Promissory Notes, who debunked the allegation. “Don’t mind them; they are telling lies,” Alimikhena responded on the phone. “The promissory notes that we have already passed? We didn’t see them and we passed over 290, and it is just remaining 38 companies. The 38 just appeared before us last week. They did not even come with their papers. They are just telling lies. What they are telling you is a lie. They have not even appeared before the House of Representatives even,” he said. But exporters told BusinessDay that they have been interfacing with the House of Representatives and have come with their papers many times. In October 2018, Abdullahi Sidi-Aliyu, director in charge of policy and strategy, NEPC, had told journalists that the notes hadbeenintheSenate.Asofthat time, senators were on recess. “Government has done all that is necessary for the take-off of the programme (EEG). Right now, we are waiting for the National Assembly to reconvene so that they can grant approval

Firm’s increase dividends 15.31 % to ... Continued from page 1

the largest producer of the

building material, accelerated its dividend payment to N16 per share (or N242.02 billion), a 35.25 percent increase from the 2017 figure. Julius Berger jacked up dividend payment by 96.67 percent to N2 per share or N2.60 billion for the 2018 financial year, from N1 per share or N1.32 billion in 2017. The most capitalised construction company was grappling with delay in the passage of the budget, huge debt owed it by the Federal Government, and a severe dollar scarcity. However, Cement Company of Northern Nigeria (CCNN) plc’s dividend payment fell by 68.62 percent to N5.25 billion from N16.75 billion as at 2017. In the consumer goods space, Unilever increased dividend by 200 percent to N8.61 billion or 1.50 per share, from 50k per share in 2017. Nestle Nigeria plc hiked dividend payment by 40 percent to N30.51 billion in the period under review as against N27.79 billion it declared in 2017.

Different factors drove the rise in some of these companies’ dividends. For Unilever the improvementwasbecauseitsolditsBlue Band, the margarine business. If not for the sale of a segment, dividend would have been slashed, according to IfedayoOlowoporoku,consumer goods research analyst at Vetiva Capital Management Limited. “Nigerian Breweries had a bad financial year even if they maintained 100 percent payout. Companieshavestartedtheyear on an unimpressive note and it could get to half year before they start to garner momentum since consumers’ wallets are squeezed,” said Olowoporoku. IfeomaOnyeka,anindustrial goods analyst at Vetiva, said that while Dangote Cement magnified dividend per share compared to CCNN, the latter has paid more dividends from distributableprofittoshareholders. “There were impressive payments from the cement and industrial goods sector,” Onyeka said. FortheNSEBanking10Index – the most capitalised lenders –

Analysts expect CBN to adopt ‘wait... Continued from page 2

Akinwunmi Ayodele. Analysts at Cowry Asset Management Limited expect inflation rate to further move upwards in the months of May and June amid Ramadan festivities and the recent signing of the new minimum wage bill.

“Given the imminence of the newminimumwageimplementation, we expect the MPR to be kept on hold, cautiously,” said Razia Khan, chief economist, Africa,StandardCharteredBank. “We expect new easing from September which will hopefully be supported by a www.businessday.ng

to the use of promissory notes. It is not only the EGG that is affected. There are other debts – domestic debts by the Federal Government – that come under the promissory notes. Hopefully, if the National Assembly can reconvene before the end of the year and grant approval, the government will definitely implementthedecision,”hesaid at the annual general meeting of the Manufacturers Association of Nigeria Export Promotion Group (MANEG) in Lagos. He had put the value of the outstanding notes at over N1.2 trillion. However, the total amount owed 307 companies approved by the NEPC and sent to the National Assembly was N320.132 billion. More so, the Federal Government is even trivialising the whole exercise by introducing what is called the reverse auction. The debt auction means that creditor exporters will bid for promissory notes by offering discounts to the government. The simple explanation of thisisthatFrigoGlassthatisowed N185.988 million (according to one of the documents) will have to bid and reduce this amount by as low as possible to have a chance of being paid at all. The lower the company is willing to go, the more chances it has. Companies that bid much lower will have to be paid. “The implication of this is that non-genuine exporters can go lower just to get anything,” a source said. L-R: Michael Larbie, CEO, RMB Nigeria and regional head, West Africa; Ralph Mupita, CFO, MTN Africa; Kemi Owonubi, senior transactor, investment banking, RMB Nigeria, and Dalu Ajene, head, investment banking, RMB Nigeria, at the MTN NSE Listing Dinner in Lagos.

dividend payment has been flat, as they continue to protect their capital against headwinds. Zenith Bank’s dividend payment is up 2.04 percent to N78.50 billion in 2018 from N76.93 billion the previous year. Guaranty Trust Bank’s dividend payment was flat at N72.10 billion while United Bank for Africa’s was flat at N22.30 billion.

“There is a rule by the Central Bank of Nigeria (CBN) that states the amount they can pay out as dividend,” said Emeka Ucheaga, analyst at ED Finance and Strategy. The banking sector has the highest dividend yield with ZenithBankyielding14.38percent. Dividend payment for the insurance companies in the country was flat, but Leadway

Assurance plc bucked the trend. The largest insurer by revenue, profit, and asset accelerated payment by 258.67 percent to N5.38 billion for the year ended 2018, from N1.50 billion in 2017. Financial performance of the largest firms in Nigeria grew slowlyinthefirstquarterasweak revenue and rising operating costs crimped profitability. For instance, the cumu-

lative revenue of the largest listed companies in the country increased by a mere 5.05 percent to N2.48 trillion in March 2019, from N2.36 trillion as at March 2018. Combined net margins followed the same slow growth trajectory as it rose by 4.65 percent to N379.22 billion in the period under review, from N362.35 billion a year earlier.

lower inflation profile. The next cut could come sooner if inflation improves, but this seems doubtful in the very near term,” Khan said. On the money supply side, data from the CBN shows that broad money supply (M2) and credit to the private sector are currently below the target for the year. Folashodun Shonubi,

deputy governor, operations, CBN, noted in his personal statement at the last MPC that broad money supply (M2) contracted by 1.98 percent in February 2019, relative to its level at end-December 2018, reflecting largely the 7.74 percent decline in net foreign asset (net). Net domestic credit, however, grew by 1.68 percent, on account of respective rise of 17.20 percent

and 6.41 percent in both credit to the government and credit to the private sector. CBN bills held by money holding sectors also grew by 31.40 percent, thus growing the broader measure of money supply(M3)by4.31percentover thelevelatend-December2018. The underperformance of money supply supports the argument for an expansionary

policy in order to stimulate credit creation. FSDH Research reiterates that the current structural issues in the economy do not support strong growth in credit. Measures that remove the inherent risks in the economy will be required to stimulate credit creation.

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Monday 20 May 2019

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

FG to promote gender balance in MDAs ...develops national gender policy Cynthia Egboboh, Abuja

he Federal Government through the Federal Character Commission has indicated interest to promote gender equality in appointment into Ministries, Departments and Agencies. Abayomi Sheba, Acting Executive Chairman of the Commission who gave this indication at a two day workshop on Gender Mainstreaming National Gender Policy in Abuja noted that gender inequality in accessing socioeconomic and political opportunities among others remain key policy prob-

lem in Nigeria. Sheba, represented by Mohammed Tukur, Secretary to the Commission stated that efforts aimed at addressing these gender related issues have prompted the development of the National Gender Policy (NGP). He said, “the National Gender Policy of the Federal Republic of Nigeria was developed at a watershed moment where government is recommitting itself to the implementation of National and International conventions and laws in support for gender equality, the empowerment of women and women’s rights”.

Sheba stressed that the commission has been very proactive in terms of gender inclusion in the area of appointments adding that the workshop was timely as the present administration was doing so much to ensure equity and fairness in the distribution of socioeconomic amenities. “The present administration has done so much to ensure equity and fairness in the distribution of socioeconomic amenities and infrastructural facilities thereby reducing fear of deprivation and marginalisation in the country”. The Chairman urged participants to deliberate exten-

Go-check-kids” targets 1million children with early eye-check Cynthia Egboboh, Abuja

sively and develop a set of guidelines that would integrate affirmative action on women’s representation within the Federal, States, Civil Service, Armed Forces, Police Force, other security agencies and all political appointments at National and state levels. Dipo Akinsola, Director, Socio-EconomicandInfrastructural Department of the Commission said the objective of the workshop was to strengthen management and leadership skills in creating gender policies addingthattheworkshopwould identify challenges as it relates to gender in recruitment and placement in various MDAs.

o-check-kidsinitsbid to solve the growing sight problem in children has partnered with Vicad clinic to promote early sight screening in children between ages 1-7, targeting 1 million kids in 5 years. Bayo Akintoye, African Representative for Go-Checkkids said that efforts are on going in collaboration with the federal ministry of health and state governments to deploy the devices to hospitals especially the primary health care centres across the country. “We recently had a workshop in collaboration with the federal government to promote national eye care program in the primary eye care department to see that these devices are deployed and used in hospitals and health care centres across the country”. Akintoye said it is important

toscreenchildrenbeforetheage of 7 adding that amblyopia is a brain condition and if a child has poor vision in preschool, the brain doesn’t learn to see through the eyes properly. “If we wait until the age of 7 to conduct a visual acuity test, the amblyopia condition has likely become permanent. Amblyopia detection and treatment ideally takes place before the age of 7”. He further explained that non-detection of eye problems in children has effect on the children have problem in the eyes and its not detection before age eight, it has effect on the eyes at the long run, good sight aids development of full potential. Edidiong Udom, Executive Director Vicads Clinic at the press briefing in Abuja said that the deviceisusedtodetecteyedefection in kids from age 1-7, adding that it is of most important as most eye problems become difficult to correct when children are grown up.

MNCH Week: NACA Targets 8000 Women Of Reproductive Age In Kaduna Abdulwaheed Adubi, Kaduna

L-R: Abraham Nwanko, former DG, DMO; Chidi Izuwah, DG, ICRC, and Egunia Abu, panelist, at the 3rd Just Friend Club of Nigeria annual lecture, topic ‘Resolving the Infrastructure Deficit in Nigeria: a Pragmatic Approach’ held in Abuja. Pic by Tunde Adeniyi

Alleged PENCOM Fraud: Group demands resignation of Reps probe panel Chair James Kwen, Abuja

ynamic Patriotic Citizens Foundation, a civil society organisation (CSO) has called for the resignation of Oluwole Oke, Chairman of the House of Representatives Committee on Procurement, jointly probing alleged N 33 billion fraud in the National Pension Commission (PENCOM). TheHouseofRepresentatives had mandated its joint commit-

teesonProcurementandPension to probe alleged procurement irregularities in the organisation. The Dynamic Patriotic Citizens Foundation in a letter signed by Tolu Babaleye and Sunday Williams, the organisation’s Chairman and Executive Secretary, alleged that Oke does business with some companies linked to PenCom and lacks the morale rectitude to preside over such a sensitive probe. “Hon. Oluwole Oke as the house committee chairman on

procurement he is said to have verycloselinkswithseveralcompanies,includingDEBRAKLimited,withwhichhedoesbusiness andcontractsatPENCOM,”Tolu Babaleye and Sunday Williams, the organisation’s chairman and executive secretary, said. “Curiously, the companies were not listed and neither him nor PENCOM has refuted these grievous allegations in writing and in the media since it was made public. Hon. Wole Oke needs to tell the public

here whether he has interest in the companies or not. “We are particularly concerned that Hon. Oluwole Oke was specifically and publicly accused in the media by his friend and colleague, Hon. Johnson Agbonayinma, of bringing the Acting PENCOM DG, Aisha Umar, to his (Agbonayinma’s) office to corruptly influence him to scuttle and end the probe by this same house of representatives on the missing N33 billion naira pension funds”.

priests of the diocese while distributing food items and toiletries to the IDPs admonished them not to lose hope in the country and in God, saying the diocese shared in their plight. Hammawa lamented that the inaction of the Federal government was responsible for the high rate of insecurity in the country, noting that in other climes people who fail in their

responsibilities humbly resigned or are sacked by the government, but unfortunately the situation was different in Nigeria. “If you fail in your responsibility you either resign or you are sacked, but unfortunately we have a government in place that is not just and don’t abide by the rules of the game and engagement. “We have a government

that only protects itself and the security of the common man is not their business and that is the cause of the problem. “If not so, if an individual does not resign himself for his failure, the government should see him sacked. It’s unfortunate, but we can only say what we feel and encourage the government to rise up to the occasion.” he said.

s preparation for the 2019 Morternal, New Born Child Health, MNCH’s week is on the top gear, the National Agency for Control of AIDS ( NACA) has disclosed its intention to cover 8000 pregnant women and women of reproductive age during the week in Kaduna. The week which is expected to kick start on May 20, 2019 will last for five days and covers three

Reps, CBN disagree over N20 trillion stamp duties ... CBN says it collected N35bn James Kwen, Abuja

T Catholic Bishop donates relief materials to IDPs in Taraba Nathaniel Gbaoron, Jalingo

he Catholic Bishop of Jalingo Diocese, Charles Hammawa has distributed relief materials to the internally displaced persons (IDPs) camps from the recent farmer/herders conflict in Kona, Mayo-Dassa, Nukkai and ATC, all in Jalingo. Bishop Hammawa acompanied by some other

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Local government areas of the state, which include Kaduna South, Jaba and Makarfi. Briefing newsmen during high level meeting with the Commissioner for Health, Dr. Paul Dogo in his office in Kaduna on Wednesday, the leader of the NACA delegation, Eno Effiong said the aim of the meeting is to collaborate with the Kaduna state government on the issue of Maternal, New Born Child Health and on issue relating to maternal mortality in the state.

he House of Representatives and Central Bank of Nigeria (CBN) have disagreed on the alleged non remittance of N20 trillion stamp duty collections as the apex Bank insisted that it collected only N35bn from the Nigerian banking public and not N20 trillion as submitted by legislature. Abubakar Kure, CBN Acting Director of Banking Services gave this indication while addressing the House of Representatives Adhoc Committee of Investigation on non remittance of N20trn stamp from 2010 to date. Kure disclosed that the collection of stamp duties which stands at N35,240,916,338.54, @Businessdayng

commencing from February 3rd, 2016 to date have not been remitted to the Federation Account on behalf of the Nigerian Postal Service (NIPOST). The CBN Director stated that, “we submitted bank statement from 2016 to date stating all the collection of stamp duties dated may 13th. Also submitted were details of bank-by-bank submission. “Bank duties collected have not been remitted to the federation account as we haven’t received instructions from the account owners. And we’re also aware of a litigation pending at the supreme court preventing the movement of the funds into thefederationaccountandonce that’s dealt with and instruction from relevant agencies such as NIPOST to remit same”.

Monday 20 May 2019

BUSINESS DAY

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Monday 20 May 2019

BUSINESS DAY

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Monday 20 May 2019

BUSINESS DAY

NEWS

Tin Can Trailer Park: Contractor urges patience as construction work continues

…Apapa residents impressed by gridlock-free bridges CHUKA UROKO

orini Prono, the contractorontheconstructionof the Tin Can Trailer Park along Apapa-Oshodi Expressway, has urged patience from all Apapa stakeholders as construction work continues on the park two weeks after it was scheduled to be thrown open to truck drivers. The park which is, arguably, oneoftheoldestconstructionsites in Nigeriatoday,was scheduled to be completed and opened for use two weeks ago as part of resolutions reached at an emergency stakeholdersmeetingconvenedat the instance of Senate Committee on Works for the decongestion of Apapa gridlock. Lilypond Terminal, which was also billed for opening a day before the trailer park, has been in use for two weeks now and the impact has been palpable as Apapa, especially the bridges, are relativelyfreeoframpagingtrailers and tankers. Expectation is that when the Trailer Park comes on stream, Apapa may be walking back to its days as a sought-after destination for living, business and leisure. But it is not going to be tomorrow or next. “We are still constrained by the absence of necessary facilities at the park, but we are closer now.

We are almost there,” Adedamola Kuti, Federal Controller of Works in Lagos, told BusinessDay on phone Friday afternoon, assuring that the park would be opened once the facilities were in place. Kuti had disclosed that the opening of the park was being delayed by the absence of water and light at the park which was confirmed by an official of Borini Prono official who pleaded to be anonymous. However, when BusinessDay visited the project site Friday morning,workerswereonsitebut not working on the two facilities. Apart from one welder who was seen working on an iron structure for the over-head water tanks, the rest of the workers were busy casting concrete on the walkway for the shoreline protection on which work was suspended, but now resumed. A peep into the toilets showed that the tiling work which was in progress during our previous visit had stopped. “We are taking our time, doing it one day at a time,” one of the construction workers told this reporter in a tired tone, “hoping that one day work on the park would be over “after so long here.” Meanwhile, Apapa residents, business owners and motorists havecommendedwhatevereffort or initiative that is responsible for the present state of Apapa roads

and bridges. AyoVaughn,chairman,Apapa GRAResidentsAssociation,wasin high spirits when he spoke with BusinessDay Friday evening, stressing that the residents were happy with the state of the roads and bridges in their domain. He was optimistic that the peace and respite would be sustained. His reason was that a new taskforce of which he is a member would soon be announced by President Muhammadu Buhari. That taskforce, which would ensure that no trucks should be seen on Apapa roads or bridges, he said, would work for only three weeks and hand over to Lagos State government. Gradually but steadily, Apapa is getting attention from stakeholders, especially the government.Theportcitywasalreadyon the precipice, awaiting implosion. Considerably, it has degenerated in value with its congested ports, degraded environment, decaying infrastructure, devalued property, declining business activities, and disillusioned investors, especially property owners whose assets have lost over 50 percent of their market value. Now, there is hope. That is the most potent weapon for survival in Apapa today and, as Apostle Paul told Roman converts, “hope does not disappoint us.”

and Argentina, according to data fromthePetroleumProductsPricing Regulatory Agency (PPPRA). As a major indigenous oil and gas industry player, Pan Ocean is poised to set the pace in achieving the gas flare-out objective of the Federal Government. Beginning in 1984, Pan Ocean started to implement an initiative on gas utilization, despite the challenges of an underdeveloped Nigerian Gas Market. As a key objective, Pan Ocean strives to

advance efficiency, reduce operating expenditure, and maintain a healthy balance with the environment in all its activities. The harnessing of its gas resources is no exception. PanOceanalsoplanstounveil two other major projects in June, the 160mbpd, 20” x 67-kilometer underground pipeline from Amukpe to the Escravos export terminal and a flow station at OML-147 flow station at OwaAlidinma, Delta State.

Hope for zero gas flare rises with Pan Ocean Gas Processing plant ISRAEL ODUBOLA

igeriainchesclosertozero gas flare, stable electric supply with Pan Ocean’s new gas processing plant. Pan Ocean Oil Corporation Limited, operator of OML98, joint venture (JV) with the Nigerian National Petroleum Corporation (NNPC), and Ovade-Ogharefe GasProcessingPlant,issettobring Nigeria closer to the zero gas flare and stable electricity supply target of the Federal Government. The unveiling ceremony of its 200mscfd Ovade-Ogharefe gas processing plant, scheduled for June 2019, will mark a new era as much needed gas supply will become available for the NIPP Power Plant at Ihobbor, Edo State. The gas processing plant has two phases; this trailblazing project will contribute significantly to local LPG (liquefied petroleum gas) supply, and reduce waste occasioned by gas flaring. The second phase of the gas plant has 200mmscf/d capacity; it incorporates a cryogenic process that delivers bone-dry gas streams, LPG and other natural gas liquid streams for domestic markets. The facility is equipped with 29 storage tanks built to store, approximately 194,400 gallons of Propane and 244,640 gallons of Propane/Butane mix (LPG) from an in-feed gas of 200mmscf/d. Over the years, Nigeria has imported 48.27 percent of locally consumed LPG despite its abundant deposits. The country imported 42.09 million metric tonnes of LPG in December 2018 majorly from the United States

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Monday 20 May 2019

BUSINESS DAY

NEWS INTELS keeps mute over NPA’s termination of pilotage contract

… it is true, close source confirms AMAKA ANAGOR-EWUZIE

NTELS Nigeria Limited, Nigeria’sleadingoilandgaslogistics company, has refused to officially comment on the report that the Nigerian Ports Authority (NPA) has again revoked its multi-billion dollar boats pilotage monitoring and supervision agreement, 17 months after it was renegotiated by both parties. INTELS, which refused to answer BusinessDay questions, says it will issue official statement after all necessary consultation, as discussions are ongoing to arrest the situation. However, a source close to INTELS, who demands anonymity, confirms to BusinessDay that the contract was actually terminated in March immediately after the 2019 presidential election. The source, which blames the development on ‘politics,’ alleges theactionwasdirectedtobringing down Atiku Abubakar, the presidential candidate of the People’s Democratic Party (PDP), in the 2019 general elections. According to the source, it is presumed that Atiku Abubakar is a majority shareholder in the

ownershipofINTELS’OilandGas Logistics business ran by Italians. “It is politics, according to African dictionary, but in the process of bringing Atiku down, the NPA is destroying jobs and scaring investors away from Nigeria, and as we speakabout10,000Nigerianshave been laid off since 2015 till date,” the source states. The source further discloses INTELS has been trying to manage the situation since March, as ‘discussions are ongoing to see what we can do,’ saying, “It is good the NPA exposed the situation so that the public will be the judge.” Recall that the NPA in 2017 made move to revoke the pilotage agreement with INTELS, a 10-year contract, which was due to elapse in 2020. Hadiza Bala-Usman, managing director of the NPA, said her managementquestionedthecontract, due to the refusal of INTELS topayrevenuegeneratedfromthe pilotage contract into the treasury single account (TSA). As result, the NPA sorted the advice of the Attorney General of the Federation (AGF) and Minister of Justice, who described the agreement as illegal ‘ab initio, and

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requested the NPA move to exit the agreement. According to a letter dated March 29, 2019, addressed to the managing director of INTELS, NPA said the decision to revoke the contract was taken in line with Article 8 (C) of its agreement with INTELS, dated February 11, 2011. The letter read: “The NPA (the principal) hereby serves on you INTELS Nigeria Limited, (the Managing agent) notice of termination in line with article 8 (C) of its agreement with INTELS, dated 11th February, 2011, which said notice shall expire three months from the date issuance.” Also,MohammedBello-Koko, executive director, finance and administration of the NPA, said in a letter dated March 27, 2019, addressedtoHadizaBala-Usman, managing director of NPA, that “INTELS has not complied with the presidential directive and circular on implementation of TSAandArticle4.1oftheexecuted supplemental agreement by refusing to remit the sum of $145, 849,309.33 being outstanding service boat revenue generated from November 1, 2017 to October 31, 2018.”

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Monday 20 May 2019

BUSINESS DAY

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Monday 20 May 2019

BUSINESS DAY

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Monday 20 May 2019

BUSINESS DAY

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Buhari challenged on National Development Plan as he readies for 2nd term in office …stakeholders say ERGP great, but not enough HARRISON EDEH, Abuja

s the May 29 date for the inauguration of President Muhammadu Buhari for a second term in office draws closer, industry stakeholders are challenging the re-elected president and the All Progessives Congress-led Federal Government to address concerns of developing Nigeria with a holistic ‘National Development Plan’ that will drive economic prosperity in the country. Nigeria posted some of the worst economic indices in the last four years.‎ The country is currently the poverty capital of the world with 91.16 million Nigerians living below a dollar a day as of February 13, 2019, according to World Poverty Clock created by Vienna-based World Data Lab. President Buhari admitted some of these concerns in a recent statement while hosting high-ranking government officials to a Ramadan breaking of fast. Experts have said appreciable measure of success recorded in some of the Federal Government’s policy initiatives has not translated to a better life for a large number of Nigerians as these are mainly stopgap measures and solutions which

are not holistic in nature. “What we do not have yet in Nigeria is a concerted and focused development plan. We can see that happening in rice production only. The main driver of any developing economy is the real sector. Government has not done enough to grow the economy through this sector,” Chijioke Ekechukwu, former director general of Abuja Chamber of Commerce and Industry, told BusinessDay in an emailed response to questions. Ekechukwu made a case for a robust manufacturing sector to drive the economy in a holistic way while creating jobs for more than 23 million unemployed Nigerians. “It is the manufacturing sector that can easily grow our GDP, employment, revenue from tax, and reduce pressure on forex. Unfortunately, the interest rates on loan, the exchange rate, and lack of power continue to be the bane of development of this sector. I expect that the growth of the manufacturing sector should be the focus of government in this new dispensation,” Ekechukwu said. Specifically, the call for a national development plan re-echoes concerns of tough roads ahead as pointed out by the re-elected Central Bank (CBN) governor, Godwin Emefiele.

While being assesses by the National Assembly following his reappointment by President Buhari for a second five-year term, Emefiele said there was an urgent need to revitalise the real and productive sector of the economy to drive the needed growth that Nigeria requires at this time. Nigeria’s population is growing at about 3 percent, faster than the economy, which is growing at around 2 percent. This makes it difficult for an average Nigerian to feel the impact of the growth as population growth erodes economic growth. Bayo Rotimi, an economist, ‎said the national development plan must see Nigeria grow at nothing less than 10 percent to create more opportunities for employment and wealth creation. ‎”Our population is growing at almost 3 percent. We are giving birth to many people, which our resources realistically cannot accommodate for now. Up till 2013, Nigeria has been growing typically at about 6-7 percent. We have the capacity to grow at 10 percent if we get our policies right. We have no business growing at a lower than 10 percent. Ghana, our next-door neighbour, is growing at about 9 percent consistently. Also, Ethiopia and other African countries have a significantly high growth rate,” Rotimi said.

Double honour as BusinessDay’s Anudu wins Citi award, US IRT

usinessDay journalist Odinaka Anudu has emerged as winner of this year’s Citi Journalistic Excellence Award (CJEA). He also won a United States Department of State’s nomination for an International Reporting Tour in the US and the Netherlands. For the Citi award, Anudu emerged as the best with his feature story, ‘Dollar in the Mills’. This story chronicles how small-scale palm oil millers make money in spite of all the man-made gridlocks set on their way. He was picked as the winner by a jury of eminent personalities from journalism and other disciplines. Anudu, being the only winner in Nigeria, will join winners from other countries in New York for once-in-a-lifetime eight-day seminar on business and financial reporting at Columbia Graduate School of Journalism. The CJEA began in 1982 as a way of recognising journalists for excellence in financial and business reporting. It is sponsored by Citi Bank and administered by Columbia Journalism School. For the International Reporting Tour, Anudu was selected after submitting some of his award-winning stories that centred on entrepreneurship, manufacturing and economy to the Washington Foreign Press Centre, US Department of State. He

is one of 20 journalists selected from across the world. He will participate in the reporting tour in Washington DC and Chicago in the US, before jetting out to the Hague, for the 2019 Global Entrepreneurship Summit, which will bring together 2,000 global leaders in entrepreneurship, innovation, investment and policy to support deals that matter to everyone. Odinaka Anudu, BusinessDay’s senior editorial analyst, edits the Industry and SMEs sections, supervising a widely read section produced every Monday called ‘Start-Up Digest’. He has won a number of local and international journalism awards, fellowships and grants. Internally, he won the 2018 BusinessDay Top Performer for the Editorial Department, making him the best journalist for the newspaper last year. He has won some nominations outside Nigeria, notable among which was his 2017 selection by the University of the Witwatersrand, Johannesburg, South Africa, for a fully funded investigation in Guateng. Anudu is a trained economist and philosopher. He is also an entrepreneur, public speaker and former schoolteacher. He was educated at Nnamdi Azikiwe University, Awka, and briefly trained at the United Nations Institute for Training and Research (UNITAR). He was formerly

Atiku threatens Buhari’s aide with N2bn suit for defamation Innocent Odoh, Abuja

ormer Vice President and Presidential candidate of the People’s Democratic Party (PDP) in the 2019 general elections, Atiku Abubakar, has threatened to slam a N2 billion suit against President Muhammadu Buhari’s assistant on social media, Lauretta Onochie, if she fails to tender apologies and pay N500 million over what he claimed was an attempt by the aide to defame his name. Atiku issued this threat in a letter dated May 14 and addressed to Onochie by his lawyer Mike Ozekhome, which was made available to BusinessDay on Sunday, even as the former Vice President decried the association of his name with terrorism by Onochie, who claimed in

a series of tweets that the Wazirin Adamawa is on the watch list of the United Arab Emirates (UAE), which was published on various media platforms in Nigeria and abroad. On May 7, Onochie had tweeted that the former vicepresident was on a United Arab Emirates (UAE) watch list. “Atiku on UAE watchlist- Security sources.” “Security operatives in the United Arab Emirates (UAE) are keeping a close tab on a former Nigerian Vice Pres Atiku Abubakar who has been in the Middle East nation for several weeks now. What is he doing there? “Me: Shopping for Terrorists?” she tweeted. Ozekhomein his letter to Onochie said, “Your odious publication is clearly also aimed at rubbishing our client’s image and reputation.

“It has caused him national and international backlash and embarrassment and done incalculable damage to him. Your publication has also caused our client, in the eyes of reasonable members of the public, unspeakable odium, obloquy, hatred, ridicule and psychological trauma. “He has thereby been subjected to the shame and infamy of being viewed by members of the public as not only corrupt, but as a terrorist and sponsor of terrorism. Numerous telephone calls, emails, visits, letters and private social media chats by his family members, friends, political and business associates, and international statesmen and women in the last few days attest to the alarm and serious concerns generated by your false publication,” the letter read.

FITC CEO Newman receives Thomas Gilbert Award SEGUN ADAMS

anaging director/CEO, Financial Institutions Training Centre (FITC), Lucy Newman, has been honoured in the US with the prestigious Thomas F. Gilbert Distinguished Professional Achievement Award. The award ceremony held at the International Society for Performance Improvement (ISPI) Annual Awards Luncheon in the US, was chaired by ISPI president, Scott Casad. Who became the immediate past president at the conference, heralding the beginning of Rose Nixon as President. The recognition of Newman comes close to the end of her two terms of five years each at the FITC and recognises her progressive contribution to the field, from

2001 to date. Speaking at the award ceremony, Newman said she would carry the award with all the honour and dignity it deserved. Newman is the first person to receive this award from outside North America, the youngest recipient so far and the 30th recipient, since the award was established in 1991. The late Dr. Thomas F Gilbert is acclaimed The Father of the field of Human Performance Technology, the founding principles of the International Society for Performance Improvement (ISPI). FITC has under Newman continued to provide quality training, consulting and research services to the players in the financial services sector and related industries within Nigeria and across Africa. Newman joined ISPI as an International Member in the year www.businessday.ng

2000, earned her Certified Performance Technologist [CPT] designation early 2008. She was invited to join the 10-person International Task Force, created by ISPI Board in 2008, to plan ISPI’s global expansion. She became an ISPI Life Member, in 2009. She was the first elected International Director on the Global Board of ISPI, in ISPI’s 52 year from inception in 1960, that was neither North American nor European, in her role as an International Director on the Global Board, from 2012 – 2014, she represented ISPI members in 48 countries outside the United States. Dr Newman has published articles and book chapters in the field of Human Performance Technology, dating back several years. Her doctoral dissertation published in 2008, is also on Leadership and Performance. https://www.facebook.com/businessdayng

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Odinaka Anudu the secretary-general of the National Drug Abuse Control Association. He has received several training programmes in journalism, locally and internationally. He has two books to his credit, ‘Top-Class English for Schools and Colleges’ (2009) and ‘Drug Abuse and Our Future: Who Will Bell the Cat?’ (2010). In its tradition, BusinessDay has produced other award-winning journalists, including Patrick Atuanya (editor), Chuka Uroko, Obinna Emelike, Iheanyi Nwachukwu, Daniel Obi, Teliat Sule, Josephine Okojie, Isaac Anyaogu, and Caleb Ojewale, among many others. BusinessDay is Nigeria’s leading business and financial newspaper, coveringbusiness,finance,economy, banking, politics, health and arts, among others.

Monday 20 May 2019

BUSINESS DAY

news CNN International Commercial appoints Phil Nelson COO TEMITAYO AYETOTO

NN International Commercial (CNNIC) has appointed Phil Nelson as chief operating officer (COO) to lead CNN’s operational and international growth initiatives outside of advertising sales. As COO, Nelson will oversee CNNIC’s Business Development and Strategy, Finance, Strategic Planning and International Sales Operations as well as its Content Sales and Licensing. This includes managing and growing CNN’s relationships with over 300 digital, broadcast and Out of Home content partners – from local CNN branded channels to airlines and hotels that carry CNN content live and on-demand. Previously, Nelson was managing director, Turner North Asia and South East Asia Pacific. In this role, he has overseen all aspects of Turner’s business in these regions including distribution of CNN International and taking a key role in establishing local partners CNN Indonesia and CNN Philippines. Nelson has also held other business development and strategic planning roles at Turner since he joined in 2010, and has significant digital experience from his time at AOL, culminating in him being managing director for AOL Asia. In addition, Nelson holds an MBA from Harvard University and, prior entering the corporate sector, was a commander in the US Navy.

Nelson will be part of the CNNIC senior management team, reporting directly into Rani Raad, president of CNNIC, and work closely with a wide range of divisions across CNN and WarnerMedia. Nelson will continue to be based in Singapore in the near-term and his team is spread across the globe, particularly in key CNNIC hubs of Hong Kong, Singapore, London and Miami. “The CNNIC business has continually evolved since it was created back in 2013 to optimise the revenue, brand and commercial partnerships across our dynamic offering of CNN content and products,” said Rani Raad. “I am delighted that Phil joins us as we enter the next chapter of our business in a role that brings together all the operational, strategic and non-advertising sales revenue under one leadership. Phil has a first-rate track record at Turner and will bring a unique skillset of business acumen, creative thinking and forensic focus.” “After many successful and exciting years at Turner Asia, I am very pleased that my next move is within the WarnerMedia family to a brand as remarkable as CNN,” said Phil Nelson. “CNNIC has done a great job in innovating and adapting its business to stay ahead of the competition during a period of unprecedented change in the news and media industry. I am looking forward to contributing to this success in the years to come.”

CIBN urged to strengthen commitment in enhancing bankers’ professionalism HOPE MOSES-ASHIKE

entral Bank of Nigeria (CIBN)hasurgedtheCharteredInstituteofBankersof Nigeria (CIBN) to strengthen its commitment in enhancing the levelandstandardsofprofessional in the banking sector. Aishah Ahmad, deputy governor, financial systems stability directorate, said this after she was conferredwithanhonoraryfellow award by the CIBN. The CIBN on Thursday at its extra ordinary fellowship investiture formally conferred its honoraryfellowshipawardsonsixdistinguished bankers in recognition of their contributions to the banking industry and the economy. Others conferred with the sameawardwereEdwardAdamu, deputy governor, corporate services, Peter Amangbo, managing director/CEO, Zenith Bank plc, Tony Okpanachi, managing director/CEO, Development Bank of Nigeria (DBN), Segun Agbaje, managingdirector/CEO,GTBank plc, Hassan Usman, managing director/CEO, Jaiz Bank plc, and Bade Adeshina, chairman, Goldfield Group. “I am honoured like other honourees to be conferred with this fellowship, the responsibility is for us to conduct ourselves both in our personal and professional life to these high standards, to be role models and mentors to other professionals in the banking industry and also to support

the Institute in its broad activities in terms of building capacity of bankers and their professionalism,” Ahmad said. Aigboje Aig-Imoukhuede, chairman of Coronation Capital Nigeria Limited, while speaking on the “Ethical Dilemma in Financial Institutions: The Way Forward,” told the bankers to develop strong moral standard to deal with ethical dilemma. Choosing the right part when faced with an ethical dilemma is not easy, he charged the participants to begin to ensure that Nigerian banking profession resolveethicaldilemmainawaythat contribute positively to building a great nation. Aig-Imoukhuede, who was the guest speaker, said the role of the banker had grown beyond the traditional function of managing the finance of the customer to include other roles such as media, celebrity, politician, philanthropist, and religious leader, among others. In his remarks, Yakubu Gowon, former Head of State, said the Nigerian banking and finance industry had in recent time been plaguedwithfraudsandunethical practices. He was concerned that no day passes without reports of frauds and other unethical practices in the industry. This constitutes a big threat to the values of trust andprofessionalism,whichought to be the basic principles of the banking industry. www.businessday.ng

Presentation of relief material by Eroton/NNPC joint venture to displaced people at IDP camp in Yola.

Stakeholders see collaboration, standard processes unlocking FM potential in Nigeria CHUKA UROKO

takeholders at the Nigerian Facilities Management (FM) Roundtable held in Lagos last week Wednesday, as part of activities marking this year’s World FM Day, said collaboration and standard processes had the capacity to unlock FM potential in Nigeria. The Roundtable, which had as theme, ‘Strategies for Implementing Global Standards in Nigeria’s Facilities Management Sector,’ was organised by Alpha Mead Group, Nigeria’s total real estate solutions company, with regulators and other key players in the real estate and facilities management industry in attendance. Keynote speaker, George Etomi, principal partner, GEPLAW, highlighted some of the challenges limiting the growth of the industry, including lack of en-

forcement of FM best practices in various sectors such as Aviation, Power/Energy, Security, among others. Etomi decried the impact of this lack of enforcement as a lead to breakdown of services, dissatisfied stakeholders and industries with stunted growth. To solve these problems, he harped on the need for collaboration among the industry players to influence legislation, public private partnership to create value from under-utilised assets and the importance of monitoring and enforcing standards in the delivery of FM services across the nation. “We have to adopt best practices and maintain exceptionally high standards within the industry. It is also important to engage with policy makers in order to improve their understanding of the role of FM in ensuring value

HMO Total Health Trust holds business forum ISRAEL ODUBOLA

health maintenance organisation (HMO), Total Health Trust Limited, held its annual business forum with this year’s edition focusing on value creation and wealth preservation by Nigeria corporates faced with a challenging macroeconomic landscape. Among the topics discussed were healthcare trends and funding, Nigeria’s economic outlook for 2019 and how Nigerians can maintain financial fitness in trying economic times. Speakers at the event were Nick Zaranyika, CEO, Total Health Trust Limited; Sakeenat Bakare, executive director – Business Development and Support Services, Stanbic IBTC Insurance Brokers, and Andrew S. Nevin, advisory partner and chief economist at PwC Nigeria, who delivered the keynote speech, which provided an insightful and thought provoking overview of Nigeria’s economic outlook post the recently concluded elections. Zaranyika, who spoke about healthcare trends and funding, said cost of healthcare in Nigeria was exponentially increasing year-on-

year partially as a result of imported inflation, among other factors. He emphasised the importance of companies subscribing to health insurance plans in order to protect against high unexpected healthcare costs, afford access to quality treatment and provide peace of mind to employees and their dependants Keynote speaker, Andrew S. Nevin said Nigeria’s economic growth would be somewhat sluggish characterised by slow recovery while unemployment would continue to trend upward and that diaspora remittances, estimated at N25 billion annually, would continue to contribute significantly to Nigeria’s foreign earnings. To maintain financial fitness despite the bearish outlook, Sakeenat Bakare pointed out different ways individuals and companies could build, maintain and transfer wealth to the next generation, emphasising that ill health could limit the potential to create more wealth and “insurance is good financial planning to have for healthcare and to protect those assets you’ve worked so hard to acquire.” This translates to better cost savings compared to paying out of pocket, Bakare said.

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preservation and maximisation of public infrastructure. Once we get this right, facilities management will become a mainstay in the Nigerian economy, and deliver on its massive potential,’’ he said. Speaking during the event, Femi Akintunde, group managing director, Alpha Mead Group, said, “The value of the global FM industry is estimated at $1.1 trillion, and if we as FM practitioners intend to capture a huge chunk of the value chain, then we need to constantly adhere to Global FM ISO standards. “We have to acknowledge the realities of our market and make a commitment to further improve the delivery of operations across the public sector, commercial, corporate real estate, residential, industrial and healthcare industries,’’ he added. He disclosed that, at Alpha Mead, they were on the vanguard

because they were committed to making real difference in the communities they operate. “Our strategic business units are constantly leveraging on technology and improving their processes to ensure we can compete with the best in the world,’’ he said. Wole Olufore, managing director, Alpha Mead Facilities Management, offered insights into Emerging Trends in FM Standards and Practices in Africa, and how Alpha Mead has consistently championed best practices The International Facilities Management Association (IFMA), Nigerian chapter, led by its chair, Wale Odufalu, also launched the Nigeria Facility Management Report which provided insights into the FM structure, FM cost, pain points AND decision drivers in Nigeria’s market.

EY urges experts to address compliance requirements in Content Act STEPHEN ONYEKWELU

rnst & Young (EY) Nigeria is poised to seek urgent panacea to many challenges faced by players in the oil and gas space while complying with the Nigerian Content requirements as contained in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act. Against this backdrop, a roundtable breakfast session is being organised by EY on May 23, 2019, in Lagos. The event, tagged “The challenges of complying with the Nigerian Content requirement and suggested solutions”,will bring together industry experts and stakeholders as a veritable platform for robust discussions on the compliance requirements of NOGICD Act with suggestions on strategies towards achieving full compliance by relevant companies. Speaking on the rationale behind the roundtable session, Temitope Samagbeyi, partner and head, Business Tax Services and Oil and Gas Sector leader (EY), said the event is to complement the efforts of the NCDMB in expounding on the @Businessdayng

relevant sections of NOGICD Act as it pertains to the Oil & Gas Sector of the Nigerian economy. In his view, the NCDMB has made decent improvement in the Nigerian content within the Oil & Gas sector. In 2018, the NCDMB rolled out a 10-year strategic roadmap, which was designed to grow the aggregate Nigerian content in the sector to about 70% (this is about 26% in 2018) by Q4 2027; generate 300,000 jobs within the sector and retain $14 billion (this is $5bn as of 2018) in-country from the sector’s annual spend. Continuing, Samagbeyi disclosed that breakfast session has so many objectives which includes but not limited to highlighting the challenges currently being faced while complying with the Nigerian Content requirements as contained in NOGICD Act; discussing the implications of the 10-year strategic roadmap being embarked upon by the NCDMB and how companies can take advantage of the opportunities that abound, as well as use this avenue to further sensitize the companies on the current compliance drive by the NCDMB on the deduction and remittance of the Nigerian Content Development levy.

Monday 20 May 2019

BUSINESS DAY

NEWS

CBN injects 268.6m, CNY 29.2m into FX market … as BDCs advised to activate over 4,000 official e-mails HOPE MOSES-ASHIKE

he Central Bank of Nigeria (CBN) weekend made an intervention of $268.6 million in the retail Secondary Market Intervention Sales (SMIS) and CNY29.2 million in the spot and short tenored forwards segment of the inter-bank foreign market. This was disclosed by Isaac Okorafor, director, corporate communications department, who said the intervention was for requests in the agricultural and raw materials sectors. The Chinese Yuan, on the other hand, was for Renminbi denominated Letters of Credit. Okorafor expressed satisfaction over the continued stability of the foreign exchange, which, according to him, was largely due to sustained intervention by the bank. He assured that the apex bank would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange. Meanwhile, $1 exchanged for N361 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY1 exchanged at N55.

Also, over 4,500 CBN-licensed Bureaux de Change (BDCs) operators have been advised to create or activate over 4,000 official/corporate e-mails on their platform and stop the use of Yahoo and Gmail for official communication. Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria (ABCON), said the advice followed a circular from the Other Financial Institutions (OFIs) Department of the CBN, directing all OFIs including BDCs to adopt corporate e-mails for their communication with the apex bank. “We are also glad to inform the gathering that over 1,000 BDCs in the South-west have been integrated with the new CBN Forex return rendition platform. In due course, our members in the other zones shall be integrated to achieve online real time return rendition to CBN from the comfort of their offices. ABCON has created over 4,000 official emails on its platform www.abconng.org for its members to enhance compliance,” he said. Gwadabe said ABCON proactiveness in the automation of its members’ operations had paid off, as all BDCs now had opportunity

to re-active their official e-mails on the ABCON platform. “ABCON advises all members to activate their emails on the automation platform to enable them comply with the CBN circular. All members are to visit national and zonal secretariats for further enquiry and assistance, where necessary,” he said. The ABCON president said the rising threats of cyber-security attacks on the financial system means that all stakeholders, including BDCs must be proactive to protect their data, businesses, reputation and overall operations from cyber attackers. He said that e-mails have remained the weakest link on cyber attacks and BDCs under his leadership will continue to upgrade their IT systems to ensure that they are ahead of the cyber criminals. Continuing, he said that banks, OFIs, digital wallets and remittance players are prime targets by cyber criminals seeking quick monetization of stolen credentials. “It is therefore important that we do not relent in our efforts at protecting this space and increasing public confidence in financial system,” he said.

Housing remains on priority list in Nigeria over low supply, weak demand CHUKA UROKO

or most adult Nigerians and households, housing tops their priority list. But it is a dream that is hardly realised for reasons of inadequate supply by developers and weak, ineffective demand by seekers. Nigeria has very scary housing statistics. An official (conservative) estimate of housing deficit in the country is put at 17 million units. The country’s total housing stock is about 13 million units for about 200 million population. Of the 13 million housing units, 95 percent have no formal mortgage. Chudi Ubosi, an estate surveyor and valuer, says houses in this class are “dead assets” because they are unbankable. This means they cannot be used as collateral to secure bank loans. Besides a low homeownership level which is a little above 10 percent as against Singapore’s 65 percent, UK’s 72 percent and over 80 percent in the US, a report compiled by Pison Housing Company says about 80 percent of the Nigerian population lives in rented accommodation, spending 50 percent of their income on house rent. The poor housing situation in the country has been made worse by the 2016-2017 economic recession which hit the sector harder than any

other. Long after the larger economy exited recession in Q2 2017, real estate remains in recession, recording -3.8 percent growth year-on-year in Q4 2018 and -4.7 percent for full year 2018, according to figures from the National Bureau of Statistics (NBS). All the housing problems in Nigeria revolve around finance. A recent Reuters report notes that “housing finance remains in its infancy” here and this accounts for the low mortgage/GDP ratio of 0.6 percent that compares unfavourably with South Africa’s 31 percent. Though government has competing claims for its limited budgetary funds, experts expect that, given its social and developmental role, government should be filling the vacuum within the housing industry or creating the enabling environment for private sector operators to do so. The Federal Mortgage Bank of Nigeria (FMBN) is government’s main housing financing institution but has been hamstrung by capital constraints. Over the past few years, the apex mortgage bank has issued over 3,500 mortgages, expanded the national housing fund (NHF) to non-government employees, and launched rent-toown and other products. Expectation is that the bank will do more when the plan to recapitalise it to the tune of N500 billion mate-

rialises. The NHF facility is granted at 4 percent interest rate to accredited primary mortgage banks (PMBs) for on-lending at 6 percent to NHF contributors over a maximum tenor of 30 years, but this has not had impressive showing. This partly accounts for why mortgage loans to the private sector by PMBs stood at N169.5 billion in December 2018, according to the CBN’s latest statistical bulletin. The Reuters’ report notes that data on loan defaulters were not provided, pointing out that given the volatility of the labour market, it would not be a surprise if nonperforming loans were significant. The Nigeria Mortgage Refinance Company (NMRC) is government’s latest intervention in the housing sector. Established in 2013 to provide liquidity to the mortgage market and enhance the maturity structure of the industry’s loans, the company in December 2018 disclosed that it had refinanced mortgage loans totalling N18 billion. This should encourage mortgage lenders to boost housing loans, but it has not. PMB operators acknowledge that the N18 billion which was used to refinance an estimated 1,045 loans presented by the PMBs has not created the anticipated impact, citing high interest rate and unaffordable property prices in the market.

National development must ensure advancement of human life -Obasanjo Francis Sadhere, Warri

L-R: Ndidi Nwuneli, non-executive director, Nigerian Breweries plc; Jordi Borrut Bel, MD/CEO; Kola Jamodu, chairman, and Uaboi Agbebaku, company secretary/legal director, at the company’s 73rd annual general meeting in Lagos, at the weekend. Pic by Olawale Amoo

Enugu moves to avert shutdown of airport, to comply with FG’s directives … as Benin Airport upgrades to operate night flight Ifeoma Okeke

he Enugu State government, in a swift reaction to avert any plan todowngradeorshuttheEnugu Airport, says it will comply with directive of the Ministry of Aviation. Hadi Sirika, minister of state, Aviation,weekenddisclosedgovernment’s plan at downgrading the Akanu Ibiam International Airport, Enugu, or shut it downtoenableitcarryoutrenovations on the airport runways to avoid any major incident. However, while responding to the state government’s plans to comply with safety rules, Sirika called for a speedy implementation of the directive, stating that it would help government address the safety concerns on that airport’s runway. The minister, who was commis-

sioning facilities around the Murtala Muhammed Airport Lagos, said, “We wish to acknowledge steps taken by the Enugu State government in a bid to improve safety at the Akanu Ibiam International Airport. “We are happy to see that the Enugu State government has seen reason with the Ministry to address safety concerns raised. “We are appreciative that in the name of safety, Enugu State Executive Council approved the immediate closure of Orie Emene Market (abattoir inclusive) to forestall any tragedy at the airport. “We are also happy that the Council also ordered immediate removal of allillegalstructuresencroachingonthe land of the Airport, radio mast of the state broadcasting service, and Free www.businessday.ng

Trade Zone. “We, however, would be extremely comfortable if compliance with the above directives from the state government are carried out as soon as possible to give us necessary allowance to carry out repairs as well as expansion and extension of the Runway. All these will better the lot of the Enugu Airport and improve safety a hundred fold,” he said. Inarelateddevelopment,theFederal Government had upgraded the Benin Airport to perform night flights and flights during low visibility with the installation of Precision Approach LightingSystemandInstrumentLandingSystemCategoryII,commissioned by the minister of state for aviation. Sirika during the commissioning of the equipment at Benin Airport

said Governor Godwin Obaseki had expressed worries on why aircraft could not land at night, during bad weather and low visibility and why there was no ILS. “From now on, you have the Instrument Landing System, which can allow pilots in reduced visibility and bad weather to be able to shoot on approach and land in Benin, just like they will do in London. And also, it is no longer closure from 6pm. The operationalcapabilityoftheairporthas improved with the installation of these equipment,” he said. The minister also said the Federal Ministry of Transportation (Aviation) through Nigeria Meteorological Services (NiMET) had constructed and donated a meteorological station to University of Benin (UNIBEN).

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ormer President Olusegun Obasanjo on Saturday said the concept of national development must ensure the advancement of human life. Obasanjo, who spoke at the 2019 Synod of the Church of Nigeria (Anglican Communion), Oleh, Isoko South Local Government Area of Delta, said national development should no longer be measured by economic growth alone. Obasanjo spoke on the topic, “Mobilising Nigeria’s Human and Natural Resources for National Development and Stability.” “Until the last two or three decades of the last century (especially while the Cold War was still on), when nations talked about national development, the emphasis was more on the growth of the economy (or economic growth as measured by GDP per capita), that is infrastructure, industrial output and growth, etc.” Obasanjo added, “Except for the western nations perhaps, very rarely did the welfare and well-being of the individual citizen come into reckoning. “In fact, in some jurisdictions, the citizens themselves counted more as means of production, which explains the historical listing of population as one of the elements of national power. Human beings were expendable commodities in the quest for greatness – that can be reduced to a single dimension as economic creatures.” This meant that in those @Businessdayng

circumstances, GDP growth mattered more than the welfare and well-being of the people. “However, following the collapse of the former Soviet Union and the end of the Cold War in 1990, there emerged a changed notion of the concept of development which now holds that people must be at the centre of all development: in other words, the central focus of all development efforts (or national development) must be to ensure the advancement of human flourishing and expanding the richness of human life,” he said. The former president added that according to this new thinking, the end point of any developmental thinking or process must be the welfare and well-being of people themselves. “Development, therefore, is for all the people, about all the people, for all the people and by all. This implies that no aspect of the development of any nation must be seen as an end in itself, but rather, as a means to acquiring human well-being and welfare. “From this, the United Nations Development Programme (UNDP) espoused the concept of Human Development as the ultimate goal of National Development. In short, from 1990 onward, the new paradigm of national development championed by the UNDP is called the human development approach – which emphasises enlarging people’s freedoms, choices and opportunities rather than economic growth,” Obasanjo said.

Monday 20 May 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

Austria to hold new election after vice-chancellor resigns Far-right leader Strache says ‘Russian oligarch’ video footage was an illegal trap VALERIE HOPKINS

ustria will hold new elections “as soon as possible”, Chancellor Sebastian Kurz announced after a video showing his vice-chancellor offering lucrative government contracts in exchange for political support was published by two German media outlets. The vice-chancellor, HeinzChristian Strache, resigned on Saturday as five thousand protesters massed to demand new elections. Hours later, as evening fell over Vienna’s usually quiet government district, Mr Kurz appeared before journalists to announce a snap poll. “For the last two years, I have had to make a lot of compromises” to fulfil the coalition’s policy priorities, he said, mentioning a campaign promise to stem the flow of migrants and asylum seekers to western Europe and improve the country’s economic situation. “After this video, I can say enough is enough.” The chancellor dismissed rumours that the leaked videotapes contained materials that would embarrass him and former Chancellor Christian Kern, of the Social Democratic Party. “The attacks are a side issue,” he said. Mr Kurz has come under fire from his critics for bringing the

far-right FPO into government and giving them key ministries such as interior, transport and defence, and accepting the appointment of Karin Kneissl, an academic with close ties to the FPO, as foreign minister. His critics have dubbed him the “Quiet Chancellor” because of his silence on a number of controversies that have engulfed the coalition since it came to power 17 months ago. Earlier on Saturday, Mr Strache announced that he would resign as vice-chancellor of Austria after German newspapers published allegations that he had offered lucrative government contracts to individuals posing as representatives of a Russian oligarch in return for political support. The head of the far-right Freedom Party said the covert video shot in Ibiza 2017 was a “trap” but that he was resigning in order to spare his party damage. “This was a targeted attempt of political assassination, this was hired work,” he said, as thousands of protesters gathered outside the Chancellery. “The only illegal thing that happened at this night was the video itself.” Mr Strache, and his longstanding confidant, Johann Gudenus — now an elected MP — believed themselves to have been meeting the niece of one of Russia’s most powerful oligarchs. Excerpts of over seven hours

manded by scores of Labour MPs as the price for their support. Mrs May has also — so far at least — refused to meet Labour’s demands for a permanent customs union, a policy which is opposed by many Eurosceptic members of her cabinet and a large number of Tory MPs. The decisive second reading vote on the bill is scheduled for the week starting June 3 and is seen as the last throw of the dice for the prime minister; few MPs at Westminster expect the outgoing prime minister to succeed where she has failed three times before. If the bill is not passed, the default position is that the UK will leave the EU on October 31 without a deal, although a new Tory prime minister is expected to go to Brussels to try to renegotiate the terms of Britain’s exit. Brussels has insisted that the withdrawal treaty text cannot be reopened. In an article in the Sunday Times, Mrs May said she would “not be simply asking MPs to think again” on the same deal that they have repeatedly rejected — but on “an improved packaged of measures that I believe can win new support”. Mrs May said she wanted MPs to look at the proposals “with fresh pairs of eyes — and to give it their support”. The Commons has previously rejected her Brexit deal by margins of 230, 149 and 58 votes. www.businessday.ng

all three Austrian intelligence services. Shortly after the formation of the coalition government, armed police raided on the domestic intelligence services, seizing material relating to the agency’s infiltration of rightwing and neo-Nazi organisations. Western intelligence services have since limited their co-operation with Austria. It is not clear who the undercover individuals who set up the meeting and posed as Russian representatives were, nor why the footage has only now come to light.

Hong Kong entrepreneur hopes protein mix will appeal to Asian palates

Few MPs expect prime minister to succeed where she has failed three times before

heresa May has promised to set out a “new and improved” Brexit deal next month as she tries to stitch together a cross-party coalition of MPs to pass her EU withdrawal treaty at the fourth attempt. The UK prime minister’s “bold offer” is expected to include new proposals to uphold EU standards of workers’ rights and environmental protection to win over some Labour MPs, even though formal cross-party talks collapsed without a deal last week. Mrs May is also holding renewed talks with Northern Ireland’s Democratic Unionist party to see whether she can overcome their opposition to a Brexit deal. Downing Street said the prime minister was looking to reassure the DUP — which notionally provides Mrs May with her majority in parliament — over elements of the treaty’s “backstop” plans to prevent a hard border on the island of Ireland. The DUP is fiercely opposed to the backstop, since it would treat Northern Ireland differently from the rest of the UK. But the new proposals, to be set out when the Withdrawal Agreement bill is published, will not include a confirmatory referendum, de-

video as “really embarrassing” and said its consequences were “a catastrophe”. He told reporters that the evening in Ibiza was the only time that he met the woman in the video and that he was the only person in the FPÖ apart from Mr Gudenus who had had contact with her. Mr Strache will be replaced by transport minister Norbert Hofer. Mr Strache’s party has been mired in scandal since it became part of the government 17 months ago. The FPÖ, which signed a cooperation agreement with Russian president Vladimir Putin’s United Russia party in 2016, controls

Inventor of vegan pork product hopes to cash in on China pig cull

Theresa May plans ‘new and improved’ Brexit deal GEORGE PARKER

of video footage shot in a private villa show Mr Strache appearing to suggest lucrative government construction work could be given to his interlocutors should they purchase a large stake in Austria’s largest newspaper, the Kronen Zeitung, and shift its editorial content to support the FPÖ. The footage was shot just weeks before elections that brought the FPÖ into government as junior coalition partner to the mainstream conservative Austrian People’s Party. Mr Strache said his actions were an “alcohol-related display of machismo.” He described the

ALICE WOODHOUSE

ith China poised to cull a third of its pig herd due to African swine fever, a Hong Kong-based entrepreneur is hoping to step into the gap with a plant-based pork product he hopes will replicate the success of Beyond Meat and Impossible Foods. David Yeung, founder of Hong Kong-based Right Treat, said he developed Omnipork from peas, soy and mushroom proteins to provide Asian chefs with a more environmentally friendly alternative to pork and now plans to launch it in China. “When Asian consumers go to the wet market or supermarket to buy meat, they turn it into their own dish — it is not a finished product,” Mr Yeung said, unlike some western ready-to-eat meat alternatives such as burgers or sausages. “For chefs, pork is almost like a foundation ingredient in whatever they cook.” He said Omnipork was designed to replace pork wherever it appeared in Asian cuisine, such as its role in dumplings where it acts as a binding ingredient to which chefs add mushrooms or other vegetables. First launched in restaurants in

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Hong Kong in April 2018, Omnipork is now sold in Singapore, Taiwan and Thailand. May Chow, chef-owner of Little Bao and Happy Paradise Hong Kong, has been using Impossible Foods products in her restaurants for a year and said her customers were opting to eat less meat. In terms of meat alternatives in Asia, Ms Chow said familiarity was a crucial factor, meaning a replacement for pork would appeal more to a Chinese housewife. Omnipork’s China launch — planned for the latter half of this year — comes as China’s pig farms have been hit by African Swine fever. The country is expected to lose 130m animals to the disease, which is fatal to pigs and has no cure. The disease has already pushed up retail pork prices in China and Nomura forecasts prices will rise by a further 40 per cent in the next six months. “I’m not a genius, I don’t have a crystal ball, but I would never expect that the year we launched Omnipork would be the year that the African swine fever outbreak would happen,” Mr Yeung said. “But I did know this breaking point [for agriculture] would happen.” Consumers globally are warming to plant-based meat substitutes as they look for more sustainable sources of protein. Los Angeles@Businessdayng

based Beyond Meat shares more than doubled on their debut at the beginning of May and Impossible Foods raised a further $300m in its latest funding round, taking its valuation to $2bn. Impossible said it will plough the new funds into production to keep pace with demand. And that trend is not limited to North America and Europe. The ranks of Asia-Pacific’s vegetarians rose to 496m in 2018, up from 488.5m in 2014, according to figures from market research provider Euromonitor International. India makes up the bulk of that population with 397m vegetarians while China is home to 56.7m. Euromonitor forecasts the AsiaPacific will account for three-quarters of the global market for meat substitutes in 2023 at $17.4bn — up from $15.2bn in 2018. Omnipork’s home market in Hong Kong has one of the highest levels of meat consumption per person where the average resident eats 664g of meat a day, and daily consumption of pork and beef is four times that of the UK, the University of Hong Kong found. China’s 1.4bn people, meanwhile, ate 55m tonnes of pork in 2017, according to OECD data, making the market for pork substitutes potentially very lucrative.

50 BUSINESS DAY

Monday 20 May 2019

NATIONAL NEWS

Martin Sorrell’s S4 faces investor revolt over pay Proxy advisers Glass Lewis and ISS attack marketing group’s long-term bonus scheme NICHOLAS MEGAW

artin Sorrell’s new marketing venture faces a potential shareholder revolt at its first annual meeting later this month, after a pair of influential proxy advisory groups criticised its complex long-term bonus scheme. Glass Lewis and Institutional Shareholder Services, the two largest proxy advisers, have both urged investors to reject S4 Capital’s pay policy. S4 has said its policy is to combine below-average salaries with generous incentive payments to encourage long-term performance from top executives, but Glass Lewis said it had “a number of concerns” about S4’s arrangements. Sir Martin’s annual pay is worth £230,000, and he received £140,000 for the period from May until the end of last year. However, he could earn up to 15 per cent of the five-year growth in the company’s market capitalisation if it meets long-term targets. Glass Lewis’ report criticised S4 for using “complex vesting conditions”, putting no individual

limits on rewards and allowing too much dilution of investors’ existing shares. S4 said its pay scheme was “consistent with the UK corporate governance provision of promoting long-term shareholdings by executive directors, aligned with long-term shareholders interests. It is performance driven and designed to incentivise management to create value for all shareholders.” Sir Martin faced several investor protests over pay during his 33 years in charge of WPP, which he transformed from a wire-basket maker into the world’s largest advertising company. He received £70m in a single year in 2015, and will still earn more than £2m from WPP this year despite leaving under a cloud in 2018. Sir Martin left WPP after an investigation into allegations of misconduct, which he has denied. He launched S4 just six weeks after departing WPP, and has since built the company up through a series of acquisitions including MediaMonks, a Dutch digital production company, and MightyHive, a programmatic advertising specialist.

Gates-backed computing platform raises $110m for new drug push Investors back Schrödinger’s plan to develop its own drugs

HANNAH KUCHLER

chrödinger, the drug discovery computing platform backed by Bill Gates, hedge fund manager David E. Shaw and Google Ventures, has closed its latest financing round at $110m, as investors back its new plan to develop its own drugs. New investors including Invus, Pavilion Capital, a subsidiary of Temasek, and Michael Antonov, one of the co-founders of virtual reality company Oculus, have joined the fundraising round, expanding it by almost 30 per cent since the round was announced in January. The company has until now focused on providing its technology to pharmaceutical customers. The platform was used in the discovery of two cancer drugs — ivosidenib from Agios and enasidenib, now marketed by Agios and Celgene — that have been approved by the US Food and Drug Administration. “Our platform has been validated again and again across hundreds of targets in real-world drug discovery projects,” said Ramy Farid, Schrödinger chief executive. The fundraising will help Schrödinger pursue its first wholly owned potential drug candidates in oncology. The company hopes to have its first potential drug candidate ready for trials by next year. Karen Akinsanya, senior vicepresident and chief biomedical scientist, joined Schrödinger last year from Merck to lead their new drug discovery programmes. She hopes the technology will significantly accelerate the process which can take several years and cost billions of dollars. Ms Akinsanya said the emergence of large genetic data sets

had opened up a “whole closet” of potential targets for the industry and that Schrödinger’s technology had created a “deep list’ of “very potent molecules” that could become drugs for the targets. Schrödinger is one of many companies exploring the possibility that vast computing power could speed up the cumbersome and expensive early stages of drug development. Relay Therapeutics, a Bostonbased start-up, raised $400m from investors including the SoftBank Vision Fund last year, while in Silicon Valley, Insitro raised over $100m from investors including Andreessen Horowitz, and signed a deal with Gilead Sciences earlier this year. But there have also been failures: IBM recently said it would stop selling its Watson for drug discovery artificial intelligence platform, although it will continue to service existing customers. Schrödinger was founded in 1990, long before the latest generation of start-ups. Its approach simulates the physics of how compounds work, rather than simply using deep learning to crunch existing data looking for patterns. Mr Farid said it is “mind-bogglingly complicated” to teach a computer the principles of physics — from the exact coordinates between every atom to how molecules behave in water. “It was a really, really hard problem. Much harder than anyone realised. It took thousands of person years of investments from Gates and Shaw, and thousands of years of computer time,” he said. “That’s why the very simple idea of pattern recognition doesn’t work reliably.” www.businessday.ng

Haftar’s stalled Tripoli advance fuels dispute over Libyan oil Foreign groups such as Total forced to reapply for licences as geopolitical tensions grow HEBA SALEH

ith Libyan strongman General Khalifa Haftar’s forces frustrated in their attempt to take control of Tripoli, a new front has opened in the fight over the North African country’s future. The battleground is the economy of the oil-exporting country, with both sides seeking to weaponise resources under their control. Now analysts warn the internationally agreed arrangements which ensured the flow of Libyan oil despite division and war, appear threatened. Their unravelling would bring further political and economic chaos and could disrupt the supply of Libyan oil to world markets. From his stronghold in eastern Libya, Gen Haftar and his self-styled Libyan National Army, have established control across a huge swath of territory seizing most oilfields, terminals and ports over the past two years. He cannot, however, sell oil because under UN Security Council resolutions, the country’s National Oil Corporation is the only entity authorised to export crude. Proceeds are deposited in accounts controlled by the Central Bank of Libya which disburses funds across the country. The two institutions are based in Tripoli and are aligned with the UNbacked government there. There has been a recurring pattern of the east trying to sell oil separately but previous attempts were blocked by Washington, said Jalel Harchaoui, research fellow at the Clingendael Institute in The Hague. After Donald Trump, the US president, phoned Gen Haftar 10 days into the Tripoli offensive and said he “recognised his role in fighting terrorism, the international climate may have changed to the disadvan-

tage of the Tripoli government,” Mr Harchaoui added. “We now have three permanent members of the Security Council [France, Russia and the US] that we know to be in favour of the Haftar camp,” he said. “So if in this environment people in the east try something that is not compliant with existing UN resolutions and the US stays silent, a sale of crude may be concluded in the market independently from Tripoli.” Money has been crucial to Gen Haftar’s swift seizure of southern Libya earlier this year, analysts point out. They say the success of that offensive owes less to military prowess than to the forging of alliances with tribes and armed groups cemented with cash. Libyan dinars printed by Russia, another backer of Mr Haftar, have been used to bankroll the east and to augment Gen Haftar’s war chest, analysts said. Some fear Gen Haftar is trying to militarise the oil facilities he controls. He has seized a landing strip at the Es Sider oil port for military use and stationed a warship off the coast of Ras Lanuf, a port and refinery, prompting Mustafa Sanalla, chairman of NOC, to decry what he described as the “militarisation” of oil facilities. Mr Sanalla charged in an opinion piece published by Bloomberg that the military man has been trying to sell oil bypassing NOC. “I have seen documentation proving that attempts are now being made to sell Libya’s oil illegally through parallel entities,” he wrote. Without doubt the breaking of NOC’s monopoly on exports would result in a prolonged civil war with an array of actors arming and funding themselves through oil money.” Others predict disruption to Libyan oil supplies as fighting continues to rage on the battlefield and

in the economic sphere. A report on Libya by Verisk Maplecroft, a risk consultancy, refers to an incident in 2018 when Gen Haftar tried to sell oil independently. It notes that “in response, the Tripoli-based NOC declared force majeure on loadings at the ports, taking 850,000 bpd off the market. Gen Haftar eventually backed down, but only after weeks of major disruption.” Already, some foreign companies are feeling the heat as the economy gets dragged into the war. Ali Issawi, economy and industry minister in the Government of National Accord in Tripoli, has warned of measures against the business interests of countries which back Gen Haftar’s “brutal aggression against the capital”. Total, the French oil company, and Siemens of Germany are on a list of forty group’s that have to reapply for licences to operate in Libya. Mr Issawi told the Financial Times that governments’ political attitudes will determine how their companies will be treated. France has been a main backer of Gen Haftar, whom it views as an ally in the fight against jihadis in the Sahara. “Countries cannot do business and make money in Libya and at the same time [support] the killing of Libyans,” said Mr Issawi. “They will have to choose.” The central bank in Tripoli has joined the fray. Citing the need to fight corruption, in late April the central bank imposed restrictions on foreign currency transfers to banks in the east. “The timing can only suggest that it is a political decision,” said Mohamed Eljarh, head of Libya Outlook for Research and Consulting in eastern Libya. “They understand that the LNA relies heavily on the banking sector.”

India exit polls point to clear election victory for Modi Ruling BJP likely to be largest party in parliament AMY KAZMIN

ndian prime minister Narendra Modi is poised to return to power and his Hindu nationalist Bharatiya Janata Party likely to emerge as the largest party in parliament, according to exit polls following the end of a bruising general election. The exit polls were released on Sunday night after voting in the seventh and final phase of a protracted election that began on April 11. Around 900m people were eligible to cast ballots dur-

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ing the mammoth process. The presidential-style contest was framed as a referendum on Mr Modi’s leadership, as he sought another fiveyear mandate to continue his efforts to build a “New India”. Exit polls indicated the BJP — riding on Mr Modi’s image as hard-working, incorruptible and well-intentioned — and its allies, would secure a majority of parliamentary seats, trouncing rivals including the opposition Congress, led by Rahul Gandhi. But the polls were divided on @Businessdayng

whether the BJP would secure a parliamentary majority on its own, as it did in a dramatic sweep in 2014, or would have to rely on allies to form an administration. Indian exit polls have a mixed record, in both numerical accuracy and detecting major electoral trends. In 2014, pollsters correctly predicted a victory for Mr Modi’s BJP but few forecast its full magnitude. But in 2004, no pollsters predicted that Congress would claw back to power after a stunning upset victory.

Monday 20 May 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

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Saudi Arabia energy minister dismisses oil disruption fears Khalid al-Falih says that global oil supplies are ‘plentiful’ AHMED AL OMRAN AND ANJLI RAVAL

audi Arabia’s energy minister said global oil supplies were “plentiful” and inventories needed to shrink, signalling the kingdom‘s reluctance to rapidly raise production despite escalating geopolitical tensions and the threat of potential disruptions. The comments come as fraught US-Iran relations, attacks on the kingdom’s oil infrastructure and volatile supplies in big producer countries have put energy investors on alert. “The market is in a delicate situation,” said Khalid al-Falih on Sunday ahead of a meeting of oil officials in Jeddah to discuss the effectiveness of a deal between Opec and Russia to curb output by 1.2m barrels a day. “On the one hand there is a lot of concern, and we acknowledge it, about disruption and sanctions and supply interruptions. But on the other hand, we see inventories rising [and supplies are] plentiful,” Mr Falih said. Mr Falih spoke ahead a formal ministerial meeting in Vienna next month when officials will decide whether or not to maintain these curbs that have been in place since January and exceeded expectations. They were originally intended to stop oil stockpiles from swelling and to alleviate a drop in prices. Brent crude, the international oil bench which fell to $51 a barrel in December, has since risen to above $72 a barrel. But Mr Falih told reporters that oil stockpiles around the world were still rising. “My recommendation to my colleagues will be to drive inventories down,” he said, adding that a final decision would be made in June. Mr Trump has repeatedly called

on Opec and its defacto leader Saudi Arabia to release supplies into the market and keep oil prices in check, as the full impact of US sanctions on Iran’s economy and energy exports is felt. The kingdom’s production dropped to around 9.7m b/d in April, which is down around 1m b/d from levels reached at the end of 2018. Oil ministers are meeting as Saudi Arabia and its Gulf allies have backed the US’s more aggressive foreign policy against Tehran, sparking fears of a military conflict in the region. Adel al-Jubeir, Saudi Arabia’s state minister for foreign affairs, said on Sunday the kingdom would do all it can to prevent a war. “But if the other side chooses war then the kingdom will respond with full force to defend itself and its interests,” he added. A “sabotage” attack on commercial ships off the coast of the UAE included two Saudi oil tankers. Then a drone assault on two pumping stations along a pipeline in the kingdom has raised concerns about supplies from the world’s biggest oil exporter. Saudi Arabia’s King Salman has invited Gulf and Arab leaders to convene emergency summits in the holy city of Mecca at the end of month to discuss the implications of the attacks. Investigations are ongoing into the vessel incident while the kingdom has blamed the drone attack on Iran-backed Yemeni Houthi rebels. Mr Falih said the kingdom’s energy assets were “well-protected.” Volatile supplies elsewhere — notably in Venezuela which is also under US sanctions — unrest in Libya and oil contamination in an export pipeline in Russia are adding to anxieties.

Khalid al Falih, Saudi Arabia’s energy minister: ‘We are going to forcefully demand participation of all’ © FT montage; Bloomberg

FCA investigations into City directors rise sharply Complaints about ‘non financial’ behaviour soar at insurers and banks CAROLINE BINHAM

he number of top brass of financial companies being investigated by the UK’s watchdog has more than doubled in two years, with nearly half of those being scrutinised for failings in culture and governance. Fresh data gleaned from the Financial Conduct Authority show that it is investigating 58 directors as of December 2018, compared with 24 in 2016, when a new tough accountability regime for banks and insurers came into force designed to clean up the City of London after a slew of scandals, from the Libor-rigging scandal to the mis-selling of payment protection insurance. The statistics show that of the 58 directors, 27 are being investigated for culture and governance failings. The data underscore two big and intertwined priorities for the regulator: improving the tone from the top and trying to improve City culture. That in part has been driven by a surge in whistleblowing complaints

about sexual harassment, homophobia and bullying: in 2018 the FCA saw a 220 per cent increase in people complaining about “non financial” behaviour. That prompted the regulator to put senior managers on notice that their futures in the City were at risk if they did not take diversity seriously, while companies faced fines. The accountability rules, called the Senior Managers and Certification Regime (SMCR), are due to be rolled out to the entire financial sector at the end of 2019, meaning more probes could ensue. Under the rules, managers can be liable for fines or bans for failings on their watch. “The number of investigations into directors has more than doubled since 2016 demonstrating the FCA’s increasing focus on individual accountability,” said Jonathan Cary, a partner at Reynolds Porter Chamberlain, the law firm that gathered the data. “Once SMCR is rolled out to apply to all financial services firms in December 2019, we can expect a further surge in investigations into directors.”

The FCA declined to comment. The only public finding by the FCA under the regime to date has been the fine on Jes Staley, the chief executive of Barclays, for twice trying to uncover the identity of an anonymous whistleblower. The regulator is also prioritising the treatment of vulnerable customers, which could also account for the spike in the number of investigations into directors. The FCA banned two directors last year for running consumer-credit websites that “consistently misled vulnerable customers”. The watchdog has come in for criticism that it was not quick enough to respond to red flags raised about London Capital & Finance, a firm that was pushing unregulated minibonds whose £236m collapse in January has left 11,600 retail customers — many of whom were first-time investors and pensioners — wondering if they will get their money back. The scandal has sparked an FCA investigation, a criminal probe and an inquiry into any FCA mis-steps and whether the rules around mini bonds need to be changed.

Frank Timis in bitcoin battle with Argo Blockchain

Regulators to consider when Boeing 737 Max can return to the air

Cryptocurrency bewildering at best of times without adding clash worthy of Minecraft

Fresh blow for manufacturer as it admits to flaws in 737 Max flight simulator

KATE BURGESS

t is a blatherskite world where bitcoin, blockchain and Frank Timis, once dubbed “the emperor of west African mining”, are mentioned in the same breath. Yet last week, a battle broke into the open between Argo Blockchain, the crypto-mining newbie that was granted a standard London listing last summer, and First Investments Holding, a Grand Cayman group that Argo claims is controlled by Mr Timis. FIH is Argo’s biggest shareholder with 13.8 per cent. Mr Timis is the Australian-Romanian who was convicted twice for heroin possession in his early years. He then headed oil explorer Regal Petroleum in the noughties, which London regulators rapped over the knuckles for misleading investors, and he chaired Aimquoted iron miner African Minerals until its collapse in 2015. Argo is involved in the business of cloud mining and blockchain, a peer-to-peer ledger where “miners” use vast amounts of energy

and computer power to check, record and verify transactions. In return they extract crypto-coins. At its float last summer, Argo said it would not mine directly. Instead it would provide shallowpocketed enthusiasts with access to servers and data centres in Quebec to help them mine. It seemed a surer way to make money — akin to providing baked beans and shovels to gold diggers in the California rush of 1849. However, in February Argo suddenly changed tack after sharp falls in cryptocurrencies. Bitcoin tumbled from nearly $14,000 to less than $4,000 in 2018 and Argo’s shares fell from 16p at float to 3.3p. Jonathan Bixby, Argo’s Canadian chairman, announced the group — cash rich but lossmaking — would cut costs and stop offering its subscription-based consumer mining service. Instead Argo would buy new hardware and begin mining on its own account. Mr Bixby said the company would be breaking even by the year end. www.businessday.ng

PATTI WALDMEIR AND KIRAN STACEY

oeing faces a crucial test this week as global regulators meet in Texas to determine when the grounded 737 Max aircraft will return to the air, after further revelations of problems with software used to train pilots to fly the aircraft. The world’s largest commercial aircraft manufacturer revealed at the weekend that it had been forced to correct a flaw in the software of flight-training simulators that are meant to reproduce the flying conditions of the Max aircraft involved in two deadly crashes in the past six months. The disclosure is a further blow to Boeing’s credibility, which has been seriously damaged by the two crashes, in which 346 people died. Subsequent disclosures of serious design flaws both in the Max’s antistall system, called the manoeuvring characteristics augmentation system (MCAS), and errors involving other safety systems have further undermined the reputation of the Chicago-based company. This Thursday, nine global avia-

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tion regulators, including those from China, the EU, Canada and Brazil, will meet to review Boeing’s application to get the Max back in the air. The aircraft maker has said it has completed work on a software fix aimed at preventing future disasters caused by the MCAS system. But Boeing has said it is still answering questions from the US regulator, the Federal Aviation Administration, ahead of formally submitting the fix to the FAA. All of the nearly 400 Boeing 737 Max aircraft were grounded by global regulators after the crash of Ethiopian Airlines flight 302 on March 10. The FAA, which organised the Texas meeting, said it does not need the agreement of other regulators before it approves Boeing’s application. But officials say they want to avoid a repeat of what happened after the Ethiopian crash, when China grounded the aircraft before any other regulator and before analysing the flight data. US officials said China’s action was premature and undermined confidence in the global system of aviation regulation, and they want to make sure countries worldwide act @Businessdayng

together when allowing the Max back into their airspace. People close to the meeting of regulators said they do not think an official timetable will come out of it, but the FAA was likely to inform other regulators that it hoped to conduct a crucial certification flight for the software fix by the end of May or early June, with full FAA certification before the end of June. The FAA may be able to persuade Canadian and European regulators to adhere to that timetable, but China is expected to seek a delay. Boeing said in a statement on Sunday: “We are providing the FAA and global regulators, as well as pilots and airlines, whatever information they need to restore their confidence in the MAX and safely return the aircraft to flight.” On Saturday, Boeing said that software used on the Max training simulator was unable to reproduce some flight conditions, including the conditions which led to the crash of the Ethiopian flight. The preliminary crash report from the Ethiopian authorities revealed that the pilots of that flight were flying at relatively high speed and were unable to overcome the power of the MCAS system.

Monday 20 May 2019

BUSINESS DAY

ANALYSIS

Small group of America’s big farms gets bulk of Trump bailout funds

Large operators take lion’s share of money aimed at softening blow of trade wars on farmers GREGORY MEYER AND FAN FEI

tenth of US farm operators have received more than half the money from a federal bailout designed to offset the costs of the Trump administration’s trade battles, data show. Some use legal loopholes to collect multiples of a $125,000 cap on payments. The government had doled out $8.5bn ahead of last Friday’s application deadline for farmers, the US department of agriculture said. The White House launched the Market Facilitation Program in September after China, Mexico and other countries fought back against US tariffs by raising duties on American farm goods, depressing their price. The payments reflect the farm

farmers”. Calls to a phone number listed at the DeLine address were not returned. The USDA said an individual farm operator could receive more than $125,000 per commodity category if it was structured as a general partnership. In this case, each member of the partnership deemed to be “actively engaged” in farming is eligible to receive up to $125,000. The three commodity categories were livestock and dairy, speciality crops and field crops such as soyabeans and corn. Jonathan Coppess, a former administrator of the USDA’s Farm Service Agency, said the use of general partnerships to increase government payments has been controversial. Lawmakers have made repeated efforts to cut down what are known in policy circles as “Mississippi Christ-

Boeing: can Muilenburg engineer a recovery course?

Facing investigations and lawsuits, the company’s chief executive is struggling to restore public confidence after two fatal crashes ANDREW EDGECLIFFE-JOHNSON AND PATTI WALDMEIR

ennis Muilenburg wanted to be “the world’s best aeroplane designer”, he once told a reporter. Growing up milking cows on his father’s farm in Sioux County, Iowa, he earned a coveted place studying aerospace engineering at Iowa State University, where a scholarship named after a former Boeing chief executive won him an internship with the world’s largest passenger aircraft manufacturer. That launched his 34-year one-company career and led to his appointment as CEO in 2015. But now he stands accused of Farm businesses that structure themselves as partnerships can claim more than the maximum helping precipitate the biggest crisis amount of subsidies offered to a single legal entitity © Bloomberg in Boeing’s 103-year history and of a faltering response which may deepen sector’s political clout in Washington. mas trees” — byzantine business the company’s troubles. No other US industry has received structures designed to maximise Questions over whether design direct payments to relieve losses subsidies. and software flaws caused the fatal caused by tariffs. “Some farmers create compli- crashes of two of Boeing’s best-selling The department is now working cated entities in order to receive passenger jets have handed the man on a second direct payment scheme more payments than they could as in its cockpit a career-threatening worth as much as $20bn after trade an individual,” Mr Coppess said. challenge. talks between the US and China fell “It is frankly difficult to justify that It was still dark outside on the Sunapart, agriculture secretary Sonny one type of entity, such as a general day in March when Mr Muilenburg Perdue said last week. partnership, can increase the total was woken by news that Ethiopian Between September and mid- amount of payments through loop- Airlines flight 302 had gone down, April, $4.5bn of MFP payments went holes in the rules. killing all 157 people aboard. It was to 10 per cent of recipients, accord“Unfortunately, it is a black eye for the second such disaster in five ing to records the Financial Times any of these type of payments that a months and like the Indonesian Lion obtained under the US Freedom of small group of people try to take ad- Air plane which plummeted into Java Information Act. vantage of the rules and get around Sea last October at the cost of 189 The government limited pay- the limits in order to receive more lives, the model was a 737 Max 8, the ments to $125,000 per person or legal than they’re supposed to,” he said. single-aisle passenger aircraft at the entity in each of three commodity A bar chart showing MFP soya- heart of Boeing’s pitch to the shortcategories. Farmers were also ineli- bean payments in leading farm haul market. gible if their adjusted gross income states Within three days, regulators began topped $900,000. Due West Farm of Glendora, to suspect that the same flight control The records showed that more Mississippi, received $840,624 in system had featured in both disasters than 3,000 farm businesses got paid MFP payments for cotton, corn and and authorities from Beijing to Washin excess of $125,000 within a single soyabean as of mid-April, the data ington grounded all the nearly 400 Max category, however. More than 100 re- showed. aircraft Boeing had delivered. ceived at least $500,000 and a handful Farmer Mike Sturdivant said The fallout could cost the comcollected almost $1m. the farm, which dates back to 1857, pany billions of dollars. Shareholders Three farm businesses that share was jointly owned by him, his four and families of the dead have brought a Charleston, Missouri address — siblings and other family members, lawsuits, airlines will claim compenDeLine Farms Partnership, DeLine and several received USDA pay- sation for the costs of the grounding Farms North and DeLine Farms ments that complied with the cap. and at least one of the government South — were collectively paid $2.8m At the end of last year, Due West investigations it faces could end in between September and April based Farm was broken into five different prosecutions. on their soyabean, corn and cotton entities as it struggled with low crop The crisis demands that Mr Muiproduction, the data showed. prices, he said. lenburg summon the kind of political Farmer Donny DeLine of CharlesEven with government pay- skills they do not teach aviation engiton was described as a “big time ments, Mr Sturdivant said it was neers. He has to address accusations operator” in 2010 by Farm Journal. difficult to turn a profit. that engineering mistakes or deliberIn 2012 another industry publication “The numbers don’t work very ate shortcuts led to 346 deaths. He said he farmed 35,000 acres. A bar well,” he said. “Beans, corn, take also has to restore the trust of regulachart showing top producers receive your pick, they’ve all taken a tumble.” tors, airlines and pilots — as well as biggest government cheques The MFP scheme is in addition navigate a US president with strong More recently, DeLine Farms to regular farm subsidies. A recent views on aviation. operated in six US states, according study by the Government AccountMr Muilenburg must defend the to a Facebook post by Missouri con- ability Office found that of the 50 world’s largest commercial aircraft gressman Jason Smith, who after a farming operations receiving the manufacturer against charges that it visit there called it “a great example highest payments in 2015, 49 were rushed a plane to market without payof the incredible efficiency of today’s general partnerships. ing enough attention to how design www.businessday.ng

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changes would affect its safety — or even that it deliberately ignored the risks. He will also have to answer charges levelled by some pilots, aviation experts and politicians that Boeing could have prevented both crashes by training pilots on the Max’s new anti-stall manoeuvring characteristics augmentation system (MCAS) and that after the first crash it resisted rushing out a software update that pilots from American Airlines called for. Some of these accusations relate to decisions that predate his tenure at the helm, but others were taken squarely on his watch. Most of all, he will need to convince a sceptical public that the aircraft — which Boeing hopes will be back in operation in August — is safe to fly. Boeing says it has completed a software update that solves the Max’s MCAS problem but the Federal Aviation Administration is not satisfied yet. Global aviation regulators meet this week to draw up a plan for recertifying the aircraft as safe. What happens next — especially in Washington where Boeing faces congressional and federal investigations and a criminal probe — could put question marks over some of Boeing’s nearly 5,000 orders for the Max, and over Mr Muilenburg’s position. His response so far has highlighted his strengths but exposed some serious blind spots, according to industry veterans. But with regulators and politicians increasingly in control of the next phase, he faces new tests. Jeffrey Sonnenfeld, professor at the Yale School of Management, says that in the league of leaders’ handling of crises, from Takata’s exploding airbags to General Motors’ faulty ignition switches, “I give [Mr Muilenburg] a B.” He argues, however, that the chief executive’s “engineer’s personality” has not helped. Dave Calhoun, Boeing’s senior independent director, says Mr Muilenburg deserves credit for his internal communications but what he can say in public has been constrained by regulators. “He has a very difficult time when [he’s not allowed to rebut] all of the speculative comments that are thrown at him in interviews,” the Boeing director says, “and when he does it looks defensive.” Asked to explain the 55-year-old’s handling of the seven months since the Lion Air crash, analysts and colleagues tend to start with the observation that he is, first and foremost, an engineer. His background and hands-on style have helped in recent weeks as he has toured plants, hosted customers and accompanied pilots on flights to affirm the safety of the Max, says @Businessdayng

Mr Calhoun. Mr Muilenburg arrived in the top job with a reputation as a cost-conscious defence executive. In his mid30s he had led the weapons design component of a bid for the $200bn US Air Force Joint Strike Fighter contract. Boeing lost that bid, but Mr Muilenburg rose rapidly and was running the whole defence division by the age of 45.His predecessor Jim McNerney told investors in 2009: “Dennis is a guy who’s going to impress you before it’s all over”. When Mr Muilenburg succeeded Mr McNerney in 2015, Boeing was mired in accounting investigations into its delayed 787 Dreamliner longhaul programme and falling behind Airbus in the short-haul passenger market. Under pressure to compete with its European rival, Boeing opted to tweak the 737 — which had been flying since the 1960s — rather than start from scratch. It did not take long for the competitive environment to change in Boeing’s favour and by last summer, the punchy confidence Mr Muilenburg brought back to the company was on display at the UK’s Farnborough Air Show, where he painted such a rosy picture of its prospects that one veteran analyst fretted to the FT: “Dennis is too gung-ho.” That self-assurance has been missing during what Mr Muilenburg has called “the most heart-wrenching” weeks of his career. He has at least avoided the kind of gaffe that sank BP chief executive Tony Hayward, who said “I’d like my life back” just a few weeks after the April 2010 Deepwater Horizon disaster, but analysts have found his public response to the crisis lacking. Since 1982, when Johnson & Johnson recalled 31m bottles of Tylenol after some painkillers were laced with cyanide, there has been a playbook for corporate crises: take swift, decisive action and put the boss in front of the TV cameras to explain and reassure. Mr Muilenburg has not followed this model. “There is a consensus that he was slow [to respond],” says John Chevedden, an activist Boeing shareholder. Not only did Mr Muilenburg carry on insisting that the Max could keep flying after Chinese, UK and European regulators had grounded it; he was also all but invisible to the flying public. The company only put its leader in front of journalists seven weeks after the Ethiopian Airlines crash. The usually affable Mr Muilenburg appeared stiff and defensive during a 16-minute press conference, taking just a few questions before bolting for the door after being asked whether he should resign.

BD Money

Monday 20 May 2019

BUSINESS DAY

PERSONAL FINANCE Need a side hustle? Hereâ&#x20AC;&#x2122;s what you need to make extra income (1) In this series, BusinessDay speaks with industry experts to explores the various opportunities young professionals can exploit in improving their income stream

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COVER MTNâ&#x20AC;&#x2122;s listing opens opportunity in cheap bellwethers The much anticipated listing of MTN Nigeria Plc on the Nigerian Stock Exchange (NSE) has finally come, triggering shareholders of market bellwethers to sell some holdings thereby creating cheaper entry points for retail investors.

Page 55

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Monday 20 May 2019

BUSINESS DAY

Personal Finance Teaching kids about money the value of money and investing

OLUFIKAYO OWOEYE

eaching kids about the value of money and power of investing early in life can help them to learn healthy financial habits that could last a lifetime. The more knowledge they know, the better they can make informed decisions about their finances. Children often get gifts in forms of money and other items from callers to their homes. It will be wise for parents to inculcate in their children the habit of saving early in life. Research shows that for many children, their attitude towards money later in life are mostly formed by the time they are 7 years old and. Parents as example Children are very adept at picking up both verbal and nonverbal cues about how their parents are handling the finances at home so it’s important to keep that in mind as you bring up finances. They are not only learning how you interact with money but are forming behaviors they will likely continue for years to come. While it is okay to discuss money around your children, try to pass down positive attitudes you would like them to adopt, not ones you would like them to avoid. Introduce them to Piggy Bank The piggy bank encourages saving because it provides children a physical place to store their money. And, unlike a savings account, which is a more difficult concept for many young children to understand - the piggy bank is tangible and the funds are readily available. Plus, counting the money will lead to saving more. The whole process allows the child to experience the satisfaction of saving money at a very early age. Parents can then use the piggy bank to help their child set financial goals and with guidance from an adult, the child can dream and plan about when and how to spend the money. Introduce them to the magic of compound interest As the child grows, there is need to introduce them to the concept of investing. Compound interest is the magic wand, introduce it to them at an early age, and they will get a head start on pre-

paring for their future. Investing is a tool for building wealth, but it is not only for the wealthy. Anyone can get started on an investing program, and various vehicles make it easy, to begin with small amounts and add to a portfolio periodically. In fact, what differentiates investing from gambling is that it takes time it is not a get-rich-quick scheme. Emeka Anezi, a personal finance coach said parents and guardians should begin to teach their children the value of saving money from an early age so that they could realise early the practical advantages involved in doing so. “The ‘spend-it-all-at-once’ mentality in our children and youths need to be checked and one of the ways to do so is through the introduction of a proper saving culture. As parents, we are dutybound to make our children understand that they must begin to save money at some point in their lives,’’ he added. Teach them to avoid impulse buying Teaching them the difference between Needs and Wants early will also help improve their spending habits. For young children, this is the first time they start to recognize that others may have more than they do. When you’re in the

store and your children are asking for a new video game or piece of clothing, instead of just tossing it into the cart, talk to them about whether it’s something that’s really important to them or if it’s an impulsive financial purchase. Help-

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The ‘spend-it-all-at-once’ mentality in our children and youths need to be checked and one of the ways to do so is through the introduction of a proper saving culture. As parents, we are duty-bound to make our children understand that they must begin to save money at some point in their lives

ing kids to draw up their budgets could help demystify the complexity between needs and wants. Encourage them to earn money Teenage years are a great time for kids to start finding a summer job to supplement their allowance or gifts that they get throughout the year. While the familiar summer jobs, like working at grocery stores or retail, are still popular, there are many opportunities for older kids to make an income online or by getting entrepreneurial on their own. Use a summer job not only as an opportunity to start the conversation about budgeting and finances but also about the responsibility of earning money and saving it. Learning is a continuous process Learning about money is a continuous pursuit and there are lessons to be learned at every step of the way. Before they leave the University and enter into the workforce, helping them understand their own relationship with money can help them succeed both when they first make it out into the world and for decades to come. Encourage them to ask questions when it comes to money and create a safe environment where they can come to you about it.

About BD Money: This finance supplement is targeted at investors and other readers keen to make their money work harder. Team Members: Lolade Akinmurele (Lead); Hope Moses Ashike; Segun Adams; Oluwasegun Olakoyenikan; Temitayo Ayetoto; Israel Odubola; Olufikayo Owoeye; David Ibidapo; Graphics: Fifen - Famous www.businessday.ng

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Monday 20 May 2019

BUSINESS DAY

Personal Finance Need a side hustle? Here’s what you need to make extra income (1) SEGUN ADAMS

n this series, BusinessDay speaks with industry experts to explores the various opportunities young professionals can exploit in improving their income stream. The first part emphasizes the plight of Millennials and Gen-X and factors to consider before taking on an extra job The words of Afrobeat star, Burna Boy, ‘’ Dangote still dey find money’’ has become a mantra among millennials and generation z’s since the singer released the melodic tune earlier in the year. The song is about Aliko Dangote’s unrelenting effort in increasing his fortunes despite being Africa’s richest man which questions complacency in the pursuit to improve one’s status-quo. Many young professionals today are caught in a fast world of smart gadgets, globe-trotting, and urban living - all of which comes at the price of higher living cost and inability to live debt-free most of the times. Of course, technology has made life

easier for young adults, affording the opportunity to shop at one’s finger’s tip, hail cab from smartphones, Netflix and tweet at friends around the world, the financial burden of maintaining such lifestyle has become of major concern. According to reports by Forbes, millennials –as well as Gen X-are financially stressed! They ‘‘have intense stress, paranoia, expectations, fears and concepts about money and finances, in a way that almost nothing else can compare,’’ the American business magazine noted. While getting a new job that pays better could be the quick fix, it is usually the case that the pay-raise that fill budget gaps often comes with a longer stay in the labour market than millennials and Gen X have. Having multiple income streams, therefore, become necessary in making ends meet and for others, it provides the opportunity to do what they really love. What are Side Jobs? Side Jobs, also referred to as side hustles or gigs, are secondary means of revenue which serves to complement one’s main source of income. Usually, they in-

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volve economic activities requiring little or no experience and offer a greater degree of flexibility than conventional jobs afford. Examples range from online or oneon-one tutoring, managing social media accounts, driving for Uber, Taxify and so on.

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Nothing is worth sacrificing your well-being for! The monetary and time cost of treating yourself might eventually outweigh whatever gains that were hoped to be derived from taking on the extra job

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What to consider before getting a side job: Time; how would the plan fit into your schedule? It is not worth the effort looking for an extra source of income if your main job takes almost all of your time for two reasons. The first is health-related while the other is the simple economics of tradeoffs. Nothing is worth sacrificing your well-being for! The monetary and time cost of treating yourself might eventually outweigh whatever gains that were hoped to be derived from taking on the extra job. In short, since the quality of life depends on one’s ability to enjoy it, health becomes a top priority in deciding on additional income streams. The other reason is that the new job which is meant to complement income may come at the expense of your main employment. It becomes very necessary to do a self-assessment that would help you estimate the impact of extra activities on productivity in your current job. Value; is the side job lucrative? The reason you are taking on an extra job is to make more money not become busier- unless the side job is a hobby that allows you to pursue your interest. To blindly jump on any opportunity to make extra money without careful research on what returns the current market allows would be counterproductive for you. Speaking with an expert in the industry, a friend doing a similar job or at least carrying out your own research over the internet might help you make informed decisions. Resources; what skills, training would the side job require? The side job might require time and resources in training yourself or honing your skills if you are familiar with the job. Although not all side jobs require that level of preparation, acquisition of materials and equipment to engage in such activity would require a careful approach to your quest of making extra income. You have to know from the start all the cost it would require of you to participate in that side hustle else you might suddenly feel stressed and stuck in the middle.

@Businessdayng

Monday 20 May 2019

BUSINESS DAY

Monday 20 May 2019

BUSINESS DAY

Cover Story

MTN’s listing opens opportunity in cheap bellwethers of MTN’s shares so giving room for cherry picking providing easy profit in a market which has lost about 8.14 percent since the beginning of the year. While Dangote Cement in the previous week recorded a decline by 1 percent in its share price, as at the close of trading on Friday, its stock underperformed as price dipped 2 percent week on week. The same trend was seen in Nestle’s share which stood as the worst performer w/w. The share price of Nigeria’s biggest consumer goods firm by market capitalization as at the previous week remained flat w/w. However, the stock plunged 6 percent as at the end of the day’s trading on Friday. Nigeria Breweries wasn’t left behind as investors sold off positions which saw the brewer shed 4 percent off its market value w/w as at Friday as against 2 percent decline in the previous week.

DAVID IBIDAPO & OLUWASEGUN OLAKOYENIKAN

he much anticipated listing of MTN Nigeria Plc on the Nigerian Stock Exchange (NSE) has finally come, triggering shareholders of market bellwethers to sell some holdings thereby creating cheaper entry points for retail investors. Some equity investors who had hoped to become one of the owners of the telecoms company are still yearning as existing shareholders of MTN Nigeria are largely unwilling to offer their holdings since the firm listed on the NSE by a way of introduction. For instance, MTN Nigeria attracted a total bid of 200 million units on the first trading day, implying investors’ aggressiveness and excitement towards Nigeria’s biggest telecommunication company by market share. If the biddings were successful, it would have translated to a whooping N200 billion worth of traded value at N99 per share. However, only 5 million shares were on offer, representing 2.5 percent success rate. While the stock hit the NSE daily price ceiling of 10 percent in its first two trading sessions last week, investors are yet to back out of the telecoms giant. “The listing of MTN won’t necessarily

slow down the bearish trend of the market,” said Paul Uzum, a Lagos-based stockbroker on the NSE. “Instead investors, in the bid to balance their portfolio, would sell off some of their existing holdings to purchase the shares of MTN.”

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Sequel to the above stance, 3 out of 5 most capitalised companies on the NSE underperformed their previous week performance, signalling the anticipated move of investors. This is on the back that investors were not likely to introduce fresh capital into the purchase

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Further analysis of the five biggest companies on the NSE before the emergence of MTN Nigeria shows the stocks have lost a significant market value, bringing them close to their weakest market prices in a year. This is despite their impressive outings in the first quarter of 2019. Nigeria’s most capitalised firm, Dangote Cement, neither gained nor lost on Friday at N176, this brings the share price of the cement giant to 3.53 percent close to its 52-week low of N170. Similarly, Guaranty Trust Bank sustained its decline on Friday by 1.29 percent, bringing it to its lowest level of N30.60 in the last one year, while Zenith Bank’s share price which stood at N19.60 was 0.26 percent close to its 52-week low of N19.55. Nigerian Breweries remained unchanged at N62.50 on Friday, but that put the stock to 9.84 percent near its 52-week low of N56.90, while Nestle stood at N1,430, representing 5.93 percent above its one-year low of N1,350. Analysts say the bullish trend witnessed in the shares of MTN would likely persist this week, a development that may likely dampen the performance of some existing companies in spite of their strong fundamentals. As a result, taking positions at this time in stocks with strong fundamentals may return value to forward looking investors as analysts forecast current market sentiment may weigh on MTN upon market’s realization of what should be the wireless carrier’s intrinsic value. www.businessday.ng

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Monday 20 May 2019

BUSINESS DAY

Commodity 5 ways to save cost while increasing tomato yield Temitayo Ayetoto

or tomato farmers, it is the season of sowing and being a capital-intensive crop, cutting cost and maintaining high yield top priorities for most farmers. As a commodity that its demand exceeds local capacity to produce, the shortfall presents a wide room for investing in tomato with the expectation of good returns. Among the domestic food prices which the Financial Derivative Company commodity checks found to be trending upwards after months of relative stability, tomatoes (50kg) in particular have jumped by over 70 percent to N13, 000. In Kano, the same scale of tomatoes has moved from N3, 000 at the farm gates to N,8, 000 on factors linked to ending dry season production and the commencement of both the wet-season farming and Ramadan fast, Sanni Yadakwari, the secretary, Tomato Growers Association told BusinessDay. Nigeria produces about 1.5 million tonnes of tomatoes worth N3 billion yearly, according to unofficial calculations, lagging far behind huge producers such as India and China, and even Italy which produces nearly five times than Nigeria with less land. While working to shore up production, experts say farmers can accentuate meagre profits by slashing costs in the following five areas. Select tomato seedlings carefully Even though a plant with lots of green leaves may seem like the obvious choice, remember the plant’s root system plays a far larger role than the leaves when it comes to tomato production. If seedlings put lots of energy into leaves, they suffer a setback when transplanting them and will take time to recover before beginning to produce fruit. Aside from your savings, growing certified, organic, heirloom variety plants from “scratch” comes with many side benefits; one of the most compelling being to avoid seedlings raised using pesticides containing neonicotinoids. In addition to having potential chemical contamination, hybrid tomato seeds and seedlings may carry more genetic

modification than simple hybridization. The introduction of non-tomato genes into your plants could produce unexpected and unintended effects on bees and other beneficial insects and perhaps on you, too. Get high yield varieties but focus planting methods As important as getting high yield seedling, farmers should also concentrate well on how they plant. Laying tomato seedlings on their side will cause the top of the plant to bend upward. Once this happens, your plants are ready for actual planting. Dig a trench in your prepared bed and set the seedlings into it, lying on their sides. Cover the roots and stems with soil, worm castings and compost. Water well and top off with wood chip mulch. Leave the top part of the plant exposed to air and the sun. The small hairs on the stems of the plants will transform into roots, so each of your little seedlings will develop healthy, vigorous root systems. A good root system is what makes healthy, hardy, heavily producing tomato plants. Avoid abusive application of fertilisers and chemicals

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Applying fertiliser when required could be more efficient and cost-effective. In addition to crop nutrient requirements and soil types, fertilizer recommendations should take into consideration soil pH, residual nutrients and inherent soil fertility. Therefore, fer-

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As important as getting high yield seedling, farmers should also concentrate well on how they plant. Laying tomato seedlings on their side will cause the top of the plant to bend upward. Once this happens, your plants are ready for actual planting

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tilizer recommendations based on soil test analyses have the greatest potential for providing tomatoes with adequate but not excessive fertility. Applications limited to required amounts result in optimum growth and yield without wasting fertilizer or encouraging unnecessary consumption of nutrients, which can negatively impact quality or cause fertilizer burn. Recommendations based on soil tests and complemented with plant tissue analyses during the season should result in the most efficient lime and fertilizer management program possible. Harvest in plastic crates, not raffia Fresh market tomatoes are best harvested by hand. Good harvesting management is needed to pick high-quality tomatoes. Care must be taken when harvesting “breaker” stage fruit because the riper the tomato, the more susceptible it is to bruising. Harvesters should carefully place fruits into picking containers instead of dropping them. Research has demonstrated that a drop of more than 6 inches onto a hard surface can cause internal bruising that is not evident until after the tomato is cut open.

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Monday 20 May 2019

BUSINESS DAY

Data

Federal government eurobond Yields on Eurobonds rose week on week by c.53bps from an average of 6.97 percent when the market closed last week to 7 percent as selling interest on sovereign Eurobonds continued from previous week.

Corporate eurobond Yields on corporate Eurobonds fell c.2143 bps across all tickers from last week with average yield at rising from 9.89 percent on last week to 7.77 percent. The fall in yields was on account of Diamond Bank Plc falling by 66.05 percent whereas yields on all other corporates fell, asides UBA that saw an uptick of 0.49 percent.

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Monday 20 May 2019

BUSINESS DAY

Personal Finance Why you need to plan your retirement ahead Israel Odubola

etirement is a must for every individual irrespective of his or her work status as an employee or self-employed. As a matter of fact, working each day is a day closer to your retirement, no matter how far it may seem at present. Like the English saying ‘Failing to plan tantamount to planning to fail”, the earlier you start to plan for life post retirement, the better for you. If you desire financial stability after retirement, you had better start taking decisive steps that would favourably affect your finances. The road to the future is not something rosy considering the rough economic terrain of the country which continues to keep living cost on the high-side, even as a large number of Nigerians are struggling to make ends meet, let alone preparing the journey ahead. However, with financial prudence practices, regardless of your current earnings, life can still be meaningful post retirement when you take charge of your financial future. It is not enough to be totally dependent on monthly pensions or gratuity after retirement, as these monies might not be promptly paid, and this could make life frustrating. This therefore underscores the importance of early retirement planning to avert possible future fi-

nancial catastrophe. Furthermore, old age is often associated with medical problems and elevated healthcare expenditure. No one prays to experience unexpected ailments that would consume his or her entire retirement savings. However, we can’t rule out natural phenomena, of which sickness is one. This again points to why you need to plan your retirement early. The following are tips that can help you achieve a trouble-free retired life. Know your retirement priorities Every individual has different goals and priorities as far as retirement is concerns. This implies that your retirement income strategy hinges on the vision you are preparing for the future.

Week Ahead Week Ahead(Monday, 20th May – Friday, 24th May, 2019) Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Event The Monetary Policy Committee of Central Bank of Nigeria to hold its third meeting of the year between Monday, May 21 and Tuesday, May 22. At its last meeting two months back, the Apex bank cut monetary policy rate by 50 basis points to 13.5 percent, and maintained cash reserve ratio and liquidity ratio at existing levels. Informed by moderation in inflation and relative stability in exchange rate, the CBN took this action to improve lending in a bid to spur growth. However, experts maintained that the policy cut does little for lending. Data Release The National Bureau of Statistics to release Nigerian Gross Domestic Product by Output Report for quarter one of 2019, on Monday, May 20. The previous statistics showed the economy leaped from 1.8 percent in Q3 2018 to 2.3 in Q4, bringing the annual average growth rate to 1.9 percent. Growth in the broader economy is still fragile, and structural policies comprising infrastructural investment and improved lending to real sector are needed to uphold growth. Fixed Income US$200 million 5-year corporate Eurobonds raised by the defunct Diamond Bank at 8.75% coupon will mature Tuesday, May 21. Nigeria’s largest lender by assets, Access Bank, will take the responsibility of repaying funds at maturity to investor. Commodity Sugar: Sugar prices averaged $0.1272/ pound in April, 2% higher than the average of $0.1247 in March. Going forward, prices of sugar will be bearish in near term due to an anticipation of increased sugar production in Mexico.

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You need to itemize your retirement plans and prioritize them as this would give a clue of how your personal lifestyle may affect your income needs in retirement. It is noteworthy to state that you might likely adjust your living standard when you stop working as retirement may be a bit expensive. Financial prudence Stay away from prodigal spending. Prudent management of your financial resources would save you from running about for financial assistance. Moderate spending would equally help you maintain a steady income flow. Know how your employer’s pension scheme works

It is noteworthy to state that not all organizations have pension schemes for staff. If you are involved in your employer’s retirement savings plan, there are basic questions you must ask yourself. How much will I contribute to get full employer contribution? And how long it would take you to remain in the plan to get full contributions? Certain sum would be deducted from your gross income, and paid to your pension account. Before you change jobs, find out what would happen to your pension benefit, and what benefits you may have from a previous employer. Also, you need to know how your new employer’s pension plan works. You can do this by requesting an employee benefit statement to determine the monetary value of your benefits. Have your own retirement account You can open your personal retirement account by putting a certain fraction of your income into the account every month. You can as well start with the little you have depending on your capacity. Operating a personal account requires strong determination and focus, to avoid frequent withdrawals. Basic investing tenets Don’t let your savings stay idle in the bank. Make it work by investing it in different assets classes, especially in fixed-income securities like Treasury bills, Federal Government sovereign and savings bond, which is risk-free and return-assured.

Chart of the week

Intensive buying has characterised the first two days of MTN’s listing by introduction on the Nigerian stock exchange, as shares of the only telecommunications company on the domestic bourse gained 10 percent in each of its trading days since Thursday. MTN’s performance has driven the lethargic market up from a year to day loss of 10 percent as at Wednesday to a loss of 8.14 percent on Friday. The stocks market gained 1.53 percent on Friday, after breaking its 8-day bearish run the day before.

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Monday 20 May 2019

BUSINESS DAY

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A12 BUSINESS DAY

Monday 20 May 2019

Government Enterprise & Empowerment Program

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GEEP & financial inclusion:

Inside look at impact of loans on beneficiaries

he Government Enterprise and Empowerment Program (GEEP) grants interest-free loans of between N10,000 to N300,000 in a graduating scale of N10,000; N20,000; N50,000; N100,000; and N300,000. Traders either start at N10,000 (TraderMoni), or N50,000 (MarketMoni), or N300,000 (FarmerMoni) depending on the scale of their current trade, and preparedness to meet the criteria at each level. When beneficiaries take a loan and pay back, they

Please may we meet you? My name is Mrs Makinde Helen. I sell palm oil in Oja Bisi market. How long have you been selling in this market? I have been selling for more than 10 years now. I make little profit from palm oil because I sell in small portions. I get money for one keg and I go to purchase from my

automatically qualify for the next higher amount. One of the primary goals of GEEP is to increase financial inclusion and support for citizens at the lowest base of the economic pyramid. A look at the impact of the program so far has seen over 2million Nigerians benefitting from the different GEEP products. We sat down with a few GEEP beneficiaries who got the Tradermoni & Marketmoni loans for a look at how GEEP has affected their lives: seller. When I get there, the seller gives me an extra keg on credit to repay back after sale. How did you hear about Tradermoni? I came to the market and I heard that the Federal Government is helping petty traders. They want us to add to our capital so we donâ&#x20AC;&#x2122;t sit idle at home. One of the people came to register me. They asked me for my name, phone number and took a picture of me and my goods. They said I will get a text message the next day. I was so surprised I got the text message the next day and they came to give us the money. What did you do with the 10,000 naira? The money has helped me to get 2 extra kegs without having to buy on credit. This means I can now buy 3 kegs and my profit has increased. Infact, I am so happy. This means that the loan has helped your business? Yes, it has. I have more palm oil to sell now and I have more customers.

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Mrs Agbo Mnenna who is a petty trader in Markudi Modern Market spoke about repaying her first Tradermoni loan and getting the next loan. We understand that you have repaid the first loan? Yes. The person that registered me told me that I have to pay back the money within 6 months so I started paying back immediately. I just finished repaying the 10,250 last week. As I finished paying, I got a message that I am qualified to get 15,000 naira. How did you get the 15,000? The message said I should look for any TraderMoni agent in the market to collect the money. The next day, I saw the agents in the market and I got the 15,000 naira that same day. I want to tell the people that have not paid to pay because it is real. They didnâ&#x20AC;&#x2122;t give us this money to eat and sit at home. They gave it to us so we can hustle and improve our business. Once you pay

back, they will give you the 15,000. Do you think this is a good program? Yes, the program is good. It has helped me and plenty other people in this market. I want to say thank you to the Federal Government. Thank you for caring about us. used the 50,000 naira to buy the materials for my ointments in bulk quantity rather than in bits like I used to. It helped me to produce more and also give more shop owners to help me sell. What do you intend to do next? I am paying back my loan now. Once I finish, I will apply to get 100,000. I want to use the money to buy a machine that will help me produce ointments faster. I really like this program and I hope that the Federal Government will continue to do more people-oriented programmes like this.

Mrs Jumai Bello who is an ointment merchant in Bauchi spoke about how the Marketmoni loan expanded her business significantly How did you hear about Marketmoni? I learnt about GEEP Marketmoni through my cooperative association. Our cooperative usually gives us loans but it is very small amount due to the number of people who want the loans. How did the 50,000 loan help your business? In my business, I give small shop owners in the market to help me sell the ointments. I keep records of all the ointments I have given for sale to help me remember what I will get in return and calculate my profit. I

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any beneficiary stories like the ones above abound across the country as GEEP continues to provide access to credit for Nigerians and increase financial inclusion. Through GEEP, the Federal government is committed to targeting the over 37 million Nigerians that are financially excluded or under-included. This will lead to an increase in savings, disposable income and economic growth, and ease in making economic policies. These Nigerians will also be able to get into structured financial institutions which will raise their credit profile and give them access to better financial resources in the future.

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Monday 20 May 2019

BUSINESS DAY

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Company IN FOCUS

BUSINESS DAY Monday 20 May 2019 www.businessday.ng

Merger drives CCNN’s profit margin to 5-year Israel Odubola & Segun Adams

he cement industry is facing increasing competitions as leading players brace up capacity to bargain for better share of the growing cement sector. The industry saw two giants leverage mergers and acquisitions between 2017 and 2018 to expand capacity and intensify competition. Cement Company of Northern Nigeria (CCNN) saw an improved performance in 2018 on the back of its merger with Kalambaina Cement. The performance in 2018 was sustained in the first quarter of 2019 and possibly heralds a better full year outing for the cement maker. Corporate information Cement Company of Northern Nigeria Plc (CCNN) is one of the oldest players in the Nigeria’s cement industry and was founded by Alhaji Sir Ahmadu Bello, the Premier of the then Northern Region and Sardauna of Sokoto. CCNN engages in the production and marketing of CEM II type of cement in accordance with the Nigerian Industrial Standards under the brand name “Sokoto Cement”. Incorporated on August 15, 1962 as a Limited Liability Company, CCNN commenced production of Cement five years after, with an initial installed capacity of 100,000 tons per annum at the Kalambaina plant in Sokoto state, Northern Nigeria. The capacity of CCNN was expanded in 1985 after current president – the then Head of State, Major General Muhammadu Buhari -commissioned a second line with an installed capacity of 500,000 tons per annum brining CCNN’s total capacity to 600,000 tons per annum. However, CCNN was forced to shut down its first line in 1986 on account of production inefficiencies, thus reducing its total capacity to 500,000 tons per annum. Under the administration of Ibrahim Badamasi Babangida in 1992, the Federal Government disinvested about 20% of its holding in CCNN and sold it to the Nigerian Public in a bid to improve operational efficiencies and as part of its privatization and commercialization programme. The full privatization of CCNN would come about a decade later under the civilian administration of Chief Olusegun Obasanjo. In 2000, Scancem International ANS of Norway, a member of Heidelberg Cement Group was appointed as core investor and technical partner of the CCNN after a public bidding for the cement company. But with the exit of Heidelberg Cement Group in 2008, Damnaz Cement Company Limited, a Nigerian company, became CCNN’s new core investor. Ten years after, CCNN seeking to expand its operations and take advantage of Nigeria’s growing cement sector, finalized its merger with Kalambaina Cement Company on the 24 December 2018. With Kalambaina Cement as a subsidiary of BUA Cement Company, the latter owned by Alhaji Dr. Abdulsamad Rabiu, CON effectively has 87.42 percent stake in the enlarged entity (CCNN PLC). CCNN was listed on the Nigerian Stock Exchange (NSE) on October 4th 1993 and currently has a market capitalisation of N182.695 billion as at Friday, 17 May 2019. Presently it is the only cement manufacturer in the North West region of Nigeria, giving the company easy access to markets in Sokoto, Kebbi, Zamfara, Katsina, Kano, and Kaduna states. Yusuf Haliru Binji currently sits at the helms of affair as Managing Director and Chief Executive Officer of CCNN. Cement Industry snapshot

Nigeria’s cement industry is facing steeper competition especially in more recent times as the three largest players- Dangote Cement, Lafarge and CCNN strategize to remain in leading positions. Lafarge in 2017 acquired Unicem as part of efforts to boost its operations and has a total of 10.5 million tons per annum in Nigeria. In comparison, CCNN by virtue of the 2018 merger has a total installed capacity of 2.0 million tons per annum while Dangote Cement remains undisputed leader in the market with total installed capacity of 15.0 million tons per annum. Although the cement industry comprises some other privately held companies, the three listed companies- inclusive of BUA, parent company of CCNN-drive the local market in terms of volume and value with a minimum combined market share of 90 percent. As CCNN and Lafarge eye greater market share through consolidation to increase capacity between 2017 and 2018, the cement continues to expand to accommodate more capacity-and more importantly, better utilisation of existing capacities. The Cement industry outgrew the economy at 4.5 percent (vs. economy +1.93%) in 2018, recording positive growth for the first time since 2016 where the impact of lower demand and scarcity of foreign exchange as

well as decline in other supporting sectors of the economy (Real Estate and Construction) resulted in cement sector contracting faster than the broader economy between 2016 and 2017. Although growth remains far below prerecession levels (an average of 25% between 2014 and 2015), stability seen since the introduction of I&E window, increasing reliance on local sourcing, transitioning to cost efficient energy, a growing domestic economy and infrastructure spending of the government provides room for better expansion of cement industry going forward. Impact of merger on cement production, export market CCNN, owners of Sokoto Cement Plant finalized its merger talk with BUA’s owned Kalambina Cement Company six months ago in a bid to expand the former’s business operations and market penetration. Ibrahim Aliyu, former Chief Executive Officer of CCNN said last year that his company has always been outstripping the cement industry in terms of capacity utilization, however growth remains a threat due to limited expansion and absence of alternative fuel sources. Therefore, this prompted the Sokoto Cement Plant owner to acquire Kalambaina Cement’s 1.5 million metric multi-powered plant, to tackle this challenge.

The deal saw BUA Cement Company emerging the major shareholder with 87 percent stake in the enlarged entity, and elevated total installed capacity to 2 million metric tonnes (mts). Consequently, production of the cement maker hits 5-year high at 764, 506 tonnes in 2018, indicating 64 percent rise over 466, 220 tonnes produced with 500, 000 mts in 2017. Also, volume of deliverables grew 59 percent to 764, 506 tonnes last year. The goal of the company’s export market expansion was achieved as proceeds from Non-Nigeria markets grew astronomically to N2.85 billion in full year 2018, an uptick from N155 million recorded in the previous year. Financial Performance The 2018 earnings scorecards of the cement maker showed impressive performance, the best since the previous five financial years. Top-line of the firm hits its 5-year high at N31.72 billion in 2018, having grown 62 percent from N19.59 billion, with 91 percent coming from domestic market. Given the revenue surge, net-earnings jumped 78 percent from N3.2 billion in 2017 to N5.7 billion last year, despite elevated operational expenses and doubled tax expense. CCNN maintained similar momentum in the first quarter of 2019. Proceeds from cement sold to customers up N16.89 billion from N5.39 billion, and jump 237 percent to N3.64 billion against N1.08 billion in the corresponding period a year earlier. The cement maker posted stronger profitability in full year 2018, and even in first quarter 2019. Operating and profit margin rose to a record high at 24.81 percent and 18.07 percent respectively in 2018, compared with 22.87 percent and 16.46 percent in 2017, and 12.86 percent and 8.9 percent in 2016. This implies that the cement maker was able N248 as profit from every thousand naira earned from revenue after settling operating expenses and N180 after paying interest and taxes. CCNN bettered margins in Q1 2019 than FY 2018, with operating and profit margin settling at 31.9 percent and 21.5 percent respectively. Cost efficiency of the cement maker was the best in five years as the merger afforded the firm with multi-input sourcing (coal, heavy oils & gas). Cost-of-sales to revenue ratio, which measures the fraction of production cost in total proceeds, decelerated for three straight years to 55.20 percent in FY 2018, and slimly to 54.47 percent in Q1 2019. CCNN’s merger with Kalambaina cement skyrocketed its asset base from N24.7 billion in FY 2017 to over N340 billion in FY 2018, resulting in declines in return on asset and asset turnover. The company, which realized N131 as profit from every thousand naira invested in assets, earned N16 in 2018 full year, and N10 in first quarter of 2019. In similar vein, going by asset turnover metrics, the cement maker generated N9 as revenue from every thousand naira invested in 2018, compared to N96 in 2014, N76 in 2015, and N70 & N79 in 2016 and 2017 respectively. This figure fell to N5 in 2019’s first quarter. The company’s return on equity faltered substantially in 2018 buoyed by equity expansion from N14.4 billion in 2017 to N333 billion in 2018, on the back of the merger. In 2017, a unit of shares held translates to a return of 22 percent. This however shed to 1.72 percent last year, 1.08 percent in the first three months of 2018. CCNN traded flat at N13.9 to bringing year to date to -28.35 percent on Friday, underperforming the NSE industrial average which has returned 2.31 percent since the 2019’s start.

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