BusinessDay 21 Sep 2020 by BusinessDay

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news you can trust I ** MONDAY 21 september 2020 I vol. 19, no 654

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3m 2m 28-oct-20 25-nov-20 392.38 395.23

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9.08

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11.09

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420.81

In Nigeria, weary investors, savers subsidise inefficient government S LOLADE AKINMURELE

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Dangote Cement plc

60m 36m 30-aug-23 27- aug-25 498.32

590.10

*NTB - Nigerian Treasury Bills; *CP - Commercial Paper

FINANCIAL REPRESSION SERIES

omething uncommon happened last Wednesday. At least that is how anyone who has not been following Nigeria’s financial markets recently would interpret it. Investors fell over one another to lend to the government at a rate that was materially lower than inflation, which essentially means paying the government to borrow money from them. The stop rate on the oney e a r T re a s u r y Bi l l , w h i c h was oversubscribed, was 3 percent. But data released

FGN

Spot ($/N) 25-Feb-21 5-Mar-21 23-Jul-30 30-Apr-25 20-May-27 27-Feb-34

$-N 450.00 465.00 1m £-N 580.00 600.00 Currency Futures 30-sept-20 389.54 €-N 515.00 545.00 ($/N)

Benchmark Sovereign & Corporate Bonds

L-R: At the session on Leadership and Competence: Repositioning the Banking Industry for Relevance, Victor Etuokwu, executive director, Access Bank; Bukola Oluyadi, acting group head, Corporate Strategy and Planning, Polaris Bank; UK Eke, group managing director, FBN Holdings plc/chairman of the session; Moji Bakare-Asieru, general manager, Sterling Bank, and Tobiloba Lawal, managing/CEO, LBIC Mortgage Bank, at the 13th Annual Banking & Finance Conference of the Chartered Institute of Brokers of Nigeria, Lagos.

Obaseki basks in victory, greets Buhari … President hails INEC, security agents …Atiku, Wike, Okowa, others congratulate re-elected governor …Say, goodbye to godfatherism Idris Umar Momoh & Churchill Okoro (Benin); Tony Ailemen, Innocent Odoh (Abuja); Francis Sadhere (Warri), and Mercy Enoch, Delta

s congratulatory messages continue to come the way of Governor Godwin Obaseki over his victory in the offseason gubernatorial election held in Edo State yesterday, the re-elected governor has however thanked President Muhammadu Buhari for deContinues on page A3

Monday 21 September 2020

BUSINESS DAY

news Edo, mining sector stakeholders chart course to deepen investment in post-COVID-19 economy

he Edo State government and stakeholders in the state’s mining sector have resolved to exploit more opportunities in the state’s solid minerals and mining sector so as to diversify earnings in a post-coronavirus (COVID-19) economy. The resolution was reached during a webinar themed, Investment Opportunities in the Minerals Value Chain and Capacity Strengthening of Local Miners in Edo State, organised by the Edo State Investment Promotion Office (ESIPO) and Nemoante, an advisory company involved in origination and project development across Africa. Permanent Secretary, Ministry of Mineral, Oil, and Gas, S.O. Oko-Ose, who represented the governor, said the state was ready to exploit its solid minerals deposit and expand the space for more investors to diversify its revenue base. He noted that players in the industry, BUA Group and Dangote Group, were already investors in the state, but that there was a need to attract more investors to saturate the space and provide more op-

portunities for job creation and prosperity. Simon Nkom, directorgeneral, Mining Cadastral Office, said it was delightful that Edo State was partnering his office to promote investment in the mining sector. He said the state was a strategic location for the cadastral office’s operations which informed the opening of a regional office to cater to the needs of miners in the state. President, Women in Mining in Nigeria, Janet Adeyemi, commended Edo State for organising the forum, noting that there was need to fast-track investment in infrastructure to attract more players in the industry. Managing director, Nemoante, Erhabor Okogun, urged stakeholders to take advantage of already existing data to make investment decisions, and engage with financial institutions and Small and Medium Enterprises (SMEs) to open up the sector. Head, ESIPO, Kelvin Uwaibi, reiterated the readiness of the state government to unlock the state’s mining sector and pilot innovations to drive investment.

Has Nigeria’s 2015 FX ban on imports worked? MICHAEL ANI & MERCY AYODELE

t is been five years since Nigeria resorted to restricting some food items from accessing foreign exchange to boost local production and conserve the dollar reserve. But Africa’s biggest economy still reels from a shortage in domestic production of some food items and a dollar crisis that is squeezing life out of the economy. Rather than pay attention to the numerous structural challenges inhibiting domestic production, from a lack of electricity to poor road network and the unavailability of basic infrastructure that has made it cheaper for businesses to import goods from abroad than produce locally, Nigeria’s central bank embarked on rationing sales of the greenback to importers, restricting access to dollars in its official market, where the naira trades stronger relative to the dollar. That dollar restrictions started after a 2014 collapse

L-R: Oladele Odusote, commissioner, Lagos State Ministry for Energy and Mineral Resources; Babajide Sanwo-Olu, governor, Lagos State; Femi Hamzat, deputy governor, Lagos State; Solape Hammod, special adviser to the governor of Lagos State on SDGs and investment, and Tubosun Alake, special adviser to the governor of Lagos State on innovation and technology, at the grand finale of Lagos Smart Meter Hackathon 2020 in Lagos, at the weekend. Pic by Olawale Amoo

How pension funds reel from negative real interest rates MICHAEL ANI & OLUWAFADEKEMI AREO

collapse in yields on Nigerian assets is leaving pension fund administrators (PFAs) with no choice but to plough back pensioners’ funds into assets offering rates below inflation. Nigeria’s biggest institutional investors, the PFAs, are reeling from a negative real interest rate environment, after a host of Central Bank of Nigeria’s (CBN) policies aimed at boosting growth in a fundamentally weak economy, restricted them alongside other local investors from investing in high yielding short-term OMO bills instruments. That sparked a massive influx of liquidity into other asset classes, par-

in global crude oil prices triggered a huge decline in petrodollars, the country’s biggest foreign earner. After banning a list of 41 items that included rice and fertilizer in 2015, the apex bank has continued to expand the list of items not allowed to access foreign exchange. Only recently, the apex bank also prohibited maize importers, taking the total items banned from sourcing dollars in the official market DIPO OLADEHINDE to 44. n amendment on Fast-forward to today, that a new bill in the move is yet to yield any reoil and gas sector markable gains, according to that will ensure that various analysts who spoke to Nigeria joins the league of BusinessDay, due to the nu- industrialised nations and merous structural challenges further help the government bedevilling the countries. save $10 billion yearly via loFrom spiralling inflation cal content is in the works at rate, currently at the highest the National Assembly. levels in more than two years The proposed law, called at 13.22 percent in August, to Nigerian Oil and Gas Indusa huge backlog of foreign ex- try Content Development change demand, the economy bill (NOGICD bill), came still faces a similar scenario out of decades of agitation for local value and has the Continues on page 30 capability to facilitate growth

ticularly T-bills and Bonds, sending the yields on these assets to lower lows below the rate of inflation. Even though the PFAs are making a killing for

sion. According to Sadiku, as PFAs investment in OMO matures, they have to look for where to invest that money but they definitely

FINANCIAL REPRESSION SERIES now, from the bond rally, by trading a part of their already invested long-dated bonds, and using capital gains from these bonds to reward clients with interest above inflation; they are still faced with huge ‘reinvestment risk’ when they make a new purchase, forcing them to reward pensioners with returns far lower than inflation. “The biggest challenge for most institutional investors, particularly the PFAs, is reinvestment risk,” said Yomi Sadiku, head of investment, Lagos-based pension firm, AIICO Pen-

cannot go into T-bills anymore because the rates are too low. “The bond markets that we could have gone to as well, the interest on the bond market is also very low. So, unfortunately, there is nowhere we can go. “This year, a lot of the PFAs have classified their bond as available for sale, it would appear they have outperformed everybody else, because of course, as yields continue to go down, the price of these bonds go up, but next year, there is nothing they can do,” Sadiku said.

Average interest rates on short-term T-bills have tumbled to 1.3 percent from the high of 14 percent some two years ago, while yields on bonds are sitting as low as 7 percent, according to data from securities trading platform, FMDQ. While the low-interestrate environment has become a major win for both the Federal Government and large corporates, providing them soft landing to borrow at low cost, it has come with so much pain for pensioners whose funds are collected largely by the government but are rewarded with returns below the country’s inflation. Between April and July this year, the Federal Government raised N7.74 billion in bonds, down by 3

Continues on page 31

Oil/gas sector: New Bill to unlock $10bn in Nigeria’s local content yearly underway

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of local content in the oil and gas sector by 70 percent. Simbi Wabote, executive secretary, Nigerian Content Development and Monitoring Board (NCDMB), said as much as $380 billion was going out of the country as capital flight when the content law was not in place. “With the new bill about 300,000 jobs would be generated yearly,” Wabote said at a Nigerian content summit with the theme “Nigerian Content Development: Facing the Future.” According to Wabote, the recent disruptions caused by

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Covid-19 pandemic should force Nigeria to prioritise local content development. At the virtual event, Rosario Osobase, secretary general at Petroleum Contractors Trade Section (PCTS) of the Lagos State Chamber of Commerce, said the essence of the bill was for the domestication of the value chain of Nigeria’s oil and gas sector and not “Nigerialisation.” “Nigeria also needs to encourage local firms to invest in research and development like its counterpart in other oil-producing countries,” Osobase said.

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Vassily Barberopoulos, chairman, Manufacturers Association of Nigeria Local Content (MAN-LOC), said the new bill would help in industrialisation, which will make it easier for Nigeria to drive its exportation agenda. In addition to proposing new requirements and regulations that would further increase and support indigenous participation in the petroleum sector, the NOGICD bill ambitiously proposes similar reforms

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Monday 21 september 2020

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news Edo, mining sector stakeholders chart course to deepen investment in post-COVID-19 economy

Has Nigeria’s 2015 FX ban on imports worked? MICHAEL ANI & MERCY AYODELE

How pension funds reel from negative real interest rates MICHAEL ANI & OLUWAFADEKEMI AREO

ticularly T-bills and Bonds, sending the yields on these assets to lower lows below the rate of inflation. Even though the PFAs are making a killing for

sion. According to Sadiku, as PFAs investment in OMO matures, they have to look for where to invest that money but they definitely

Continues on page 31

Oil/gas sector: New Bill to unlock $10bn in Nigeria’s local content yearly underway

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Nigeria lacks credible regimes for competition and consumer protection global Perspectives

OLU FASAN

ast week, I wrote about the much-talked-about Companies and Allied Matters Act, CAMA 2020. This week, I want to turn to the lesstalked-about Federal Competition and Consumer Protection Act, FCCPA, which President Buhari signed into law in 2018. Both statutes, if soundly conceived and properly implemented, could lay the legal and institutional foundations for a robust free market economy in Nigeria. However, as I wrote last week, CAMA 2020, which focuses mainly on the incorporation and management of companies, only scratches a tip of the iceberg in terms of the problems confronting business environment and private sector development in Nigeria. Sadly, as I will argue here, the FCCPA 2018, on which, legally and institutionally, a liberal and competitive market economy could be anchored, does not cut the mustard. For context, it’s worth noting that until President Buhari signed the FCCPA into law in 2018, Nigeria had no proper competition and consumer protection law. Indeed, in the Nigeria Industrial Revolution Plan (NIRP), published by the Jonathan administration in 2014, the government said: “Nigeria does not have an adequate set of policies, regulations and laws to control anticompetitive practices in industry.” Furthermore, the NIRP identified key competition–related problems in Nigeria. First, it said that the manufacturing sector “has failed to undergo the critical structural transformation necessary for it to play a leading role in economic growth.” Second, it said that “some industrial sectors have evolved into oligopolies, with just a few companies controlling the majority of the market”, with some charging excessive prices for their products. Of course, these problems arose because of the absence of a robust competition and consumer protection regime. For instance, where industries face

competitive pressures, they will be forced to innovate and undergo structural transformation. But where they are shielded from competition, they will atrophy and become “zombie” industries. Equally, monopolies and oligopolies cannot emerge or survive in a country with stringent competition law and enforcement. So, can the FCCPA tackle these problems? Well, the first point is that the act sets out laudable objectives. Its objectives include to: “promote and maintain competitive markets in the Nigerian economy”; “promote economic efficiency”; “protect and promote the interests and welfare of consumers by providing consumers with wider variety of quality products at competitive prices; and “prohibit restrictive or unfair business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria.” As a strong believer in an open and competitive market economy, I applaud these objectives. I mean, the idea of promoting economic efficiency in Nigeria is music to my ears. It is one of the things this column stands for and one of the things I have been banging on about for the past six years, to the utter annoyance of socialists and protectionists. So, I welcome the objectives of the FCCPA 2018. In terms of the substantive provisions, the act contains some of the usual competition and consumer protection rules. For instance, with respect to competition, it prohibits restrictive agreements, abuse of dominant position, monopoly and anti-competitive practices, such as price-collusion. On consumer protection, the act protects a wide range of consumer rights, even covering the remits of traditional principles of contract and sales of goods laws. Furthermore, the act establishes the Federal Competition and Consumer Protection Commission (FCCPC) and invests it with wide-ranging powers to identify and tackle “anti-competitive, anti-consumer protection and restrictive practices.” What is more, the FCCPC has a remit to advise the Federal Government on “the eradication of anti-consumer protection and anticompetitive behaviour.” So far so good! But can the act achieve its laudable objectives? Can it turn Nigeria into an open and competitive market economy? Well, based on some anti-market provisions in the act, and the adverse government policies that

underpin the act, the truth is that FCCPA 2018 offers little hope of engendering economic efficiency in Nigeria. But even before we come to those counterproductive provisions and policies, there is a legitimate question about whether the FCCPC, that is, the commission, can effectively administer and enforce the good provisions of the act. Why did I say that? Well, recently, President Buhari blamed the runaway food inflation in the country on middlemen. Speaking through Garba Shehu, his senior media assistant, Buhari said that “exploitative market behaviour by actors has significantly increased among traders”, adding: “The most worrisome are the activities of ‘corrupt’ middlemen and other food traders found to be systematically creating an artificial scarcity so that they can sell at higher process.” If, indeed, the Presidency “found” middlemen and traders that are engaging in exploitative market behaviour or restrictive practices, what’s the FCCPC doing about it? Why has it not swung into action to identify those engaging in such practices and enforce the provisions of the act against them? There must be genuine questions about whether the FCCPC can be effective or whether it would be a toothless bulldog. Can it act independently, without fear or favour? I noted earlier that the Nigeria Industrial Revolution Plan states that “some industrial sectors have evolved into oligopolies, with just a few companies controlling the majority of the market.” This has resulted in the prices of some products being “among the highest globally.” But can the FCCPC act against the powerful and politically connected oligopolists? Well, the truth is that, in the Nigerian context, the answer is no. Expect the FCCPC to bear its fangs against the “small fries” while the “big beasts” act with utter impunity. But that aside, how can the FCCPA 2018 achieve its objectives when some of its provisions and government policies blatantly undermine those objectives? For instance, how can it “promote economic efficiency” and “protect the interests and welfare of consumers by providing consumers with a wider variety of quality products at competitive prices” when import bans and forex restrictions are the centrepiece of the government economic policy? You cannot have a wide variety of quality products at competitive prices

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There must be genuine questions about whether the FCCPC can be effective or whether it would be a toothless bulldog. Can it act independently, without fear or favour?

with protectionism! The truth is that any competition regime that denies market access for imports and forecloses markets to foreign competitors cannot promote economic efficiency or promote the welfare of consumers. Open and competitive markets drive down prices and provide incentives for domestic firms to innovate and to become more efficient and competitive internationally. As the saying goes: “industries thrive locally when they can compete globally.” So, shielding domestic industries from international competition is counterproductive. Yet, the FCCPA is set within the economic philosophy of import-substitution. In that regard, it is utterly misleading to say the act would “promote economic efficiency” or “promote and maintain competitive markets in the Nigerian economy.” No, it cannot achieve those objectives. You cannot have a competitive but illiberal market. It is both liberalisation and contestability of markets that promote economic efficiency. Which brings us to price controls? Recently, the Centre for Social and Economic Rights (CSER) placed an advertorial in this newspaper, rightly condemning the incessant practice of price-fixing by regulatory agencies. The CSER described Nigeria as a “free market economy”, operating “a liberal economic system.” No, Nigeria is a protectionist and dirigiste economy. Think of it, no free market economy will legitimise price-fixing. Yet, Part XI of FCCPA 2018 gives the president wideranging powers to control the prices of goods and services. Any person who violates the president’s price regulation orders can be fined up to N50m and if it’s a company up to 10 percent of its previous year’s turnover! Nigeria’s first-ever competition and consumer protection legislation puts price-fixing on a statutory footing. Furthermore, it exists under the shadow of aggressive protectionist and interventionist policies. It is utterly ill-suited to promoting economic efficiency. So, FCCPA 2018 is a misnomer: it’s neither pro-competition nor proconsumers. On both, it doesn’t cut the mustard. What a wasted opportunity! 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

The Company Secretary – supporting board effectiveness

he office of the Company Secretary is a statutory position occupied by a principal officer of the Company, responsible for ensuring that the Company complies with statutes and regulations (where the incumbent is also the Compliance Officer), and also keeps the Board informed of its legal responsibilities. Company Secretaries have high-level responsibilities including advising on governance matters, corporate conduct within the regulatory environment, coordinating Board, Committee and General meetings, overseeing the training and development of Non-Executive Directors, liaising with regulators and interacting with shareholders and other stakeholders. Historically, the functions of the Company Secretary were administrative and not concerned with the management of the Company. However, this 19th century view of the Company Secretary has since changed and has become increasingly out of step with modern reality. The Company Secretary, an officer of the company charged with significant governance and compliance responsibilities has clearly evolved to a key organ within the governance framework. In the case of Okeowo and ors v. Milgliore it was held that “a Company Secretary is the principal officer

of the company”. By the provisions of Section 330 (1) CAMA 2020, every company other than small companies are required to have a Secretary. As a key advisor to the Board with respect to matters of corporate governance and directors’ duties, the Company Secretary has a significant opportunity to help morph the conditions and environment for healthy boardroom culture and effectiveness. Principle 8 of the NCCG 2018 recognises the important role the Company Secretary plays in supporting the effectiveness of the Board by assisting the Board and Management to develop good corporate governance practices and culture in the company. An effective board is one composed of Directors with appropriate skills and experience required to provide leadership and direction to ensure the Company is well managed to deliver value to stakeholders. This necessarily requires that directors have to receive continuous training and development, identify training needs and emplace a structured and robust Training Plan and budget. This should also include a comprehensive onboarding programme for new Directors. Whilst the Chairman is expected to take the lead role in the assessment, improvement and www.businessday.ng

development of Directors, the Secretary as the advisor and support system of the Board should prompt and support the Chairman in this regard. On the assessment and evaluation of the performance of the Board and individual Directors, it is important for the Company Secretary to help the Board understand the value the evaluation can bring to the Board and work Directors and the Consultant engaged to undertake the evaluation to deliver on the value. The findings and recommendations from a well-structured board performance evaluation process can indeed be transformational and will assist the Board to set the agenda for the year ahead. Another area where the Company Secretary plays a key role is with respect to Conflict of Interest. It is important that the Board considers and approves a Conflict of Interest Policy, as this is the most effective way to manage this hydra headed monster that can significantly impact board effectiveness. Conflict of interest is inherent in the position of Directors as fiduciaries who should not allow their own personal interest to interfere with those of the company they serve. However, personal interest can be limitless and range from financial gain, to the desire for professional advancement, recognition for personal

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Bisi Adeyemi achievement, and favours to friends and family. Section 25.2 of the NCCG (2018) recommends that the concerned director be precluded from discussions and voting on any matter in which he/she may have an interest. The Director is also required to seek clarity from the Chairman of the Board or the Company Secretary when he/she is in doubt as to whether or not a conflict of interest exists. The Conflict of Interest Policy will provide clarity as to what constitutes a conflict of interest and the process for dealing with such a situation.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comments and reactions to badeyemi@dcsl.com.ng

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Resilience [forging ahead] – Fixing insecurity

Bashorun J.K Randle

n 5th August 2020, virtually all the major newspapers devoted their front-page to the Audit Report/Forensic Audit Report delivered at the State House, Aso Rock, Abuja, by the National Security Adviser to the President, Major-General Babagana Monguno (Rtd). The common thread was (and remains) the deplorable security situation in the country. According to “The Nation” newspaper: Headline: “Buhari orders security rejig as C.A.N, sultan raise the alarm” “A rejig of the nation’s security operations has commenced in response to the growing insecurity in many parts of the country. National Security Adviser (NSA), Major. Gen. Babagana Monguno, stated this on Tuesday after the National Security Council meeting at the State House in Abuja. According to the NSA, President Muhammadu Buhari, who presided over yesterday’s meeting, gave the directive, adding that he is “working on something” with Minister of Defence Maj.-Gen. Bashir Magashi in that regard. Gen. Monguno told reporters after the meeting that the President directed a “rejig of our strategy, both in terms of operations and intelligence, to further prevent catastrophes. We must bear in mind that we owe a duty to the people that elected this government and at the end of the day, without securing the nation, all other things such as revamping the economy and fighting corruption cannot be addressed. He added: “I know it has not been

easy, there has been a gradual loss of confidence over the years and the president is determined to restore confidence. Equipping the security agencies. Speaking specifically on what transpired at yesterday’s meeting, the NSA said: “What the President said today was virtually a reaffirmation of what he said the first time. Yes, Mr President said you are doing your best, as far as I’m concerned, but there’s still a lot more to be done. I’m more concerned about the promise we made to the larger Nigerian society and I am ordering an immediate re-engineering of the entire security apparatus. This is something that I believe will be done in a very short time, but I just want us to keep hope alive. “I know how everybody feels, I know how Nigerians feel. Definitely, the President is not oblivious of the fact that securing the nation is a primary responsibility of government and I believe in his sincerity, but again, since he’s not an octopus, since he’s not a spirit, if he delegates to people, then, the onus is on them to actually fulfil the legitimate expectations of the larger Nigerian society. “The office of the National Security Adviser, in conjunction with other security agencies, will work on a blueprint in a short, medium and a long term to address this matter”. Asked about President Buhari’s earlier marching orders to service chiefs to shape up and live up to their task, Monguno said: “basically, these are operational matters that are best dealt with by the Minister of Defense. “I know that there’s something that he’s working on, which has led to this meeting being delayed slightly, this meeting was actually supposed to take place before the Sallah holiday, but I think one or two things have come up that I don’t think I can explain, but I want you to be comfortable that something is being done, following that marching order”, he said. On the clash between Borno State Governor Babagana Zulum, and the military, the NSA said he would get a better briefing after the meeting of the National

Security Council with the Nigerian Governors’ Forum (NGF). “Just like you have seen things on the social media here, again I don’t know the final details of what happened, but I know that the governor will meet with Mr President to discuss whatever led to the incident and the debacle. What I know, however, is that in another 30 minutes from now (yesterday), we are going to have a virtual meeting with the Governors’ Forum. “My name sake has already told me that he’s coming for the meeting, it’s only after that meeting that I can really be able to understand the nitty gritty of what happened, but like you said, it’s unfortunate and I believe we’ll get over this issue”. Gen. Monguno accused criminals of being driven by drugs: “These drugs basically are codeine, opium, cocaine, tramadol and amphetamines and of course cannabis sativa. The popular drug of choice is tramadol, it is easily acquired. Tramadol has been the drug of choice for terrorists, bandits and kidnappers. And if we don’t tackle this we are going to be immersed in a great problem by virtue of the fact that he who resides in the town, urban or rural area must be able to collaborate with agents of government in revealing these abnormalities. “The second issue of course is also tied intrinsically to that situation of banditry in the northwest and north central zones, where you have a lot of illegal aliens working just like what you see in the mining sector, illegal miners working with bandits and kidnappers. Of course, there are also other issues of fully equipping the security agencies” he explained. What has gone viral is the emphatic declaration by the National Security Adviser [NSA] that security is the number one item on the agenda; and without security virtually everything else – from the economy to education, health, banking, industry and agriculture etc. would collapse. That cannot be the end of the debate. Unless Professor Gambari has discarded liberal socialism, which was drilled into him at the London School of Economics,

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What has gone viral is the emphatic declaration by the National Security Adviser [NSA] that security is the number one item on the agenda; and without security virtually everything else – from the economy to education, health, banking, industry and agriculture etc. would collapse

we are entitled to expect a robust discussion with the National Security Adviser with a view to shifting utmost primacy from security to the ECONOMY. Perhaps it is an oversimplification to argue that if the economy is thriving, security would find its own level. Of course, the correct answer may be something in-between. This is somewhat akin to John Maynard Keynes’s vigorous advocacy of liberal socialism and the imperative to borrow money to fund public services. According to Keynes, in pursuing liberal socialism the solution lies neither with nationalisation nor unregulated private competition. It lies in a variety of experiments, of attempts to get the best of both worlds. In essence, the fate of Nigeria hangs in the hands of two ex-Payne’s House (“KCOBs”) – Professor Ibrahim Gambari, Chief of Staff to the President and MajorGeneral Babagana Monguno (Rtd), the National Security Adviser. The critical issue is whether the final decision will favour Security (Monguno) or Economy (Gambari). Both of them cannot be right. That leaves room for Harman’s House to insist that both of them are wrong!! The precarious situation is somewhat akin to what prevailed during the Nigerian Civil War (1967 to 1970). Somewhere in the archives is an iconic photograph of the two warring parties at a peace-making meeting (which was eventually aborted). On the Biafran side were General Emeka Odimegwu Ojukwu (leader) accompanied by his Chief Justice Sir Louis Mbafeno and on the Nigerian side were Alhaji Femi Okunnu (Minister of Works); Chief Anthony Enahoro (Minister of Information), Chief Wenike Briggs (Minister of Education) and two Permanent Secretaries – Chief Allison Ayida and Chief Phillip C. Asiodu. All of them were old boys of King’s College!! J.K. Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN) and former Chairman of KPMG Nigeria and Africa Region. He is currently the Chairman, J.K. Randle Professional Services. Email: jkrandleintuk@gmail.com

Disruptive risk management: The Nigerian fallow ground

ike Eleanor Roosevelt once said, “on the other side of that fear, opportunity awaits”. It’s okay to dream; to skydive or bungee jump off a cliff, but you can’t pour from an empty cup or jump from the 12th floor of a 10-storey building! Maybe Jesus got off the boat to walk on water. And yes, motivational speakers and our churches tell you to take a leap of faith too; to “aspire to perspire”. They may encourage you to soar like an eagle, but what of the risk management of it? Yes, eagles take the biggest risks, days after birth, they throw their new offspring off a feared height with nothing but trial, confidence and hope that the new eagle will fly, and else it dies. But then, they learn to fly. Good for it, but don’t try it. By the way, when next you see an eagle or any bird fly or lay confidently on a small twig of a tree, remember that it’s more than faith. It’s not that it can’t fall off, or the branch breaking. The truth is that its trust is not on the branch but on its own wings. It’s too bad risk management that most firms are going under post COVID as rarely do any Nigerian business transactions apply the clause of force majeure (a legal exception to deliver, as a result of unforeseeable circumstances from say pandemics and natural disasters. This legally prevents a firm or someone from fulfilling a contract). With it, lesser businesses would be in trouble. It’s too bad Risk Management that we have so many road accidents, bad loans never to be paid back in banks and why over 75 percent of our agricultural produce is lost due

to mishandling, spoilage and pest infestation before they get to any market. Whether it’s a crusade or a Detty December Concert, a quick question though, do you know if the last social event you attended was insured? Africans are careless risk takers. I recently was trying to have a conversation with an entertainment project manager about risk management. It felt so alien to him. He hadn’t even heard of concert insurance. In Nigeria, the insurance industries like so many others are leaving money on the table. Take for example; concert insurance is designed to protect concert workers, production staff, and event attendees in the event of an accident or incident that could potentially cause liability issues. In 2019, thousands of fans attending a Jennifer Lopez concert at Madison Square Garden were left in the dark after a power outage struck parts of Manhattan. Jennifer Lopez was forced to abruptly cancel the concert in New York City Saturday night when power outages caused blackouts in parts of Manhattan. When interviewed by the entertainment outlet, she said “They were like, ‘you don’t have to do the show, you know, insurance will cover everything – including you, including the fans, and everything will be fine’. That is the importance of insurance coverage for concerts. Issues such as water shortages, artist disputes or crowd stampedes are just some of the things that can go wrong. A concert in Nigeria has an average of 20,000 people in attendance excluding the workers at the venue, the vendors and www.businessday.ng

the performers. These people are not usually under any insurance cover and that poses a risk for the event organizers. Prior to the COVID-19 pandemics breakout, the streets of Lagos were usually flooded with numerous parties (popularly known as Owanbe). With all the highflying headgears, expensive accessories and luxurious cars, would you believe that your life and properties had no insurance at that event? What if the insurance companies push for a bill for a safer project management terrain for large gatherings? Business loss and lawsuits can be prevented this way and it serves as an additional source of income for the insurance companies. A very avoidable case is that of Davido’s. In 2018, a girl named Karimah allegedly claimed she was robbed and sexually assaulted by a man during Davido’s concert. She said Davido saw it happen and ignored it. Whether all of this is true or not is not the main issue, the main issue is that it was clear enough that there was no insurance cover on the attendees of that concert or the concert in general. If the case had taken a worse turn, Davido might be trying to settle a legal lawsuit against him. Insurance companies should use situations like this to their opportunity. We need more disruptive thinkers and not just chance takers in today’s emerging businesses. In the words of Glenn Jones, “You don’t have to believe in coincidences because they happen every day. The trick is to be able to discern when something is more than coincidence.” Business is not about coincidences but about

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EIZU UWAOMA risk management. Risk management refers to the practice of identifying potential risks in advance, analysing them and taking precautionary steps to reduce/curb that uncertainty. Whether it’s in your life or business, it starts from following the sequence of having a Risk Management Plan. And from it being able to identify and prioritise risks, and risk triggers. Perform Qualitative and Quantitative Risk Analysis (from project SWOT Analysis; breaking down your projects into activities and categorizing each of them). Beyond that, it’s looking for the tendency of risks via a Probability and Impact matrix assessment-scoring model). Rank your uncertainty into levels. Then, anticipating and Planning Risk Responses for higher-level risks (whether to accept, mitigate or even transfer that risk to either a secondary contractor or an insurance firm). Risk Management is powerful. And there is a science and opportunity to it. I look forward to helping your business with a structural blueprint to manage and grow amidst uncertainty. Uwaoma is a start-up, corporate restructuring and strategy consultant. contacteizu@gmail.com

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Monday 21 September 2020

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When President Buhari tweets, I follow back

David Hundeyin

n October 2010, I attended a Europa League football match at the City of Manchester Stadium (now known as the Etihad Stadium) between Manchester City and Polish side Lech Poznan. This was a City side that had the likes of Emmanuel Adebayor, Yaya Toure, David Silva, Nigel De Jong, Shaun Wright-Phillips and Patrick Vieira. Poznan were complete no-hopers in comparison and everyone knew it. On the pitch, the little-known Polish team did well to keep the score down to just 3-1, though that may have had more to do with City conserving energy instead of going flat out. City expectedly had by far greater territorial advantage and possession, making the game look at times like a half-court press. Yet to my left in the away corner, the Poznan fans never stopped having a party all night long. More interesting was what they were doing. Instead of watching the game and getting depressed by how comprehensively outplayed their team was, or even trying to motivate their team to give them something, they were doing something I had never seen before. All 2,000+ Poznan fans

had their arms linked, backs turned to the pitch, screaming and jumping up and down all game long. It became such a spectacle that soon even some City fans started doing it when the game petered out as a contest toward the end. Nearly 10 years after that insignificant Europa League group match game in 2010, the ‘Poznan’ is now a staple of the Manchester City fan base and has taken root across England. Why is this? And why did I think of this little anecdote when writing this column? Buhari’s government is the pitch Nigerians have lost interest The thing that made a simple and distinctly silly-looking spectacle like the ‘Poznan’ so infectious and adoptable was that it gave the fans a power that they did not have before. Previously, the performance of their team on the pitch inevitably determined the level of their spirits. These Polish fans however, proved that no matter how badly your team is getting beaten on the pitch, you can reclaim your own happiness by turning your back to them and having your own private stadium party. The ‘Poznan’ was part protest, part statement of personal independence, part riotous party. The seductiveness of being able to reclaim small bits of your happiness from an abusive relationship with a football team is very similar to a curious new online movement many young Nigerians are now a part of. You can see this movement in many corners of the Nigerian internet, but none is more common than in the replies to tweets from President Muhammadu Buhari’s official Twitter handle. As against the expected wall of argument and recriminations everytime he posts something, something curious is happening. Every single one of Mr President’s tweets gets 3

or 4 thousand replies saying nothing but the following 3 letters: “I.F.B.” The acronym “IFB” means “I Follow Back,” but clearly 3,000 people do not suddenly and spontaneously decide to carry out social media etiquette under a tweet by a head of state. It turns out that in the weird and wonderful manner of internet culture, young Nigerians have synthesized a new way of expressing their anger and lack of interest in whatever the president has to say. Like the Poznan fans on that bitterly cold October evening, social media-savvy Nigerian youth have decided to metaphorically turn their back on Buhari in a pointedly visible and passive-aggressive manner. As one of the “IFB” posters told me, “Buhari’s government is completely useless to us, so at least let us get something useful from him by gaining followers under his tweets.” It’s funny at first but then... At first this delightfully mutinous mass action was nothing short of hilarious in my eyes. After a few weeks however, having seen the movement get stronger without a single shred of acknowledgment from the president or his media team, it now seems sad and dangerous to me. It is not dangerous because there is any risk of youth anger spilling over into physical action - the very medium of this ‘protest’ tells an entire story on its own. It is however dangerous precisely because of how passive it is. The real problem that Mr Buhari and his co-travellers seem blissfully unaware of is that when citizens no longer care enough to fight; when young Nigerians genuinely from the bottom of their hearts do not care about or have a shred of belief in Nigeria, the very frayed fabric of national existence suffers critical damage. While Buhari carries on with his imperial demeanour,

‘

Every single one of Mr President’s tweets gets 3 or 4 thousand replies saying nothing but the following 3 letters: “I.F.B.” The acronym “IFB” means “I Follow Back,” but clearly 3,000 people do not suddenly and spontaneously decide to carry out social media etiquette under a tweet by a head of state

Hundeyin is a writer, travel addict and journalist majoring in politics, tech and finance. He tweets @DavidHundeyin.

Reclaim your power over money

hen did you become such a money monger? When did you become so desperate to see funds in your accounts that you have denied yourself life’s basic pleasures all in the name of saving money? There’s a difference between being frugal and being a hoarder. Since I began writing this column, I have preached austerity, summing up the nature of the last 6 months we’ve had to endure. With that in mind, I’ve encouraged you to practice frugality whose methods help you cut down on frivolous expenses, help you stick to a budget and keep you in a healthy cycle of saving money. To identify as frugal means you are deliberate about the way you spend your money. On the other hand, a hoarder is someone who essentially cheats him/herself. Are you the kind of person who refuses to pay premium, despite the quality of product or service you’re getting, even to your own detriment? Do you revel in the sense of security that seeing funds sit in your bank account brings you? Do you feel especially

sad when you put money aside for savings because you feel like you’re “dashing” the money out? My friend, you are a hoarder. An interesting conversation with a member of my team last weekend brought up the story of Diran whose life’s philosophy was “Why pay more?” At first, it sounded to me as though he was doing a good job handling money, if he truly had the power to get the same quality for cheaper, after all, it was his money. She went on to say though she saw some sense in his ways; she didn’t want to end up like him. Diran was a complainer who never did anything about anything. He wasn’t being frugal; Diran was a miser - a cheapskate. Not only was he near always bitter, he hid what wealth he’d amassed from his folks, drove a beat up car so no one would think he was too comfortable and barely had any assets to his name except for an impressive bank balance that he would not stop talking about. What was Diran storing his money up for? Tomorrow? One lesson these past few months have taught me is that we are powerless over anything that isn’t in the now. www.businessday.ng

making asinine references to “able bodied young people” who should apparently engage themselves in subsistence farming, young Nigerians are completely detached from anything he has to say. Without men with guns to enforce the arbitrary existence of his government, he is now only “president” in any meaningful way, of probably his immediate family. Young Nigerians have not only turned their metaphorical backs to him, but they are actively exploring ways to render his presence or influence in their lives as minimal as possible. I wrote in this column two weeks ago about the growing phenomenon of Nigerian ‘crypto maximalists’ - people who keep their savings almost exclusively in cryptocurrency, where it is outside the reach of Buhari and his woefully compromised CBN governor. Data from SBM Intelligence shows that no fewer than 23 different ethnic vigilante groups now exists across Nigeria, created or emboldened by Buhari’s unprecedented failure at securing the lives of Nigerians. The president meanwhile, is not aware. He lives in a walled-off reality inside Aso Rock where he is shielded from any kind of responsibility or accountability, and he is treated like a hero simply for existing and breathing air. If this status quo continues where on-street reality and government policy continue to diverge like the multiple naira exchange rates, this story will inevitably only end one way. Not even ‘docile’ young Nigerians have the ability to remain passive forever. For the record, despite their footballing inferiority, Poznan won the return match in Poland 3-1.

Money Brain with We must realise that we can neither change the past nor see the future. The one difference between you and I, and people like Diran is that we are planners. That’s what we do which sets us apart. As we bolster for the remaining 100 days of 2020, we set goals, we improve our creditworthiness, we save, we invest and we strive to live our best lives. We don’t preach money hoarding and pass it off as truth. We make money moves with the right information and direction. What if we reclaimed our power over money? What if we told you that you could still find the silver lining between your unlimited needs and your limited resources? Make the decision to get your personal finances back on track with plans that work, one of which is to grab your copy of Money Brain, a book I wrote to help millennials navigate career and money. Get situated in the right friendships and communities, join an investment club or talk to a mentor about your goals. It’s not too late! And if you prefer to talk to me, you can write to me at stories@reach.africa and I’ll be happy

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JR Kanu

to provide you some guidance. It’s time to stop being only anxious about money but to roll up your sleeves and finally do something about it. Kanu holds an MBA from Stanford University, a master’s in Journalism from NYU and a bachelor’s in Engineering from Calvin College. His career has included time at Konga, Amazon, The United Nations, Esquire, CNN, and Black Enterprise magazine. Armed with a strong conviction that you can live a great life no matter how much money you have, JR founded REACH Technologies, www. reach.africa. His company builds software to help young people and companies to manage and grow their money.

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BUSINESS DAY

Monday 21 September 2020

EDITORIAL Publisher/Editor-in-chief

Frank Aigbogun editor Patrick Atuanya

Security votes: Nigerians demand accountability and transparency Financial recklessness by state governors must not be tolerated

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

Bashir Ibrahim Hassan

GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu

inancial recklessness and looting of public treasury by state governors in the name of security votes has become embarrassing and must be stopped. They have become sources of embezzlement, corruption and misappropriation, and the governors take advantage of the immunity in the constitution to ensure they are not checked until they leave office. This monthly allowance called security vote is allocated to the 36 state governors to fund security services in their states. The controversial funds, which run into hundreds of millions of naira per state, per month and drawn from the federal purse, are usually spent at the governor’s discretion and without accountability. In other words, the permission of appropriation for security votes has ironically pushed up rather than diminished insecurity. This is because the money that should ordinarily be available for social and economic development is appropriated as security votes and used discretionarily.

Clearly, there is a lacuna in the budgeting process and a lack of guiding principles on security votes. A worrisome development is the recent revelation by the Civil Society Legislative Advocacy Centre, (CISLAC) that 36 state governors pocket over N208.8billion every year as security votes with nothing to show for it other than blaming the federal government for the insecurity in their states. On the other hand, the Nigerian Police Force with 371,800 officers has a budget of N409bn for 2020. It becomes obvious that the governors are looting the treasury dry in the name of security vote. But the tragic irony is that half of the 371,000 officers of the Nigerian Police, paid and maintained by the federal budget of N409 billion are deployed protecting and serving state governors and their families, local government chairmen and their families, state commissioners, principal officers, top state party men and their families while the rest of the citizens remain at the mercy of criminals. For better transparency, security votes should be audited. It is not a defense vote. It is

not meant for the armed forces. We have funding for the Ministry of Defence and the armed forces. We also have the police fund and other security services such as the Department of State Service, Civil Defence Corps and the rest. So, if these agencies have budgets to run their affairs, why security votes? We consider the thinking in some quarters that security votes are not meant to be accounted for as erroneous. This is so because the Nigerian Constitution invests the states’ legislature with the power to oversee the audit of all accounts of government, including security votes. The fact that the legislature has failed to do this in the past, either because of incompetence or compromise, does not change this fact. We reject the position of the governors that security votes help them to handle urgent security situations in their states as there is no evidence to prove that. For instance, revelations on how security funds were allegedly disbursed by the former National Security Adviser, Sambo Dasuki , as slush funds to prominent members of the former ruling Peoples’ Democratic

Party (PDP) are indicative of the abuse to which such discretionary spending is subjected in Nigeria. The abuse of security votes started during the era of the military administration. But it was not until the military handed over power to civilians in 1999 that the use and abuse of security votes spread to all tiers of government. Even chairmen of local government areas (LGAs), who are not generally considered as an independent tier of government in Nigeria, and who also do not have any constitutional security responsibilities, are routinely allocated security votes. The renter nature of the Nigerian state ensured that the security vote malpractice, together with the culture of impunity, survived the transition to democratic rule. It’s unfortunate that, in some states, banditry and kidnapping happen on a daily basis, but their governors collect security votes every month, only to turn round to blame federal government for not coming to their aid. Instead of using this money to improve security situation in their states, governors use it to suppress the opposition.

HEAD, HUMAN RESOURCES Adeola Obisesan

EDITORIAL ADVISORY BOARD Imo Itsueli Mohammed Hayatudeen Afolabi Oladele Vincent Maduka Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Mezuo Nwuneli Charles Anudu Tunji Adegbesan Eyo Ekpo Wiebe Boer Paul Arinze Boye Olusanya Ayo Gbeleyi Haruna Jalo-Waziri Clement Isong Konyin Ajayi

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Monday 21 September 2020

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Monday 21 September 2020

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COMPANIES&MARKETS The Companies and Allied Matters Act 2020 - what you need to know Part 11 – company voluntary arrangements UDO UDOMA & BELO-OSAGIE

Background he Companies and Allied Matters Act (Chapter C20) Laws of the Federation of Nigeria 2004 (“CAMA 1990”) was initially made law in Nigeria in 1990 as a decree of the military government. It was modelled on the English Companies Act 1985. For thirty years, there were no significant amendments to the CAMA 1990, notwithstanding that England has, over the past three decades, amended and replaced its own Companies Act. Nigerian companies had to, essentially, rely on a 30-year old law to govern the way businesses operate in our dynamic and exponentially evolving global community. However, this all changed on Friday the 7th of August 2020, when President Muhammadu Buhari, gave his assent to the Companies and Allied Matters Act 2020 (“CAMA 2020”). In the course of a 12-part series, Udo Udoma & Belo-Osagie will provide a review of the provisions of the CAMA 2020, highlighting changes that have been introduced into the body of Nigerian company law by this ground-breaking legislation. Company voluntary arrangements The CAMA 2020 has introduced company voluntary arrangements (‘’CVA’’) into the body of Nigerian company law. A CVA is an alternative arrangement available to companies facing financial challenges, that can be used by companies to conveniently structure the repayment of debts to their creditors. The provisions of the CAMA 2020 on CVAs are modelled primarily after the UK Insolvency Act 1986, including all subsequent related legislation (‘’UK legislation’’). Although the CAMA 2020 does not define a CVA, in practice in the UK, CVAs are described as a form of business rescue arrangement which allows a company in financial difficulties to propose to its creditors to enter into an agreement with them regarding the repayment of all, or a part, of its debts over an agreed period of time. CVAs, in some respects, are similar to a scheme of arrangement. A fundamental difference between a CVA and a scheme of arrangement is that CVAs are contractual in nature and require the approval of the creditors and members of the company to take effect. A scheme of arrangement, on the other hand, involves the courts, and requires orders of the court to convene meetings and to sanction the resolutions passed at such meetings. Furthermore, the CAMA 2020 introduced the concept of a statutory 6-month moratorium under a scheme of arrangement under s. 715, during which period, no winding up petition or enforcement action by

any creditor shall be entertained against the company. This feature is not available under a CVA. Features Of Cvas •CVAs represent a shift from the traditional mindset that the only option available to an insolvent company is to be wound up. The primary objective of a CVA is to restore a company to profitability so that it may be able to meet its financial obligations to its creditors under the CVA. •Unlike other company rescue options (such as administration) a CVA allows directors to remain in control of the affairs of the company while the company continues to conduct its business. •The approval by creditors of a company to a CVA only binds the Company and all unsecured creditors (including unsecured creditors that do not agree to the CVA). Secured creditors who do not consent to the CVA, on the other hand, are not bound by the CVA and can enforce their security notwithstanding of the CVA. Moratorium In order for a potential restructuring or reorganisation to have the best odds for success, it is necessary for a moratorium to be put in place. A moratorium prevents the company’s creditors from instituting or continuing any insolvency proceedings or legal processes against the company during the period of the CVA, thereby giving the company – and its creditors – an opportunity to agree on a plan to restructure the company and/or its debts without having to deal with the constant threat of enforcement action by certain creditors. A statutory moratorium does not apply to CVAs under the CAMA 2020. In the absence of a statutory moratorium, and in the course of negotiating the terms of the CVA, creditors (including unsecured creditors) that are not part of the CVA may still enforce their rights as they choose without regard to the majority of the creditors who are in support of the CVA. This is similar to the situation in the UK where there is no statutory moratorium applicable to CVAs except in relation to “small eligible companies” and companies in administration; both of these categories of companies enjoy an automatic moratorium once they embark on a CVA. It is interesting to note that a statutory moratorium is also applicable in the CAMA 2020 where a company

enters into administration. The experience in the UK has shown that a CVA proposal works best when initiated within the framework of administration unless there are compelling reasons for avoiding administration. Procedure The CAMA 2020 outlines the process for implementing a CVA: •A CVA proposal is made to the creditors by the directors of the company, or by the administrator or liquidator, as applicable. •The proposal is made through a person appointed by the directors, administration or liquidator of the company (as applicable) to act as a nominee for the purpose of supervising the implementation of the CVA. The nominee must be qualified to act as an insolvency practitioner. •Within 28 days of receiving the notice of the proposal for a CVA, the nominee must submit a report to the Federal High Court stating whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal, and the date, time and place at which he proposed the meetings to be held. •The above requirement for the nominee to submit a report to the Court only applies where the company is not in administration or winding up. Where the company is in administration or winding up, the nominee may proceed to summon the necessary meetings without recourse to the Court. The meetings of the members and creditors are to be held separately. •The CVA proposal may be approved with or without modifications, provided that the proposal itself or any subsequent modification does not affect the right of a secured creditor to enforce its security or the priority and rights of preferential creditors except with the concurrence of the secured creditor or preferential creditors concerned. •The CAMA 2020 does not provide for the voting threshold for the approval of a CVA at the creditors’ and members’ meetings and this is a significant lacuna in the CAMA 2020. It only provides that “…each of the meetings shall be conducted in accordance with the rules.” The CAMA 2020 defines the term “rules” to include “rules made by the Chief Judge of the Federal High Court for the purpose of section 616 (i.e. Delegation to

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liquidator of certain powers of court ) or 683 of the CAMA 2020 (i.e. Information as to pending liquidations and disposal of unclaimed assets) and all incidental forms together with rules made by the Corporate Affairs Commission.” There is, however, no specific indication of the rules being referred to in the CAMA 2020 so, perhaps, the provisions of the current Winding Up Rules, 2001, could be relied on. The Winding Up Rules provide for a simple majority approval of creditors and contributories (i.e. 50% + 1 vote) for a resolution to have been deemed to be passed. Under the UK Insolvency Rules, 1986, approval of a CVA requires the majority in excess of threequarters (by debt value) of the creditors present in person or by proxy at the creditors’ meeting, and a simple majority approval of the members present in person or proxy at the members’ meeting. For clarity, it is recommended that the CAC, in its regulations, should confirm that the rules applicable to voting in relation to a CVA shall be the Winding Up Rules 2001. The CAC could also specify the voting threshold applicable to voting in relation to a CVA. •Where the decision taken at the creditors’ meeting differs from that taken at the members’ meeting, the Court may, on application by a member, order that the decision of the members’ meeting shall prevail or make such other order as it thinks fit. This position applies in similar circumstances in the UK. •The decision relating to the approval of a CVA has effect if it has been taken by both meetings summoned, or by the creditors’ meeting alone, but in the latter case the decision is subject to an order of the court made on application as mentioned in the preceding paragraph above. The company shall be liable to pay the creditors the amounts approved under the CVA. •The CVA can be challenged in Court on the grounds of unfair prejudice or material irregularity (or both) in relation to either of the meetings, and where such application is made, the Court may revoke or suspend any decision approving the CVA or direct the nominee to summon further meetings to consider a revised proposal with regard to the CVA.

World Bank says Nigeria’s diaspora remittances to decline 25% in 2020 on COVID MERCY AYODELE

ia sp o ra re m i ttance flows into Nigeria will tumble by 25% this year as the coronavirus pandemic drags on the economic crisis, deepening hardship for households that receive remittances, according to the World Bank. In a recent webinar by the World Bank tagged “Nigeria in the time of COVID- 19, Rising to the challenge”, the institution said there are 1517 million Nigerians living abroad who send home over $25 billion dollar annually. 53 percent of this population reside in Europe and North America, where rising unemployment rates are already choking incomes, the Bank says. Wi t h m o st a d va n c e d countries already in recession being dragged by the coronavirus pandemic, it will become more difficult for Nigerians in diaspora to send money home. “Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on

Inside Nigeria’s bitumen irony MAYO DEJI-OMOTAYO

igeria is home to the second-largest bitumen deposit in the world; spanning about 120km. Nigeria is also home to some of the worst roads in the world. How ironic. In July 2020, the Minister of Works and Housing, Babatunde Fashola revealed that the Federal Executive Council (FEC), with the President Muhammadu Buhari presiding, approved a new policy on the local production of bitumen. The apparent need for this new policy emerged from the review of a policy memorandum which revealed that a substantial amount of the bitumen used in road construction in Nigeria is imported; costing billions of dollars. The aim of the new policy is centred around further diversifying the economy and stimulating growth through the local production of bitumen.

This series was produced by Udo Udoma & Belo-Osagie for general information purposes only and does not constitute legal advice and does not purport to be fully comprehensive. If you have any questions or require any assistance or clarification on how the subject of this guidance note applies to your business, or require any company secretarial or business establishment services, please contact us at uubo@uubo.org

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the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” said World Bank Group President David Malpass. Global remittances were projected to dip sharply by about 20 per cent in 2020, said the World Bank. According to the World Bank, the fall in remittances will affect household consumption as 1 in 2 of Nigerians live in households that receive remittances. According to the National Bureau of Statistics (NBS), Nigeria received $17.57 billion diaspora remittances in 2019, up by 56.4 percent from $11.23 billion in 2018. “Diaspora remittances into the country could fall to $17 billion in 2020, a 32 per cent drop from the $25 billion inflows recorded in 2019”, Bismarck Rewane, chief executive officer, Financial Derivatives said. On the average, remittances received per household is $224 or N84,741 and over 80 percent of the received remittances goes to consumption, the Bureau noted.

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In Ondo state alone, about 16 million barrels of bitumen are available for extraction. The bitumen reserves in the country are estimated at about 42.7 billion metric tonnes with the expectation that the locally produced bitumen will be sold at less than 50% of the current price of imported bitumen. This places the local industry at an advantage with available supply at a cheaper rate to service the existing demand for bitumen of about 500,000 metric tonnes. Billions of dollars are leaving the nation’s coffers annually to pay for the value we have the resources to create ourselves. Bitumen was first discovered in Nigeria as far back as the 1900s with the first exploration efforts made in 1905. Bitumen has always been here. We have been aware of its existence for over a century so the need for exploration should have been birthed alongside its discovery, given its importance.

Monday 21 September 2020

COMPANIES&MARKETS

BUSINESS DAY

Business Event

CAMA 2020: What it is, what it is not – CAC registrar-general JOHN OSADOLOR

arba Abubakar, Registrar General of Nigeria’s Corporate Affairs Commission (CAC), in this interview with John Osadolor and Harrison Edeh, speaks on the controversial Companies and Allied Matters Act (CAMA) 2020. He gives a blow-by-blow explanation of the various sections of the Act and what makes it different from the CAMA 1990. Talk to us through some of the new developments in the new CAMA at it replaces the one of 1990. As you may be aware, on the 24th of July, 2020, Mr President assented to the new Companies and Allied Matters Act (CAMA) bill which repealed and replaced the CAMA Act 1990. The new law will soon be gazetted and it’s supposed to take effect immediately after it is gazetted. There are major developments in the new law that will change the face of our company’s regulation and supervision framework. Let me start with the major areas of differences between the new CAMA and the repealed Act. The new law has 870 sections as against 612 sections in the former law. This means we have 258 new sections. Of this difference, 167 sections are completely new, while 91 were modifications of some of the provisions of the repealed law. And unlike the repealed law that was divided into four parts, the new law is divided into seven parts. Under the old law, the law provided for only three legal entity types; companies, business names and incorporated trustees. We now have two new legal entity types that have been added; we have limited partnerships and limited liability partnerships. These are new legal arrangements that were alien to our law before, but they have now been introduced and they are consistent with what obtains globally. My approach will be to discuss the different sections. I’ll highlight some of the major changes as it relates to companies. I will start from the administrative part of the law and even the composition of the commission. We have additional board members that have been introduced; we now have the federal ministry of finance as a member of the board, the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) will also be on the board and the National Association of Small Scale

Enterprises. This will bring the membership of the board to about nine (9). Then, other issues related to companies. So many changes have been introduced in line with the ease of doing business initiatives of the government and to strengthen the legal framework and provide for greater disclosure by registered entities. On the ease of doing business, some of the major changes that I will highlight relate to capacity to form a company and access to registration services. Under the former law, to register a company, you’ll require a legal practitioner to depose your declaration that the requirements of the law have been complied with before that company can be registered. Although, over the years, the commission had tried to introduce regulatory measures to reduce the impact of the provision, particularly on small entrepreneurs that may not afford the services of a legal practitioner. But, what the law has done now is that the owner of the business or agent can simply sign a statement of compliance that you have met the requirements of the law, it doesn’t have to be under any statutory declaration. So, with that, CAC can go ahead and register. But, if you decide to use a legal practitioner in the registration process, the window for statutory declaration is still there. This will actually reduce the cost of registration because, in the ease of doing business measurement criteria, the World Bank is looking at the totality of the cost, not just statutory fees that you are paying. While calculating the cost of the registration they factor all the monies that you ordinarily pay to agents or intermediary to do the registration. So, this approach is now optional. You can do it yourself if you choose. But, we recognize that not everybody has the time to do it themselves, there are people that have the resources. But, the concern is about the small entrepreneurs, they may not even have the capital, they may even have to borrow the money to even pay the registration fees. Such kind of person should not have the additional burden of having to engage a professional. Secondly, the minimum share capital threshold for companies’ registration has also been increased. Under the old law, with N10, 000 share capital, you can register a private company. And the N10, 000 doesn’t mean that you have to provide the www.businessday.ng

money, at least, that is the authorized share capital. The assumption is that you can have other sources of running your company, you can borrow and run your company, you don’t have to bring the capital at the point of registration except if the company is coming to a close. Under the old law, all you are obliged to share among the shareholders is 25, you can leave 75% unallotted and this can remain in your books for an inordinate period. This means that when you have new investors you can give them those shares. The new law says no, whatever share you register, you must distribute it at the point of registration, to cure any mischief that may arise. But, that doesn’t remove your right to increase the share capital whenever you intend to. And, the essence of this is that you don’t have to spend money registering share capital that you may not have any immediate need for. So, if all you require is N100, 000 to operate, you don’t have to register a company with N500, 000 share capital, just register with N100, 000. When you are ready to increase, if you have grown to a size that necessitates an increase, then you increase and pay at the point of this increase. So, this is the analogy. Then, the concept of the one-man company, until this new CAMA, to register a company, you require a minimum of two persons; shareholders and directors, they could be individuals or cooperate bodies for shareholders. Over the years, in the course of discharge of our statutory responsibility here, we’ve come across cases where companies were faced with a challenge, particularly 2-man companies when the principal owner dies. In most cases, we discover that the second person was included merely to satisfy legal requirements. In actual sense, he doesn’t even know how this business is being run, he doesn’t contribute anything. But because on the record he is a shareholder and a director, you can’t do anything without his consent and knowledge. So, in most cases, you have hostile succession process when the principal owner dies, and at the end of the day, you’ll discover that the estate of the deceased is always at the receiving end, because one person who never partook in the running of the business can hold him to ransom, simply because somebody decided to put his name there to satisfy other requirements.

(L-R) Member of Young President Organization, Lagos Chapter & Chairman, LASUTH Board, Dr. Richardson Ajayi; Chief Medical Director, Prof. Adetokunbo O. Fabamwo; Director, Clinical Services and Training, Dr. Ibrahim Mustafa; Director, Finance & Accounts, Mr. Tayo Lawal during the donation of Neonatal incubators to LASUTH by YPO today.

L-R: Tayo Eduwa, Welfare Officer, LOTS Charity Foundation; Godspower Utawure, Activation Manager, CHI Limited; Aare Solomon, Chief Administrative Officer, LOTS Charity Foundation and Chinyem Austin, Assistant Activation Manager, CHI Limited during the donation of Hollandia Products by Hollandia Nurture A Child Initiative to nourish Children at Dustbin Estate, Ajegunle, Lagos.

L-R - Regional Head (South West) NNPC, Adebisi Adediwura; General Manager Finance, KFC Nigeria, Deepak Bhardwaj; Business Head, KFC Nigeria, Manish Mehra; Manager, Non-fuel Revenue NNPC, Oluwole Adama ; Sales Representative (Lagos 1) NNPC Makinde Atarase and Business Development Lead, KFC Nigeria, Kingsley Chibogu - at the opening of a new KFC Store in Ikoyi, Lagos

L-R: Tayo Adelaja, Corporate Affairs Manager-West, Nigerian Breweries Plc; Tayo Ogundana, brewery manager, Ibadan and Ijebu-Ode, Nigerian Breweries Plc; Adekunle Alao Personal Assitant to the CMD, University College Ibadan; Jesse A. Otegbayo, chief medical director (CMD), University College Ibadan; Emeka Ofulue, medical doctor, Ibadan and Ijebu-Ode, Nigerian Breweries Plc, and Stephen Olubusayo Oladeji, Director of Administration and Secretary to the Board of Management, University College Ibadan, during the presentation of COVID-19 Palliatives to hospital in Ibadan.

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Monday 21 September 2020

BUSINESS DAY

In Association With

The new energy order

AEthnic Balkan betrayal tensions and state violence

Is it the end of the oil age?

Ethiopia’s democratic transition is in peril

Power in the 21st century

IL FUELLED the 20th century—its cars, its wars, its economy and its geopolitics. Now the world is in the midst of an energy shock that is speeding up the shift to a new order. As covid-19 struck the global economy earlier this year, demand for oil dropped by more than a fifth and prices collapsed. Since then there has been a jittery recovery, but a return to the old world is unlikely. Fossil-fuel producers are being forced to confront their vulnerabilities. ExxonMobil has been ejected from the Dow Jones Industrial Average, having been a member since 1928. Petrostates such as Saudi Arabia need an oil price of $70-80 a barrel to balance their budgets. Today it is scraping along at just $40. There have been oil slumps before, but this one is different. As the public, governments and investors wake up to climate change, the clean-energy industry is gaining momentum. Capital markets have shifted: clean-power stocks are up by 45% this year. With interest rates near zero, politicians are backing green-infrastructure plans. America’s Democratic presidential contender, Joe Biden, wants to spend $2trn decarbonising America’s economy. The European Union has earmarked 30% of its $880bn covid-19 recovery plan for climate measures, and the president of the European Commission, Ursula von der Leyen, used her state-of-the-union address this week to confirm that she wants the EU to cut greenhouse-gas emissions by 55% over 1990 levels in the next decade. The 21st-century energy system promises to be better than the oil age—better for human health, more politically stable and less economically volatile. The shift involves big risks. If disorderly, it could add to political and economic instability in petrostates and concentrate control of the green-supply chain in China. Even more dangerous, it could happen too slowly. Today fossil fuels are the ultimate source of 85% of energy. But this system is dirty. Energy accounts for two-thirds of greenhouse-gas emissions; the pollution from burning fossil fuels kills over 4m people a year, mostly in the emerging world’s mega-cities. Oil has also created political instability. For decades petrostates such as Venezuela and Saudi Arabia, with little incentive to develop their economies, have been mired in the politics of handouts and cronyism. In an effort to ensure secure

Abiy Ahmed has so far delivered neither democracy nor peace

“

REEDOM IS NOT a gift doled out to people by a government,” Abiy Ahmed said in his inaugural address as Ethiopia’s prime minister in 2018. “Rather [it is] a gift of nature to everyone that emanates from our human dignity.” His words marked a remarkable turn for a country that over the past five decades had seen an absolute monarchy, revolutions, civil war and authoritarian rule, but not freedom or democracy. After coming to power on the back of anti-government protests, Abiy freed political prisoners and journalists, welcomed opposition parties back from exile and encouraged rebels to

supplies, the world’s big powers have vied to influence these states, not least in the Middle East, where America has roughly 60,000 troops. Fossil fuels cause economic volatility, too. Oil markets are buffeted by an erratic cartel. Concentration of the world’s oil reserves makes supply vulnerable to geopolitical shocks. Little wonder that the price has swung by over 30% in a sixth-month period 62 times since 1970. A picture of the new energy system is emerging. With bold action, renewable electricity such as solar and wind power could rise from 5% of supply today to 25% in 2035, and nearly 50% by 2050. Oil and coal use will drop, although cleaner natural gas will remain central. This architecture will ultimately bring huge benefits. Most important, decarbonising energy will avoid the chaos of unchecked climate change, including devastating droughts, famine, floods and mass dislocation. Once mature, it should be more politically stable, too, because supply will be diversified, geographically and technologically. Petrostates will have to attempt to reform themselves and, as their governments start to depend on taxing their own citizens, some will become more representative. Consuming countries, which once sought energy security by meddling in the politics of the oil producers, will instead look to sensible regulation of their own power industry. The 21stcentury system should also be less economically volatile. Electricity prices

will be determined not by a few big actors but by competition and gradual efficiency gains. Yet even as a better energy system emerges, the threat of a poorly managed transition looms. Two risks stand out. Autocratic China could temporarily gain clout over the global power system because of its dominance in making key components and developing new technologies. Today Chinese firms produce 72% of the world’s solar modules, 69% of its lithium-ion batteries and 45% of its wind turbines. They also control much of the refining of minerals critical to clean energy, such as cobalt and lithium. Instead of a petrostate, the People’s Republic may become an “electrostate”. In the past six months it has announced investments in electric-car infrastructure and transmission, tested a nuclear plant in Pakistan and considered stockpiling cobalt. China’s leverage depends on how fast other economies move (see Briefing). Europe is home to giant developers of wind and solar farms—Orsted, Enel and Iberdrola are building such projects around the world. European firms are leading the race to cut their own emissions, too. America’s trajectory has been affected by the rise of shale oil and gas, which has made it the world’s largest oil producer, and by Republican resistance to decarbonisation measures. If America were to act on climate change—with, say, a carbon tax and new infrastructure—its capital

markets, national energy laboratories and universities would make it a formidable green power. The other big risk is the transition of petrostates, which account for 8% of world GDP and nearly 900m citizens. As oil demand dwindles, they will face a vicious fight for market share which will be won by the countries with the cheapest and cleanest crude. Even as they grapple with the growing urgency of economic and political reform, the public resources to pay for it may dwindle. This year Saudi Arabia’s government revenue fell by 49% in the second quarter. A perilous few decades lie ahead. Faced with these dangers, the temptation will be to ease the adjustment, by taking the transition more slowly. However, that would bring about a different, even more destabilising set of climate-related consequences. Instead, as our special report in this issue explains, the investments being contemplated fall drastically short of what is needed to keep temperatures within 2°C of pre-industrial levels, let alone the 1.5°C required to limit the environmental, economic and political turmoil of climate change. For example, annual investment in wind and solar capacity needs to be about $750bn, triple recent levels. And if the shift towards fossil-fuel-free renewable energy accelerates, as it must, it will cause even more geopolitical turbulence. The move to a new energy order is vital, but it will be messy.

disarm. He made peace with Eritrea, for which he was awarded the Nobel prize last year, and pledged to hold the first free elections in Africa’s second-most-populous country. Yet Abiy has been unable to patch the deep ethnic fissures that threaten to tear Ethiopia apart, and has not altered the state’s instinct for violence and repression. This year alone at least 147 fatal clashes have left several hundred dead, according to figures compiled by the Armed Conflict Location & Event Data project (see map). In July riots took place across Addis Ababa, the capital, and the Oromia region, after the assassination of Hachalu Hundessa, a musician and activist from Abiy’s own Oromo ethnic group. By one count 239 people were killed, some by mobs, others by security forces. Thousands have since been arrested, including Jawar Mohammed, an Oromo opposition leader considered Abiy’s main rival, who is accused of Continues on page 19

Monday 21 September 2020

BUSINESS DAY

In Association With

Off target

The ECB’s lack of credibility could hamstring Europe’s recovery A strong currency is both cause and consequence of the ECB’s failures

T POINTS IN the past decade the European Central Bank (ECB) was the only institution standing between the euro zone and financial oblivion. Europe’s problem was budgetary inhibition and insufficient risksharing. Monetary policymakers were the only game in town. No longer. Earlier this year the European Union agreed to issue joint debt to fund a fiscal response to the pandemic, sending confidence in the currency union surging. Now the most pressing problem in eurozone economic policy stems from Frankfurt. It is that hardly anyone believes the ECB is serious about hitting its inflation target of “below, but close to, 2%”. Covid-19 continues to leave most of the world with a 90% economy in which activity is depressed (see article). Disinflation is the natural consequence. In August euro-zone prices fell for the first time in four years. But it is the job of policymakers to ensure that shocks do not become prolonged disinflationary slumps. The ECB’S own forecasts, released after its monetary-policy meeting on September 10th, show that it is failing. Inflation will rise over the next three years—but only to 1.3%. Financial markets expect it will stay around that level for most of the next decade. Professional

forecasters are only a little more optimistic. The latest force holding down prices is a strong euro. The single currency has appreciated by 5.4% against the dollar this year. A central bank that took its target seriously would fight tooth and nail to improve this outlook. Depressed inflation expectations are a dangerous malady. They keep real interest rates—that is, rates minus expected inflation—higher than they otherwise would be. This is a problem when, as today, nominal rates cannot fall much further. And central banking is a confidence game: the more a target loses credibility, the harder it is to hit. So concerned is America’s Federal Reserve about inflation expectations that it has promised to allow inflation to overshoot its

target temporarily to make up for shortfalls, ensuring that inflation averages 2% over the long term. The ECB, by comparison, seems unperturbed. Instead of injecting new stimulus last week, it held back. The problem is not a lack of means. It insists that it could cut interest rates below today’s level of -0.5%, offer funding to banks on looser terms or expand its purchases of government debt. But it has done none of these things. After last week’s meeting Christine Lagarde, the bank’s president, said that increased asset purchases had not even been discussed. That pushed the euro up further, showing that the bank’s insouciance is adding to the currency’s strength and making expectations of low inflation self-fulfilling. Perhaps

Continued from page 18

Ms Lagarde, not for the first time, gave too hawkish an impression. In a seemingly corrective blog post the next day, Philip Lane, the bank’s chief economist, struck a more doveish tone. The ECB will probably act in December. But it remains an institution that appears to view inflation shortfalls as a minor annoyance, not a test of its mettle. Some would have it that the problem remains fiscal. Europe’s budgetary stimulus is smaller than America’s, and the ECB has already played an enormous role in markets this year. But the view that looser purse strings are needed to “ease the burden” on monetary policy is dangerous. If the practical effect of budgetary loosening is to let the central bank take a breather, the chances are that the exchange rate will appreciate, offsetting some or all of the stimulus. The monetary taps must stay fully open for the extra fiscal stimulus to have the desired effect. That is what is happening in America. There is nothing inherently wrong with a strong euro. Many models, including our Big Mac index, suggest that it is warranted. But at present it partly reflects a suspicion that the ECB is willing to live with a lower rate of inflation than its official target demands. That risks damaging both the central bank’s credibility and also the euro zone’s recovery.

The changing geopolitics of energy

America’s domination of oil and gas will not cow China Being an importer of fossil fuels and an exporter of renewable technology is not so bad

“

HE UNITED STATES OF AMERICA is now the number-one energy superpower anywhere in the world,” President Donald Trump told oilmen in Midland, Texas this summer, from a stage decorated with gleaming black barrels. The sheer volume of hydrocarbons that such American oilmen have released from the shale beneath Midland and previously unforthcoming geology elsewhere gives substance to his boast (see chart 1). Over the past decade America’s oil output has more than doubled and its gas production increased by over 50%. America is now the world’s top producer of both fuels. Had they heard Mr Trump say that “We will never again be reliant on hostile foreign suppliers,” presidents from Franklin Roosevelt on might have nodded in envious approval. After the second world war America’s unmatched ability to consume oil outstripped its unmatched ability to produce it. Ensuring supplies from elsewhere became an overriding priority. The oil shock of the 1970s had a profound effect both on the economy and on geopolitics, driving much of America’s subsequent involvement in the Middle East. The surge in domestic supply in the 2010s both boosted the economy and opened up new geopolitical opportunities. America can apply sanctions to petrostates such as Iran, Venezuela and Russia with rela-

tive impunity. But what it might mean to be an energy superpower is changing, thanks to three linked global shifts. First, fears about fossil-fuel scarcity have given way to an acknowledgment of their abundance. Not least because of what has been achieved in America, the energy industry now knows that it will be lack of demand, not lack of supply, which will cause production of oil, coal and, later, gas to dwindle. In its latest “World Energy Outlook”, published on September 14th, BP, an oil company which has recently said it plans to go carbon neutral, argues that demand for oil may already have peaked, and could go into steep decline (see chart 2 ).

This is because of the second shift: an acknowledgment by most countries that, for the sake of the climate, reliance on fossil fuels needs to come to an end. And that leads to the third shift: electrification. Fossil fuels provide heat that is mostly used to move things, be they vehicles or electric generators. Solar panels and wind turbines provide energy as electricity straight off. Maximising their emissions-free benefits means processes and devices that now rely on combustion must in future use currents and batteries instead. The BP analysis argues that in a world going all out for decarbonisation the share of energy used in the form of electricity would rise from about a fifth in 2018 to

Ethiopia’s democratic transition is in peril...

just over half in 2050. Falling demand for fossil fuels will tilt the balance of power away from producers and towards consumers— though there will doubtless be reversals now and then along the way. And in a world which needs to generate much more fossil-free electricity, mass production of the means whereby to do so will become crucial, as will government backing and know-how in deployment. Being a mighty pumper of oil will do a lot less for America under such conditions than once it might have done. But China, the world’s biggest fossil-fuel importer as well as its leading exponent of renewable energy at gigawatt scales, will have the wind, as it were, at its back. The covid-19 pandemic has provided a dramatic preview of a world in which demand for oil falls instead of rising. When the globe stopped spinning in March, its thirst for oil suddenly subsided. Petrostates dependent on pricey oil for their spending now face gaping deficits. Investors have fallen out of love with oil companies. For all Mr Trump’s grateful boosterism, the value of America’s shale sector has fallen by more than 50% since January. ExxonMobil, an oil company included in the Dow Jones Industrial Average since 1928, has been kicked off it. With a market capitalisation of $155bn it is worth considerably less than Nike, a shoemaker with a swoosh.

inciting violence. In August protests calling for his release resulted in yet more deaths. Tensions had been building for months before the latest unrest. The government’s decision to postpone elections because of covid-19 spurred talk of a constitutional crisis. Opponents including the Tigrayan People’s Liberation Front (TPLF), which runs the northern region of Tigray and dominated the federal government for nearly three decades, accused Abiy of trying to extend his time in office. Abiy and his allies, in turn, blame the TPLF and militant ethnic nationalists for inciting violence. In an opinion piece published online by The Economist this week (see article), the prime minister warns that Ethiopia’s journey to democracy risks being derailed by those “who are accustomed to undue past privileges” and those trying “to assume power through violence”, allusions to both the TPLF and parts of the previously outlawed Oromo Liberation Front (OLF). Abiy’s comments are his most explicit admission yet of the difficulties of holding together a fractious federation in which ethnicity is arguably more powerful than national identity. Moreover, he is trying to do so with fast-dissipating legitimacy. Next month the constitutional term limit of this parliament and government will expire. This is adding to tension between the federal government and some of the nine ethnically constituted states, each of which has the right to secede. This month the TPLF defied the centre and held regional elections, which some saw as a first step towards Tigray breaking away. Yet Abiy insists that his government’s actions do not mark a reversal of its democratic reforms. “What we learn from the fledgling democracies of Europe of the 1920s and 1930s is that democracy has to be defended from violent demagogues and mobs,” he told The Economist in a written response to questions. Tacitly acknowledging brutality, he says, “Given the institutions we have inherited, we realise that lawenforcement activities entail a risk of human-rights violations and abuse.”

Monday 21 September 2020

BUSINESS DAY

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Monday 21 September 2020

BUSINESS DAY

This is MONEY

• Savings • Travel • Debt & Borrowing

A guide to your Personal Finance

• Utilities • Managing your Tax

Back to school

of a school-shopping list. Every child would love to have a brand new uniform each year but where there are older siblings who attended the same school, it makes perfect sense to hand them down to a younger child if they are in good condition, even if you can afford to buy new ones. Some schools offer second hand uniforms in perfect condition for a fraction of the cost but many Nigerian parents, are embarrassed by this. Don’t be. The book list As children go through the same stages year on year, one can find second hand books in good condition. When handing in

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Today’s harsh economic climate has left thousands of parents struggling to pay for their children’s education. If your child is bright and talented, there may be opportunities for scholarships and bursaries, which should be explored

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hat an unusual year it has been thus far. A pandemic swept across the world and changed our lives in a way that we could never have imagined. The educational sector has faced the most profound changes; our children have been home schooled for months through online learning, radio and television. Many schools continue to maintain the distance learning but many others will reopen for physical classes this month. Governments, school proprietors, teachers, parents and the students themselves have been forced to innovate and create workable solutions. As physical schools begin to reopen, I hope we will merge the various forms of learning and not lose the life changing skills that so many parents, teachers and students have gained by embracing technology at this time. Technology is key to fast-tracking our development and education is a critical component for us to realize our goals. Every new school year presents huge opportunities for children, along with some challenges for parents. The academic year comes with significant costs; school fees, uniforms, supplies, and all the paraphernalia that must be paid for. For most parents, particularly at this time with finances stretched and some job losses, it can be a huge challenge to prepare for children to go back to school. Here are some things to consider as you prepare for the new term: Plan ahead Ideally, parents and guardians should have started planning for the school year long before the resumption date. When you shop early, without the pressure of time, there’s no rush and you can take advantage of sales. When you wait until the last

minute, most items will be at full price. Indeed this is probably the most expensive time to shop for the school year. If there are some items that your child doesn’t need right away, you can decide to wait for when unsold inventory is being sold at discounted prices. Review the school list The school supply list can be quite daunting. Go through the list critically. Does your child really need every single item on the list? Check to see what your child brought home at the end of last term; you will be surprised to find that there are many items at home that can be used this term so you can avoid wasting money or duplicating items. Make an inventory. It is important to keep track of what you’ve actually bought. Keep a list and give one to your child as they leave for school. Children should be accountable for their belongings and at the end of each term, should be expected to bring them back home largely intact. Unpacking when they come home and ticking off the items that could still be used for the next term is a good idea. To encourage this habit, some parents give a small reward to children that respect, manage and care for their personal possessions. Prepare a budget Most people cannot afford to buy every single thing on the school list. How much money do you have to spend? Set out a budget for school supplies including school books, lunch, the school bus, uniforms, allowance and so on. Shop with your list, prioritise and stick to it. Going through the school list with your child is an opportunity to teach some valuable money lessons. Talk through the difference between wants and needs; there may be standard trainers that the school recommends for PE, which will be compared with the much more fashionable high-end trainers that they would rather have; this provides strong lessons in costs, prioritising and budgeting. It is a good idea to go along with them for some of the shopping trips. Hand me downs Uniforms are essential and are a constant part

your book list to the shop, request that they check for available second-hand alternatives in the correct edition listed on the book list. Talk to friends and relatives with children who have just completed the year above. So many parents find that they can do book swaps. Children should be taught to protect their books, so they can be used by others after them. Buy in bulk Some people advocate buying school items, such as stationary including pencils and notebook paper, in bulk. This can lead to waste so be careful. This technique is most effective for households with multiple students. For singlechild families, consider doubling up with others for extra savings on basic supplies. If you buy too much they will get lost, lent out, given away, misplaced or just never used. Buy quality over quantity It is tempting to buy a cheap school bag, lunch box or water bottle, but what may seem cost-effective now will just fall apart in no time at all. It pays to spend more on good quality, sturdy items that will last for a long time. Quality and durability are key as opposed to being trendy or having the “latest” version. Children face enormous peer pressure and when they start school and see that their friends are all using the latest version, they are em-

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barrassed. It is important for parents to take the time to talk through these challenging issues as they seek to raise confident, welladjusted children. Send them to school healthy Before your children go back to school, see to it that they are healthy and have had all their checkups; eyes, teeth and general health to avert any festering problems that could cause them to miss classes. The premium on a family medical and dental insurance plan is a small price to pay to ensure that have access to the best medical care. We all know packed lunches prepared at home are much healthier and cheaper than the fast food alternatives. The Coronavirus has not disappeared, but we must learn to live with it for the foreseeable future. Whilst your child’s school is obliged to enforce the COVID-19 protocols, the onus is on you to ensure that they understand how to protect themselves and others by wearing face masks, washing their hands frequently, using sanitizers, social distancing and sneezing or coughing responsibly. Without being healthy, they cannot learn effectively. The most expensive school may not be the best Today’s harsh economic climate has left thousands of parents struggling to pay for their children’s education. If your child is @Businessdayng

bright and talented, there may be opportunities for scholarships and bursaries, which should be explored. But where you have run your numbers, cut back on family expenses, even sold assets and are struggling to meet your obligations, it is time to have that serious conversation about withdrawing from a particular school and enrolling in a cheaper option. For many parents earning naira and with children being educated abroad, the exchange rate and availability of foreign exchange makes it increasingly difficult to maintain children abroad. Be careful not to jeopardize your livelihood and retirement plans to pay exorbitant school fees at all cost. It will be worse for everyone if you go broke! Whatever you decide, the key to successful educational planning is to plan ahead and take advantage of the various products available including longterm educational plans, investments in property etc. Start to plan for your children’s education from the time that they are born; this gives you the advantage of time to plan and prepare effectively for this important obligation. Your child’s education is the greatest legacy you can leave them. Instagram and Twitter: @ mmwithnimi, Facebook and Google+: ‘Money Matters with Nimi’. www. moneymatterswithnimi. com, or send us an email info@ moneymatterswithnimi. com Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance. For more personal finance tips, contact Nimi: Email: info@ moneymatterswithnimi Website: www. moneymatterswithnimi. com Twitter: @MMWITHNIMI Instagram: @ MMWITHNIMI Facebook: MoneyMatterswithNimi

Monday 21 September 2020

BUSINESS DAY

INTERVIEW

‘New gas code will create an open-access regime in Nigeria’s market’ CHICHI EMENIKE is the head of Gas Ventures at Neconde Energy. In this interview with JOSEPHINE OKOJIE, she spoke about the gas industry and the critical need for the passage of the PIGB, among others. Excerpt:

t has been said that Nigeria is a gas country with crude meant to be a side business. But the reverse is the case as even the gas is not efficiently supplied to the local market and other issues. What is the nature of the domestic gas sector and what is hampering investments therein? We have gained some traction in the local market but there is still a lot to be done. The focus is really on gas as an enabler. For us, we say gas is revenue, it is jobs, and it is food. Gas can guarantee us economic security and it is the new crude. We all know Nigeria is more of a gas nation than a crude nation, however, for all the gas that we have in this country, we haven’t even touched a tenth of it. Most of the gas volumes you are looking at are the gas volumes that have been generated from crude oil drilling activities. We haven’t really gone for full gas development, that is, non-associated gas, and most of the gas is still trapped in the ground. There is also the angle of gas development for increased economic impact, so, as I speak to you, there are reports that have been done showing that there’s a direct correlation between investment in gas development and economic growth. Reports done show that if you put in a dollar in gas investment and it earns you around three dollars in GDP. Additionally, there is a direct proven correlation between the level of power generation and utilization, and a nation’s economic growth and development. Therefore, it cannot be overemphasized that natural gas is, therefore, a critical resource with the potential to be the core enabler for very serious economic growth. The focus has been more on exporting, should that be the focus and what can be done to make gas available for local consumption to aid the development of the economy? What is Neconde’s role in this? There’s so much focus on taking this gas outside, that’s okay and has its benefits but what about opening up domestically and then across the value chain, you know, from here even into the West African region. All those are initiatives that we need to begin to look at. The benefits of whether we export or use the gas domestically are enormous. Take a look, for instance, a project like the NLNG Train 7, we’ve put some figures to it, so for the about 1.27BCF that is involved in this train of the project, this will yield at least well over 4000 jobs. We’re talking of economic

that are where we begin to talk to the willing buyer, a willing seller situation. What we have continued to advocate for is sort of what we happened in the telecoms sector with GSM. We need more players to come on board with investments and then over time liberalize the market. Investments need to come in at prices that can make sense to those who brought in the money as well as making consideration for affordability for the end-users.

Chichi Emenike

recovery, even the Federal Government’s Economic Recovery Growth Plan (ERGP), and these are directly linked to opening or creating more jobs, driving the GDP. Our GDP, when compare to the resources we have and then look at the dismal figures, it is just not adding up. For Neconde and its JV partner the Nigeria Petroleum Development Company (NPDC), we are committed to developing our huge volumes of gas reserves on OML 42. We have been delivering gas into the domestic market since December 2018 to our current off-taker the Nigerian Gas Company. We have also been working with other initiatives to see how to increase our Gas production capacity, monetize the volumes, and ultimately achieve zero flaring on our asset. We have also initiated what we refer to as accelerated gas development programs. On the asset, we have some existing Gas infrastructure and working on deploying additional Capex to acquire more. What are the issues preventing investments from coming to the gas sector? Why are investors sceptical of the sector? The number one issue is a lack of adequate legal, fiscal, regulatory, and contractual framework, which has prevented a whole lot of international investors from participating in the Nigerian gas market? www.businessday.ng

What I speaking to is specifically the Petroleum Industry Bill (PIB). Everywhere else in the world, at least for most of the countries that there have developed their oil and gas sector, you have in place frameworks that have encouraged this growth. Here in Nigeria, we need to get very deliberate about what we are doing about this bill. We keep talking about local gas development and the utilization and over time the concerns have been from the off-takers in terms of gas pricing. How do we address this issue? You have come to a big lacuna in the room, which is the gas pricing issue and I need to first paint the big picture. You need to understand the peculiarities, first of all, of doing business in Nigeria. Doing business in Nigeria is not easy. Two, we want to speak to gas pricing; we need to also look at the available volumes and how that complements pricing. We need more volumes in the system and those volumes that we need will come from gas development, investment in infrastructure, in the drilling of upstream wells. Now, please note that most of these activities mostly require Foreign exchange because the equipment and technical solutions required are mostly imported. The market has to open up and accepts this gas at prices that also make sense to the investors and

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On the recently launched Gas Transport Network Code, What role is it coming to play in the light of these deficiencies in the key legal and fiscal infrastructure? The gas conversation is neverending and, so you are correct as it relates to the legal and fiscal framework. The network code was just recently launched and it is seeking to achieve is to help to liberalize the market and this is all driven towards an open-access regime. If you know a bit about what’s available now as regards existing infrastructure, it’s more around a certain monopoly. However, the network code is seeking to encourage diversified participants, buyers, sellers, shippers, transporters, just trying to get users to use the infrastructure more with a framework that backs these arrangements. Companies and end-users can contract volumes upstream and then speak to transmitters and shippers and then sort it all out with non-discriminatory access. Effective operationalization of the code will create a transparent and optimally available open access pipeline regime that will accelerate the growth of the domestic gas market. All this is really just encouraging the use of gas. The network code has come to stay and it something we have also been advocating for a very long time. It will also serve as an enabler for the gas master plan which came upon 2008. What the gas master plan was trying to do was create a crisscross of gas infrastructure all over the country to see how we can get more industries to open up. We need to create that enabling environment and part of this is the enabling environment is the network Code. I know you’re one of the top players within the gas development and utilization sector. What are the specific challenges that your company has encountered? For most of us players, it’s about securing a bankable market. About 40 percent of gas volumes in Nigeria are used in the power sector and that power sector is completely on lockdown, despite all the investments that have gone in there. If you are investing, you want to know where your money is going to come @Businessdayng

out from and have a clear line of sight to how you will get it back. Funding is very contingent on this market. Also, we need to address the issues surrounding access to financing. You need loans that can give you better tenor with better interest rates so that with our kind of economy, plus or minus your numbers can take the knocks and hits from regular business. Most of the economies worldwide have gone into red and capital is seriously constrained. Capital, however, will always go to the place of highest and secured return. We also have had to deal with communities’ issues and we are working on more ways to effectively collaborate with the communities where we operate. These are some of the challenges we have been dealing with. What are the key concerns for companies intending to do business in the Nigerian gas market and what are the key financial challenges indigenous companies face? Most of the investments needed to liberalize the sector are FDIs. It’s huge, we are talking about Foreign exchange that would come out of the country and those CAPEX have to make sense and can be repatriated to where they came from. Some of the discussions today has centered on the PIB, creating this environment, a willing buyer, willing seller situation to kick-off, allow the market to liberalize. If we try to unbundle it, layer by layer probably at a faster rate, we may see the influx of more investments. We also have issues with how the domestic market pays for these foreign exchange-based investments with the naira. There is a mismatch between investment and revenue currency, forex risk and value erosion, and even regulatory inconsistencies relating also to forex. These are some of what investors are looking at and deciding whether their capital is coming to Nigeria or not. What is the quantum of gas being delivered domestically daily by Neconde and how has this helped the efficiency of the power sector? Currently, we have an infrastructure with a capacity of 80million Scf, and our short to medium term plans under what we call accelerated gas programs will deliver an additional 100m Scf to be pumped into the local market. Our current offtaker is Nigeria Gas Company who is not the final end-user but rather supplies this gas to the market part of which is the Power sector. That is what it looks like now for our associated gas, gas coming out with our crude drilling activities, which we are trying to capture and process, all geared towards zero gas flaring activities on our asset.

Monday 21 September 2020

BUSINESS DAY

INTERVIEW ‘Lagos Free Trade Zone development will generate employment, grow Nigeria’s economy’ Since the 1970s, Tolaram Group West Africa has had operations in Nigeria spanning from manufacturing to distribution of goods. In a CNBC Africa TV interview monitored by BusinessDay’s BUNMI BAILEY, PAWAN SHARMA, the CEO of the company discusses the COVID-19 realities and how it is impacting the company.

ow have you managed the COVID-19 pandemic across your business segment and globally? Since early this year, the pandemic has severely disrupted the societies and businesses in Nigeria and globally. And as countries and businesses are striving to cope with the crisis and implementing their response strategies, we have tackled some of the challenges like crude oil prices resulting in weakened economy and currency devaluation which is fuelling the high inflation in the period of recession and shaking consumer confidence. And due to the lockdown in many states in the country, the supply chain has been totally distorted. Even the companies which are importing their goods are stuck at the ports due to congestion. Another important element is business risk, as most of the businesses were not prepared to deal digitally but now they are operating remotely so their systems are not robust and open for cyber threats. Our businesses are wide spread through West, South and North Africa. We have more than 20 manufacturing plants in Africa and the majority of our business is basic food business which falls under essential & necessary items. We are making sure that in this period, we should serve our customers regularly to keep the food inflation as low as possible. Our businesses are almost fully backward integrated, so we did not face much challenge from the supply chain side and we could still supply all the food items to market. Though the cost of doing business has gone up and eroded our margins, currently our objective is to serve our customers at as low a cost as possible. The other priority is to take care of our employees. Wherever it is possible most of them are operating from home and in case of a manufacturing plant where workers have to come to factories or a logistics team where they have to move out to deliver the products, we make sure all the hygiene and safety protocols are fol-

ties for feeding programs. We have joined hands with all of them. Mostly daily wagers who were affected had no means of earning. We made sure we can provide them daily food at least.

Mohammed Asaria

Oladayo Orolu

lowed. We invested a lot to provide required safety gears and hygiene solutions to all our employees. To our employees and colleagues around the country who have bravely come out to work and bring daily food to the table of millions households, I say big thank you to all of them. In terms of investments, you are doing quite a lot within the Lagos Free Trade Zone. Can you tell us more about that? Tolaram operates in three major verticals which are consumer goods, digital space and infrastructure. Under the infrastructure vertical, we are developing the Lagos free zone in Lekki. In the first phase of development, we are providing all infrastructure and utilities for industries to operate and in the second phase, we will be developing residential parts in the Lagos Free Zone. It is an 800 hectare land area which will be developed in phases. We are attracting a lot of Foreign Direct Investments into the Lagos free zone. Currently, three multinational companies www.businessday.ng

have put up their manufacturing plants there and have been operating smoothly. I see that place becoming an industrial hub in the next five years which will surely help the country in generating a lot of employment and improving its economy. What is your outlook for the rest of the year? This year seems to be difficult in terms of business growth and profitability. We are looking at how we can help the communities we operate in. We want to make sure that no job is lost despite making losses in the business. In the past, we have seen many turbulent times and have come out stronger, though this time due to pandemic a lot of uncertainty is there but being an agile group, we will keep upgrading our strategy to handle the crisis. We are still bullish about the future of the country and that’s why all our investment plans are still on. They have been delayed a bit due to pandemic but we are not backing off on any investments.

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Tolaram played a major role in supporting the Government at differ ent levels in Nigeria in arresting the scourge of COVID-19. Can you tell us more about your experience? Tolaram group is closely working with CA COVID-19, a special committee formed to coordinate federal and state responses to deal with the fallout of the pandemic. At Tolaram, we have contributed N1 billion and a lot of our food products to support the committee. This committee has been establishing the isolation centres, providing medical equipment, providing feeding support to almost every state in the country and working closely with the state govt. Prominent personalities in Nigeria which we are happy to be part of and helping communities. Other than this, we are donating millions of food packs to the people in Lagos, Ogun, Ondo, Osun, Edo, Kaduna and River State so far. Lot of other Non-Government Organisations and food banks have approached us to support the communi@Businessdayng

Are there other big infrastructure projects planned by Tolaram Group for the country? Our Lekki Deep Sea Port project is a Joint Venture with China Harbour Engineering Company Limited (CHEC) and next to Lagos Free Trade Zone. Anyone operating in Lagos free trade zone will have direct access to the port. This offers a lot of logistical advantages, which is why many companies are interested in establishing their manufacturing facilities in the zone. At the end of March, when the entire world was and still going through COVID-19 pandemic we received the funding of $221 million from one of the stakeholder “China harbor Engineering company” (CHEC) Investment during this pandemic and this shows the confidence of Tolaram and all other stakeholders in Nigerian economy and policy framework. Though currently, most of the states are under lockdown to control the spread of pandemic, we have also put the construction on halt temporarily.Once the pandemic situation improves and lockdown opens up, the work will start in full swing. It will ease down the pressure on Apapa port. Where do you see Tolaram Group in the next five years? In Nigeria we are focusing a lot on backward integration to have local raw material for our manufacturing setup. Agriculture is the one field where with less investment you can create more jobs. We have gone into Palm Oil plantation and cassava plantation which will be supporting our manufacturing plants and reduce the import of raw materials. We have got 15,000 hectare land for plantation purposes. It will create thousands of jobs and save foreign exchange for the country. The Central bank of Nigeria has come up with many lucrative schemes to support backward integration plans.

Monday 21 September 2020

BUSINESS DAY

real sector watch

Why Heineken’s acquisition of NB stocks matters for brewers Gbemi Faminu

eineken Brouwerijen B.V, largest shareholder of the Nigerian Breweries (NB) stocks, has over the last two months consistently purchased units of NB’s stocks, increasing its shares in the company. As of 2017, the percentage of Heineken issued share capital stood at 37.76 percent. Between the month of August and September, Heineken purchased over 10 million shares with an average price of N37 to N40 per unit, which puts the total value of Heineken at N126.98 billion accounting for 37.80 percent of Nigeria’s Breweries’ market cap of N335.87 billion. According to analysts, Heineken is positioning itself for the rebound of the breweries industries following the gradual resumption of business and commercial activities as the sequential acquisition of the brewer’s shares by Heineken increases control of the company. Akinloye Ayorinde, equity analyst at CSL Stockbrokers, said Heineken is simply increasing its share holdings ahead of the expected recovery of the sector. “The price of Nigerian Breweries stock has declined significantly over the past year and considering the fact that things are slightly beginning to look upwards in the

source: Bloomberg

brewery industry, it is an opportunity to buy the stocks at a low price and take advantage of the expected recovery going forward,” Ayorinde said. “Buying NB stocks means taking a long-term position and expecting full returns in the next financial year as the events that characterised the first and second quarter of 2020 will significantly drag the

Flour Mills appoints Anammah as board member

Josephine Okojie

Juliet Anammah

to take advantage of the changing consumer landscape in the foods and agro-allied sectors,” he said. The giant miller despite the impact of the pandemic on business activities sailed through in the last three months ending June having realized a 15 percent increase in its revenue moving from the N134 billion it realized in 2019 to N154 billion in 2020. Furthermore, the firm made an increase of 56 percent in its gross profit moving to N25 billion in 2020 from the N16 billion it realized in 2019, Flour mills also recorded an increase of 17 percent in its profit after tax earning N4.97 billion in 2020, from N4.23 billion in the same period of 2019. www.businessday.ng

holder, they have a long-term investment horizon, hence it makes sense for them to buy now that the stock is trading at very low levels not seen in decades,” he explained. A detail of each transaction was disclosed by the company in a series of notifications signed by Uaboi Agbebaku, company’s secretary, which was sent to the Nigerian Stock Exchange. The transaction

Taiwan plastic, rubber makers display smart machines for manufacturers

Gbemi Faminu lour Mills of Nigeria (FMN), Nigeria’s largest miller with 32 percent market share, has appointed Juliet Anammah to its board of directors effective from September 10, 2020. This was contained in a notification sent to the Nigerian Stock Exchange (NSE) and signed by the company’s secretary, Umolu Joseph. Described as an accomplished business consultant with extensive years of management consulting in different organisations, Anammah is the current chairman of Jumia Nigeria board and the head of institutional affairs across Africa. She also serves on the board of many non-profit organisations involved in women development and trade expansion. Speaking on the appointment, John Coumantaros, chairman of the board, said the appointment reflected the firm’s determination to ensure a diverse mix of skills and viewpoints on the board. “Her over 28 years of executive leadership experience in business consulting and e-commerce in Africa will be of tremendous value to FMN as we continue to position the group

results for the third and fourth quarter,” he explained. Similarly, Gbolahan Ologunro, equity analyst at CSL stockbrokers, said that Heineken finds the stock price cheap to purchase during this period as they expect it to skyrocket when activities return to normalcy. “They are buying now because they find the stock price very cheap at that price. As a majority share-

prompted an uptick in the value of the brewer’s shares on the stock market. At the close of market on Friday, the company share price stood at N42 per share, which was the highest recorded gain in one month. Analysis of NB’s financial report for the first half of 2020 reflected the impact of the pandemic on the sector. Nigerian Breweries (NB), the biggest brewer controlling 56 percent market share, recorded a revenue decline of 11 percent to N151 billion in the first half (H1) of 2020. The firm’s profit after tax declined by 58 percent, from N13 billion in the first half of 2019 to N5.5 billion in the same period of 2020,. Consequently, the poor revenue forced the company to cut its administrative and marketing expenses as the situation demanded. Data from Meristem Research say that the Nigerian brewery industry is the second largest beer industry in Africa and accounts for 18 percent of Africa’s total beer output. Heineken’s investment is expected to expand that. The Nigerian market is a highly competitive one dominated by three major players, NB, a subsidiary of Heineken with 59 percent market share; Guinness, a subsidiary of Diageo with 25 percent, and International breweries with 16 percent. The NB could have more market share with larger expansion projects as its share appears increasingly attractive, analysts say.

s international crude oil prices fluctuate and environmental awareness rises, recycling rates of plastic waste have become the most important issue in the future of the plastics and rubber industry. As a result, four Taiwanese manufacturers have showcased a series of smart plastic and rubber machines to help meet the global demand of plastic in line with efficient green production. “In response to the trend of Industry 4.0, Taiwan’s plastics and rubber machinery industry is constantly upgrading and combines Taiwan’s strong ICT & smart automation technologies, to build smart systems and solutions to fulfil the demand for cutting-edge technique development and customized production,” said Walter Yeh, president and chief executive officer of Taiwan External Trade Development Council (TAITRA). Yeh, who spoke during the online press conference on ‘Taiwan Excellence Plastic & Rubber Machinery,’ organised recently by the Bureau of Foreign Trade (BOFT), MOEA, TAIWAN, R.O.C and TAITRA in conjunction with the Taiwan Association of Machinery Industry (TAMI), said that the manufacturers are helping to

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meet the demand of small and large volumes. Currently, Taiwan, as one of the top six plastics and rubber machinery exporting countries in the world, is recognised for providing high-quality products with refined technology and consistent performance. Speaking also, Guann-Jyh Lee, deputy director general, BOFT, highlighted that the circular economy is the next trend in the industry due to the rise of global plastic restriction issues, stressing that manufactures must be able to quickly respond to new production regulations. “Taiwan is also continuing to accelerate the creation of all-electric injection molding machines with good environmental performance, featuring low noise, low vibration, power saving, cooling water saving and running cost savings, to become the best partner of the global manufacturing industry with environmentally friendly smart machinery,” he said. The four manufacturers; Fu Chun Shin Machinery Manufacture Co., Ltd. (FCS), ChumPower Machinery Corp., Fong Kee International Machinery Co., Ltd., and Diing Kuen Plastic Machinery, Co., Ltd., presented their advanced smart manufacturing solutions, from twocomponent injection molding machines, high speed stretch blow molding machines and intelligent all-electric blow molding machines @Businessdayng

to a five layer co-extrusion for industrial stretch-hood. Neilson Su, sales manager, Fu Chun Shin Machinery Manufacture Co., Ltd. (FCS) stated that to meet various customer needs nowadays, FCS dedicates itself to developing customized multi-component injection molding machines, which broaden the application scope of the industry, and he received positive feedback from customers. Similarly, Tony Wu, sales support sngineer, ChumPower Machinery Corp. demonstrated that the product is the fastest blow molding machine in the world, with it’s per cavity output of 2,250 bottles per hour being faster than its competitors’ 1,8002,000 bottles per hour. “Global brands including PEPSI, Kao, LOTTE, and more use Chumpower machines to produce PET bottles,” he said. Charles Wei, Fong Kee International Machinery Co., Ltd. introduced their ‘Intelligent All-Electric Three Layer Blow Molding Machine-Industry 4.0.’ and emphasized that the model is environmentally friendly. “Specifically, it decreases average power consumption by 18percent, specific energy index by 22percent, Noise Levels by 20db and CO2 emissions by 42.4percent while increasing the production rate by 13.3percent,” Wei said.

Monday 21 September 2020

BUSINESS DAY

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Monday 21 September 2020

BUSINESS DAY

Start-Up Digest Oluwole: Naval officer eyes affordable housing in Africa In association with

ODINAKA ANUDU

n online report by Housing Dynamics Market Africa says owning a decent house is still an unattainable goal for many African households today. In Nigeria alone, housing deficit is as high as 17million going by the Federal Morgage Bank report. Lack of affordable mortgage finance, high costs of land, weak land tenure security, rising construction costs and prevalence of slums are major setbacks to efforts towards alleviating the continent’s housing crisis. Retired Rear Admiral James Oluwole is trying to contribute his quota towards solving this problem, with an eye on making housing affordable for Nigerians and Africans. Oluwole’s story is one to restore hope to those who begin life in paid employment but dream of transiting to entrepreneurship. In 2017, the retiree cut a path for himself in entrepreneurship by unearthing the huge opportunity in the construction industry. Oluwole, who has been in the construction business for

about three years now, is the founder of Ipile Earth Synergy Construction Limited (IESCL). Narrating how it all began, the Admiral says the idea of going into construction began to brew in 2014 while still serving in the Nigerian Navy. “Ipile Earth Synergy Construction Limited actually started officially in 2017, but I must say the idea was muted three years earlier while serving as Rear Admiral and just appointed the Director of Research and Development (R and D) at the Naval headquarters,” he says. According to him, one of the compelling challenges in the Nigerian Navy back then was lack of accommodation for its personnel with a huge deficit in housing units running into thousands. “This challenge got me thinking and prompted research into using different building materials that could provide a realistic and affordable cost of building houses for our personnel. Shortly, I was able to find requisite answers in some highly professional officers and ratings working with me,” Oluwole recalls. The entrepreneur, whose background is Electrical and Electronics Engineering

James Oluwole

(Communications major), says he had never imagined playing in the construction space as this was not his area of core competence. “Interestingly, I became so passionate about construction in a bid to find a solution to the housing deficit we were confronted with in the Navy. “In the course of our research, we finally settled for what was referred to as stabilised Compressed Earth Bricks (CEB), made from cement stabilised laterite soil, as the choice technology most suitable to address the

challenge of building more cost-effective houses.” He notes that the prototype of the houses was a huge success. It was graciously endorsed and soon turned into the over 300 housing units in naval formations at Kuje, Calabar and Lokoja. He explains that while basking in the euphoria of the successes recorded, he soon realised that his retirement was due, but thanks to God that prepared him for the life ahead through his work in the Navy. He says, “Well, I found it most comfortable to go into

construction using my knowledge of CEB technology. Consequently, I started buying machines and other equipment in keeps, and by the time I was retiring, I had purchased enough of them to start business without recourse to borrowing. Today, I look back and I thank God who in His kindness had prepared me for retirement by using two of my bosses, the immediate past, and present Chief of Naval Staff, who believed in me and supported me to achieve great strides in the provision of decent accommodation in the Nigerian Navy and by extension birthing of my company, which at the outset was not devoid of challenges that was most discouraging.” He says his brand plans to reduce housing deficit in Nigeria, offering qualitative budget-friendly houses by partnering with individuals or relevant private/ public bodies. On his workable advice to those who aspire to CEB home ownership, Oluwole says, “Build practical and functional house type, avoid complex designs that would increase building cost, and then limit procrastination due to fluctuations of prices of building materials.”

The construction brand has carved a niche as a provider of CEB buildings, CEB Consultancy Services, Landscaping and Property Management to numerous clients among whom are the Redeemed Christian Church of God, Defence Intelligence College, and the Nigerian Navy. Since inception, the organisation has been contributing to the economy through the provision of adequate, sustainable and affordable housing, CEB machine training as well as job creation for many young unemployed youths. Sharing his success secret, the Admiral notes that team work, discipline, focus, research and development as well as accountability and transparency paved way for him till date. Explaining the brand’s significant achievements since inception, he says. “It was an exhilarating experience for us participating in the 12th Abuja International Housing Show in 2017. It was a launching pad for our company. We had about 300 participants who visited our stand. It was quite thrilling for us a young company, barely six-month old, standing close to great companies in the housing industry.

Ibe: Mobilising African entrepreneurs to tap $12bn digital opportunity RAZAQ AYINLA

ike Tony Elumelu, young Just Omomo Ibe is mobilising African youths to rethink, re-focus and re-strategise while capturing series of economic opportunities inherent in the $12 billion global digital economy. Ibe recently launched the Association of African Startups (TAAS), a digital economy hub, which is on a mission to equip 20,000 African startups with tools, strategies and mentoring support to help them navigate the business terrain in the digital economy while

rebuilding Africa. To achieve this lofty mission, Ibe is gathering a competent team of faculty members who collectively have helped businesses grow revenues of over $1 billion in their different capacities and field of endeavours from across Africa, including Nigeria, South Africa, Ghana, and Kenya. Speaking on the concept of TAAS, Ibe says TAAS’ major goal is to build startups that can use their businesses as tools for empowering their communities, nations and continent. “We are focused on transforming the minds of our members such that they see

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that business is not just for enriching themselves but for personal and national economic development. “Entrepreneurship is a viable way out of poverty for the people in Africa. We have come to realise that part of the challenges we face on the continent is not solely as a result of the dearth of human resources. Africa houses some of the greatest minds on earth. We have businesses that are providing solutions to real time problems and scaling out. “It is, however, unfortunate that most part, the efforts of the average African entrepreneur are not matched with government

Omomo Ibe

support. That is why we are intentionally seeking strategic partnership with government and business stakeholders who sit at the helms

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of the affairs to support our objective. “We intend for our work to inform policies that would propel and strengthen the business of the average entrepreneur in Africa,” she says. Talking about sources of finance and seed funding, Ibe says, “Startups will be required to subscribe for as little as $15 owing to the obvious reason that most startups bootstrap their way through any business venture. “The goal of the organisation is to provide an enabling platform. As we progress, opportunities for seed funding by Africans will be made available. We understand

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that previous seed funding opportunities have created reasons to doubt the integrity of Africans to focus on building businesses. “We intend to build a safeguard against that by focusing on what we can do with the available resources and also expose opportunities that have been overlooked within the African space. The idea is for Africa by Africans. “Our existing business members will be equipped with knowledge of breaking into new borders of intercontinental trade. We have also created a curriculum that hones into the digital economy which is an almost $12 billion market.

Monday 21 September 2020

BUSINESS DAY

MARKETS INTELLIGENCE

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Week Ahead

Watchlist

Naira weakens marginally against dollar despite strong oil price rally BALA and IFEANYI JOHN

in the official market. The fall in Naira has surprised currency traders as Nigeria’s bonny light crude oil rallied by 9 percent during the trading week. Bonny light crude oil rose from $38.98 at the start of the week to $42.48 at market close on Friday, providing the Central Bank with more ammunition to increase dollar sales into the currency market. Against expectations, Naira suffered a dip this past week as inflation jumped, spooking investors to rush back into the greenback.

Inflation has now risen for the 12th consecutive month, making it an entire year of inflation rising in the country. “Rising inflation in a country typically causes the value of the country’s currency to drop, an entire year of rising inflation could have severe effects on a country’s exchange rate. Valuing Nigeria’s exchange rate today using the purchasing power parity (PPP) will show you that Naira is a lot weaker today against the dollar than it was one year ago. This explains why CBN has been forced to

devalue twice already this year,” said Faith Ogedengbe, chief economist at EUA Intelligence. “Naira stability will probably return when crude oil trades around $45 or above for the next 3 months. If the crude oil market gets oversupplied again, CBN will have a lot of headaches trying to stabilize Naira in a market where crude oil price is tanking. A strong oil price always supports Naira, but I guess this past week was just something different,” Ogedengbe added.

…The dollar exchange rate has risen 55,998 percent in the last 38 years

f you were to guess the one economic problem that every Nigerian and business has struggled with regardless of their wealth status in the country is the persistently declining exchange rate. In the last 38 years, the United States Dollar value has soared 55,998 percent against Naira in the official exchange rate market, moving from N0.67 to N379 as at Friday market close. This unequivocally puts Nigerian Naira among the worst performing currencies in the world in the last 4 decades. One of key mandates of the Central Bank is to ensure exchange rate stability; it’s far too obvious how woefully the apex bank has performed at this task. Asides suffering annual average devaluation of around 18 percent per annum since 1982, the economy periodically struggles with multiple exchange rate, dollar rationing and delayed

N312m

The Sanusis and Soludo were superior managers of Nigeria’s exchange rate BALA and IFEANYI JOHN

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

he Nigerian market has been filled with a lot of ups and downs in the past week but none of the news have been positive at all. After the National Bureau of Statistics (NBS) announced on Tuesday that inflation had risen to from 12.82 percent in July to 13.2 percent in August, Naira suffered a selloff in the parallel market that has seen the US Dollar jump 2.2 percent against Naira week on week. Naira, which enjoyed a strong rally at the start of September after the Central Bank of Nigeria (CBN) resumed the sale of dollars to Bureau de Change (BDC) operators in the country, suffered a gain reversal during the past trading week. After sliding from 450 N/$ at the start of June to 470 N/$ by end of August, it appeared Naira was on track to make a relief rally back to 400 N/$ where it was on March 27 before CBN halted the sale of dollars to BDCs. However, after Naira hit 435 N/$ on September 3, it appears all momentum has been lost and investors betting on a continued Naira rally have suffered significant losses. On Friday last week, Naira traded at 465 N/$ in the parallel market and 380 N/$

P.E

foreign transaction payments resulting in huge production losses, weaker purchasing power and huge foreign exchange losses for businesses and individuals. While the exchange rate has been devalued by every single one of Nigeria’s last 5 CBN Governors between 1982 and today, some Governors have fared far better than others in the management of the foreign exchange under their tenure. The most superior exchange rate management performance was achieved by Sanusi Lamido Sanusi who under his stewardship the Central Bank managed to keep annual devaluation rate around 1.2 percent during his 5-year tenure as CBN Governor. Lamido Sanusi was CBN Governor between 2009 and 2014, during this period crude oil price rallied 38 percent from $80 to $110, proving the required earnings support to ensure Naira stability. Under Sanusi, dollar exchange rate moved from N148 to N157. Closely behind Sanusi was Charles Soludo who achieved an

average annual devaluation of just 2.1 percent during his 5-year tenure between 2004 and 2009. While Soludo is widely remembered for the banking industry recapitalization, he is not given due credit with his impressive management of the Naira despite the crash in crude oil price in 2008. Crude oil price rallied 143 percent between 2004 and 2008 before crashing by 41 percent between 2008 and 2009 during the Global Financial Recession. In 2004, crude oil traded at $37.66, rose to $91.48 in 2008 and fell to $53.48 in 2009. Under Soludo, the dollar exchange rate moved from N133 to N147. Joseph Oladele Sanusi who also spent 5 years at the helm of CBN between 1999 and 2004 was the third best Exchange rate manager amongst the past 5 CBN Governors. During his tenure, the average annual devaluation rate was just 7 percent although crude oil price grew by 127 percent during his 5 year tenure. Slow devaluation pace of this nature now seems like a lifetime ago considering the rate

at which Naira has been devalued in recent times. Under the stewardship of Godwin Emefiele, the current CBN governor, average annual devaluation in his active 6-year tenure is 15.8 percent. In the last 6 months alone, Naira has been devalued twice as Nigeria battles to manage its currency pressure due to the oil price crash of 2020. When Emiefele began his tenure, dollar exchange rate moved from N157.3 to N379 on Friday. Crude oil price has fallen roughly 60 percent since Emefiele took charge of CBN. The worst 2 exchange rate managers were Abdulkadir Ahmed and Paul Agbai Ogwuma who under their tenures, average annual devaluation rates were 37.2 percent and 27.2 percent respectively. Ahmed led the Central Bank between 1982 and 1993, during this period, dollar exchange rate moved from N0.67 to N21.88, marking the worst decade for Nigeria’s Naira. Ogwuma was Governor between 1993 and 1999 and the dollar exchange rate moved from N21.88 to N94.88 at the end of his tenure.

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

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

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

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

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Monday 21 September 2020

BUSINESS DAY

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Monday 21 September 2020

BUSINESS DAY

NEWS A/Ibom honours Mike Asukwo, BusinesDay cartoonist to mark 33rd anniversary ANIEFIOK UDONQUAK, Uyo

ike Asukwo, BusinessDay’s most versatile cartoonist has been honoured by the Akwa Ibom government to mark 33rd anniversary of the creation of the state. Asuquo is among other notable indigenes of the state from all walks of life who have been singled out for honour in recognition

of their contributions to humanity. He is being celebrated because apart from an award-winning cartoonist, he is also one of the most influential cartoonists on the African continent, they noted. According the organizers of the awards, Asuquo is “the most abrasive cartoonists in Nigeria, his cartoons have been described as poignant, acerbic and humorous.” In a post on its website,

they noted that his cartoons are “mostly counter-narratives against dominant governmental narratives on socio-political issues. “The impassive nature of his cartoons provokes discourse on various sociopolitical issues and remain instruments of persuasion. They say those nominated are those whose lives have been inspirational, who have demonstrated the can-do spirit of Akwa Ibom person in honesty and integrity.

Born in Idua Assang in Oron Local government of Akwa Ibom state. Asukwo attended the famous St Vincent’s College, Oron, and went to study Business Administration at Calabar Polytechnic, he dropped out in his second year to pursue his passion for fine arts at the prestigious Yaba College of Technology, specialising in Sculpturing. In 1996 he left the institution as Best Graduating Student in the School of

Art, Design and Printing. Contacted, Asuquo expressed delight and excitement over the award saying he least expected it especially coming from government. He said he is always inspired by human situations and the need for a better society based on fairness and justice with abundant natural resources in the country. Expressing gratitude to the state government “for the recognition and those

Experts advocate leader-follower model to build Nigeria OLUWAFADEKEMI AREO

xperts have emphasised the need to build Nigeria on leader-follower model, saying it is only when leaders assume the role of followers and followers assume the role of leaders that Nigeria can quickly move forward. The experts spoke at the 5th Nigerian leadership risk summit held virtually on Wednesday with the theme ‘leadership versus followership risk; uniting a divided people.’ The goal of the summit was to explore solutions to national leadership and followership crisis through a cross-generational conversation. The session attracted five speakers and seven interrogators drawn from the public and private sectors. It was kick-started by Ibukun Awosika, chairman, First Bank of Nigeria Plc, whose presentation centred on leader’s selection - what followers should look for in our future leaders.

COVID-19: TGI Group employees provide free meals to indigent Nigerians OBINNA EMELIKE

GI Cares Fund, an employee-led charity initiative of Tropical General Investments (TGI) Group, has commenced the provision of one million free meals in communities struggling with the economic impact of Covid-19. The pandemic has left many vulnerable people in communities without a steady source of livelihood but TGI Cares Fund, focusing solely on supporting communities during and beyond the economic crisis, is giving them food items. At the handing over of the food items to FoodClique Support Initiative, an organisation that identifies and reaches out to the vulnerable in communities, Tominiyi Oni, coordinator of TGI Cares Fund, reiterated the commitment of TGI employees to assisting less-privileged Nigerians. “We are proud of our people who birthed this noble idea. These are difficult times, so I am elated that my colleagues have pooled resources together to kick start this charity drive,” he said. www.businessday.ng

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who found me worthy for nomination in a state filled with individual deserving of awards and individuals who have made indelible marks in different fields of endeavour, he said he felt “real special to be so recognised.” He also thanked the management of BusinessDay for all the support and inspiration saying that the unbiased editorial position of the newspaper “has really strengthened and embolden me.”

Monday 21 September 2020

BUSINESS DAY

news Reforms seen boosting jobs for 54m unemployed Nigerians

L-R: Ituah Ighodalo, chairman, 2020 Kingsweek planning committee; Babagana Monguno, national security adviser; Leke Oshunniyi, deputy president, King’s College Old Boys’ Association (KCOBA); Kashim Ibrahim-Imam, president, KCOBA; Olumide Akpata, president, Nigerian Bar Association (NBA); Andrew Agada, principal, King’s College Lagos, and Sonny Echono, permanent secretary, Federal Ministry of Education, at the KCOBA 111th annual founders’ day lecture, with the theme “Education: The Way Forward” in Lagos, at the weekend. Pic by Olawale Amoo

BUNMI BAILEY & GBEMI FAMINU

Has Nigeria’s 2015 FX ban on imports... Continued from page 2

that triggered the West African nation to begin the rationing of the greenback, with the recent pandemic making it more glaring. “The policy is ill-timed as there are structural challenges that if not addressed, there would not be any improvement despite the ban on importation,” said Ayorinde Akinloye, a research analyst at CSL Stockbrokers asked. “Structural challenges regarding transportation and storage have led to wastage and increase in cost for farmers. Since the ban on the importation of 44 items in 2016, we are yet to see any improvement, the prices of some of the ban items have doubled. Unless these structural challenges are solved, we would see no improvement,” Ayorinde said. It seemed to the government, like the country is reaping the fruits from its decision of halting the sales of dollars to importers of these commodities after the country’s dollar reserve at some point touched a 4-year high of $45 billion. But that was majorly due to the uptick in crude oil prices and the calmness seen in the Niger Delta region, helping crude oil production, as opposed to what was seen in 2016

when the country suffered a lengthy recession. It wasn’t really due to a boost in non-oil exports driven by increased local production. Nigeria’s foreign reserve has been depleted to the region of about $36 billion after the novel coronavirus-induced fall in oil demand, added with a price war between Saudi Arabia and Russia (two of the world’s biggest exporters of the commodity), send prices to lower lows, wiping over a quarter of Nigeria’s revenue. That has continued to mount pressure on the country’s currency with the naira being devalued twice to N379/$. In the black market where the greenback is accessible, the naira trades at a weaker rate of N450/$. On top of that, many manufacturers, even those importing items not blacklisted, still find it difficult to access dollars. “Nigeria is putting the cart before the horse; this policy is archaic. Even the biggest economies have not done that. Nigeria does not use its comparative advantage as it is not cheap to produce some of the items banned in Nigeria,” Abiola Gbemisola, consumer goods analyst at Chapel Hill Denham, tells BuisnessDay. “Even if we are going to ban food items, we should

Oil/gas sector: New Bill to unlock ... Continued from page 2

for the Nigerian mining, Information Communication Technology (ICT), construction and power sectors. According to Umar Danbatta, CEO, Nigerian Communications Commission (NCC), the new bill is a welcome development while noting that there are no barriers to entry into the telecoms industry being a fully liberalised sector that promotes competition. Chairman, Senate Committee on Local Content, Teslim Folarin, said the proposed amendment to the

Nigeria Oil and Gas Industry Content Development bill would afford stakeholders the opportunity to make inputs based on their experiences in the sector. Folarin listed two other private bills that would be legislated to complement the gains recorded in the industry, assuring that if the bills were passed it would aid investment promotion, economic competitiveness, and others. The two fresh bills, which will receive the parliamentary legislation, he said include “Nigerian Local Content Development and Enforcement www.businessday.ng

have a 10-year plan; Nigeria was not ready for the abrupt change. The poor people they want to help with the policy are the ones bearing the brunt; it is a failed policy,” Gbemisola said. Following the restriction to FX, many companies have either resorted to sourcing the dollars from the parallel market or have exited their Nigerian operations. Grif, Federated Steel, Universal Steel were among aluminium drum manufacturers that closed shop during the FX crisis in 2016. Steel importation was among the list of items restricted. Till date, importation of palm oil hasn’t seized despite being in the list of items not accessible to the exchange. This is due to the huge demand of over 2.1 million tons, scrambling for the country’s 1.1 million tons of palm oil production. A supply gap of over 1 million tons was needed to be bridged. Nigeria has a deficit across every type of food produced. In fact, the Agriculture Promotion Policy released in 2016 showed a 20.14 million metric tonne deficit across 13 major crops and 60 million poultry bird deficit. Three years later, with the rapidly growing population, this deficit has increased substantially, say experts.

The price of Rice which is the country’s major food staple has already risen substantially due to a land border closure last year that aimed to stamp out smuggling and boost local production. The coming months could be worse for rice growers after reports show flood destroying 90 percent of the 2 million tons that Kebbi state officials expected to harvest this autumn, according to the head of the state branch of the Rice Farmers Association of Nigeria, who spoke to Reuters. The loss amounts to some 20 percent of the rice Nigeria grew last year, Reuters said in a report. Problems accessing foreign exchange to import food are adding to shortages. It also appears to be a major downside to potential growth of the economy which suffered its deepest contraction in more than a decade in the second quarter of 2020 at 6.1 percent. After adding maize to the list of banned items, the country suffered a huge shortage that has caused the price to nearly double. Nigeria took roughly 4,000 tons of millet and sorghum from the regional economic bloc’s (ECOWAS) strategic stocks last month and released 30,000 tons of its own maize. It also gave four companies special permission to import maize.

Bill, 2020, and the “Nigerian Local content Development and Enforcement Commission Bill, 2020.” He explained that the ninth Assembly would ensure that the oil and gas industry would work on the bills that address human capital development; public procurement; ease of doing business in Nigeria and infrastructure with a special emphasis on how the absence of developed infrastructure impacts on the development of local business, saying those thematic areas had been elusive for long. Deputy managing director, Deep Water, Total Upstream Companies in Ni-

geria, Ahmadu-Kida Musa, said: “We believe in the development of local capacities and will continue to work with all stakeholders, especially the NCDMB to ensure sustainable economic development of Nigeria.” Using EGINA FPSO as a testament of the company’s commitment to local content in Nigeria, Musa described the vessel as the largest in the Total Group and the first to be fabricated and integrated in Nigeria with 77 percent engineering man-hours done in-country. According to Musa, 100 percent of the project management man-hours is being performed in Nigeria.

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fter his mandatory youth service in 2015, Tunmise, a 2 6 - y e a r- o l d graduate of Economics, ended up doing menial jobs despite finishing university with good grades. “I was unable to get a job and, eventually, I had to move back to my parents’ home,” Tunmise said. “Now, I do menial jobs to at least take care of myself, even if I can’t take care of my parents yet.” Experiences like Tunm i s e’s a re n o l o ng e r unique in Africa’s biggest economy undermined by a paradox of high unemployment and slow growth.

Lola, a bank cashier, says she earns a net income of N55,000 monthly, almost doubles the country’s minimum wage. However, the cashier pay cheque is barely enough to get her through the month, especially with two dependents to provide for. Lola insists she is underpaid but remains grateful to have a job. The plight Nigerian youths, which constitute over 65 percent of a population of over 200 million, mirrors structural deficiencies in the domestic economy. The majority of 54 million jobless Nigerians are seeking opportunities to travel abroad, fuelling massive brain drain that is hurting the labour quality of Africa’s biggest oil producer. Analysts are calling for deeper reforms to enable businesses create enough jobs that can control unemployment crisis in the country. “We need more economic liberalisation and reforms that could open new sectors of growth, similarly to the way we had the telecommunication and pension reforms back in the early 2000s. So, there are opportunities to pursue similar liberalisation efforts that could create jobs,” notes Omotola Abimbola, a macroeconomy analyst at Lagosbased Chapel Hill Denham. Abimbola says Nigeria needs a long-term commitment to the reforms in the growth areas that will create jobs for the economy and solve perennial unemployment. This solution will also solve another twin evil: poverty. Around 82.9 million Nigerians are extremely poor, constituting 40.1 percent of the total population with real per capita expenditure below N137,430 in 2019, according to the National Bureau of Statistics’ (NBS) Poverty and Inequality report in May 2020. The World Bank predicted that @Businessdayng

there would be 95.7 million Nigerians living below the poverty line by 2022. President Muhammadu Buhari has on several occasions promised to lay the foundations necessary to lift 100 million Nigerians out of poverty. But Nigeria risks the familiar mistake of making contradictory policies as Covid-19 beckons on sweeping reforms. Electricity and petrol subsidies have been removed by the government, but the economy totally needs reforms at all levels, analysts say. Ayodele Akinwunmi of FSDH Merchant Bank says Nigeria needs a structure to allow the private sector create opportunities in strong growth prospects areas that have the capacity to employ a lot of people, like the solid minerals, oil and gas, exports and agriculture. “When we are making policy recommendations, we need to look at the realities on ground to ensure that we do not do something that is unrealistic,” Akinwunmi notes. Data from Index Mundi, a firm that provides detailed data and analysis on countries, show that the dependency ratio of Nigerian youths as of 2015 stood at 83 percent in a country where the provision of welfare is verbally present and physically absent. On average, out of 10 Nigerian youths, five are unemployed, three are underemployed while two are gainfully employed. According to experts, the pitiable conditions faced by graduates and unemployed Nigerians affect their lifestyle and selfesteem, which in the long run often leads to depression and suicides. Muda Yusuf, directorgeneral, Lagos Chamber of Commerce and Industry (LCCI), believes that creating an enabling environment for small and medium enterprises (SMEs) would have a more impact on employment than focusing on big firms. “We have about 41.5 million enterprises, according to the NBS. Imagine, two of those enterprises creating one job in a year – that is about 20 million jobs. So, you can see the impact that they make once you create an enabling environment for them,” Yusuf says. Currently, households are struggling to cope with the impact of the Covid-19 pandemic and are deploying strategies that may have negative long-term consequences on their welfare. According to a recent report by NBS, in all four states (Lagos, Abuja, Kano and Rivers), at least two-thirds of households had spent their savings to cover their living expenses.

Monday 21 September 2020

BUSINESS DAY

News FINANCIAL REPRESSION SERIES

How pension funds reel from negative... Continued from page 2

percent from the N7.94 billion raised in the first three months of the year. As at August 29, a total of N559.77 billion had been raised by large corporates from commercial papers, which is about 103 percent higher than the N275.37 billion raised in March, according to data from the FMDQ. The case of a low-interest rate may not have been a big issue for investors— since interest rates on assets are still high when compared with what is obtainable in other climes. It would also have not been an issue for a country looking to boost spending and consumption after suffering its deepest economic contraction in more than a decade by 6.1 percent in the second quarter of the year. But for the country’s spiralling inflation, which is eroding the real value of these assets, leaving investors and savers with nothing to cheer. With commodity prices jumping to their highest levels in 29-month to 13.2 percent in August, real yields, arrived by deducting yields on an asset from the prevailing inflation rate, have largely been negative. “With the negative real interest rate, it becomes the pensioners that will suffer because the fund managers will only pay out returns they get,” an investment expert, who has more than 25 years’ experience, said, noting that there was no guaranteed pension in Nigeria. “In real terms, they are not making any money; instead they are losing because both inflation and market price are wiping out their investments. “I suspect at this point, they are probably advocating to both CBN and the PENCOM regulator to relax the regulation that allows them to invest in non-Nigerian instruments, which is their biggest to hedge their asset, or there is a quick launch of Nigeria’s infrastructure fund to help give them some comfort,” the person said. An inverse relationship exists between the price of an asset and the returns, meaning in a low yielding environment, particularly on bonds and fixed income assets like treasury bills, prices are expected to be high and vice versa. Pension funds invest in a variety of assets, but

most, including defined benefit plans, use low-risk assets such as government bonds as the benchmark discount rate. While that means they have profited from the fixed-income rally, falling yields have also driven up future liabilities — in turn threatening their ability to meet oncoming obligations. In nominal terms, pensioners have seen assets under management hit over N11 trillion. Such growth has been wiped out in real terms due to successive devaluation of the naira. With more than 56 percent of pension assets invested in Federal Government bonds, fund managers who spoke with BusinessDay said they have had to trade some portions of their bond holdings in line with their business policies, just so they could meet up with rewarding clients with returns higher than the country’s prevailing inflation rate of 13.2 percent. W h i c h e ve r t h e ca s e is, they still can’t escape, since long-dated bonds which they have taken comfort in, is very sensitive to interest rate changes. With average yields on bonds trading at their lower levels below 10 percent, analysts foresee either stagnancy or an upward reversal in the yield position. That would mean a tapering of the bond rally, which fund managers and asset managers have cashed in on to reward high returns, according to Omotola Abimbola, a fixed income and macro analyst at investment and advisory firm, Chapel Hill Denham. “It could also form the case for them to increase allocation to equities since returns on the bond side could be a lot more restrained next year, if there is no further downward push in the yields,” Abimbola told BusinessDay. As expected, domestic participation in the Lagos bourse has seen an uptick from 40 percent to 61 percent, Oscar Onyema, CEO, Nigerian Stock Exchange, said in one of his presentations to clients. The increased participation of local investors in equities is due to the lowinterest-rate environment, which has positioned the exchange as a haven and viable market for the destination of private capital, Onyema said. www.businessday.ng

L-R: Ebigoni Ngoseigha, Bayelsa State deputy governor, Lawrence Ewhrudjakpo, a senator; Governor Douye Diri, and the Paramount Ruler of Oluasiri Clan, Iyerite Awalulu, during the courtesy visit of Oluasiri stakeholders to Government House, Yenagoa.

In Nigeria, weary investors, savers... Continued from page 1

the same week by the National Bureau of Statistics (NBS) show that inflation accelerated to 13.22 percent in August. Ideally, a rational investor would balk at lending at a rate below inflation, but this time investors were so eager to lend to the government even though it left them with a negative real return of 10 percent. The same investors lent to the government at 21 percent in 2017, which earned them a real return of around 3 percent at the time. So what had changed? Had they suddenly forgotten the concept of risk pricing and why were they happy to park their cash in government debt when they stand to lose 10 percent of their money in real terms at the time of maturity? The answer to that is the low yield environment in Nigeria, which means even though the return on the one-year TB is below inflation; it is about the highest yielding risk-free asset for that duration. There are simply no other alternatives for an investor. So, the investor must set tle for a negative real

return that hurts for each of the 20 investors surveyed by BusinessDay. “It is classic financial repression,” one of the investors who craved anonymity told BusinessDay. “Left with no other investment options, investors are forced to lend to the government at very low rates that are not marketreflective,” the investor said. Indeed, the decline in yields in Nigeria is not marketdriven. Take the one-year TB for instance. The big plunge in the yield of the one-year T-bill from 21 percent in 2017 to 3 percent

currently is due to a raft of policies by the Central Bank of Nigeria (CBN), which has kept interest rates artificially low. Yields are not down because Nigeria’s risk premium is lower but because some CBN policies have kept them that way, whether it is the open market operation (OMO) policy that bars non-bank investors from investing or the recent reduction in the savings deposit rate. If anything, at a time when the country’s finances have been hit by the double whammy of the Covid-19 pandemic and the oil price downturn, the country’s risk premium should be higher and investors should demand higher return today than they did in 2017. Economists surveyed by BusinessDay explained that the artificially low rates in Nigeria were due to the financial repression by the monetary authority. Financial repression, which includes legal restrictions on interest rates, credit allocation, capital movements, and other financial operations, was widely used in the past but was largely abandoned in the liberalisation wave of the 1990s, as widespread support for interventionist policies gave way to a renewed conception of government as an impartial referee. The practice has come back on the agenda with the surge in public debt in the wake of the Global Financial Crisis, and some jurisdictions have reintroduced administrative ceilings on interest rates. A study done by the International Monetary Fund (IMF) that attempted to estimate the impact of financial repression on growth using an updated index of interest rate controls covering 90 jurisdictions over 45 years shows that the practice poses a significant drag on growth, and could amount to 0.4-0.7 percentage points drop in economic growth. In Nigeria’s case, not only is financial repression a threat to

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an already flailing economy, it means an additional burden on many Nigerians whose purchasing power is already being eroded by the country’s current stagflated economy. “Financial repression does have its advantages in the short term as it provides cheap loans to companies and governments, and reduces their burden of repayments but could have damaging long-term implications,” one economist said. “The problem with Nigeria is that investors and savers are subsidising a government that is largely inefficient in its spending, prioritising frivolous recurrent spending over capital spending,” the economist said. An investor who lends N10 million to the government for one year will get N10.3 million at maturity. While that is an increase in nominal terms, it is a decline in real terms when inflation of 13 percent is factored. If the return on the oneyear TB matches an inflation rate of 13 percent, the investor would have earned N1.3 million and would have N11.3 million at the end of one year. However, by getting a return of 3 percent rather than an inflation-adjusted return of 13 percent, the investor has essentially lost N1 million. The story is different for the government. Rather than pay the investor N1.3 million, it now pays only N300,000 and saves N1 million. That is brilliant business for the Nigerian government whose debt service cost hit a record high of 99 percent in the first quarter of 2020, according to Debt Management Office (DMO) data, before moderating to 72 percent in the second quarter. Lower interest rates moderate the cost of borrowing for the government, but the problem is that the government is widely viewed as an inefficient allocator of resources. Critics say Nigeria has little to show for doubling its debt @Businessdayng

in five years to N28 trillion. They point to tepid economic growth that has been stuck at 2 percent. Weak economic growth rate and rising debt levels strengthen the argument made that the government is not an efficient spender. Investors are not the only ones subsidising the government, savers as well. By the CBN’s order to commercial banks to slash the minimum interest rate on savings deposit to a minimum of 10 percent of Monetary Policy Rate (MPR), or 1.25 percent per annum, from the previous minimum of 30 percent of MPR, or 3.75 percent, Nigerian savers have lost about N162 billion. Nigerian savers hold over N6.5 trillion in their savings account with commercial banks, according to NBS data. Before the CBN policy that reduced the interest rate on savings from 3.75 percent, that amount of money would have yielded additional N243 billion per annum. But with the policy pegging the rate at 1.25 percent, the money yields N81 billion, a difference of N162 billion. That effectively means Nigerian savers would lose N162 billion annually on the back of the policy that took off September 1. “While savers and investors reel, the government is one of the biggest beneficiaries of the financial repression, especially when it is as indebted as the Nigerian government and needs some breathing room from choking debt service costs,” one economist said, “That is what financial repression is about.” The CBN has achieved financial repression by its policies on savings deposits and bank lending. The bank’s aim is to incentivise lending to the real sector and pave way for access to affordable loans. The economists surveyed however said the CBN might not be able to achieve its aim without help from fiscal authorities.

Monday 21 September 2020

BUSINESS DAY

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Monday 21 September 2020

BUSINESS DAY

NEWS

Lagos releases 2020/2021 academic calendar MARK MAYAH

agos State government through the Office of Education Quality Assurance has released the approved school calendar for year 2020/2021 session. According to the time table, both public and private schools below tertiary level would resume first term academic activities on Monday 21st September, 2020 while the term runs through Friday, December 18, 2020. The second term will commence from Monday January 4, 2021 and runs through Friday April 6, 2021 while students will resume for third term on Tuesday, May 4, 2021 and close on Friday, August 6, 2021. While enjoining all public and private schools in the state to adhere strictly to the harmonised school calendar, the director-general, Office of Education Quality Assurance, Abiola Seriki-Ayeni, urged school leaders to have a qualitative health and safety plan that will help protect students, teachers and work-

ers as schools reopen in the state. According to her, “it is not enough to reopen but to keep staying opened since some schools all over the world had to shut down after reopening due to a spike in the pandemic. All schools must make efforts to comply with these requirements, not just for the improvement of the overall school operations but for safe reopening for academic activities to support the Lagos State Government quest for a full return”. While advising schools to have a flexible teaching and learning plans where students and teachers who feel sick can teach or learn from home via available online platforms, Seriki-Ayeni said schools must strive to avoid any Covid-19 infection in their school. The DG further advised that teachers, students and visitors must wear face mask at all time, observe physical distancing, regularly wash hands with soap under running water and maintain high standard of personal hygiene in the school premises. She em-

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phasised that schools must have an isolation/holding bay to care for medical emergencies should students come up with symptoms such as cough, headache, catarrh, difficulty in breathing, sneezing and fever. She also said further measures put in place by the Lagos State government through the Office of Education Quality Assurance is for public and private schools in Lagos State to register online with the OEQA, take the school self-risk assessment, take the online training course to obtain reopening clearance for academic activities on the OEQA website: www.oeqalagos.com. According to her, this will help the office to determine the level of preparedness as well as guide schools on what they need to put in place for a safe reopening. She implored school leaders to embrace new learning style like outdoor classes, staggered attendance, platooning or alternative attendance among others in collaboration with parents in a safe and secure environment.

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Monday 21 September 2020

BUSINESS DAY

NEWS

Edo State Governor and governor-elect, Godwin Obaseki (right); chairman of PDP National Campaign Council for Edo gubernatorial election and Rivers State governor, Nyesom Wike (2nd right) and Edo State deputy governor and deputy governor-elect, Philip Shaibu (2nd left), after a press conference where Obaseki was announced winner of September 19, 2020 guber election, on Sunday, September 20, 2020.

People jubilating shortly after the declaration of governor Godwin Obaseki of PDP winner of the September 19, 2020 governorship election by INEC in Benin City on Sunday. Pics by Churchill Okoro.

Obaseki basks in victory, greets... Continued from page 1

mocracy. Obaseki also commended the president for allowing the Independent Electoral Commission (INEC) and the security services to perform their constitutional functions without interference. The elated governor noted that INEC and the security services had shown Nigerians and the world that they were capable of conducting free and credible elections. While thanking the People’s Democratic Party (PDP) and the governors on the party’s platform for giving him and his deputy the platform to achieve their political aspirations, he reiterated his commitment to making Edo Great Again. “Our success has reinforced my belief that there is nothing we cannot achieve as a people if we put forces together and collectively call on God for support,” Obaseki said. “Words fail me in saluting the teeming supporters who displayed courage in the face of fierce intimidation and brutalisation. The collective will of Edo people made it possible for us to triumph over godfatherism. “I’m eternally grateful to my party, the PDP, and my brother-governors, not only for giving us the umbrella during our political storm, but for the hard works which have brought me back as governor,” he said. Earlier, Governor Nyesom Wike of Rivers State and chairman, PDP governorship campaign council, commended the governor for allowing himself to be used by the people of the

state to fight godfatherism. “Let me formally introduce the newest governor in the country, the man who God used to fight godfatherism. “Edo people have spoken and say you cannot tie our fate in one man’s hands and that was what Edo people did yesterday,” Wike said. “I want to thank the governor and his deputy for allowing themselves to be used to fight for the interest of Edo people. “Let me thank all the entire people of Edo State for their support since the campaigns, during the election and till today. To God be the glory all your efforts are not in vain. Our governor has been declared the winner of the September 19, 2020, governorship election in Edo State,” he said. The President congratulated Obaseki, who scored a total of 307,955 or 86.75 percent of the total votes to defeat his closest rival and the candidate of the All Progressives Congress (APC), Osagie Ize-Iyamu, who scored 223,619 representing 13.25 percent of the total votes. Obaseki also won in 13 local government areas while Ize-Iyamu won in 5 local government areas. The results were announced by Akpofure RemRukeh, vice-chancellor, University of Petroleum Resources, Effuru, Delta. Reacting to outcome of the exercise yesterday, President Buhari commended the election process in which led to the victory of Governor Obaseki. Buhari, in a statement signed by presidential spokesman, Garba Shehu, urged Obaseki, who had similarly defeated Ize-Iyamu in 2016, to show grace and www.businessday.ng

humility in victory. He applauded INEC for conducting a credible election, adding, “My commitment to free and fair elections is firm, because without free and fair elections, the foundation of our political and moral authority will be weak.” According to the president, “I have consistently advocated for free and fair elections in the country because it is the bedrock of true democratic order. “Democracy will mean nothing if the votes of the people don’t count or if their mandate is fraudulently tampered with.” He also commended the people of Edo State, the parties, candidates and security agencies for conducting themselves responsibly. In his message, Atiku Abubakar, a former vice president and presidential candidate of the PDP in the 2019 general election, said: “The end of godfatherism has come in Nigeria.” In a statement he personally signed, Atiku said there was a new dawn in Edo State, and that the hard won victory of “Governor Godwin Nogheghase Obaseki is not just a victory, but a Declaration of Independence from the anti-democratic forces of godfatherism and militarism.” According to Atiku, “No victory could be sweeter than this, and I heartily congratulate the governor, and the good people of Edo State for their resilience in the face of the forces arrayed against them.” The Adamawa-born politician further said: “Edo has a rich history as the centre of Black civilisation, and to this, she is adding a new history as the bastion of

Nigerian democracy. This double whammy of ancient and modern glories is a testament to a people who have for centuries set the pace as a beacon of light on the African continent.” Appreciating the roles played by voters in Edo and the PDP family, he said: “I most heartily congratulate the PDP, who stood shoulder to shoulder, with the people of Edo and their government, in good times and bad. We, in the PDP, have shown that we are not fair weather friends to the good people of Edo. In good times, we will walk beside you. In bad times, we will be your true ‘comrade’. We will never be a turncoat. We will never abandon the principles we once espoused, so we can dine with our nemesis. Democracy has no nemesis. And this, the PDP has again proved.” He was optimistic that the next four years under Obaseki would be greater than the former. “I look forward to the continuation of four more years of tangible development, and people-centred leadership from Governor Obaseki. I also seize this opportunity to thank His Royal Highness, the Oba of Benin, Omo N’oba N’Edo Uku Akpolopkolo, Ewuare II, for the fatherly role he played as a neutral catalyst for peace. That this election was, by and large, free from violence, is a testament of the long and effective shadow he casts over his domain. “From personal experience, I know Governor Obaseki to be a magnanimous man, and I urge Pastor Osagie Ize-Iyamu to accept the right hand of fellowship that is likely to be ex-

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tended to him. The leprous hand he is now holding, can only lead to a destination of barrenness. He is among strange bedfellows, and I remind him that no matter how far one has gone on a wrong road, it is never too late to turn back and head in the right direction. The PDP is the right direction.” He challenged Ondo State to emulate Edo, emphasising, “There is a new wind of democratic change now blowing all over Nigeria. The forces of despotism, nepotism, and interlopers cannot successfully withstand this force. Nigeria shall soon be totally free from these forces, from Kaura Namoda to Lagos. The only power that will stand in Nigeria is people power, not the power of godfathers, or despots.” In a statement by his Chief Press Secretary, Olisa Ifeajika, in Asaba, on Sunday, Governor Ifeanyi Okowa said the people of Edo across the 18 local government areas spoke loudly and clearly in their reaffirmation of the choice of Obaseki as their governor. The governor, who is the chairman of SouthSouth Governors’ Forum, said with the re-election of Obaseki, the entire region was now being ruled by the PDP. “Let me congratulate my brother Governor, Mr Godwin Obaseki and his Deputy, Comrade Philip Shaibu, on their victory in the September 19 Governorship election in Edo. “It is heart-warming to see you re-emerge as Governor of Edo against all odds and I am grateful to the people of Edo for shunning the entreaties of retrogressive forces who were deviously @Businessdayng

bent on subverting the wishes of the people,” he said. “Let me also thank the INEC for being truly independent as required by the laws of our land. “The most significant aspect of this victory is the peaceful outcome of the election as Edo people proved pundits wrong by ensuring that the elections were devoid of violence,” he further said. Felicitating with the PDP on the victory, Okowa said, “Let me also congratulate our great party, the PDP and the chairman of the PDP National Campaign Council and Governor of Rivers, Nyesom Wike and other members of the Campaign Council for their efforts, which led to the victory of the party in Edo. “The brotherhood displayed by the governors of the PDP and other party members towards the reelection of Obaseki is what the country needs to take the nation to greater heights in 2023. “On behalf of the government and people of Delta, I congratulate you my brother Governor, Godwin Obaseki and your deputy, Philip Shaibu, on your resounding re-election by the resilient people of Edo who displayed honour, dignity and courage. “It is my prayer that God will grant you wisdom, knowledge and the needed resources to attend to your campaign promises to the people,” he said. Also, Osaze Ize-Iyamu on twitter said, “Edo people have decided, We thank you all! Congratulations to the opposition party! They have won! Election no be war. It’s time to work more harder for the next 4years. Congratulations.”

Monday 21 September 2020

BUSINESS DAY

Access Bank Rateswatch KEY MACROECONOMIC INDICATORS Indicators GDP Growth (%) Broad Money Supply (N’ trillion)

Current Figures Comments -6.1 Q2 2020 — lower by –7.97% compared to 1.87% in Q1 2020 36.82 Increased by 3.36% in July’ 2020 from N35.63 trillion in June’ 2020

Credit to Private Sector (N’ trillion)

30.19

Currency in Circulation (N’ trillion)

2.4

Inﬂation rate (%) (y-o-y)

12.82

Monetary Policy Rate (%)

12.5

Interest Rate (Asymmetrical Corridor)

12.5 (+2/-5)

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

Global Economy

reposition their market portfolio in light of current

In the US, the Bureau of Economic Analysis revealed that

macroeconomic realities.

Increased by 2.57% in July’ 2020 from N29.43 trillion in June’ 2020

the current account deﬁcit expanded by $59 billion, or

Money Market

Increased by 4.13% in July’ 2020 from N2.3 trillion in June’ 2020

52.9%, to $170.5 billion in Q2'20. It is equivalent to 3.5% of

The debt market was ﬂush with liquidity last week as a

Increased to 12.82% in July 2020 from 12.56% in June 2020

GDP, compared to 2.1% in Q1'20, mostly reﬂecting a

result of the net Open Market Operations (OMO) maturity

Adjusted to 12.5% in May 2020 from 13.5%

widened deﬁcit on goods and reduced surpluses on

and Bond Coupon payment (� 278billion and � 50billion

Lending rate changed to 14.5% & Deposit rate 7.5%

primary income and services. Major transactions dropped

respectively). These inﬂows led to a decline in short-term

35.81

September 17, 2020 ﬁgure — an increase of 0.39% from September start

in part due to COVID-19, as many businesses were

lender's charge such as the Open Buy Back (OBB) and

42.48

September 17, 2020 ﬁgure— an increase of 8.2% from the prior week

operating at limited capacity or ceased operations, and

Overnight (O/N) to 2% and 3% from 14.5% and 16.5%,

1.48

August 2020, ﬁgure — an increase of 0.13% from July 2020 ﬁgure

NSE ASI & Bond

FX Market N/US$

External Reserves & Oil price

STOCK MARKET

Indicators

18/9/20

NSE ASI Market Cap(N’tr)

Inﬂation Rate

2 Weeks Ago 11/9/20

Last Week

Change (%)

25,591.95

(0.08)

13.36

13.35

0.10

Value (N’bn)

0.19

0.21

(9.04)

1.85

2.28

(18.99)

MONEY MARKET NIBOR

Last Week 2 Weeks Ago Rate (%) Rate (%)

Tenor

OBB O/N CALL 30 Days

18/9/20

11/9/20

2.0000 3.0000 1.8750

14.5000 16.5000 15.9500

2.6030 2.8293

90 Days

2.4799 2.6707

COMMODITIES MARKET

Indicators

Change (Basis Point) (1250) (1350) (1408) 12 16

42.48 Crude Oil $/bbl) Natural Gas ($/MMBtu) 1.99 Agriculture

Ofﬁcial (N) Inter-Bank (N) BDC (N)

379.00 385.85

Parallel (N)

0.00

1 Month Ago 2 Weeks Ago Rate (N/Rate (N/$) $) 11/9/20 18/8/20 381.00 379.00 385.72 386.37 0.00 0.00

465.00

455.00

Last Week Rate (N/$) 18/9/20

BOND MARKET AVERAGE YIELDS

Tenor

Last Week Rate (%)

2657.00

3.71

37.24

119.15 65.88 13.17

(8.87) 1.42 5.02

(8.49) (14.99) (14.09)

Wheat ($/bu.) Metals Gold ($/t oz.) Silver ($/t oz.) Copper ($/lb.)

560.00

1.73

29.18

1952.77 27.07 308.05

0.39 1.05 1.35

48.21 57.48 (6.03)

NIGERIA YIELDS

INTERBANK

Tenor

TREASURY

Last Week Rate (%)

2 Weeks Ago Rate (%)

18/9/20

11/9/20

TRUE

Change (Basis Point)

1.00

1.01

(1)

3 Mnths

1.18

1.20

(2)

6 Mnths

1.55

1.37

9 Mnths 12 Mnths

2.26 2.79

2.18 2.90

8 (12)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

2 Weeks AgoChange Rate (%) (Basis Point)

Indicators

5.16

(35)

10-Year

6.30

6.42

(12)

Mkt Cap Net (N'tr)

15-Year

9.62

9.64

(2)

YTD return (%)

Last Week

Indicators

4.81

2 Weeks Ago

18/9/20

Index

4,541.11

Mkt Cap Gross (N'tr)

14.68 10.35 84.87 -7.52

20-Year

8.97

9.11

(14)

25-Year

YTD return (%)(US $)

9.89

10.00

(11)

TREASURY BILLS PMA AUCTION

9.88

10.05

(17)

Tenor

30-Year

BILLS

1 Mnth

3.17

7-Year

(34.10) (34.88)

Cocoa ($/MT)

11/9/20 3.10

5-Year

18/9/20

480.00

8.20 (13.85)

Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.)

FOREIGN EXCHANGE MARKET

Market

YTD Change (%)

1-week Change (%)

18/9/20

Energy

25,572.57

Volume (bn)

Market Analysis and Outlook: September 18 - September 25, 2020

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 accept responsibility or liability for errors of fact or 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 written consent of Access Bank Plc.

91 Day 182 Day 364 Day

Change (Basis Point)

11/9/20

4,518.06 14.60 10.29 83.93 -8.46

0.51 0.51 0.57 0.94 0.94

Amount (N’ Rate (%) Date million) 1.2 19,783.59 12-Aug-2020 54,592.59 1.5 29-July-2020 27,000.00

3.1999

12-Aug-2020

Sources: CBN, Financial Market Dealers Quotation, NSE, NBS, Energy Information Agency, Oilprice, Bloomberg and Access Bank Economic Intelligence Group computation. * Crude oil (Bonny Light) is as at the previous day.

the movement of travellers across borders was

respectively. Longer tenored rates such as the 30- and 90-

constrained. In a separate development, the Central Bank

day Nigerian Interbank Oﬀered Rate (NIBOR) settled at

of Brazil unanimously decided to keep its key interest rate

2.6% and 2.83% from 2.48% and 2.67%. This week, we

at an all-time low of 2% in its September meeting.

expect interbank rates to remain at these low levels given

Committee members noted that inﬂation climbed to

the current system liquidity and the absence of any

2.44% in August from 2.31% nudged by prices of food and

funding activity in the market.

some services. Policymakers said that recent indicators

Foreign Exchange Market

suggest a partial recovery in domestic economic activity,

The Naira depreciated against the dollar in most market

still sectors more directly aﬀected by social distancing

segments, but it remained unchanged at the oﬃcial rate.

measures remain depressed despite the oﬀsetting

At the Nigerian Autonomous Foreign Exchange Rate

eﬀects of the government transfer programs. Committee

(NAFEX) window, the local currency weakened, settling at

members added that the uncertainty about economic

� 385.85/US$ from � 385.72/US$ the preceding week.

growth remains larger than usual, especially for the period

Similarly, at the parallel market, the naira pared � 10 to

starting at the end of this year. The Bank also said that the

s e tt l e a t � 4 4 0 / U S $ f ro m � 4 5 5 / U S $ d e s p i t e t h e

current economic conditions continue to recommend an

resumption of dollar sales to Bureaux de Change

unusually strong monetary stimulus but it recognised that

operators. Low supply of the greenback and pent-up

due to prudential and ﬁnancial stability reasons the

demand pressure were largely responsible for the

remaining space for stimulus, if it exists, should be small.

weakness in the currency. The oﬃcial market rate stood at

Elsewhere, Japan's consumer price inﬂation dropped to

� 379/US$. This week, we expect the naira to trade around

0.2% year-on-year in August 2020 from 0.3% in the

current levels.

previous month according to the Ministry of internal aﬀairs

Bond Market

and communication, as the pandemic continued to

The bond market was bullish for the second consecutive

hamper consumption excluding food. Food inﬂation

week as demand rose across board for various securities.

jumped to 2.9% from 1.9%. Prices for education continued

Strong buying interests were recorded for the 2025, 2026,

to drop at a sharp 10.3% pace. In contrast, prices for

2027 and 2036 bonds following improved liquidity from

transport & communication rose by 0.2% percent after

the coupon payments. Yields on the 7-, 10- , 15-, 20-, 25-

edging down 0.1% in July. Meanwhile, deﬂation for fuel,

and 30-year papers tapered to 4.81%, 6.3%, 9.62%,

light & water charges softened (-1.9% vs -2.2%). Core

8.97%, 9.89%, and 9.88% from 5.16%, 6.42%, 9.64%,

consumer prices, which exclude fresh food, fell a sharp

9.11%, 10%, and 10.05% in that order. The Access Bank

0.4% after remaining unchanged in the two previous

Nigerian Government Bond Index climbed to 4,541.11

months.

points from 4,518.06 points, 23.05 points higher. Market

Domestic Economy

performance this week might likely reﬂect outcomes of

Data from the Nigeria's Bureau of Statistics revealed that

the CBN Monetary Policy Committee meetings where

annual inﬂation rate surged for the 12th consecutive time

rates such as the monetary policy rate, liquidity ratio and

to 13.22% in August 2020 from 12.82% in the prior month.

cash reserve requirement are expected to be left

It was the highest rate since March of 2018 as food prices

unchanged. The September Bond Action scheduled to

increased to an over two-year high (16% vs 15.48% in

hold this week would also drive yield direction.

June) amid the coronavirus crisis. This rise in the food

Commodities

index was caused by increases in prices of bread and

The price of oil recovered from its two weeks ago lows

cereals, potatoes, yam and other tubers, meat, ﬁsh, fruits,

amid hopes over a recovery in fuel demand after reports

oils and fats and vegetables. Core inﬂation, which excludes

that Saudi Arabia's crude oil exports rebounded in July to

the prices of volatile agricultural produce stood at 10.52%

5.73 million barrels per day from a record low of 4.98 bpd in

in August 2020, up by 42% when compared with 10.1%

June. Sentiments were also lifted by reports that ﬁnance

recorded in June 2020. On a monthly basis, consumer

ministers and central bankers from China, Japan, and

prices were up 1.3%, following a 1.2% gain in the previous

South Korea agreed to redouble their eﬀorts to help the

month. In a separate development, the Federal Inland

region recover from the COVID-19 pandemic. Bonny light,

Revenue Service (FIRS) reported that it generated a total

Nigeria's benchmark crude surged 8.2% to close at $42.48

sum of � 490 billion in tax receipts in the month of July. The

per barrel. Precious metal prices trended higher last week

revenue agency disclosed that � 438 billion out of that

following a subdued dollar due to overall uncertainty about

amount was generated from non-oil receipts, which

the economic outlook and fears of a prolonged pandemic.

represents 89% of the total ﬁgure, while � 52 billion is from

Consequently, gold prices notched up 0.39% or $7.65 to

oil receipts, which represents 11% of the total collection.

ﬁnish at $1,952.77 per ounce from $1,945.12 per ounce.

The statement also quoted the Executive Chairman of

Silver settled at $27.07 per ounce, a 1.05% rise from prior

FIRS, as attributing the increase in the non-oil receipt to

week price. This week, we anticipate that oil prices will

the various reform measures that have been introduced

remain bullish on back of Goldman Sachs estimates that

by the board and management of the service, as well as the

the market is in deﬁcit and concerns of further supply

dedication of the staﬀ. He said that it was gratifying to

disruptions as a new storm building in the US Gulf of

note that their collective eﬀort as stakeholders was paying

Mexico. OPEC+ has also said that the group will take action

oﬀ.

on members that are not complying with massive output

Stock Market

cuts to support the global oil market. Bullions are

The Nigeria stock exchange market remained bearish for a

expected to remain bullish as vows by major central banks

second consecutive week. Stocks in the ﬁnancial services,

to roll out further stimulus if required to revive their

transportation services and industrial goods were majorly

coronavirus-hit economies bolsters safe-haven demand.

responsible for the negative persistence seen in the stock

Monthly Macro Economic Forecast

market. Consequently, the All Share Index (ASI) and market capitalization closed at 25,572.57 points and

Variables

N13.36 trillion from 25,591.95 points and N13.35 trillion,

Exchange Rate

respectively the preceding week. This week, market

(NAFEX) (N/$)

participants are expected to remain wary while they

Inﬂation Rate (%) Crude Oil Price (US$/Barrel)

Sep’20

Oct’20

Nov’20

388

389

388

13.22

13.6

13.85

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

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Monday 21 September 2020

BUSINESS DAY

NEWS

NIRSAL, Royal Exchange unveil new insurance product for Nigerian farmers ONYINYE NWACHUKWU, Abuja

igeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), in collaboration with the Royal Exchange General Insurance has unveiled a unique insurance product which provides cover for Nigerian farmers, targeting those in the crop sub-sector in the first instance. The Hybrid Multi-Peril Crop Indemnity-Index Insurance product- HM-II for short, would protect farmers from losses during a planting season caused as a result of bad weather in the form of low and high rainfall, early and late season dry spells, lightning, hailstorms and thunderstorms. The HM-II piloted during NIRSAL Plc’s participation in the 2019 Anchor Borrower Programme (ABP) Wet season farming- also guards farmers against pest outbreak, disease outbreak, fire outbreak and perma-

nent disability or death of a farmer. At the launch in Abuja, Aliyu Abdulhameed, NIRSAL managing director explained that as part of the HM-II, in a case where the afore-mentioned risks materialise, benefits paid out to the farmer would be up to the maximum loan or the insured amount following the trigger from advanced satellite technology or an assessment by an agriculture expert or both. According to him, NIRSAL’s policies and initiatives are guided by the fact that besides the Agric sector’s contribution of about 24 percent to the country’s GDP, and jobs for more than 60 percent of the population, 80 percent of the sector’s contribution to the GDP is attributable to smallholder and subsistent farmers who are unfortunately the most vulnerable actors along the agric value chain. He said in addition to finding it difficult to access sustainable financing, Nige-

rian farmers and their families are often left to contend with the negative effects of many factors including bad weather, pest outbreak, disease outbreak, fire outbreak, permanent disability and even the death of the farmer. He said on the back of these factors, and in line with NIRSAL’s mandate, the product was developed in collaboration with Royal Exchange, and support from Swiss Re as well as the regulator, National Insurance Commission (NAICOM). Leveraging the Insurance pillar, NIRSAL aims to increase the distribution of existing and new Agric insurance products from about 0.5 million farmers in 2017 to 3.6 million farmers nationwide by 2026. NIRSAL has already reached a milestone of 1,476,289 smallholder farmers who have subscribed to the company’s already-developed insurance products in past farming seasons, according to available information.

IFRSEF calls for Nigeria’s representation at IASB, condemns poor financial reporting in Nigeria BUNMI BAILEY

newly formed group of financial experts, IFRS Experts Forum (IFRSEF) Nigeria, has advocated for Nigeria’s representation at the International Accounting Standard Board (IASB), London. The non-profit organisation, incorporated in Nigeria in February 2020, asserts that the biggest market for IFRS in Africa is Nigeria but it is not well represented at International Accounting Standards Board (IASB). The IASB, an independent group of experts with an appropriate mix of the latest

practical experience in setting accounting standards, accounting education and standard preparation, auditing and utilisation of financial reports is a body responsible for the coordination of the International Financial Reporting Standards (IFRS), which Nigeria has adopted. IFRSEF expresses its worries over the poor financial reporting in Nigeria, which has been the bane of private and public accountability in the country, hence the need for a better representation at IASB. It believes that creating awareness and promoting the adoption of IFRS would raise the bar on better gov-

ernance of private and public entities in Nigeria. According to IFRSEF memorandum of association, the international accounting standards being advocated for are IFRS for private sector and International Public Sector Accounting Standards (IPSAS) for public sector. During its inaugural event with IASB London on June 3, 2020, IFRSF Foundation London welcomed the formation of IFRSEF, Nigeria, acknowledging it as a platform for the discussion and articulation of views of IFRS developments from a Nigerian perspective.

Dangote Cement invests N4bn on CSR projects in host communities GBEMI FAMINU

angote Cement plc, Ibese, says it has committed about N4.1billion into various infrastructural projects as Corporate Social Responsibility (CSR) for its 14 host communities in Yewa land in Ogun State. The company has also flagged off the 2020 acutherapy training for youths in the area, attracting commendation from Oluwadare Kehinde, the Ogun State commissioner for youths and sports, who lauded the company for living up to its billing in the provision of social service to the people. Speaking during the flag off of the training in Ibese, weekend, the plant director of Dangote Cement, Azad Nawabuddin said the company was willing to spend

even more because it owed its continuous operation to the peace in the community. Nawabuddin explained that training was part of the company’s host community skills acquisition and empowerment programme, for which the company is irrevocably committed. He said the management believed education was power and has consistently invested in training of the youths to become self-reliant. Nawabuddin said, “education is power, skill is power, Dangote Cement places a premium on education and skills acquisition that is why we are encouraging our people to be educated.” He explained that the acutherapy training would last for two months and urged the beneficiaries to make the most of it as the training offers them a means of livelihood. www.businessday.ng

Giving the profile of the CSR of Dangote Cement Ibese, head of external relations, Joseph Alabi disclosed that since the inception of Dangote Cement in Ibese the last eight years, the company has executed capital projects to the tune of N4.381 billion He said the last eight years of creation in Ogun State has focused on construction and repairs of roads, building of blocks of classrooms, construction and repairs of healthcare facilities, provision of boreholes, provision of electricity transformers, among others. He itemised the projects as: 40 classrooms, 3 health centres, 22 boreholes and 3 transformers totalling ₦4.1 billion. According to him, various on-going projects include 18 classrooms, 4 roads, 1 borehole, 1 health centre, and 5 transformers estimated at N278 million. https://www.facebook.com/businessdayng

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Monday 21 September 2020

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Monday 21 September 2020

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Monday 21 September 2020

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Monday 21 September 2020

NEWS

Review sections of CAMA 2020 that conflict with Finance Act, FG urged ISAAC ANYAOGU

L-R : Obinna Ofili, general manager, Nigerian Content Development Fund and Treasury Management, Nigerian Content Development and Monitoring Board (NCDMB); Paul Zuhumben, general manager, project certifications and authorisation; Simbi Wabote, executive secretary, NCDMB; Ama Ikuru, general manager, capacity building, and Ejiro Dortie, institutional relations and entrepreneurship development manager, at the Nigerian Oil and Gas Technology in Lagos. NAN

50,000 bpd modular refinery begins operations in Imo October …as NCDMB wants 10% of Nigeria’s crude refined by modular refineries IGNATIUS CHUKWU & GLADYS NWEKE

50,000 barrels per day (bpd) modular refinery located in Imo State is getting set to roll by October 2020. The refinery, currently at 98 percent completion stage, is touted to be one of the fastest modular refinery projects in Nigeria. The first phase will, however, begin with 5,000 bpd and load 23 trucks daily. The plant located at Ohaji/Egbema area of Imo will increase its refining capacity to 30,000 bpd in 2021, and gradually up it to 50,000 bpd, according to Chikezie Nwosu, its chief executive officer, who said all hands are on deck to deliver on the target date.

Officials of the Federal Government led a team to inspect the site and ended up applauding Waltersmith Petroman Oil Limited and the Nigerian Content Development and Monitoring Board (NCDMB) for a speedy construction and effective partnership that would make the project possible within two years. Minister of information and culture, Lai Mohammed, conveyed the commendation after a tour of the project in company of Governor Hope Uzodimma, and minister of state for education, Chukwuemeka Nwajiuba, and Simbi Kesiye Wabote, the executive secretary of NCDMB. Construction work on the modular refinery started in October 2018 and will begin operations on October 14, 2020, having con-

Naira strengthens ahead dollar allocation to BDCs Monday HOPE MOSES-ASHIKE

igeria’s currency at the weekend appreciated by N0.67k as the dollar traded at an average rate of N464.33k from N465 traded on Friday on the black market. The naira appreciation is as a result of slow down in demand for the greenback by the end users. This was ahead of the dollar allocation to about 5,000 Bureau De Change (BDC) operators by the Central Bank of Nigeria (CBN) on Monday, September 21, 2020 (today). Investigations show that while currency traders across Lagos parallel markets buy dollars from individuals at N460, they sell at N464 and N465 to the end users. “We expect naira to stabilise against the USD, especially at the Bureau De Change market, amid CBN’s increasing capacity to in-

tervene; hence, the positive impact could trickle down to the parallel (black) window,” analysts at Cowry Asset Management Limited said. The external reserves moved northward in the month of September – rising by 0.42% to $35.81 billion as at September 17, 2020 up from $35.66 billion. The price of Brent crude, which has fallen to below $20 per barrel in March 2020 is gradually recovering as it stood at $43.13 per barrel as at September 18, 2020. Naira fell by N6 as the dollar was sold at N466 on Friday from N460 on Thursday at the Bureau De Change (BDC) segment of the foreign exchange market. The daily forex turnover declined further by 4.43 percent to $83.35 million on Friday from $87.78 million recorded on Thursday at the Investors and Exporters (I&E) forex window, data from FMDQ revealed. www.businessday.ng

cluded off-take arrangements with select firms. The minister stated that the completion of Waltersmith modular refinery and the conceptualisation of similar projects in Bayelsa were key achievements of President Muhammed Buhari-led administration. Mohammed described modular refineries as key to meeting the Federal Government’s agenda of increasing local refining capacity, enhancing value addition to the hydrocarbon resources and employment generation. He gave the assurance that the government through the ministry of petroleum resources and relevant agencies would provide Waltersmith with all necessary support it needs to operate and grow sustainably. In his remarks, Wabote

expressed satisfaction with the 30 percent equity invested by the NCDMB in the refinery. He said that the project had several benefits, including generation of direct, indirect, and induced employment opportunities for management staff, plant operators, technicians, drivers, cleaners, suppliers, security personnel and others. Wabote canvassed that at least 10 percent of Nigeria’s oil production should be refined through the modular refineries. He noted that an average of 10 direct jobs were created for every 1,000 barrels/ day capacity of modular refinery, hence over 2,500 direct jobs and over 25,000 indirect jobs can be created if 10 percent of Nigeria’s production is refined using modular refineries.

Expert unveils book on retirement DANIEL OBI

ollowing the inadequate literature on retirement management in Nigeria, a book titled ‘Retirement in Nigeria: A Management Approach’ has been unveiled to address critical issues on retirement. “People in retirement and those planning retirement in Nigeria do not have literatures to consult,” said Felix Amadi, MD/CEO, Crown Insurance Brokers Limited and author of the book. Since the 2004 review of pension laws in Nigeria, retirement planning has been an important part of the working population’s daily lives. Also retirement is also a period most dreaded by workers, especially those in public service mostly by the state and local government employees. According to Amadi, retirement provides the stimulus for government to make laws that promote social affairs for senior citizens. The book, which will be of-

ficially unveiled on November 5, 2020 in Lagos and formally presented to the public on November 19, in Abuja, is a pioneer publication in retirement management according to the author. Speaking on the focus areas of the publication, Amadi said the book addresses challenges of retirement in Nigeria, on the back of research being an important component of retirement management. He observed that corruption in Nigeria was fuelled largely by wrong perception of retirement by civil servants. This is because many hold the opinion that they will not get their due after retirement, hence government should pay more attention to employees’ benefits. According to Amadi, government should leverage advocacy to achieve social safety net in Nigeria. “We want to see more reviews of pension laws, especially Military pension, said Amadi stating that there is a need to partner with pension administrators, agencies, and all relevant stakeholders.

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igeria’s new Companies and Allied Matters Act (CAMA) 2020 has the potential of bringing the country’s business environment up to speed with the rest of the world and promote ease of doing business, analysts at the Franco Nigerian Chamber of Commerce and industry/ Aelex webinar have said. However, for the law to have the desired effect, they said there were some aspects that conflict with already existing law - the Finance Act 2019 - such as the definition of small companies and rules guiding the filing of annual returns and these should be amended so the law can achieve its goals. The webinar which held on September 16 had on the panel Yewande Sadiku, CEO Nigerian Investment Promotion Commission, Laurence Monmayrant, French Consul general in Nigeria. Other panel members include Asiata Agboluaje, senior manager, Tax department Deloitte and Touche, Peter Nwofia, partner, Tax & Regulatory Services, Mazars Nigeria, Peter Ango, associate director, Andersen Tax, Nigeria and Davidson Oturu, Partner at Aelex law firm. The panel members agreed that CAMA 2020 would significantly improve company administration in Nigeria but certain conflicting sections with the Finance Act 2019 would require amendments. The Finance Act 2019 defines small companies as those with turnover of

N25million and below whereas in the CAMA 2020 defines small companies as those with turnover of not more than N120million and net assets not exceeding N60m “For me N120 million is a more realistic revenue threshold when compared to the N25 million threshold in the finance act 2019” said Nwofia. “This is because it will admit more companies who are still trying to find their feet in the economic space.” Nwofia further said that CAMA 2020 has come to exempt small companies from appointing statutory auditors allowing them to file a modified financial statement to reduce the cost burden of appointing and remunerating auditors and filing annual returns, however, the Finance Act 2019 exempts companies of revenue threshold of N25 million, it did not exempt them from filing annual returns. “Essentially, the Finance Act 2019 has watered down the intention of reducing the burden of paying taxes on small business in Nigeria. I will recommend that the tax authorities and the national assembly should quickly amend the tax laws in terms of CAMA 2020,” said Nwofia. In her address, Monmayrant commended the work done by the Federal Government through agencies like the NIPC, the ease of doing business council and the lawmakers to bring this new CAMA 2020 Act into reality. “This new act makes a strong case for the ease of doing business drive of Nigeria while making issues of business governance less complex.

Winners in Lagos smart meter hackathon receive N10m JUMOKE AKIYODE-LAWANSON

eam Power Bit Crunchers from the hardware category and team Zeena Platform from the software category, have emerged as winners at the Lagos Smart Meter Hackathon and have earned the combined prize money of N10 million to bring their innovative solutions to life and improve access to electricity in Lagos state. Speaking on the high points of their respective prototype designs, Team Zeena Platform stated that their smart meter software solution could fix tariffs and usage restrictions to guide electricity consumption by users. “Administrators can control pricing, check working meters, energy consumption, and perform oversight functions. Our database will run on blockchain technology and data security of users is assured.” Power Bit Crunchers, winners in the hardware category team explained that their prototype smart meter can be monitored and controlled remotely, with additional tamper-proof functionalities which protect against bypass and other fraudulent activities. Both winners and runnersup at the 3-day finals will also get working space at the Eko Innovation Centre in Ikoyi Lagos, while all 10 finalists will get mentorship opportunities, among @Businessdayng

other consolation prizes. Although Lagos State government initially committed N7 million to appreciate the winners’ for their efforts before progressing to commercialisation, Babajide Sanwo-Olu, governor of Lagos, Kola Balogun, chairman, MOMAS Electricity Meters Manufacturing Company Limited, and Bunmi Akinyemiju, CEO, Venture Garden Group, all contributed N1 million each to raise the total prize money to N10 million. Chantelle Abdul, CEO MOJEC International also contributed N2 million for the runners-up. Olonma Ibrahim and Peter Okonma represented the hardware team, while Oluwasemi Oreoluwa and Adenitire Ayonikun represented the Software Team at the event. Speaking on the significance of the initiative at the announcement ceremony at the Eko Innovation Centre, Ikoyi, Lagos, on Friday, Governor Sanwo-Olu said: “Today is a true hallmark in our administration’s pursuit to improve the welfare of our people. As you are aware, a key pillar of our administrations T.H.E.M.E.S agenda is to make Lagos a 21st-century economy and this Lagos Smart Meter Hackathon fits perfectly as it combines innovation, creativity, and local capacity to deliver solutions that will improve access to electricity in Lagos.”

Company IN FOCUS

BUSINESS DAY Monday 21 September 2020 www.businessday.ng

Nigerian Breweries’ profit dips by 58%, lowest in 7 years amid Covid-19 Favour Olarewaju

iger ia’s largest brewery by market value, Nigerian Breweries, has recorded its lowest net profit in 7 years since H1 2014 amidst the Covid-19 pandemic which slowed sales of its key products. It would seem however that the company is also reeling from the lengthy decline in consumer purchasing power that started in 2015. The company has seen reduced revenues and net profit for 3 years in a row now but half-year 2020 is the worst drop so far. This signifies that the company has been struggling and performing rather poorly since H1 2018 with reduced revenue by 4.6% to N172.7 billion in H1 2018 from N180.9 billion in H1 2017. Similarly, H1 2019 and H1 2020 recorded further 1.4% and 10.8% drop in revenue to N170.2 billion and N151.8 billion respectively. The biggest brewery has also seen its share price crash by 44% to N35.00 in June 2020 from N63.00 in June 2019. The share price has however, improved since then, closing at N42 per share on Friday. Half-year statistics of Nigerian Breweries for 2018, 2019 and 2020 saw a downward trend of net profit from N23.8 billion in H1 2017 to N18.4, N13.3 and N5.6 billion respectively, indicating 22%, 28% and 58% drop

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Despite easing the lockdown and the gradual resumption of activities, people’s lifestyle and habit have changed. You find out that many people are trying to keep fit and healthy and as a result stay away from alcohol

in half-year profits. In fact, the company only recorded net profit in H1 2017, as all other half-year records show reduced net profit within H1 2014 to H1 2020. Overall, net profit dropped by 21.5% to N5.6bn in 2020 from N23.9bn in 2014 on half-year basis. This begs the pertinent question: what has been driving this continuous reduction in revenues and profits of Nigerian Breweries for the past three years? Whereas revenue has dipped by 10.8% to N151.8bn in H1 2020 from N170.2bn in H1 2019, cost of sales reduced by 5.96% to N92.7bn from N98.5bn within the same period. So, the drop in cost of sales is merely about half of the decline in revenue growth.

From this, it can be said that revenue was declining at a much faster rate than cost of sales, which further depleted profit levels. Also, profit before tax and profit after tax declined sharply by 57.0% and 58.0% to N8.3bn and N5.6bn respectively in H1’2020. Vincent Nwani, an investment and business consultant, explained that early in the year, one of the top brewers projected an output of 4 million litres in the first quarter of 2020 but was only able to achieve 600,000 litres in volume, which is a direct consequence of the pandemic and the lockdown. Nwani further said that consumers’ lifestyle was impacted especially as social activities were on hold, thereby hurting

demand and sales volume. He predicted that the situation would linger on into the year. “Despite easing the lockdown and the gradual resumption of activities, people’s lifestyle and habit have changed. You find out that many people are trying to keep fit and healthy and as a result stay away from alcohol. Consequentially, demand for their product will not be as much as expected as people try to stay safe,” Nwani said. Akinloye Ayorinde, a consumer goods analyst at CSL research, said the poor financials were driven by the decline in demand caused by the closure of clubs as well as the restriction on social gatherings. He said despite the excitement of the reopening of bars

and clubs, brewers may still face problems as people may not be comfortable sitting in bars or be inclined to resume social activities during a pandemic. “Going forward, sales in Q3 and Q4 may not be as bad as Q2 but will not be as good as the previous year,” Ayorinde projected. In line with this, cost margin has been increasing at a positive rate compared to gross margin which has been more of negative growth. This reiterates that cost has been growing faster than revenue as earnings have not been increasing sufficiently to offset rising cost. At this rate of declining profits due to revenue not being sufficient to cover increasing costs, the recent move of the Nigerian Government to ban packaging and sales of alcohol in small bottles and sachet might further trigger reduced revenue of such brewers. This is given the issue of affordability as living standards of Nigerians has worsened as indicated by the 2020 National Bureau of Statistics (NBS) report which puts poverty level at 40% of Nigerians (or 82.9 million out of the total populace of about 200 million). Nigerian Breweries Plc. engages in the brewing and marketing of Lager beer, Stout and non-alcoholic malt drinks and the bottling of the Schweppes range of soft drinks and Crush Orange. The company’s product range includes Star, Gulder, Legend Extra Stout, Maltina and Malta. These products are mainly sold in Nigeria and other neighboring countries. Nigerian Breweries was incorporated in 1946 and the first bottle of its brand, the STAR Lager, rolled off the bottling lines of its Lagos brewery in June 1949. As the company expanded into other regions, it established more breweries such as Aba Brewery in 1957 and Kaduna Brewery in 1963. By 1971, the company was one of the largest industries within the country in terms of capital investment. In 1982, another brewery was added in Ibadan. In September 1993, the company acquired its fifth brewery in Enugu, and in October 2003, its sixth brewery, sited at Ameke in Enugu. Ama Brewery began brewing on the 22 March 2003 and at 3 million hectolitres is the largest brewery in Nigeria.

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