BusinessDay 22 Jul 2019 by BusinessDay

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news you can trust I **MONDAY 22 july 2019 I vol. 19, no 354 I N300

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NGUS sep 18 2019 361.03

as loans, advances decline by 7.57%

igerian state governments are looking for alternative ways of financing their recurrent and capital projects as banks’ claim on sub-national bonds rose significantly by 267 percent to N68.22 billion in the first quarter of 2019 compared to N18.6 billion in 2018. Despite the surge, however, growth in banks’ claim on state bond slowed in Q1 2019 compared to the Q1 2018 figure when the claim jumped 514 percent from N3 billion to N18.6 billion. The quarterly statistical bul-

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L-R: Deji Soetan, managing partner, BAM Technology; Kayode Falowo, president, Nigerian-British Chamber of Commerce; Andrew Nevin, chief economist, PwC/guest speaker, and Tayo Ashiru, head marketing, Main One, at the NBCC Professional Services Group Breakfast meeting on ‘Blockchain: Rethinking Business Systems’.

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10.84

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NGUS dec 24 2019 361.48

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13.74

14.07

NGUS jul 29 2020 362.53

Banks’ claim on states’ bonds rises 267% to N68.22bn in Q1 HOPE MOSES-ASHIKE & SEGUN ADAMS

fgn bonds

Treasury bills

Weak economy slows uptake of micro pension …as informal sector consumers focus on basic needs MODESTUS ANAESORONYE

h e m i c ro p e n s i o n scheme launched by President Muhammadu Buhari on March 28 this year, expected to extend financial inclusion to the informal sector of the economy, has failed to gain the needed

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Inside Analysts see CBN holding key rate as P. 2 MPC meets today

Monday 22 July 2019

BUSINESS DAY

news Exceptional business leaders set to shine at BusinessDay’s NBL Awards LOLADE AKINMURELE

he stage is set for B u s i n e s s D a y ’s maiden Nigerian Business Leadership (NBL) Awards which re c o g n i s e e x c e p t i o n a l business leaders for their sustained commitment to excellence in enterprise and contributions to the economy. The awards and gala dinner hold Friday, July 26, 2019 and will host over 300 distinguished guests from business, government, public sector, and the diplomatic corps. The selection of nominees was based on a rigorous review process by an independent panel of judges, handpicked for their professional background and familiarity with their sector. The vetting criteria were based on a balanced scorecard that assigned weighted averages to leadership, innovation, information and knowledge management, process improvement, financial performance, employee job satisfaction, social and environmental focus, and compliance with extant regulatory requirements. Nominees were shortlisted from a list of over 15

companies in each sector, which was pruned to five finalists. An independent perception survey was also administered by BusinessDay’s Research and Intelligence Unit (BRIU) on customers, suppliers, advisers, and professionals, who gave their feedback on companies’ workplace culture, marketplace practices and performance. The finalists of the awards exemplify the best in leadership across a wide range of economic sectors, from manufacturing to services. Individually and organisationally, they epitomise the core values of a successful leader – strength, innovation, ingenuity, knowledge and foresight. Award winners will join other accomplished respondents in the BusinessDay Corporate Confidence Index (BCCI), a bi-annual comprehensive report of the opinions and projections of Nigeria’s most significant corporate leaders. The Corporate Confidence Index will serve as a trusted predictor and leading indicator of the gross domestic product (GDP) at least two quarters in advance.

•Continues online at www.businessday.ng

Insurers’ returns dip on rising replacement cost BALA AUGIE

verage returns on equity (ROAE) across group of life and nonlife insurance firms operating in Nigeria have tumbled as replacement cost continues to rise. The added pressure from poor investment returns, premium growth that is failing to keep pace with loss cost trends, intense competition, high inflationary environment, rising claims and underwriting expenses has driven the decline. “The pricing of insurance hasn’t changed in the last 10 years and the costs of replacing assets are outpacing the cost of the risk we are covering,” said Oluseyi Taiwo, financial controller, Wapic Insurance plc. For instance, if a car owner bought a car at N5 million and insured it when the exchange rate was $150/$, if the insurance company was to replace some parts of the car today when exchange rate and inflationary pressure have impacted prices, the company would be spending much more than it should have spent when the car was insured. Taiwo added that the cost

of doing business is high as overheads cost has spiked, further undermining underwriting performance. Data gathered by BusinessDay showed that the average returns on average equity of 14 largest insurers declined to 14.82 percent in March 2019 from 16.96 percent the previous year. In the finance parlance, a higher ROAE means a company has utilised the resources of its owners in generating higher profit. Obligations to policyholders are rising, particularly on motor insurance policies, which were largely ignored by customers before now. The industry is currently experiencing claims in large numbers without commensurate increases in premium income due to economic hardship as weak liquidity position hinders companies from taking on more risk. Experts say low rates continue to hurt insurance business, and insurers are cautious about the risk they admit because they must meet claims obligations when they crystalise.

L–R: Ige Olorunsogo of Nigerian Interbank Settlement System (NIBSS); Charles I. Ojo of Central Securities Clearing System (CSCS) plc; Ugochi Obi, head, X-Academy, The Nigerian Stock Exchange (NSE), and Akin Oyegoke, managing consultant, Johan Consults Limited, at an X-Academy and Johan Consults training on GDPR and NDPR Masterclass, at the Exchange in Lagos.

Analysts see CBN holding key rate as MPC meets today MICHAEL ANI

…2 of 12 predict a ‘cut’

he two-day Monetary Policy Committee (MPC) meeting chaired by Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), will commence today with majority of analysts expecting a hold in the Monetary Policy Rate (MPR). The meeting is coming about three days ahead of the Fed Reserve Chairman Jerome Powell’s plans to set the interest rates next week. Analysts polled by BusinessDay are of the view that if current macro-economic conditions are good indicators to forecast from, the apex bank will apply a waitand-see approach and hold rates at current levels of 13.5 percent to have a sure glimpse of the effect of the upward review of custom duty charges on the prices

of goods and services. Ten out of 12 investment and financial firms surveyed by BusinessDay voted for a hold in interest rate, while two believe the committee would cut rates by at least 50 basis points. “The MPC will maintain the current status quo of 13.5 percent benchmark rate and a cash reserve ratio of 22.5 percent,” said analysts at Financial Derivatives Company (FDC) in a note. “The decision would be premised on rising inflation rate which is above the CBN’s single digit, lower crude oil prices, slow economic growth and the increase in import duty charge,” said the analysts at the Bismarck Rewane-led FDC. Since the financial regulator cut by 50 basis points the benchmark interest rate

meeting in May retained all benchmark lending parameters, including the MPR at 13.5 percent, Cash Reserve Ratio (CRR) at 22.5 percent, Liquidity Ratio at 30 percent, as well asymmetric corridor of +200/-500 basis point around the MPR. At the last meeting, the CBN said it would roll out policies that would help in boosting lending to the real sector. The apex bank followed with a five-year roadmap aimed at achieving a single-digit inflation and a double-digit growth rate; boosting financial inclusion by on-boarding 95 percent of the population by 2024; reducing high cost of obtaining mortgage loans; boosting external reserves from current level of $45 billion, and recapitalisation

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A new era dawns for Nigeria’s banks and this is why

or Nigeria’s banks it is the dawn of a new era in which access to treasury bills will become even more restrictive raising the hope they will expand lending to their customers. But it will not be that straight forward. The banks are traumatised from uncomfortable ratios of non performing loans and for others, they have simply been spoiled by an abundance of easier and risk-free sources of cash. There was a rude awakening on Thursday when the central bank barred banks from buying bills for their own accounts at an open market auction held on, •Continues online at a move intended to force www.businessday.ng them to lend rather than invest in government debt, www.businessday.ng

from 14 percent, a record it held for over three years, inflation figure has seen an upward trend and only in the month of June did headline inflation buck the trend, slowing its lowest level in 11 months from 11.40 percent in May to 11.22 percent in June. “We think the CBN will reduce rates by 50 basis points, given that inflation has slowed further, and exchange rate has remained stable,” said analysts at investment and merchant banking firm, FSDH. The FSDH analysts were of the view that since the CBN has embarked on an aggressive policy to stimulate lending to boost economic growth, it was rational to reduce the monetary policy rate to help drive this strategic goal. The CBN at the last

traders said on Friday. After all that’s why the bankers are also called lenders. Data by Bloomberg show that Nigerian lenders are about the most risk averse among their emerging market peers and now the apex bank is stepping up a campaign to wean them off easy money and get credit flowing into an economy wobbling on its knees. Last week, the CBN limited the size of interestbearing deposits it would hold for banks, the latest in a series of measures aimed at reviving an sluggish economy The central bank, which had not issued market stabilisation bills for about a week before Thursday’s auction, told banks bids must be backed by customer

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demand. In the past, banks have bought government debt rather than assume risk by lending according to a report by Reuters. It was unclear if the order applied to Thursday’s auction only. Banks can still purchase bills on the secondary market, traders said. At Thursday’s open market auction, the central bank offered 75 billion naira ($245.14 million) of bills, drawing demand totalling 475 billion naira for the various maturities. The bank sold one-year bills at a yield of 12.25%. A trader said Thursday’s auction was aimed at nonbank investors, adding that the central bank has considered offering bills directly to foreign investors to support the currency. @Businessdayng

The central bank had been issuing securities at high yields to mop up naira, a policy it maintained for more than two years to attract foreign inflows into bonds and support the naira. It was unclear which option the central bank wants to pursue: boosting credit flow locally or maintaining a stable currency in the face of inflation and dollar shortages. At its last rate meeting in March, the bank cut rates by 50 basis points for the first time since November 2015, saying it wanted to signal a new direction. Analysts expect another 50-bp rate cut on Tuesday.

•Continues online at www.businessday.ng

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news Oyegun slams Oshiomhole over fuelling Edo APC crisis James Kwen, Abuja

mmediate past national chairman of the ruling All Progressives Congress (APC), John Odigie-Oyegun, has slammed his successor, Adams Oshiomhole, over the ignoble role he is playing in fuelling the crisis in Edo State chapter of the party. Oyegun, apparently reacting to the recent outburst and indictment by Governor Godwin Obaseki and the House of Representatives ad-hoc Committee, said he was yet to come to terms on why Oshiomhole had easily forgotten that he never interfered in Edo State affairs as the national chairman of the party while he (Oshiomhole) was the governor. The former APC national chairman in a statement issued by his public affairs adviser, Ray Murphy, wondered why Oshiomhole had failed to realised that Governor Obaseki should be supported as the only APC governor in the South-South geopolitical zone rather than vilifying and destabilising his administration. The former governor of Edo State, expressed shock on why Oshiomhole

was blatantly and brazenly engaging in an anti party to the extent that the party in Edo was now in confusion and division. He also wondered why a man who claimed to have buried godfatherism in Edo State politics could play God and become an agent of disruption in the smooth running of the state government. The AP C Chieftain urged the Progressive Governors not to stand aside and watch their fellow Governor being hampered by a party chairman whose actions may lead to political misfortune of the party. “The recent outburst by Governor Obaseki and the report by the House of Representatives ad-hoc committee, indicting the current National Chairman of the APC, have confirmed my earlier claim that Oshiomhole is not only the architect but also responsible for fuelling the crisis in Edo State. “In the face of these confirmations, I want to urge Oshiomhole to stop disgracing the ruling party and the good people of Edo state. I wonder how he could easily forget that I never interfered or bothwww.businessday.ng

ered about how he ran the government as the then governor of Edo state all the while I occupied the position of the party’s National chairman. “I am yet to come to terms why it has become difficult for Oshiomhole to realise that Governor Obaseki is the only APC governor in the entire South-south and should be allowed to concentrate in giving the people of Edo the dividend of democracy. “It is shocking that a man who boastfully claimed to have buried godfatherism in the Edo state politics could become enmeshed in playing God to his successor. Oshiomhole is not only guilty of godfatherism but also guilty of anti-party activities considering the ignorable role he has been playing and his shameful involvement in the whole Edo crisis. “Rather than dissipating energy in fomenting more crises, Oshiomhole should rather concentrate in ensuring that the federal government policies conform with the party’s manifesto and campaign promises to the good people of this country.

“I appeal to him once more to stop disgracing the governing party APC and Edo state. He should give the governor a breeding space to concentrate in doing the job of serving the people of Edo state. “I want to also appeal to the Progressives Governors not to stand aside and watch their fellow governor hampered by a party chairman whose actions may lead to political misfortune of the party in the state,” Oyegun warned. Simon Ebegbulem, chief press secretary to the APC national chairman when contacted declined comment on weighty allegations against his principal, insisting that Oyegun as a respected leader of the party would have properly addressed his successor rather than resorting to press statements. “I have no comment. Chief Oyegun is a respected leader of the party and an elder statesman. Comrade Oshiomhole has so much respect for him. If he really want to address Oshiomhole he can come out openly to address the man who succeeded him in office and not one Murphy,” Ebegbulem stated.

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Stakeholders task FG to put policies in place to ensure survival of domestic airlines IFEOMA OKEKE

takeholders in the aviation sector have called on the Federal Government to put the right policies in place for domestic airlines to operate and survive in the market. Speaking at the 2019 LAAC seminar in Lagos, last week, with the theme: Boosting aviation investments through policy, Roland Iyayi, CEO of Topbrass Aviation, and former managing director of the Nigerian Airspace Management Agency (NAMA), said airlines would continue to fail until the Nigerian Civil Aviation Authority (NCAA) began doing their due diligence. The situation where the country does not have policies and the NCAA does not have policies that are constant, Iyayi said, is not normal, lamenting that the country has individuals holding key positions in government with little knowledge of the industry. He said Nigeria needed to address some of these major issues by putting policies in place, adding that the airlines could thrive in the country because of the size of the market. @Businessdayng

In the area of boosting aviation investments through policy, he explained that for Nigeria to grow aviation, there had to be a deliberate and consistent policy geared towards ensuring that the airlines who were the primary players in the industry could actually survive. He stated: “That you have airlines failing is not because they can’t run the airlines, it is because the environment in which they operate is extremely harsh and not even conducive for growth. You heard some of the presenters talking about charges in the industry; we have multiplicity of charges in the industry that are inconsistent with the purpose of growing the industry. On one hand we have government agencies that are supposed to be cost recovery agencies been geared to grow their IGR, that is an inconsistent objective with the industry growth.” He explained further: “Essentially I am saying let us stay consistent, lets focus, lets look at the issues and focus on the issues, put a framework in place to address those issues, allow the industry enough air to breathe so it can grow.”

Monday 22 July 2019

BUSINESS DAY

news Nigeria’s extant export law seen to constrain anticipated gains from AfCFTA Cynthia Egboboh, Abuja

espite signing the Africa Continental Free Trade Area (AfCFTA) agreement, Nigeria could be facing a huge challenge of maximising the potential of the pact on the back of its extant export prohibition laws. At the moment, Nigeria’s Export Prohibition Act 1989 prohibits the export of certain agricultural produce, including Beans, Cassava tuber, Maize, Rice, Yam tuber, all products or derivatives of mentioned items as well as all imported food items.

Nigeria became the 53rd African country to sign the AfCFTA agreement recently at the African Union summit in Niger Republic. But BusinessDay findings show that the export law, which ought to majorly drive the country’s trade among other African countries, has not been repealed to enable the country export some of the items where it has some competitive advantage. The Act specifically states that any person who takes, causes to be taken, induces any other person to take or attempts to take out of Nigeria any of the goods specified in the Schedule to this

Act shall be guilty of an offence and liable on conviction to imprisonment for life. BusinessDay had reported that going by the provisions of this law, the government had embarked on the exportation of 72 tons of yams in 2017 illegally. ObadiahMailafia,formerdeputy governor, CBN, told BusinessDay that the AfCFTA agreement was an opportunity for Nigeria to diversifyanddevelopothersectors of the economy, look away from the total reliance on oil as a major source of revenue. He urged government to repeal the Export Prohibition Act as

it might hinder Nigeria’s participation in Africa market, and see the need to remove all factors that could hinder a fair trade. “We need to put things in place and make proper preparations for the Africa market, the export prohibition act is not useful at this time, it should be repealed as soon as possible. “We should target the foreign market with our products and encourage the local producers especially the agro producers, we have local farm produce that we can trade to other countries, and this is an opportunity for us a country,” he said.

He further explained that there was need for the government to promote a more enabling business environment, right mix of industrial policy as well as take necessary measure to ensure a more competitive economy. “Thegovernmentneedtotake measures to ensure that we avoid beingadumpinggroundforother products, this is a call for competitiveness. Nigeria as country has the human resources but lacks the right leadership, enabling environment, and right industrial policy to ensure a fair trade. “Also, before the commence-

Absence of governing councils responsible for communal clashes in Cross River – Peter Odey MIKE ABANG, Calabar

ajority leader and member representing Ogoja State Constituency in the Cross River State House of Assembly, Peter Odey, has attributed absence of governing councils at the local level as one of the factors responsible for the countless communal conflicts in the state. Odey made this assertion weekend in his office during an interactive session with journalists. Expressing his wish for a democratically elected government at the local level, Odey stressed that the eighth Assembly had persistently asked for the conduct of election at the local level. “It has been my wish for us to have an existing local government system in place. I am in support of a democratically elected local government system in Cross River State, and if there is anything the House has done, we have persistently advised the Executive Government to conduct local government elections,” he said. On issue of communal conflicts and how it relates to government at the local level, he said: “I also think that part of these communal clashes we do have in our various local government areas is because of lack of government at that level. Like in Odukpani now, if you have a local government chairman there, he becomes the Chief Security officer of that area and he will ensure that there is peace within the area. And so, that will help governance in general.” The two-term member believes that in the event there were councillors, for instance, they could lay hands on firstclass information as to misunderstandings between one district and the other. Lamenting the poor state of affairs at the local level of government, he said, “If you go to Ogoja right now and get into the local government secretariat, it looks dead. The activities down there are not helping at all. www.businessday.ng

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ment of this trade we need to ensure that we have measures put in place to monitor the quality of products that are allowed into the country,” he said. Auwal Musa Rafsanjani, executive director, Civil Society Legislative Advocacy Centre (CISLAC), is concerned that Nigeria’s gainful participation in the AfCFTA is threatened since there are no substantial goods that the country can trade in the Africa market apart from agricultural produce, most of which, unfortunately are still being hindered by laws, government policies and programmes.

Monday 22 July 2019

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news Passenger traffic spikes on Abuja-Kaduna rail corridor as insecurity heightens on road travels Stella Enenche, Abuja

buja-Kaduna rail service has come under immense pressure as many passengers have abandoned road travels, particularly on that route due to heightened insecurity along the highways. Some 549,862 passengers travelled through the Abuja - Kaduna rail corridor between January and June 2019, lower than what was recorded same time last year and even second half of last year. Statistics indicated that 71,623 travelled in January; 58,796 in February, 81,033 in March; 120,521 in April; 103, 776 in May, while 114,113 passengers used the platform in June, according to figures seen by BusinessDay. In the first quarter of 2019, a total of 211,452 passengers were conveyed, while traffic rose to 338,410 in the second quarter – even though the expected coaches have not been delivered, maybe due to the absence of a minister. Rotimi Amaechi, former minister of transport, had

assured that additional 10 new coaches were being expected from China in June, which has also put pressure on ticketing – a fundamental problem to passengers. Emmanuel John, an Abuja transport expert, is concerned that the Nigeria Railway Corporation (NRC) cannot cope with the current surge in passenger traffic due to the present manual ticketing system. “The truth is that, the upsurge in passenger traffic didn’t start today, it’s been on since last year as a result of the insecurity and also a greater majority of businessmen who drive cars have chosen to use the train, which is a positive development. Of course, that is one of the purposes the rail is supposed to serve - reducing the number of cars on the road. But the challenge now is that, the system is not coping with the upsurge. There is no increase in the number of coaches. “What is critical however is that, I can’t understand what is wrong with us (NRC) that we can’t use technology for the admin-

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istration of the ticketing. Elsewhere, you don’t need to go and queue for the tickets; you don’t need to pay cash to anybody. Nobody can hoard a ticket and keep for another person because, it is transparently done online. And the processes of doing it online cost nothing. “In fact, it is more expensive to do it physical than to do it online, but we have a situation where the entire system is not ready to open up to reality,” John said. The system cannot progress the way things are, he said, saying, “That train that you see today, is only addressing the need of the big men who already own car, but the poor who are supposed to be the target of the train cannot afford it. It is not serving the general public purpose as it is with rail system across the world.” Another deficiency is the difficulty to bridge what he calls the “last mile gap‘’ – meaning “If I enter the train, the remaining part of my journey to my destination, how do I complete it? It is not factored into the system and that makes the

entire process expensive for the general public to use.” On whether the rail corridor has contributed to economic growth in both cities, John said, “contribution to economic activities in this case is a relative term. However, the arrival of the train is an improvement because if you don’t have it at all, we loss.” Victor Adamu, operations manager, Abuja-Kaduna train service, raised the hope that the new coaches would probably arrive before the end of the year, while the e-ticketing that ought to ease the process had reached an advanced stage. On poor lightening on the rail corridor, Adamu said, “There is a project going on to lighten the car parks, adjoining roads that lead to the train station. “A committee has been set up comprising the Ministry of Transportation, Ministry of Works and the NRC. They are working on modalities. They have gone round the station, however, authorities have started making plans,” Adamu told BusinessDay.

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College of surgeons accredit 3 Ojukwu varsity medical courses Emmanuel Ndukuba, Awka

he West African College of Surgeons (WACS) has accredited three courses of Chukwuemeka Ojukwu University Teaching Hospital (COOUTH), Awka, Anambra State. The Chief Medical Director of the hospital, Basil Nwankwo, made this known on Friday in Awka, saying WACS had granted full accreditation to COOUTH courses in obstetrics and gynaecology, and partial accreditation for surgery. Nwankwo said the hospital now attended to no fewer than 9,000 patients monthly as against 3,000 some years back, while commending the state governor, Willie Obiano’s investment in the hospital. He said the quest to reduce capital flight due to medical tourism abroad cloud be solved by upgrading hospitals in the country. “We have seven mega laboratories donated by USAID in each of the geopolitical zones, and that of South East in COOUTH, Awka. The mega laboratory can conduct 510 samples for virological tests,” he said. @Businessdayng

The CMD said the donor agencies and the state government had injected not less than N2 billion in the upgrade of facilities in the hospital, recently. He stated that a committee had been put in place to look into the grievances of doctorate of the institution that resulted in a two-month strike. He affirmed that a consultant had also been engaged to work out the doctors’ remunerations as appropriate. “One of the reasons the resident doctors embarked on industrial action which they called off this week was the problem of diagnostics and this has been resolved by the full accreditation of our courses by the West African College of Surgeons. “COOUTH now has full accreditation in pharmacy, obstetrics and gynaecology, paediatrics and surgery, which had gotten accreditation. “This success story is a product of the Anambra government’s determination to ensure good health care delivery to the people,” he said.

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Nigerian power sector: Opportunities and threats

Bashorun J.K Randle

commend the President of King’s College Old Boys Association, Alhaji Kashim Imam for tenaciously holding on to his mandate having won an election that was manifestly free and fair. No fear of annulment!! Next week, our nation will on June 12, 2019 lament the tragedy of the cancellation of the election of Bashorun M.K.O Abiola as President of our beloved nation on June 12, 1993 – twenty-six years ago. He ended up in solitary confinement for almost five years before paying the supreme sacrifice on July 7, 1998 after allegedly drinking a cup of tea. Just before the commencement of today’s proceedings, Alhaji Kashim Imam, his Deputy Alhaji Jani Ibrahim and I sat down together to drink tea and coffee. Should anything happen to any of us, you know who to blame!! As for the matter at hand, NIGERIAN POWER SECTOR OPPORTUNITIES AND THREATS, the guest speaker Lolu Adubifa, Managing Director of Lavayo Energy Advisors has delivered a wellresearched and thoroughly riveting paper which under normal circumstances would have earned him a distinction. Alas, he is a product of Hyde-Johnson’s House and the best those of us from Harman’s House would concede is “satisfactory”. A mere pass mark. However, what is beyond doubt is that he has mastered the subject thoroughly and his presentation was excellent notwithstanding the faulty microphone and several power failures. From King’s College, he proceeded

to universities in both the United States and Britain. Much of what he said reminded me of a similar lecture I attended in Boston, Massachusetts, United States of America. On the podium were two Nobel Prize winners – one was a Professor of Electrical Engineering at the Massachusetts Institute of Technology (MIT) and the other was a Professor of Petroleum/ Geology at Harvard University. Their joint presentation was tagged as “A Case Study of Zimboda” – a country which has thoroughly messed up two of its most critical power sectors – electricity and petroleum/gas, through reckless incompetence combined with endemic corruption to the detriment of its economy, social fabric and security with self-evident consequences for industry, agriculture, employment and virtually everything else. According to them, the brutal systematic failure in the power sector has been replicated in the oil and gas sector of the nation. By way of contrast, over the same period of twenty years, the US has been able to create twenty million additional jobs and added $47 trillion in wealth. It is only after listening to Lolu Adubifa that it dawned on me that the country on which the two exceptionally gifted professors based their case study is none other than our beloved Nigeria. Sadly, the two eminent professors concluded matters by suggesting that in stark reality, not all problems can be solved. That should earn them another Nobel Prize!! Fortunately, Lolu Adubifa is of a more sanguine disposition. Indeed, he has assured us that even in the midst of the overwhelming ruins of the power sector (generation, transmission and distribution) as well as the oil and gas upstream, midstream and downstream sectors there are still vast opportunities for smart chartered accountants and sleek lawyers to make a killing. I suspect that he is a convert to the thesis canvased by Professor Edward de Bono of Cambridge University, England that in moments of despair in our search

for solutions, the answer is not likely to come from logical linear thinking. Rather, for salvation and rescue we have no choice but to resort to lateral thinking. Professor de Bono has also held faculty positions at the universities of Oxford, London and Harvard. Maybe that is sufficient justification for us to sacrifice this fine Saturday morning to the lecture delivered by our distinguished speaker who has reinforced our hope for the future of our beloved nation – and by extension, the restoration of King’s College, Lagos to its former glory. From 1957 to 1963, I was a beneficiary of the core values of the College and I can testify that many of those listed on the “Hall of Fame” roll - Sir Adetokunbo Ademola (Chief Justice), Sir Samuel Manuwa (Chief Medical Adviser/Surgeon); Sir Louis Mbafeno (Justice of the Supreme Court); Judge Charles Dadi Onyeama, CFR (Justice of the Supreme Court); His Royal Highness Oba Adeyinka Oyekan (Oba of Lagos); Dr. Flavius Abiola Akerele; Chief J.K. Randle (my father);...... spared neither time nor energy to extol the enduring virtues of King’s College and the attributes expected of old boys of the College – hard work, uprightness, patriotism, loyalty, sportsmanship. After we would have concluded our deliberations on “The Nigerian Power Sector – Opportunities and Threats”, I hope to persuade The President and Deputy President of King’s College Old Boys Association as well as the new Principal of the College (“PKC”), Mr. Andrew Agada; Mr. Yinka Oduntan, the Chairman Parents Teachers Association; Mr. Lolu Adubifa and other old boys who are here (I understand that the students are on mid-term break) to tarry a while in the Assembly Hall so that we can deliberate further and reflect deeply on the crises which have engulfed our nation in various directions and from terrifying dimensions – invasion of herdsmen, banditry, armed robbery, kidnapping, hostage taking, corruption, drug trafficking, sabotage; rigging of elections etc. Without waiting to be invited, we have

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Without waiting to be invited, we have a mission – to turn the tide of history. The alternative is a cop out. We may choose to join the rest of Nigeria in their orgy of brutal indifference and subversive inertia. Another option is to lower our expectation and wait for heavens to fall

a mission – to turn the tide of history. The alternative is a cop out. We may choose to join the rest of Nigeria in their orgy of brutal indifference and subversive inertia. Another option is to lower our expectation and wait for heavens to fall. However, that would run counter to the exhortation and command in our school song: “When the call is sounded, we must answer HERE!!” This is our nation’s defining moment and it is a clarion call by the bugle for heroism in the face of adversity. It is not sufficient to preach to the nation: “You cannot win the race on a stolen horse.” Thankfully, Nelson Mandela has provided us with a powerful minimum entry level: “Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.” Of our own free will we must admit that King’s College has conferred on us certain privileges, knowledge, learning and character at public expense. The critical issue is what has the nation received in return? We cannot dodge our responsibility to reflect critically on the conduct of old boys of King’s College (KCOBs) when they serve at the highest level in the public sector (particularly in politics) or in the private sector. In the past, it was taken for granted that they would demonstrate patriotism, integrity and selflessness regardless of the temptations/opportunities rather than subscribe to the self-serving lowest common denominator which would provide them with the excuse – everybody else is plundering and shafting the nation so why should they (KCOBs) be any different?

Note: the rest of this article continues in the online edition of Business Day @ https://businessday.ng Randle is Chairman/Chief ExecutiveJK Randle Professional Services Chartered Accountants

Reminiscences from Dick Kramer’s “factory of professionals”

hen, nineteen years ago, I was employed by the leading global professional services/accounting/ consulting firm, Arthur Andersen, I did not think that the organization was going to have a significant impact on my career and certain life choices. My career journey to that inimitable firm was fortuitous. I had won the Andersen Honours List, an award instituted by the firm to recognize best ten (10) students in each of five (5) selected universities at the time- OAU Ife, ABU Zaria, University of Ibadan, University of Lagos, and University of Nigeria Nsukka. It turned out that out of the 10 students picked for the award in ABU Zaria, I was the only one from the entire Kongo Mini Campus. This first contact eventually encouraged me to make the trip to Lagos to submit my curriculum vitae at the firm’s Gerrard Road Ikoyi office. I was invited for the recruitment test and the ensuing rigorous set of interviews; as they say, the rest is history. Unequivocally, the firm Arthur Andersen (now KPMG Nigeria) was the Holy Grail among the ‘big 5’, globally-acclaimed multi-disciplinary firms, starting from 1978 when it began operations in Nigeria followingthe work of a young American, now a grand old 85-year old man, Dick Kramer. In those times, and till today, best graduates of diverse disciplines were employed there; the firm deliberately sought the best people as a policy. In a tribute to Dick Kramer(Officer of the Federal Republic-OFR-, Founder/Vice Chairman Nigeria Economic Summit Group, NESG,

President Harvard Business School Association of Nigeria, HBSAN, Head of Technical Team/ Member Vision 2010 Committee, Recipient of Zik Prize in Leadership, Member Lagos Business School-LBS- Advisory Board, etc), who finally leftNigeria, a few weeks ago, I discuss my following takeaways from the firm: a. Integrity: The firm had a mantra called “think straight, talk straight”, i.e. maintaining integrityin both official and personal matters was sine qua non. As an employee, you were praised, and not reprimanded,if you lost a potential customer’s business becauseof any hint of threat to personal or official integrity. b. Professionalism: You just had to get the job done; no consideration was given for cronyism, bootlicking, ‘eye-service’, being a ‘yes man’, etc for career growth. The level of professionalism was almost an obsession. c. Drive for competence, confidence, and healthy competition among employees: The firm provided staff with very challenging, but professionally beneficial exposure. You could not work in the firm and be timid; even if you had the trait owing to initial socio-cultural circumstances, you would beweaned off it. d. Early exposure to senior-level clientele: It was the norm at the firm to expose young consultants to rigorous projects with executive management and Board of Directors of multinational organizations and big local conglomerates. At that time, very, very few organizations provided that opportunity. e. Absolute objectivity in career progression/

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appraisal system: The system was pivoted on concrete bases, and you could easily determine your career path/future before the formal process commenced. It isa culture I am yet to find on that scale in any organization in Nigeria or elsewhere. f. Challenging, fast-paced work environment: It was an organization where laggards were not entertained and where ‘coasting along’ or merely getting by was an aberration. The case was one of ‘shape up or ship out’; without exception, without bias. g. Inculcating the “can-do-spirit” in staff: In many instances, you got taken to the deep end of clients’ significant projects across diverse sectors. In response, you went beyond the call of duty in consonance with your career goals and the firm’s growth. h. Mentorship: It was given that the firm was an agglomeration of very smart people, yet, supervisors provided the platform for mentoring, without any negative effect on objectivity and merit. i. Knowing something, however little, about almost everything: Owing toyour diverse clientele in various sectors, you had opportunities for applied learning regarding so many things. j. Other diverse skills: The make-up of the true professional was accentuated at the firm. There, skills such as business/opinion/report writing, presentation, listening, coaching, negotiation, etc, were formed, honed, and in some cases, mastered. As I attended every single send-offsession held for Dick Kramerand his ever-supportive wife, Wanda, in June: on June 14, by Andersen

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Tajudeen Ahmed Tax; on June 20, jointly by the three legacy firms of KPMG (formerly Arthur Andersen), Verraki (formerly Accenture), and African Capital Alliance; on June 24, by Business Day Editorial Advisory Board; and on June 28, during KPMG Alumni Cocktail 2019; I sincerely wished that our country could have many more Dick Kramers, who would continue to improveand extend the frontiers regarding integrity in corporate and personal affairs, innovative thinking, competence and meritocracy, and unwavering optimism about the future of our dear country, Nigeria, in spite of obviously debilitating challenges.

Note: the rest of this article continues in the online edition of Business Day @https:// businessday.ng Tajudeen Ahmed, FCA, HCIB, a strategy expert, with several years of senior management experience in consulting, commercial banking, and FMCG, is the General Manager/Group Head Business Development at BUA

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Monday 22 July 2019

BUSINESS DAY

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Nigeria’s growth imperative

Patrick Atuanya

he United States economy expanded by 3.1 percent in the first quarter 2019, after expanding by 2.9 percent in 2018, while the Chinese economy (second largest economy globally) grew by 6.6 percent in 2018. The United States has the largest economy in the world at $21 trillion, according to data from the International Monetary Fund (IMF), China follows next, at $14 trillion. An economy the size of the US which is expanding at a 3 percent clip implies new economic output of around $612 billion being created annually, while for China (expanding at 6.6%) it means $924 billion of new economic activity/expansion (assuming exchange rates remain fairly stable in the period). Both economies are creating on an annual basis new economic activity larger than Nigeria’s annual economic output of about $440 billion. More worrisome though is the fact that these 2 economies (U.S and China) bumping up against the ‘law of large numbers’ (wherein if a firm, company or economy becomes bigger, high growth rates become increasingly difficult to maintain), are outperforming Nigeria which is growing from a very low base.

In the past four years Nigeria’s annual growth rate has averaged: 2015 (2.8%), 2016 (-1.5%), 2017 (0.83%), 2018 (1.9 %). Nigeria’s economy expanded 2.01 percent in Q1 2019. While the 2015 growth rate of 2.8 percent was the weakest level since 1999 and down from 6.2 percent recorded in 2014, there is still no sign that growth is set to return to levels (circa 7% per annum) needed to lift millions of Nigerians out of poverty. This is frankly unacceptable and threatens to bestow a lost decade of poverty, unemployment, misery and worsening infrastructure/quality of life to the ever expanding population of Nigerians. It is instructive that Nigerian economic managers do more than pay lip service to growth as social safety net programmes or dishing out of ‘free’ money by the State (in the form of intervention programmes) to the so called poor can do no more than tinker at the edges. The Federal Government must know that there is no substitute for growth and market reforms for lifting millions of Nigerians out of poverty. It must also know that it is failing woefully in that regard right now and must duly change course. Since initiating market reforms in 1978, China has shifted from a centrally-planned to a more market-based economy and has experienced rapid economic and social development. China’s GDP growth has averaged nearly 10 percent a year—the fastest sustained expansion by a major economy in history—and has lifted more than 800 million people out of poverty (World Bank). China reached all the Millennium

Development Goals (MDGs) by 2015 and made a major contribution to the achievement of the MDGs globally. India another major global economy (GDP $2.85 trillion) has between 1990 and 2013, pulled some 170 million people (the second-most number of people in the world) out of poverty, reducing the number of its citizens living in extreme poverty by 25 percent. During the same period, life expectancy in the country rose by more than a decade (McKinsey Global Institute, MGI). The World Bank forecasts that India will be the world’s fastest growing major economy for the next 3 years with GDP growth numbers exceeding 7 percent annually. Getting your economy to expand at 7 percent per annum usually entails hard work including pro-growth government policies, attracting and keeping major global companies and manufacturers, and streamlining regulations. McKinsey Global Institute in a recent report found that big companies are driving GDP growth in countries that are growing fast and lifting their citizens out of poverty. MGI found that outperformers identified in the report have almost twice as many large firms (publicly listed ones with annual revenue of over $500 million) as other developing countries, adjusted for the size of the economies. Presence of big firms also leads to clusters of innovation and increased productivity. In Nigeria the urgent need for growth cannot be overemphasised. The negative wealth effect from falling stock markets, poor fiscal position of the Government (Federal and State),

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This is frankly unacceptable and threatens to bestow a lost decade of poverty, unemployment, misery and worsening infrastructure/ quality of life to the ever expanding population of Nigerians

lack of jobs/opportunity for millions of young graduates, all derive one way or another from low or anaemic GDP growth and absence of reforms. Nigeria’s current situation is made more baffling by its infrastructure needs in all sectors. Whether it is roads, high speed rail, subways for cities, bridges, broadband/ high speed internet, hotels, food processing, car assembly, power, services, restaurants, manufacturing, food processing, Healthcare, quality education, oil refining, housing, and so on, there is massive unmet demand in Nigeria. This means Nigeria is very far from capital misallocation like being done in some parts of China and so can attract liquidity from within and outside to make these capital investments, provide a return on investments, create jobs, boost growth sharply and provide a better quality of life for most of its citizens. Even with its impressive economic performance Chinese policymakers are still laser like focused on growth and understand its far reaching implications for employment, income and stability. China is targeting growth of about 6.2 percent over the next two years to meet the Communist Party’s longstanding goal of doubling gross domestic product and incomes in the decade to 2020, and to turn China into a “modestly prosperous” nation. It is sobering that while a country like China that is light years ahead of Nigeria is still setting high growth targets, Africa’s largest and arguably most important economy seems resigned to mediocre economic performance. Atuanya is the editor of BusinessDay. Email: patrick.atuanya@businessday.ng Twitter: @patrick_atuanya

The Nigerian code of corporate governance on board appointments “A written, clearly defined, rigorous, formal and transparent procedure serves as a guide for the selection of Directors to ensure the appointment of high-quality individuals to the Board.” Principle 12, Nigerian Code of Corporate Governance, 2018 (NCCG). he fate of an enterprise, shareholders, customers and other stakeholders is to a large extent dependent on the quality of leadership and oversight provided by the Board of Directors. To effectively discharge its responsibilities, it is imperative that the Board comprises of an appropriate balance of skills and diversity, without compromising competence, independence and integrity. The traditional practice of choosing directors based exclusively on their “visibility” or “popularity”, is not in sync with the evolving demands of good corporate governance. Rather than focus on assembling ‘glittering ornaments’, regulators, investors and other stakeholders are now demanding a more structured and transparent approach to director selection and appointment to the Board. A formal and transparent process is as critical to gaining the confidence and trust of all stakeholders as it is to improving Board effectiveness. The starting point in the recruitment of new directors is to determine the skills set and experience gaps on the Board and then define a set of criteria against which prospective directors will be evaluated. The task of selecting and nominating candidates for appointment to the Boards is typically delegated to a Board Committee (Nomination or Governance). The Committee undertakes an initial assessment of the suitability of prospective candidates before making recommendations to the Board. The Committee, in defining selection criteria and determining the skills and experience gaps on

the Board, is expected to gather input from a variety of sources, including other Directors. A clearly defined profile or competency matrix should be developed, distinguishing between qualities that are needed and those that are merely desirable. It should also include those qualities needed now and in the short to medium term. The critical qualities to look out for in a Board member can be grouped into three main categories namely; essential skills and experience; individual attributes and the diversity that the individual is bringing to the Board in terms of gender, ethnicity, age and other diversity considerations. The NCCG recommends that while determining the requisite number of its members, the Board should consider the appropriate mix of knowledge, skills and experience, as well as the need for sufficient number of members that qualify to serve on committees. The Code recommends that diversity should be considered in the selection and nomination of new directors as it affords the Board the benefit of diverse perspectives and experience when dealing with complex issues. Careful consideration should also be given to conflicts of interest when considering prospective candidates, These will include individuals who are sitting on the Boards of companies in the same industry or business sector and those who have relationships that will always put them in situations of conflict of interest The Board should be mindful of public perception and seek to avoid situations where there might be perceived or real conflict of interest. It is good practice to have a decent pool of candidates and prospective candidates may be sourced from recommendations by other Board members. The search should however be extended beyond the contacts of sitting Board www.businessday.ng

members to make the process more robust. It is good practice to use Consultants and professional search firms. Potential candidates are then shortlisted via a thorough assessment to determine suitability. The assessment will match the candidates’ background, skills, qualification and experience against the defined criteria and the specific needs of the Board at the material time. The Committee should determine at this stage, if there are any candidates that should be taken off the list due to issues such as conflict of interest, independence or because they already sit on too many boards. Prospective directors also need to perform their own due diligence on the target entity. Before associating with any organisation, a director should first ensure that its values and objectives align with theirs. Formal and informal interaction with sitting Board members and Management, reading recent annual reports, and available public disclosure should provide enough information about the organisation. Where it is a new venture, a prospective director should assess the professional and personal track record and antecedents of the founder. As part of the assessment process, it is good practice to have the candidates meet informally with the Board Chairman and an independent director to determine appropriate fit and chemistry. Whilst a prospective director might very well tick all the right boxes in terms of qualification, expertise and experience, he/she may have the potential of unsettling the dynamics on the Board. The Chairman is usually well placed to undertake this assessment. The Committee thereafter recommends the most suitable candidates to the Board for further consideration. Typically, the Articles

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Bisi Adeyemi of Association allow the Board to fill vacancies on the Board and have such appointment ratified by shareholders at the next Annual General Meeting. Upon appointment, the new directors should undergo robust induction and onboarding as this is critical to the Board effectiveness. The Board should periodically review its composition and refresh its membership to ensure it always has the appropriate complement of skills set and diversity to deliver on its mandate effectively. Boards are encouraged to pay sufficient attention to succession planning and develop medium-term succession plans that identify the balance of experience and skills that will be required over the short to medium term to maximise Board effectiveness. In doing so, the Board should consider term limits, independence as well as Chairman and CEO succession.

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 comment(s) and reaction(s) to badeyemi@dcsl.com.ng. For more articles, kindly download the DCSL Knowledge Hub via this link https://www.dcsl.com.ng/index/pages/page/dkhub

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Monday 22 July 2019

BUSINESS DAY

EDITORIAL Publisher/CEO

Frank Aigbogun editor Patrick Atuanya DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Chuks Oluigbo EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, STRATEGY, INNOVATION & PARTNERSHIPS Oghenevwoke Ighure GENERAL MANAGER, ADVERT Adeola Ajewole ADVERT MANAGER Ijeoma Ude FINANCE MANAGER Emeka Ifeanyi MANAGER, CONFERENCES & EVENTS Obiora Onyeaso BUSINESS DEVELOPMENT MANAGER (South East, South South) Patrick Ijegbai CIRCULATION MANAGER John Okpaire DIGITAL SALES MANAGER Linda Ochugbua

Examining the five-year agenda of the CBN

very central governor brings to bear on this office his or her wealth of experience garnered over years in various sectors of the economy including academia and the financial industry. For Emefiele, his experience was not in doubt, having been a key player in Nigeria’s banking sector. To his credit, he employed his toolkit in the last five years to address the challenges of the economy that he inherited. Expectedly, prominent among the pillars of Emefiele’s new plan is his focus on development finance. In its simplest description, development finance is the approach of allocating a nation’s financial resources without unrestrained reliance to the market mechanism as the sole determinant of where resources are channelled or deployed. In other words, it means a guided approach to the allocation of scarce and therefore costly financial

resources to sectors that are regarded, at any given point in time, as the most important in the economy based of course on the needs of the time. In his first five years, Emefiele made this stance quite clear. In pursuit of this policy approach, the CBN executed numerous intervention programmes, largely funding arrangements with the express purpose of raising domestic production in selected sectors. These have included the highly popular Anchor Borrowers, Micro Small and Medium Enterprise Development Fund (MSMEDF), Commercial Agricultural Credit Scheme, and the Real Sector Support Facility, among others. The Governor has embarked on what he calls “targeted development finance”, to boost the output of 10 commodities. The focus on these 10 commodities is hinged on the amount that Nigeria spends importing them. If they produced and processed locally as much as 10 million jobs would be generated in five years, reckons the CBN.

Laudable as this approach is, there is an inherent danger. It shifts the focus of the institution from its fundamental role as the regulator of the financial system. It makes the CBN a player instead of a regulator. There is a downside: neglect of macroeconomic stability, its core mandate, which is anchored on price stability. Before the regulator drifts too far away from its main functions, we do here offer a caution: the CBN should not stretch the development finance model beyond what it has done already. Effective regulation will allows financial institutions play their traditional roles. By 2023 the CBN governor also wants to expand the number of Nigerians with access to banking services to 95 percent. Yet Nigeria is struggling with the target of 80 percent by 2020. The revised target appears too ambitious. But given the current efforts being made, anchored largely on technology, the target may not be farfetched as it seems. The collaboration among

the nation’s banks under the Shared Agent Network Expansion Facility (SANEF) could hasten this process. Emefiele also struck a pleasant chord in his second-term plan when he announced a plan to recapitalise banks in the coming years, and position them among the top 500 in the world. This is a logical continuation of a process that started with the Charles Soludo era (2004-2009) and continued with Sanusi Lamido Sanusi (2009-2014). One undisputable justification of a recapitalisation of the banking industry now is the depreciation of the naira over the years. At today’s “official” exchange rate of 306 naira/dollar, the minimum capital base N25b for banks is a paltry $81.699m. As Soludo argued 15 years ago when he raised the capital base from merely two billion naira, the low capital base of Nigerian banks remains a constraint for them to take on significant transactions. Recapitalisation will change this.

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Monday 22 July 2019

BUSINESS DAY

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AfCFTA: Nigeria will be big loser without productive and trade capacities global Perspectives

OLU FASAN

he biggest economic development in Africa since the start of its post-colonial era is the creation of the African Continental Free Trade Area (AfCFTA), which would be the world’s largest free trade area, and, potentially, the world’s largest common market, given Africa’s population of 1.3 billion. So, it’s impossible to stop talking about AfCFTA and, indeed, Nigeria’s place in it. Well, I haven’tstopped talking about it– in this column and elsewhere! Last week, I hailed Nigeria’s eventual signing of the AfCFTA agreement and urged that the signingmust be meaningful and not perfunctory. In other words, having signed up, Nigeria must use the agreement as a trigger for far-reaching domestic policy and institutional reforms to enable it not only to faithfully implement its AfCFTA commitments but also to benefit fully from the agreement. This week, I argue that Nigeria could be one of the biggest gainers, or biggest losers, from AfCFTA, depending on its productive and trade capacities. For well over a year, Nigeria’s reluctance to sign the AfCFTA agreement attracted huge hue and cry because of its importance both as Africa’s most populous country and, thus, single largest market and as Africa’s largest economy, with a GDP of $376 billion, around 17% of the continent’s GDP of $2.19 trillion. Yet, despite Nigeria’s relative importance, the reality is that its refusal to join AfCFTA would have hurt it more than it would have hurt Africa. To be sure, AfCFTA would have gone ahead without Nigeria. In 1947, the United States’s refusal to ratify the treaty establishing the International Trade Organisation led to the demise of the proposed

global trade body because the US, after World War II, was the world’s dominant and indispensable economy. But Nigeria is 2019 was not like the US in 1947, and its refusal to join AfCFTA would not have killed off the agreement, as the US’s nonratification of the ITO treaty killed off what would, then, have become the trade component of the Bretton Woods institutions after the IMF and the World Bank! Of course, without Nigeria’s membership, AfCFTA members would not have access to the country’s 200 million-strong market. But, in turn, Nigeria would not have access to AfCFTA’s 1.1 billionstrong market. So, both in relative and absolute terms, Nigeria would have been the biggest loser from non-membership of AfCFTA. Add to that the fact that not participating in AfCFTA wouldn’t have stopped goods from being smuggled into Nigeria from AfCFTA countries, thanks to Nigeria’s extremely porous borders, especially when most its proximate neighbours are in AfCFTA. So, Nigeria would have been the biggest loser had it not joined the AfCFTA. But Nigeria has finally joined the trade bloc. So, now what? Well, sadly, it could still be the biggest loser unless it has the productive and trade capacities to benefit from the intra-African trading opportunities created by the agreement. AfCFTA opens up huge opportunities for Nigeria’s manufacturing and services companies, so it has the potential to be one of the biggest winners from the agreement. But it could also be the biggest loser if it cannot produce efficiently and competitively to increase its intra-African trade significantly. Truth is, currently, Nigeria is doing extremely poorly in terms of its intra-African trade. In an analytical paper entitled “The African trade profile for manufactured goods”, written by the economist Ron Sandrey, who drew on data from the International Trade Centre, ITC, it was clear how appallingly Nigeria fared in exporting to the rest of Africa. While South Africa, the continent’s industrial powerhouse, accounted for 48% of intra-African manufactured exports in 2014, followed by Egypt at 7%, Nigeria languished at 0.8%. When the whole of exports, rather than just manufactured products, are considered, again, unsurprisingly, ac-

cording to African Trade Statistics (2017), South Africa dominated, with a share of intra-African exports of between 27 to 30% over a period of 7 years (i.e. 2010 to 2017), while Nigeria’s share was 8% during the same period. Of course, no surprises, Nigeria is also hardly importing anything from the rest of Africa! Although neighbours and near-neighbours tend to dominate trade destinations, Nigeria is not good at selling to its neighbours. The problem is not just with wider intra-African trade, but also intraECOWAS trade. For instance, despite the ECOWAS Trade Liberalisation Scheme, Nigeria exported only around 6% of its total exports to other ECOWAS countries in 2016, according to the WTO. The National Bureau of Statistics recently reported that, in the first quarter of this year, Nigeria exported goods valued at N300.6 billion to ECOWAS member states, representing 32.8% of total merchandise exports to Africa. Yet, the fact remains that Nigeria’s exports of manufactured products either to ECOWAS countries or to the rest of Africa remain very low. Given that Nigeria is not doing well under ECOWAS Trade Liberalisation Scheme, can it do better under AfCFTA free trade regime? The jury is out! Yet, here’s the problem. With AfCFTA, Nigeria would be expected to significantly dismantle its tariff and non-tariff barriers. Now, if other African countries boost their productive and trade capacities to take advantage of AfCFTA’s free trade regime, they would penetrate the Nigerian market, not through smuggling or dumping, but legitimately by being able to produce and trade efficiently and competitively. But if, on the other hand, Nigeria doesn’t turbocharge its capacities to produce and export competitively to the African markets, it wouldn’t be able to access those markets. So, you could have a situation where AfCFTA members are exporting more to Nigeria, but Nigeria isn’t selling more to the AfCFTA markets. Of course, then, government officials and industry lobbyists would respond with cries of “smuggling”, “dumping”, “unfair trade” etc, and populist calls for import prohibitions!

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But if... Nigeria doesn’t turbocharge its capacities to produce and export competitively to the African markets...you could have a situation where AfCFTA members are exporting more to Nigeria, but Nigeria isn’t selling more to the AfCFTA markets

compete in AfCFTA markets. As he put it, “Inferior products do not stand a chance to compete in that market, so we have to increase the quality of our products”. That’s the message that the Buhari government should be helping Nigerian manufacturers to understand and internalise. Sadly, Nigeria is only interested in production, not productivity; in quantity, not quality. The Central Bank’s protectionist interventions are designed to boost local production, without concern for productivity, by throwing money at Nigeria’s chronically inefficient agricultural and manufacturing industries, while also shielding them from international competition through import prohibitions. Yet, to succeed, Nigeria must embrace the idea that trade liberalisation can, through efficiency gains, technological upgrades, innovation etc, help develop its competitive productive capacities. It must see AfCFTA not as a threat but as an opportunity to build its productive and trade capacities. Recently, Olusegun Awolowo, the hardworking and competent chief executive of the Nigerian Export Promotion Council said that Nigeria had identified 22 sectors that could replace oil as the country’s biggest foreign exchange earners. According to him, “We are hoping that in the next 10 to 15 years, we will be able to raise $150 billion from sources outside oil”. Great and laudable ambition, butit would be a pipe dream unless it is predicated upon Nigeria building its productive and trade capacities, including tackling the problem of poor product quality by developing firstclass quality infrastructure. There are countless people who want Nigeria to be a major non-oil exporting nation. Richard Ough, the outgoing head of economic development at the Nigeria Office of the UK Department for International Development (DfID), who tweets frequently and positively about Nigerian products, is one of them. Well, I am another! But we all know that unless Nigeria uses trade agreements like AfCFTA to build its productive and trade capacities, including export quality, it would not be a great trading nation. Yet it should!

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

But the president of the Manufacturers’ Association of Nigeria, Mansur Ahmed, was absolutely right when he said recently that only quality products can

How do financial bubbles typically start?

any people still debate the causes of the global financial meltdown in 2008 and 2009. Most arguments have their merits and demerits, but the broad consensus is that many things came together create the set of conditions that led to the crisis. A crisis which still has repercussions until today. Firstly, in no order of importance, was the policy objective of the US federal government to boost affordable housing and improving home ownership rates. In the mid-1990s the US federal government set on a strategy to move home ownership rates from 64 percent which they were in 1994 to 70 percent by 2000. The “public” corporations whose mandates were to expand mortgage markets set out do their bit towards the implementation of this objective. Part of their strategy involved lowering the standards over what was considered a risky mortgage asset. Secondly, financial intermediaries like banks and other lenders flush with new technological tools created financial products which, while innovative, were difficult to understand. Mortgage debt from different home buyers and with different levels of risk were securitized and packaged together as assets whose quality was difficult to judge. Imagine a tomato seller took three baskets of tomatoes, one with very fresh tomatoes,

the second with just okay tomatoes, and the third with almost rotten tomatoes. Then mixed them all together, shared them equally into three baskets but made sure that the very fresh tomatoes were always on top. And then wrapped the baskets in plastic film and said you couldn’t open it until you bought it. The prices were very attractive though. The seller then got a respected market leader to announce that the baskets of tomatoes were okay. Financial institutions bought these securities of course. Finally, regulators had become a bit lax in their supervision of financial markets. Deregulation and self-regulation were key phrases of the decades before the crisis and this worked on the assumption that financial markets could regulate themselves, and if any participant misbehaved then they could just die and leave the system. The idea of systematically important institutions was left to the realms of theoretical academics. The macroeconomic gurus constantly reminded everyone that risk premia in financial markets was very low and that all signs pointed to a continued growth in credit. The funny thing is if you looked at US home ownership rates prior to the financial crisis the concoction of policies and innovations were a massive success. Home ownership rates stuck at 64 percent for the decade prior to 1994 www.businessday.ng

started growing. It grew consistently reaching 69 percent in 2005. I can imagine politicians and CEOs clapping for themselves and giving each other awards over their strategic policy goal on its way to being achieved. Of course, we all know how that all ended up. The global financial crisis was not new but represented a financial bubble which historically is a frequent occurrence, at least relatively. From the tulip mania in the Netherlands in 1636, to the Mississippi bubble in 1716, to the south sea bubble, to the Latin American debt crisis, and even to some extent the great depression. Here in Nigeria we cannot forget the stock exchange bubble which popped in 2008 and which continues to deter domestic retail investors from the stock market today. In all cases there is a common theme: liquidity flowing into assets whose fundamentals don’t support it. Over the past month the Central Bank of Nigeria has put out various policies all with the objective of stimulating lending to small and medium enterprises. Banks have been given three months to get their loan to deposit ratios to a minimum of 60 percent or face severe consequences. The incentives to park money at the central bank have also been cut with banks now only allowed to earn interest on a maximum of N2bn from its standing deposit facility. Rumors of more circulars waiting to

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ECONOMIST

NONSO OBIKILI be released to push liquidity into the SME lending spaces are rife. On the one hand the objective of incentivizing lending to SMEs to support growth is a noble one. SMEs are typically a key part of economic growth and job creation stories. But do the fundamentals support all the liquidity going to SMEs? Are there SMEs who can absorb all these loans, do some economic activity, and then generate enough profits to repay these loans? Because if there aren’t then we may simply just be creating the conditions for the next financial bubble. A bubble, like all the others, will show up in surprising places. As the famous saying goes: “the road to hell is paved with good intentions”. Dr. Nonso Obikili is Chief Economist at Business Day.

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Monday 22 July 2019

BUSINESS DAY

In Association With

Trouble in the Persian Gulf

A Balkan betrayal Earnings reprieve

America claims to have downed an Iranian drone Iran denies it

Is it time to worry?

NE MONTH after Iran shot an uncrewed American spy plane out of the sky in the Strait of Hormuz, America has returned the favour. On July 18th the USS Boxer, an American warship loaded with marines, zapped an Iranian drone that had approached within 1,000 yards and refused to “stand down”, according to President Donald Trump. The drone was taken out not by bullets or missiles, but by electronic warfare used to jam its signals. The Boxer and five other ships had been passing through the strait as a show of force, and Iranian helicopters and ships had been making close passes, according to the Wall Street Journal. On July 19th Iran claimed that all its drones are accounted for. “I am worried that USS Boxer has shot down their own [drone] by mistake!” tweeted Iran’s deputy foreign minister. America and Iran have a long history of drone dust-ups. A decade ago American jets shot down an Iranian drone flying 80 miles inside Iraq. In 2011 Iran went one better: it claimed to have nabbed one of America’s cutting-edge RQ-170 Sentinel spy drones, 140 miles inside its border with Afghanistan, by jamming the aircraft’s signals and feeding it false GPS data. Iran triumphantly produced several knock-offs based on the captured design. In subsequent years, Iran has complained bitterly of American drone flights near its land and maritime borders. In 2012 it began firing back. In November of that year Iranian jets shot unsuccessfully at an unarmed Predator drone flying in the Persian Gulf for the first time. America insisted that its aircraft was not in Iran’s airspace, which extends 12 nautical miles out from the coastline, but 4 nautical miles beyond that in international skies. The problem is that such things are hard to verify. A Predator travelling at higher speeds would cover the distance into Iranian airspace in mere seconds. Nor do American spy planes always broadcast their location. The American drone downed by Iran on June 20th appeared not to

Profits are down in America Inc

“I

T’S NOT that bad,” remarked Jamie Dimon, boss of JP Morgan Chase, of the global economy on July 16th. But, Wall Street’s favourite banker had to concede, business sentiment “is a little bit worse”. Prospects for American companies have indeed dimmed. Analysts expect earnings of the biggest among them, which have just begun reporting their latest set of results, to have

have its public transponder switched on. That is “aggressive” and “like driving with your headlights off at night”, says Steffan Watkins, an Ottawabased researcher who monitors open-source information on aircraft and ships. By contrast, American spy planes that fly near Russia tend to keep transponders on, to avoid misunderstandings. Mr Watkins also points out that America even seems to have used falsified transponder numbers to impersonate Iranian planes on occasion. These are risky tactics at a time when the Persian Gulf is thick with American military aircraft and Iranian missileers are likely to have twitchy trigger fingers. This week’s skirmish comes at a particularly sensitive moment. On the same day as the USS Boxer’s take-down, Iran’s Revolutionary Guards announced that they had seized a ship carrying 1m litres of oil and its crew of 12, accusing it of smuggling. In fact, that was probably the latest Iranian riposte to an intensifying campaign of American sanctions, as well as to Britain’s seizure of a tanker laden with Iranian crude oil off Gibraltar on July 4th. Britain said it believed the tanker was carrying oil to Syria. Iran denies this and accuses

Britain of breaking international law. Iran, crushed by the weight of sanctions, is eager to show it can impose a cost on America and its allies in turn. In May and June Iran was accused of planting mines on several commercial ships in the Persian Gulf. And on July 10th Iranian forces attempted to halt a British tanker, reportedly retreating only when a British warship trained its guns on the Iranian boats. The root cause of the crisis is America’s decision to walk away from a multinational nuclear deal signed with Iran in 2015. Though Iran remained in compliance with the deal for a year, in recent weeks it has begun breaking several of its provisions, such as caps on the quantity and purity of enriched uranium. On a visit to New York this week Iran’s foreign minister, Muhammad Javad Zarif, offered to give international inspectors greater access to Iran’s nuclear facilities if America would lift sanctions. That was meant to happen anyway in 2023, as part of the nuclear deal; Mr Zarif’s offer would simply accelerate the timeline. But it was the first concrete proposal from an Iranian government that, less than a month ago, said Mr Trump’s sanctions meant the “permanent closure” of diplomacy.

Making cosmetic tweaks to an old pact and slapping Mr Trump’s name on it is a tried-and-tested trick. In November America’s trade deal with Canada and Mexico was changed slightly, renamed USMCA and then embraced by Mr Trump. “Minimal changes could be enough to call it the Trump Agreement,” says Ernest Moniz, who played a key role in negotiating the original deal as secretary of energy in the Obama administration. But there is a small problem with attempting this solution for Iran, points out Nick Miller, a professor at Dartmouth: “to execute it, Trump would need to fire or ignore most of his national security team.” Mr Trump’s advisors have been busy trying to box in the president. In May last year Mike Pompeo, the secretary of state, insisted that Iran cease all enrichment as one of a dozen conditions to be laid down for a new deal. On July 18th John Bolton, Mr Trump’s national security advisor, tweeted that “one of the worst mistakes of the Iran deal, now on full display, was allowing Iran to maintain enrichment capabilities.” Such drastic new prohibitions would go well beyond the face-saving modifications that Iran is likely to accept. More aerial skirmishing probably lies ahead.

declined in the second quarter. This would mark two consecutive quarters of falling profits, the first such “earnings recession” since 2016. Coming just as the current economic expansion makes history as America’s longest ever, it raises the prospect of a long boom running out of steam. Bosses are getting twitchy. America Inc has enjoyed an extraordinarily good run since the country rebounded from the global financial crisis of 2008-09. The economy has grown, inflation has been low and interest rates rockbottom. Despite unemployment hovering below 5% wage pressures have been modest. All told, annualised corporate profits exceeded $2trn last quarter, nearly double the level a decade ago. President Donald Trump’s tax reform cut the corporate tax rate from 35% to 21%. This and his deregulatory efforts have freed up capital. Companies have used the windfall to buy back shares—reducing the amount of stock and superficially boosting earnings per share. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite, three leading share indices, hit record highs on July 15th. Today the mood in boardrooms is less ebullient. The latest survey by the Business Roundtable, a conclave of bosses (chaired Continues on page 19

Monday 22 July 2019

BUSINESS DAY

In Association With

The next 50 years in space

A new age of space exploration is beginning It will need the rule of law and a system of arms control to thrive

HE MOMENT when, 50 years ago, Neil Armstrong planted his foot on the surface of the Moon inspired awe, pride and wonder around the world. This newspaper argued that “man, from this day on, can go wheresoever in the universe his mind wills and his ingenuity contrives…to the planets, sooner rather than later, man is now certain to go.” But no. The Moon landing was an aberration, a goal achieved not as an end in itself but as a means of signalling America’s extraordinary capabilities. That point, once made, required no remaking. Only 571 people have been into orbit; and since 1972 no one has ventured much farther into space than Des Moines is from Chicago. The next 50 years will look very different (see Science section). Falling costs, new technologies, Chinese and Indian ambitions, and a new generation of entrepreneurs promise a bold era of space development. It will almost certainly involve tourism for the rich and better communications networks for all; in the long run it might involve mineral exploitation and even mass transportation. Space will become ever more like an extension of Earth—an arena for firms and private individuals, not just governments. But for this promise to be fulfilled the world needs to create a system of laws to govern the heavens—both in peacetime and, should it come to that, in war. The development of space thus far has been focused on facilitating activity down below—mainly satellite communications for broadcasting and navigation. Now two things are changing. First, geopolitics is stoking a new push to send humans beyond the shallows of low-Earth orbit. China plans to land people on the Moon by 2035. President Donald Trump’s administration wants Americans to be back there by 2024. Falling costs make this showing off more affordable than before. Apollo cost hundreds of billions of dollars (in today’s money). Now tens of billions are the ticket price. Second, the private sector has come of age. Between 1958 and 2009 almost all of the

spending in space was by state agencies, mainly NASA and the Pentagon. In the past decade private investment has risen to an annual average of $2bn a year, or 15% of the total, and it is set to increase further. SpaceX, Elon Musk’s rocket firm, made 21 successful satellite launches last year and is valued at $33bn. Jeff Bezos, the founder of Amazon, sells off $1bn-worth of his shares in the company each year to pay for Blue Origin, a space venture. Virgin Galactic plans to go public this year at a valuation of $1.5bn. As well as capital and ideas, the private sector provides much greater efficiency. According to NASA, developing SpaceX’s Falcon rockets would have cost the agency $4bn; it cost SpaceX a tenth of that. Two new commercial models exist or are within reach: the big business of launching and maintaining swarms of communications satellites in low orbits and the niche one of tourism for the rich. The coming year will almost certainly see Virgin and Blue Origin flying passengers on sub-orbital excursions that offer the thrill of weightlessness and a view of the curved edge of Earth against the black sky of space. Virgin claims it might carry almost 1,000 wealthy adventurers a year by 2022. SpaceX is developing a reusable “Starship” larger and much more capable than its Falcons. Yusaku Maezawa, a Japanese fashion mogul, has made a down-payment for a Starship trip around the Moon; he intends to go with a crew of artists as early as 2023.

Such possibilities could see the annual revenues of the space industry double to $800bn by 2030, according to UBS, a bank. Still further in the future, space development could remake how humanity lives. Mr Musk hopes to send settlers to Mars. Mr Bezos, the richest man in the world, wants to see millions of people making a living on space stations, perhaps before Armstrong’s footprint marks its centenary. At a time when Earth faces grim news on climate change, slow growth and fraught politics, space might seem to offer a surprising reason for optimism. But it is neither a panacea nor a bolthole. And to realise its promise, a big problem has to be resolved and a dangerous risk avoided. The big problem is developing the rule of law (see International section). The Outer Space Treaty of 1967 declares space to be “the province of all mankind” and forbids claims of sovereignty. That leaves lots of room for interpretation. America says private firms can develop space-based resources; international law is ambiguous. Who would have the best claim to use the ice at the poles of the Moon for life support? Should Martian settlers be allowed to do what they like to the environment? Who is liable for satellite collisions? Space is already crowded—over 2,000 satellites are in orbit and NASA tracks over 500,000 individual pieces of debris hurtling at velocities of over 27,000km an hour.

Such uncertainties magnify the dangerous risk: the use of force in space. America’s unparalleled ability to project force on Earth depends on its extensive array of satellites. Other nations, knowing this, have built antisatellite weapons, as America has itself (see Briefing). And military activity in space has no well-tested protocols or rules of engagement. America, China and India are rapidly increasing their destructive capabilities: blinding military satellites with lasers, jamming their signals to Earth or even blowing them up, causing debris to scatter across the cosmos. They are also turning their armed forces spaceward. Mr Trump plans to set up a Space Force, the first new branch of the armed forces since the air force was created in 1947. On the eve of the annual Bastille Day military parade on July 14th Emmanuel Macron, France’s president, also announced the formation of a new space command. In Heaven as it is on Earth It is a mistake to promote space as a romanticised Wild West, an anarchic frontier where humanity can throw off its fetters and rediscover its destiny. For space to fulfil its promise governance is required. At a time when the world cannot agree on rules for the terrestrial trade of steel bars and soyabeans that may seem like a big ask. But without it the potential of all that lies beyond Earth will at best wait another 50 years to be fulfilled. At worst space could add to Earth’s problems.■

Profits are down in America... Continued from page 18

by Mr Dimon), put confidence higher than the historical average and well above the level which would signal a recession. But it has slipped. The National Federation of Independent Business observes a similar decline in optimism among bosses of small and medium-size enterprises. Nearly four-fifths of S&P 500 firms that have issued guidance on financial performance for the latest quarter have indicated that earnings per share will fall year on year. Analysts’ forecasts reflect these sentiments. Profits in six out of eleven big industries may have declined from April to June compared with a year earlier (see chart). FactSet, a research firm, estimates an average drop of 2.8% for S&P 500 earnings, on top of a 0.3% dip the quarter before. Observers—and executives themselves—see three reasons for the darkening outlook. The most prominent is Mr Trump’s trade war with China. Doug McMillon, boss of Walmart, has warned that tariffs will lead to higher costs for the retail giant, which sells plenty of Chinesemade goods. David Herring, head of the National Pork Producers Council, this week told Congress that the lobby group’s members were suffering from Chinese retaliatory tariffs on American pork. Despite his friendly encounter with China’s president, Xi Jinping, at a G20 summit in late June, Mr Trump threatened this week to impose fresh tariffs on $325bn of Chinese imports. According to JP Morgan Chase, the new levies could tip the economy into a contraction. A survey of companies by the Institute for Supply Management (ISM) echoes such worries. A manager at a chemicals firm told ISM that the levies were increasing costs. Another at a metals company worried they would weaken global demand for its products. Trade frictions are “wreaking havoc with supply chains and costs”, according to an executive at electronics manufacturer. “The situation is crazy.”

Monday 22 July 2019

BUSINESS DAY

In Association With

A beacon flickering on a hill

The old American consensus on religious liberty is weakening But it has not disappeared altogether, as the State Department’s “ministerial on religious freedom” showed

TUDYING RELIGIOUS PERSECUTION, in all its ghastly forms, concentrates the mind. However Americans feel about the country’s domestic culture wars, most can agree in abhorring the imprisonment of Muslim Uighurs in China, the arrest and torture of Jehovah’s Witnesses in Russia, the jailing of so-called blasphemers in Pakistan. Such brutal assaults on basic religious liberty can make America’s internal debates on the term’s precise meaning seem rather petty. That universally felt horror was one impulse behind what Mike Pompeo, the secretary of state, called the largest human-rights meeting his department had ever staged. For the second year running he convened a “ministerial on religious freedom”, an event that is growing in scale and scope. This year’s, which concluded on July 18th, involved over 100 governments as well as 1,000 activists of every religious and political hue. Among the speakers were survivors of religiously targeted acts of terror over the past year: against Jews in Pittsburgh, Muslims in New Zealand and Christians in

Sri Lanka. Other purposes were being served too: for Mr Pompeo and Mike Pence, the vice-president, such events are a way of reassuring their fellow evangelicals, concerned about co-religionists in China and the Middle East. But it would be unfair to dismiss the event completely as an exercise in short-term domestic politics. Nor indeed, can the Trump administration monopolise whatever credit is due. In many ways, the foreign service’s ability to host such gatherings reflects a tradition of reli-

gion-based diplomacy which has developed, under different administrations, over two decades. The 1998 International Religious Freedom Act mandated two agencies to monitor global persecution: the State Department and the United States Commission on International Religious Freedom, a panel appointed by Congress and the White House whose members have been distinguished and diverse. Whatever personal agendas lurked in the background, this week’s meeting felt “more professional than political”, says Elizabeth Prodromou, a

professor of conflict resolution at Tufts University’s Fletcher School. The event will not silence those who accuse the Trump administration of hypocrisy in matters of religion: because, for example, it often excoriates the Shia rulers of Iran while giving a free-ish pass to its own Sunni Muslim friends. As Shadi Hamid of the Brookings think-tank puts it, “nothing in this ministerial changes the fact that America encourages and empowers the authoritarian rulers of Saudi Arabia.” But at least the world’s worst persecutors (of which the State Department keeps a careful score) were left off the list of participants in this week’s gathering: no stiff white cards for the likes of China, Pakistan or North Korea. As Katrina Lantos Swett, a former USCIRF chair (and veteran Democrat) observes, the old American consensus on the duty to proclaim religious liberty to the world, and call out terrible violators, has frayed but not completely disappeared. Still, the signs of that fraying are all too evident. Start with party politics: Sam Brownback, the Republican politician who is now

America’s religious-freedom envoy, won no Democratic support when he was being confirmed. By contrast, some Republicans had voted for his Democratically nominated predecessor, Rabbi David Saperstein. More fundamentally, Mr Pompeo is horrifying liberal-minded rights advocates by dismantling the approach to rights and diplomacy that was developed by Hillary Clinton when she was secretary of state. She had emphasised women’s rights, reproductive rights and gay rights. She was not indifferent to matters of faith but she spoke often of “religious engagement”, implying that faiths could be harnessed and also challenged. At times, the change of stance can seem tortuous. This year, American embassies were told not to hoist gay-pride banners on their flagpoles, although it was specified that they could be displayed more discreetly. The Trump administration has affirmed America’s opposition to the criminalisation of gay sex, but it plainly has little appetite for preaching against homophobia in places, from Brazil to Georgia, where that sentiment is rife.

Bibi’s hollow record

Binyamin Netanyahu will soon be Israel’s longest-ever-serving leader How much longer can he last?

INYAMIN NETANYAHU is nothing if not tenacious. On July 20th he will set a new record by overtaking Israel’s founder, David Ben-Gurion, to become the country’s longest-serving prime minister, in office for 13 years and 128 days. The anniversary will ring hollow. Having failed to win enough seats to form a coalition after an election in April, Mr Netanyahu leads an interim government and is facing a second contest on September 17th. The polls suggest that he will struggle to form a majority once again. Despite his long period in power, the prime minister has consistently failed to increase his party’s share of the vote. (Israel’s right-wing politicians have never enjoyed a majority.) Four of the country’s prime ministers have come from Likud. Under Mr Netanyahu the party has won fewer seats than under the others. He triumphed in four elections largely owing to the weakness of his opponents and the unwavering support he received from religious parties. But now the alliance of right-wing and religious parties which has kept him in charge for so long has fallen apart. In the past the parties representing Israel’s ultra-orthodox Jewish community were prepared to sit in coalitions led both by Likud and by

ultra-Orthodox allies but they are now pushing other voters away.” Mr Netanyahu’s long stint in office itself attracts criticism. Both election campaigns this year have focused on his suitability to continue as prime minister. Centre-left parties have refused to sit in government with Mr Netanyahu, pointing to his impending indictments on bribery and fraud. Without them, and without the members of Mr Lieberman’s party, he is almost incapable of gaining a majority.

its rivals from the centre-left. But Mr Netanyahu secured more exclusive loyalty by agreeing to nearly all the religious politicians’ demands on legislation and budgets. That is now costing him. Avigdor Lieberman, a former defence minister and once Mr Netanyahu’s righthand man in Likud, is now leader of a rival nationalist party. Yisrael Beitenu is targeting Mr Netanyahu’s most vulnerable front. The party has

doubled its share of the vote in the polls by promising to enlist religious seminary students, who are currently exempt from the draft that applies to most other young Israelis. Mr Lieberman is tapping into widespread frustration over the disproportionate influence of rabbis over public life. Mr Netanyahu’s main appeal to right-wingers is that he has presided over a decade of uninterrupted economic growth and relative calm

within the country’s borders (certainly when compared with the turbulent region around it). At the same time he has withstood international calls to make concessions to the Palestinians. But President Donald Trump’s antics and other crises in the Arab world mean those calls are now quieter. Secular right-wing voters are becoming more exercised about other issues. “Bibi is stuck,” admits one Likud insider. “He can’t rule without his

Monday 22 July 2019

BUSINESS DAY

COMPANIES & MARKETS

COMPANY NEWS ANALYSIS INSIGHT

MARKETS

Nigeria Global X MSCIfund down 69.97% in 7 years …foreign investors lose $76.102 million …appetite for Nigeria risky assets to dampen further DAVID IBIDAPO

nvestors in the Nigeria Global X MSCI fund, an equity mutual fund managed by Morgan Stanley Capital International, have seen the value of their investments eroded significantly over the last seven years. The fund which had a market value of $108.763 million at inception in 2013, plunged over the period by 69.97 percent cumulatively to $32.671 million at the close of trading on Tuesday. This puts the loss in the value of the fund to the tune of $76.102 million since 2013 when the fund was created. Also, the Net Asset Value (NAV), which measures the value of its assets less liabilities, also fell by the same margin to $13.54, from $45.09, according to BusinessDay analysis. Asset holdings underlying this fund include Dangote Cement, GTB, Nestle Nigeria, Access Bank, Zenith Bank, Nigerian Breweries, Stanbic IBTC, UBA, Ecobank and First Bank, to mention the top 10 based on market value in dollar terms. Compared to similar funds in other emerging markets, investors had seen over the years, appreciation in their asset value in countries

like Colombia (+60.05%), Argentina (+17.98%), and Norway (+13.34%). These funds stood as the best performers amongst 6 major Global X MSCI funds, outperforming the Global X MSCI Next Emerging & Frontier ETF (EMFM) which was down -4.16 percent in Net Asset Value (NAV) during the period. The Global X MSCI funds provide investors a broad exposure to frontier and nextemerging markets, while excluding the more developed emerging markets of Brazil, Russia, India, and China (BRICs), as well as South Korea and Taiwan. Grossly under performing the broad-based exposure fund were Greece and Portugal with NAV eroded by -29.93 and -13.41 percent, respectively. However Nigeria stood as the worst performer amongst all. “The factor largely responsible for this is the huge devaluation of the Naira against the dollar since 2013,” Paul Uzum, a Lagosbased stockbroker told BusinessDay. “This gives us an idea of how foreign investors in the Nigerian equity market are faring. A lot have lost significant value for their holdings. However the good thing is that most have diversified portfolios in other emerging

markets which had limited the effect of their losses,” Uzum explained further. During the period under review, the value of the naira against the dollar fell by about 49 percent, as official exchange rate moved from N157.3/$1 in 2013 to N306/$1 in 2019. The upward pressure witnessed in Nigeria’s consumer price index (CPI) has reduced the real worth of foreign investors in the Nigeria global X fund dip by 69.47% when adjusted for inflation to N3.55 billion from N11.63 billion in 2013. While in Q1 2019, Nigeria

experienced a reduced appetite for its risky assets by foreign investors, evident in the capital importation data released by the National Bureau of Statistics (NBS), concerns remain that the country should expect further dampening in foreign exposure to the equity market. For every corresponding Q1 period in the last six years, while capital inflow into money market instruments accelerated by an average of 116 percent yearon-year, and by 3 percent in the bond market, investment in Nigeria’s equity market decelerated by 22 percent,

BusinessDay analysis shows. While the prospect that the US Fed will cut rates which analysts expect to spur appetite of foreign portfolio investors for risky assets in the emerging markets, the Nigerian equity market may not benefit from possible inflows of capital into the economy. This is on the back of a perceived heightened risk position of the Nigerian economy by foreign investors as the economy is largely susceptible to global and domestic shocks, hence a sustained trend in money market instruments.

“Since the global financial crises, the market is yet to hit the highs recorded during that period, coupled with the devaluation of the currency which have seen returns on companies represented on the fund lose value in dollar terms,” Gbolahan Ologunro, research analyst at CSL stockbrokers. Current market rout which has led the Nigerian All Share Index (NASI) to a year-to-date performance of -10.3 percent as at Tuesday shows the perceived precarious state of the Nigerian economy and low confidence from investors.

CONGLOMERATES

Transcorp’s H1 profit dampens on steep decline in two revenue pillars … stock hits 26-month low ISRAEL ODUBOLA

alf-year profit of Transnational Corporation of Nigeria Plc (Transcorp) nosedived in the first six months of 2019 after sustaining positive growth trajectory in two years. This was driven by big decline in receipts from capacity charge and energy sent out, the company’s two pillars of revenue. The group’s revenue plunged 30 percent in half year 2019 to N37.7 billion compared to N54.1 billion posted a year earlier, leading to a double-digit decline of 54 percent in after-tax profit. Six out of eight revenue

segments of the firm trended northwards, while receipts from capacity charge and energy sent out, which accounted for a joint 73 percent in top-line, tanked 36 percent and 40 percent respectively. Meanwhile, the rout on the Nigerian Stock Exchange (NSE) has pushed a number of stocks to fresh lows and the conglomerate is no exception, as its stock is trading at its lowest price since May 2017. Year-long the stock is down some 23 percent, translating to a monetary loss of N12.6 billion out of N1.9 trillion lost on the Nigerian exchange since the start of the year. Despite cost of sales or direct cost of production

declined 31 percent in the review period, cost margin ticked up 100 basis points to 54 percent, fuelled by the steep decline in revenue. Consequently, operating profit was down by 35 percent to N11.1 billion despite a 15 percent reduction in administrative expenses, which pushed margin lower to 29 percent. This implies for every thousand naira generated as revenue, Transcorp was able to retain N290 in the review year compared to N310 in the preceding comparable period. While Transcorp paid N7.4 billion as interest on borrowings in first half of 2019, which is 47 percent

more than N5 billion expended for similar purpose a year before, interest earned on cash with bank nearly doubled to N922 million. This brings net finance cost to N6.5 billion in the review period. Meanwhile, the group lost N342 million to foreign exchange on borrowings. The group’s short-term and long-term obligations as at 30th June 2019 stood at N31 billion and N101 billion respectively. Total assets of the conglomerate appreciated some 6 percent or N17 billion to N307 billion in half-year 2019, an uptick from N290 billion twelve months back. Shareholders’ funds expanded N3 billion higher in the

review period. The group has N28 billion worth of investment in subsidiaries with Transcorp Hotels Plc (N20bn) and Transcorp Power Limited (N8bn), accounting for combined 99 percent of total investment.

Transcorp Plc operates as a diversified investment company. It invests in companies focused in the energy, agribusiness and power sectors. It maintains controlling interests in all its 14 subsidiaries.

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

Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

BUSINESS DAY

COMPANIES&MARKETS HEALTHCARE

What to expect as Fidson signs partnership with Japanese pharmaceutical company OLUFIKAYO OWOEYE

n an effort to consolidate its market position, pharmaceutical manufacturer, Fidson has announced the signing of a strategic partnership with Japanese pharmaceutical company, Ohara pharmaceutical company Ltd. Fidson said this alliance is as a result of its recent Rights Issue which saw the Japanese firm’s stake in Fidson increased to 21.57percent. According to Fidson, the new alliance is aimed at supporting it in fulfilling its commitment to the Nigerian market with the latest healthcare products and services. “Ohara is a major player in the Asian market will bring cutting edge technology and innovation through technology transfer, expertise and knowledge sharing,” the statement said. In May, Fidson opened for subscription a Rights Issue involving the issuance of 750,000,000 ordinary shares of 50 kobo each at N4.00 per share on the basis of 1 new

ordinary share for every 2 ordinary shares held as at 28 December 2018. The Rights Issue was in a bid to raise N3 billion for the company, of which the company said about 60percent of the issue proceeds, would be used to clear expensive short term debts and reduce finance cost. The Right Issue was 78.18 percent successful. Right Issues is a process by which a company raises capital by offering additional new shares in the company to existing shareholders. The additional shares are offered at a discount to the market price on a stated future date and in proportion to their existing holdings. While the shareholders are not obligated to subscribe, an eventual increase in the total number of share units would dilute holdings of owners that waive their right. According to the exchange, with this listing of the additional 586,360,250 ordinary shares, the total issued and fully paid up shares of Fidson Healthcare has now increased from 1,500,000,000 to

2,086,360,250 ordinary shares. In Q1 2019, Fidson recorded a decline in revenue of about 2 percent from N3.61 billion in the corresponding period of 2018. The company pared profit to N144.9 million in the same period. However, Imokha Ayebae, Head of Finance and Accounts, Fidson Pharmaceutical, said the company’s revenue is expected to reach N20 billion in 2019 and N23 billion in 2020. Ayebae who made the disclosure during Fidson’s Fact-Behind-the-figures at the NSE in April said profit before tax to hit N3.4 billion by the end of 2019. Increase in volume owing to expanded production at Fidson’s WHO compliant factory helped the company grow its revenue by 15 percent to N16 billion in 2018. However a rise in the cost of sales and finance cost owing to company-specific and industry-wide challenges ensured Fidson was unable to translate revenue gains to improve its bottom-line as the company noted a loss of N97 million last year.

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Business Event

L-R: Temitope Fasoranti, executive director; Adobi Nwapa, general manager/chairperson Style By Zenith Committee; Olatilewa Babalogbon, deputy general manager, and Lanre Oladimeji, assistant general manager, group head retail banking, all of Zenith Bank, at the launch of the second edition of Style By Zenith.

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L-R: Ayodele Antonio, GM, Lagos State Environmental Protection Agency (LASEPA); Ore Famurewa, corporate affairs director, FrieslandCampina WAMCO, and Ben Langat, MD, FrieslandCampina WAMCO Nigeria plc, at the 2019 Tree Planting by Lagos State in partnership with FrieslandCampina WAMCO Nigeria plc.

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Monday 22 July 2019

BUSINESS DAY

Monday 22 July 2019

BUSINESS DAY

GREG REEVE

CEOINTERVIEW

CEO, Transsnet Payments

Interview with Private Sector Leaders

‘We want Palmpay to be the centre of your financial world’ Greg Reeve, the CEO of Transsnet Payments, a new entrant into the African payments scene spoke to BusinessDay’s ENDURANCE OKAFOR on how the company is going to use Palmpay, its new financial service product to make it easy for Nigerians to transact. Excerpt: Tell us about yourself and your career experience hat’s a big question. I am Greg Reeve, I am 57, and I’ve got 3 grown up children who have very successful careers. I’ve had a long career which started in technology a long time ago and I moved into commercial activity when I was working for Vodafone and I have been working on commercial activity primarily for the last 10 to 15 years. My career has been quite varied. I have worked for the public sector, so if you get arrested in the UK you will probably be processed with one of my technical systems. I have worked for the Airline industry so if you have flown a plane, the ticket was probably processed through one of my systems. I have worked with small companies and big companies, I have worked in a two-man organization; with was just two of us, and I have also worked with companies with 60,000 people around the world, multinational corporations. I have always found that in smaller businesses, one can be more nimble and do things faster so I am excited to have helped to establish PalmPay, which will hopefully grow to become quite a big business!

How did your work take you to Africa? In 2009 I was lucky enough to be working for Vodafone and an opening came up to be commercially responsible for the M-pesa product and at that time it was still quite a new thing that Vodafone was doing, it was running for about two years; it was big in Kenya, it was very small in other markets- it was in Tanzania, Afghanistan, India at that time but nowhere else and I took that role as the executive responsible for Vodafone M-Pesa in all those global markets and we went into different markets, I know that we had operations in Egypt, Ghana, Mozambique, South Africa, Fiji, and others although unfortunately I didn’t get to travel to Fiji! I left Vodafone around 2013 and joined Millicom shortly afterwards, Millicom is the company which operates as Tigo in a number of African markets as well as in Latin America. So I was the general manager there responsible for Mobile Financial Services which included Tanzania, Rwanda, DRC, Chad, Senegal, and Ghana at that time, and also Paraguay, Bolivia, El Salvador, and Central America. I left Millicom around 2015 and established my own consulting business, MFX (mobile financial experts) which is still operating. The firm brought together experts in mobile financial services to assist people who wanted to learn about what had been done when growing in big markets. I then joined Transsnet about a year and eight months ago. Although I had been consulting with the company before then through MFX, and then they offered me to become the CEO of the payments side of the business in December 2017. The proposi-

How do you think financial inclusion going by your definition can be used to alleviate people from poverty, say for a country like Nigeria that is the poverty capital of the world?

tion is really quite exciting - here you have a company which is backed by the one of the biggest phone manufacturers in the world, who have the majority market share in Africa with their device brands Tecno, Infinix and Itel. And now they want to leverage that and build a Pan-African mobile financial services business. We started the business with nothing but that partnership and some capital and now, we are established in 4 markets with a view to entering into two more. We have got businesses in Ghana, Nigeria, Kenya and Tanzania and we have launched our product already in Ghana and are planning to launch very soon in Nigeria as well. One of our products is Palmpay, and we want Palmpay to be the center of your financial world. So when you want to do anything with money, you go to PalmPay and you can find what you are looking for. Since the beginning we were clear that we really want to create rewarding experiences around payments for consumers, and we have a few innovations that we will be launching that you currently don’t find elsewhere in the market. You probably like only one or a few apps on your smartphone - some of which might be games, social apps, so some other applications, you go back to them all the time because you love the experience and there is always something new to keep you interested and excited and so we wanted to take that level of engagement and bring it to the world of finance, and that’s where we are going with PalmPay. What inspired you to come up with Palmpay? It was the fact that a number of things have happened to cause the opportunity to be realized and you can see this because other people are trying to do this even though no one is yet doing it across the whole of Africa. It was a combination of much better data networks from the mobile operators, that’s the first thing, so people start to rely on data and they say; do you know what, most of the time, data is going to be around and I can use data. The second thing was the ability of smartphones to do things, to hold more information, the cameras were better, the features were better, there is a much better way of managing the service. Smartphones became clever and people started to find new ways of offering services on smartphones. I’ll give you an example, there is a motor bike app in Rwanda, where they embedded the smartphone in the bike and then they saw how fast the guy will go round corners or what sort of rider he was, whether the person rode the bike too fast and if the bike was ridden too fast, they would get rid of that driver and so they always had drivers that drove nicely and they were able to market themselves as a safe service, and that was made possible by the smartphone revolution. The next thing that happened was the www.businessday.ng

growth of mobile payment worldwide including in China, so whilst M-pesa was growing for 10 years and people were saying isn’t this wonderful, China was planning what they were going to do and in that country, the wave of smartphones and data had already hit, so a lot of people had smartphones and data already, so the product that hit the Chinese market was Alipay and the Wechat pay which was all built around the Quick Response (QR) codes. It’s very easy because I don’t have to have any other particular technology on the phone other than the camera which is on the phone already, so suddenly people walking around with cameras on their phones can use QR codes to make payments, it’s safe and secure and suddenly before you know it, it’s everywhere and I visited China on a number of occasions and I didn’t need to carry cash with me, everything, I could pay using the camera on my phone. So some people came together and said why we don’t take the best of what’s happening here, the best of mobile money in China and then make a really fantastic experience that people can say oh! I would love to use that app, which is what brought about Palmpay.

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I learnt you have a partnership with Visa, what was the basis of the partnership? One thing we wanted to do is to make the PalmPay user experience super easy and straightforward. On the internet the primary payment means is usually some sort of card, so if I want to buy something from the Google Play Store, or if I want to buy a phone online or if I want to subscribe to an online service, a lot of the time, they will say give me your debit card details and not everyone has a debit card. So what we did was we talked to Visa, we said to them that we want to do something with you to help you scale Visa products across our distribution network and help users pay merchants online and offline and even provide value added services to the merchants themselves, so of course they were interested in working together. One of the first things we will be launching are Visa virtual cards that anyone will be able to create in the PalmPay app in minutes and use for domestic and international payments. And we will make this option available for everyone on PalmPay, whether you already have a bank account or not. The other thing is access to the whole Visa merchant network, remember those QR codes? Wherever you see a Visa QR payment, you will be able to take your PalmPay app and just pay by clicking on it. We are trying to make it simple for users to

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use financial services, to make it intuitive and easy. That’s going to be the cornerstone of our approach; and we are always listening to our users and customers, to see how we can make our product better. Nigeria has the largest population in Africa and yet has one of the lowest inclusion rates in Africa.What do you think of financial inclusion in Nigeria? I think the word financial inclusion is a bit of a badly defined term, so while some countries might say oh I have got great financial inclusion and you dig into it, what that figure includes is that somebody has gone on and sent money to their brother’s account last month, and I will say that’s not the whole picture of financial inclusion, they’re not using financial products on a regular basis, they’re not gaining access to relevant saving products, to credit or to insurance and so are they really included? Policy should be made, in my mind, on how can I drive not just access but deeper usage, because when I do that it spills over into positive outcomes such as improved livelihoods, the growth of businesses and the economy, and so we need a holistic view that’s not just about how can I get people to open an account and send money from A to B although of course that is an important first step.

There’s a story I’m going to tell you, so we had a situation which in this case was in the DRC, when we had news that someone on our platform was making one large deposit and small regular payments every day and it looked odd, so the investigation officer ended up speaking to the customer; what do you do with our service? And the customer said you need to understand my situation, I am a single mother, I live just with me and my son and the only money I make is when I take things that I make in my house to the market and I sell them in the market. I make enough money each day to feed my son and pay the rent. So that is somebody living in poverty according to the definition. She said, our product has changed her life, she went on to explain that instead of her normally leaving the market during lunch time, which required her to walk an hour home, to feed her son because he’ll be with the neighbor and then later head back to the market which meant she would be absent from the market three hours every day, through our product, she now goes to the agent in the market, to send the money she makes to her neighbor, to help her feed her son. “She feeds my son for me and I’m in the market three extra hours a day” and she said her income had grown by 20 percent. So here you might think that you improved her life but no you’ve actually improved 3 people’s lives, maybe 4. You’ve improved her life, you’ve improved her son’s life because now mummy has 20 percent more money to spend and maybe now that could pay for a better education. You’ve improved the neighbour’s life because the neighbor now gets a small amount of money to do a job at home and feed her son, she makes a bit of money off that as well. You’ve also improved the agent’s life because the agent has a job which they didn’t have before, managing transactions. So if you take an example like that and you now imagine how this can work for millions of people, and also throw other financial services into the mix such as savings, loans and insurance, and make it really easy for people to access and use these services, you can see how this can contribute to poverty alleviation. While coming to Nigeria, I am sure you must have done your due diligence, are there some key challenges you saw that are peculiar to only the country as you have operated in other countries across the globe? I’m not new in the African market, and there are two things I have learnt. The first thing is, every country says we are different and it’s true because every country is different and the second thing I’ve learnt is every country is the same because at the end of the day people are the same. They have the www.businessday.ng

same desires to improve their lives, to feed their families, to put their children through school, to make good use of their financial resources, to leave something better for the next generation and that is the same all over the world. Does the country make that any different? Not really. What can we do as operators of financial services, we can make it really easy and smooth for you to achieve those objectives. Sometimes it’s not just about access, I may have got access but I don’t really understand it. What is in it for me when I use this service and how does it really work? So if you can explain it well, because you have got a smartphone with a screen which can show when payments are due or can have an embedded chat where a customer service representative can talk you through how to use the product, that’s a good thing. And of course it’s important to create products that are relevant to the customers you are serving and to always listen to customer feedback and keep improving your proposition. What does Palm pay as a financial service app have in stock for Nigerians? Our vision for the app is that PalmPay becomes the one stop shop for your digital and financial world and that PalmPay is the place to go that has the best choice and offers in the market. We’re already working on some exciting features and partnerships to make that happen and the more we roll out the more we hope we will attract new partners to come and join our ecosystem. So imagine a world where you want to go to the cinema, you can buy the ticket on the PalmPay app or pay for the ticket at the cinema counter using QR or your PalmPay Visa card. Or if you ran out of money for the month, you can borrow the money as a cash loan or even by scanning the QR code at the venue. And because we want you to share PalmPay with all of your friends we might

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give you a special offer if you buy a ticket for them as well that you won’t be able to find anywhere else. All you’ll need to access this ecosystem is your smartphone. We will be rolling out more and more functionality as we grow that will mean that even those without bank accounts and BVNs will be able to access services that previously you wouldn’t have been able to without. We’ve been hard at work preparing the business and we are going to be launching something very soon. For now we have a wait list of over 25,000 users waiting for us to roll out with our full launch and we are engaging our community on social media. We will be announcing the date on our Facebook page @PalmPayApp. Those users who have already downloaded our app and registered will get priority for early access once the app launches and we will be distributing about 10million naira among them to thank them for being the first to try us. In your short stay in Nigeria, what do you think about the country? I think the first thing I will say is that you guys have the best business mind than anywhere I have seen. If there’s a deal to be done or a way to do something, you’ll find a way to make it work and that’s amazing. Other countries will say there’s no way to do this but you guys will figure out something and you’ll do it and do it well. You’ve got a good economy not just because of the oil but a lot more. So there’s pretty much everything you can get in Nigeria because you will see someone seize that opportunity and do it. You guys do so many things, the diversity is incredible. The energy that people put into their work is amazing and you see the way people are passionate about their work and the way they hustle. We’re very excited to be here.

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BUSINESS DAY

C002D5556

COMPANIES & MARKETS CONSUMER GOODS

Cadbury returns to profitability with best half-year performance in 5 years SEGUN ADAMS

adbury, a listedfood maker on the Nigeria Stock Exchange (NSE) has grown its profit by morethan 200 percent to post its biggest half-year profit since 2014, when it made over N1 billion. The food maker onFriday announced that it made N670 million in profit for six month to June 30, 2019, 258 percent more than wasposted a year ago when the company struggled with losses. This is the company’s first half-year profit since 2016. Cadbury on the back of steady growth in revenue and improvements in net finance income was able to snap out of its spell of halfyear losses which began in

2017 when huge finance cost amid economy-wide slowdown impacted on its performance. Revenue grew by 11 percent in the first half of 2019 as Cadbury made sales up to N19.45 billion from 17.55 billion in 2018. Despite a 4 percent rise in the cost of sales, the consumer good firm posted its first increase in gross profit since a steady decline in bottomline since 2016. Cadbury’s gross earnings jumped 47 percent to N4.14 billion from N2.81 billion last year. As a result of the positive trajectory, Cadbury was able to save N21.29 out of every hundred naira sales after accounting for the cost of goods sold. This was an improvement from N16.03 meaning the company sold its inventory for a higher profit.

Cadbury’s operating income surged 941 percent from a loss of N105.63 billion to N888.78 billion in profit as at June 2019, supported by 96 percent growth in income from other sources although both selling, general and administrative expenses rose in the period. Net finance income for Cadbury turned bad for the consumer goods manufacturer following Nigeria’sfirst recession in 25 years which led to foreign exchange loss and tightened operating environment for manufacturers. Cadbury’s bank overdraft grew significantly in the first half of 2017 for instance. The company was, however, able to bounce back in the first half of 2019 with a net finance income of N68.28 million as against a net cost of N318 million last year.

L-R: Titi Akisanya, vice president, Chartered Institute Of Personnel Management Of Nigeria; Karabo Moloko, CEO, Colab Project Implementation, South Africa; Olawale Adediran, president; Ajibola Ponnle, registrar/CEO, and Nkeiru Adesogan, national treasurer, at the Chartered Institute Of Personnel Management Of Nigeria 11th Special Human Resource Forum, in Lagos.

REAL ESTATE

Amlad Group, Arkland to roll out property solutions for individual, institutional investors KELECHI EWUZIE

etermined to reduce the Nigeria’s current housing deficit, Amlad group and Arkland have joined forces for the construction of A&A Tower, a stunning piece of architecture designed by renowned Turkish architect, Atilla Ilhan. From the very foundation, design, construction, operation and maintenance, A&A Tower situated at ocean front district of the new coastal city, Eko Atlantic in Lagos is a structure that promises to be environmentally responsible and resource efficient throughout its life-cycle. Joseph Clarke, chief executive officer, Amlad Group, a real estate firm says future residents of the mixed-use development will be immersed in the beauty of the surrounding

landscape and the state of the art furnishings throughout the building. According to him, “A&A Tower comprises dual level penthouses, 2 bedroom & 3 bedroom apartments, high quality office spaces, and welldesigned retail spaces with mezzanine floors. All of this is available at favourable pricing in comparison to other properties in Eko Atlantic, as buyers also have the option to purchase via multiple flexible instalment payment plans. Clarke noted that developer of A&A Tower are thrilled to be joining the illustrious group of developers contributing to the growth of Eko Atlantic, the coastal city being built adjacent to Victoria Island. “This new city has evolved rapidly from a visionary design concept into a technological www.businessday.ng

reality. Infrastructural road works and underground surface drainage pipes are already laid along major routes across the new city. All bridges in Phase 1 & 2 of the project have been completed”, he said. Jide Olumodimu, Managing Director/CEO, Arkland Properties and Investment Co. Ltd, while commenting on the project, opines that A&A Tower is our biggest and most exciting project yet! “With 98 units in this building we look forward to contributing positively to the Nigeria’s current housing crisis by providing viable property solutions. The course being set with ongoing projects at Eko Atlantic is one that acknowledges Nigeria’s role as one of the World’s fastest growing economies and we are proud to be contributing to this venture.” He said. https://www.facebook.com/businessdayng

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Monday 22 July 2019

BUSINESS DAY

COMPANIES&MARKETS

Flour Mills cuts borrowing costs to 3-year low as positives lurk amid industry-wide troubles LOLADE AKINMURELE

“There are issues of wheat prices which account for most of our production cost, cost of interest rate and exchange rate and all of these dynamics affect the eventual cost of production,” Despite the decline in profit, Flour Mills’ board of directors recommended an increase in dividend payout by 20 percent, based on its future projections to lower capital spending. Shareholders will receive a dividend per share of N1.20 for the 2019 business year as against N1 paid for the 2018 business year. In a statement, the group expressed optimism that it will witness continuous growth in key segments of its food and agro-allied businesses in the new business year, noting that targeted strategies are expected to

ment, optimal operation of its supply chain and further balance sheet management are expected to result in higher profitability. The group noted that it undertook series of strategic actions designed to improve returns and deliver maximum gains for its investors in 2018 including the restructuring process that saw all its businesses in the agriculture sector aligned under its wholly owned holding company, Golden Fertiliser Company. The company also pointed out that the consolidation of its agricultural businesses has started yielding appreciable contributions to the group in the areas of cost maximisation and improved operational efficiency as the businesses make the most of their competitive advantage and synergies. The management of the company stated that cost control measures put in place during the year supported the company despite the prevailing economic headwinds and harsh operating environment, especially for businesses in the congested Apapa, Lagos axis. According to the company, it has continued to consolidate its investments in the agriculture sector with a strong focus on innovative and efficient use of resources. As such, the group is resizing and simplifying the operations of some of the farms which form an

Plc, Paul Gbededo, said the group has made substantial progress as growth and efficiency initiatives across various functions and businesses started to show anticipated gains. According to him, Flour Mills has undergone several functional and structural changes within the last year, with innovation and focus on customer at the heart of the group’s strategic direction. “We are positive that we will see even greater achievements in our financials in the following quarters as we continue to focus on value creation for our shareholders,” Gbededo said. Group Chief Finance Officer, Flour Mills of Nigeria Plc, Anders Kristiansson, noted that the group’s strategy to restructure its balance sheet base and optimise financing costs have started to yield desired results. He pointed out that in spite of ongoing pressures on consumer disposable income in many target categories, the group has continued to deliver stronger performance. The Group’s debt-toequity ratio also improved from 101.7 per cent in 2018 to 84.1 percent in 2019, while its net asset per share stood at N36.80, almost a triple of its current market valuation. In the coming years, as the company continues to invest in agriculture, and with the several function and structural changes to their business direction,

deliver improved margins and operational efficiencies. According to the company, continuous implementation of turnaround initiatives in the agro-allied business, accelerated expansion in the business-to-customer seg-

integral part of its backward integration strategy with a few of the smaller experimental farms being scaled down, while continuing focus on key units. Group Managing Director, Flour Mills of Nigeria

the general belief is to hope that some of Federal Government reforms if well implemented will truly help the manufacturing sector to take its pride of place and contribute significantly to the country’s GDP.

ingle-digit operating costs to revenue highlight management efficiency Nigeria’s biggest flour miller by market value cut its borrowing costs by a third in the year ended March 31, 2018/2019, with the miller guiding towards an even steeper decline this year. The company’s finance costs fell 30 percent to N22.9 billion in 2019 from N32.7 billion in 2018 and N32.5 billion in 2017, while the group’s Q4 2018/19 improved by N1.9 billion according to data provided in its financial statement. Flour Mills will “continue active balance sheet management and the objective is to achieve additional reduction in finance costs in the current year,” the company said in an investor presenta-

tion on its website. The miller will also “focus on increasing operational efficiency and ensuring cost savings on operations,” the presentation read, while it will aim to double Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) in five years. Flour Mills is fresh off releasing its annual financial statement which showed it recorded revenues of N527 billion, a 3 percent decline compared to the previous year but the biggest revenue of any listed miller in the country, serving as an indicator of the company’s dominant market share. Other players in the space like Honey Well Flour posted revenues of N74 billion in the same period while Dangote Flour Mills, which has now been ac-

quired by Olam International, posted revenues of N112.3 billion in 2018. Though Flour Mills has larger assets (N416 billion in the year ended March 31, 2019) than Honeywell (N137 billion in March 2019) and Dangote Flour (N120 billion

N16.5 billion the previous year while profit after tax was down 71 percent to N4 billion from N13.6 billion. The same trend was observed for Honeywell and Dangote Flour. Honeywell’s profit after tax declined 98 percent to N68 million in 2019, while Dan-

in 2018), it demonstrated efficiency in sweating its assets to generate revenue. It had an asset turnover ratio of 1.26 in the period, which means that for every naira of assets, it generated N1.26 in revenue. That is higher than HoneyWell’s 0.54 and Dangote Flour’s 0.9. Asset turnover ratio measures the value of a company’s revenues relative to the value of its assets and is a proxy for how a company is able to use its assets to generate revenue. Despite its huge revenues, Flour Mills made N10.2 billion in profit before tax, as operating costs hit a five-year high of N474 billion, it leaves the company with a gross margin of 10 percent, bettered only by Honeywell in the industry. The company’s profit before tax however declined 38 percent to N10.2 billion from

gote Flour, according to its most recent financials, made a loss of N1.15 billion, a 92 percent decline compared to the previous year, in the first three months of 2019, the loss had swollen to N2.9 billion. Flour millers are struggling to turn in decent profits at a time when depressed consumer demand and the fear of losing market share has meant millers are unable to pass on high costs of operations to consumers. “The cost of production is weighing on us. Flour Millers are absorbing a lot of cost because we are conscious of the Nigeria that we live in today and the consumer purchasing power,” Lanre Jaiyeola, Vice President of the Flour Milling Association of Nigeria told Business Day.

Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

BUSINESS DAY

Access Bank Rateswatch

Market Analysis and Outlook: July 19 – July 26, 2019

KEY MACROECONOMIC INDICATORS GDP Growth (%)

2.01

Q1 2019 — lower by 0.38% compared to 2.39% in Q4 2018

Broad Money Supply (N’ trillion)

34.89

Decreased by 0.77% in May’ 2019 from N35.17 trillion in Apr’ 2019

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

24.86 2.11

Decreased by 0.13% in May’ 2019 from N24.89 trillion in Apr’ 2019 Decreased by 2.22% in May’ 2019 from N2.16 trillion in Apr’ 2019

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

11.22

Decreased to 11.22% in June 2019 from 11.40% in May 2019

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

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

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

45.09 62.38 1.86

July 17, 2019 figure — an increase of 0.11% from July start July 19, 2019 figure— a decrease of 7.84% from the previous wk June 2019 figure — an increase of 7.47% from May 2019 figure

COMMODITIES MARKET

STOCK MARKET Indicators

Friday 19/07/19

NSE ASI Market Cap(N’tr)

27,919.50 13.61

Volume (bn)

0.27

Value (N’bn)

2.84

Friday

Change(%)

(2.27) (2.25)

0.10

174.21

1.46

94.80

Friday Rate

Change

NIBOR Friday Rate (%) 19/07/19

(%)

(Basis Point)

Energy Crude Oil $/bbl) Natural Gas ($/MMBtu) Agriculture Cocoa ($/MT) Coffee ($/lb.) Cotton ($/lb.) Sugar ($/lb.) Wheat ($/bu.) Metals Gold ($/t oz.) Silver ($/t oz.) Copper ($/lb.)

2.2100

972

O/N CALL 30 Days

12.6400 12.4500 10.8389

2.9300 2.8500 10.8600

971 Tenor 960 (2)

90 Days

11.4492

11.2800

Friday

1 Month

FOREIGN EXCHANGE MARKET (N/$)

19/07/19

(N/$)

Rate (N/$)

12/07/19

19/06/19

Official (N) Inter-Bank (N)

306.95 361.46

307.00 360.79

306.95 360.53

BDC (N) Parallel (N)

0.00 360.00

0.00 362.00

(7.84) (5.00)

(3.23) (25.39)

2464.00 108.70 62.26 11.63 497.25

(1.20) 1.87 (1.33) (6.13) (4.01)

27.27 (16.51) (19.66) (24.14) 14.71

1438.99 16.33 275.55

2.20 8.00 2.13

9.22 (5.00) (15.94)

Friday

Change

(%)

(Basis Point)

(%) 19/07/19

12/07/19

1 Mnth 3 Mnths

9.34 10.30

9.23 9.86

11 44

6 Mnths 9 Mnths 12 Mnths

11.25 12.02 12.37

11.09 12.09 12.43

16 (7) (6)

ACCESS BANK NIGERIAN GOV’T BOND INDEX

Indicators

Friday

(%)

AVERAGE YIELDS Friday (%) 19/07/19

(%)

62.38 2.28

BOND MARKET Tenor

YTD Change

NIGERIAN INTERBANK TREASURY BILLS TRUE YIELDS

11.9300

Friday

1-week Change

12/07/19

OBB

Market

19/07/19

(%)

MONEY MARKET Tenor

Indicators

12/07/19 28,566.79 13.92

Friday (%)

Change (Basis Point)

12/07/19

3-Year 5-Year

0.00 13.09

0.00 13.42

0 (33)

7-Year 10-Year 20-Year

13.55 13.87 13.86

13.77 13.94 13.94

(22) (7) (8)

30-Year

14.10

14.12

(2)

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

Change

(%)

(Basis Point)

19/07/19

12/07/19

Index

2,992.21

2,970.29

0.74

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

8.97 5.74

8.90 5.69

0.75 0.88

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

21.81 -34.00

20.92 -34.92

0.89 0.92

TREASURY BILLS (MATURITIES) Tenor

Amount (N' million)

Rate(%)

Date

91 Day 182 Day

10,000.00 20,000.00

10.5 11.7

3-July-2019 3-July-2019

364 Day

58,857.01

11.91

3-July-2019

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

Global Economy In the US, the ISM purchasing managers index (PMI) edged down to 51.7 in June after slipping to 52.1 in May, although a reading above 50 still indicates growth in the manufacturing sector. The modest slowdown in manufacturing growth came as the new orders index dropped to 50.0 in June from 52.7 in May. Meanwhile, the production index climbed to 54.1 in June from 51.3 in May, indicating an acceleration in the pace of growth. Elsewhere in Asia, China's economic growth slowed to the weakest pace in at least 27 years as domestic and international demand cooled in the face of a bruising trade war with the United States. The world's second largest economy grew 6.2% in the second quarter from a year earlier, after expanding 6.4% in the first three months of 2019, figures released by China's National Bureau of Statistics showed. A breakdown of the data showed output of the service sector, which accounted for 54.9% of the total GDP, rose 7% in the first half of the year, outpacing a 3% increase in the primary industry and a 5.8% rise in the secondary industry. In a separate development, Eurozone industrial production improved in May for the first time in four months. All five of the Eurozone's largest economies registered expansions in industrial production in May, with the month-on-month (m-o-m) figure for the bloc as a whole at 0.9%. In Germany, industrial production grew by 0.3% in May, following a 2% decline in April. Despite this welcome improvement, levels of industrial production remain lower than in May 2018. Domestic Economy The Consumer Price Index (CPI) which measures inflation rose by 11.22% year-onyear in the month of June 2019, which is 0.18% points lower than the 11.40% recorded in May 2019. The food index increased by 13.56% (year-on-year) in the reference month, slightly lower than 13.79% recorded in May, thus indicating declining pressure in the prices of food items. The core sub-index, which excludes prices of farm produce declined by 0.2% to settle at 8.8% in June 2019 from the previous month's figure of 9% year-on-year. During the month, the highest increases were seen in the prices of fish, bread and cereals, vegetables, meat, fruits, potatoes, yam and other tubers, oils and fats. Others are tobacco, major household appliances whether electronic or not, medical and hospital services, cleaning, repair and hire of clothing, actual and inputted rent for housing, repair and hire of footwear services and repair of household appliance. In a separate development, the National Bureau of Statistics, in a recent report titled “Nigerian Domestic and Foreign Debt”, revealed that the country's total public debt portfolio stood at N24.95trn as at March 31st 2019. External debt was reported at N7.86trn or 31.51% of the debt while N17.08trn or 68.49% of the debt was domestic. Lagos state accounted for 13.64% of the total domestic debt stock while Yobe State has the least debt stock in this category with a contribution of 0.68% to the total domestic debt stock. Stock Market The Nigeria Stock Exchange witnessed significant sell-offs for the third consecutive week largely in most bellwether counters. The All Share Index (ASI) dipped by 2.27% to settle at 27,919.50 index points from 28,566.79 index points the previous week. Similarly, Market capitalization contracted by 2.25% to close at N13.61 trillion from N13.92 trillion last week. We expect investors to continue tread cautiously this week in the absence of any definitive positive market triggers.

Money Market There was a significant increase in money market rates driven by tighter liquidity levels and the Retail Secondary Market Intervention Sales (SMIS) FX auction held on the last day of the trading week. Shortdated placements such as Open Buy Back (OBB) and Over Night (O/N) rates settled higher at 11.93% and 12.64% from 2.2% and 2.9% respectively last week. Similarly, the 90-day NIBOR rose to 11.45% from 11.28% the previous week. This week, we envisage the Monetary Policy Committee (MPC) meeting will drive the direction of rates. Foreign Exchange Market Last week, the naira was majorly stable across most markets except at the NAFEX window where it saw a slight depreciation. The official window saw a marginal appreciation as it ended N306.95/$, a 5 kobo gain from the prior week. The parallel market remained unchanged at N360/$. At the NAFEX window it saw a depreciation of 67 kobo to close at N361.46/$. The appreciation recorded in the official market segments may be attributed to the apex bank's regular interventions. This week, we envisage the stability in the market would continue due to consistent FX liquidity injections by the CBN. Bond Market The bond market traded with bullish sentiments despite the recently released bond calendar. Consequently, the market witnessed some buying on select maturities especially the 2023, 2028 and 2036 securities. Yields on the five-, ten- and twenty-year debt instruments closed lower at 13.09%, 13.87% and 13.86% from 13.42%, 13.94% and 13.94% respectively. The Access Bank Bond index closed higher by 0.74 points at 2,992.21 points from 2,970.29 points the previous week. The outcome of the MPC and Bond auction scheduled to hold this week will largely determine the direction of the secondary market. Commodities The price of oil plunged in the market after Iran offered the U.S. new nuclear deal if it drops its sanctions. The offer was made by Iran's foreign minister on a visit to New York in an effort to smooth heightened tensions between the two nations. Bonny Light, Nigerian benchmark crude settled at $62.38 per barrel last week, 7.84% lower than the previous week. In contrast, precious metal prices edged up as investors brace for an interest rate cut by the US Federal Reserve. Weaker U.S. dollars also supported the boost in price. Consequently, gold price closed at $1,438.99 per ounce, up 2.2% from the previous week's close while silver climbed to $16.33 per ounce compared to $15.12 per ounce the prior week. This week, expectations of a production rise from the U.S. Gulf of Mexico region, coming back into service after last week's Hurricane Barry disrupted production will weigh on oil prices. For precious metals, we expect prices to nudge higher as an increasingly dovish monetary policy stance by major central banks spurs safe-haven buying.

MONTHLY MACRO ECONOMIC FORECASTS Variables

Jul’19

Aug’19

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Sept’19

Exchange Rate (Interbank) (N/$)

361

362

Inflation Rate (%)

11.44

11.5

Crude Oil Price (US$/Barrel)

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

www.businessday.ng

@Businessdayng

Monday 22 July 2019

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

InsuResilience acquires 39.25% stake in Royal Exchange General Insurance Stories by Modestus Anaesoronye

nsuResilience Investment Fund (“IIF”) has acquired 39.25 percent equity stake in Royal Exchange General Insurance Company Limited (“REGIC”), Nigeria’s foremost insurer. The InsuResilience Investment Fund (IIF) promotes the development of climate risk insurance products by providing debt and equity, along with technical assistance, to qualified insurers, reinsurers and companies in the insurance value-chain in developing countries. The specific objective of the fund is to reduce the vulnerability of micro, small and medium enterprises (MSME), as well as lowincome households, to extreme weather events. Currently, there are two investments in Africa, five in Latin America, one in Central Asia,

and one global investment. With this investment, Royal Exchange General will be making a strong incursion into agric insurance, and this will happen soonest, a source in the company said. The announcement of the acquisition was communicated to the Nigerian Stock Exchange Thursday, informing shareholders and the investing public that the investment has been approved by the regulator of REGIC, the National Insurance Commission. Through its activities, the IIF is expected to reach out to more than 1 million Nigerian farmers by 2025. REGIC, a subsidiary of Royal Exchange Plc, is a leading player in agriculture insurance. The proceeds of the investment will help REGIC to spur growth by increasing its risk capital and supporting its underwriting capacity in agriculture, hereby extending its outreach to low income farmers. “The history, team and commitment of REGIC to agriculture

L-R: Zainab Adeleye, company secretary, FBN General Insurance; Yusufu Modibbo, independent director, FBN General Insurance; Seye Kosoko, company secretary, FBNHoldings; Bode Opadokun, managing dirctor/CEO, FBN General Insurance; Olugbenga Shobo, chairman, FBN General Insurance; Tunde Mimiko, executive director, FBN General Insurance; Hendrik Nel, non-executive director, FBN General Insurance and Val Ojumah, non-executive director, FBN General Insurance at the FBN General Insurance Annual General Meeting held recently in Lagos.

insurance make it a great addition to our portfolio. REGIC is uniquely positioned to capture the opportunity presented by 30 million under insured small scale farmers in Ni-

AXA Mansard maintaining consistent growth in fund performance

easurement of the performance of Nigerian Pension Funds Administrators (PFAs) reveal strong determination on the part of operators to deliver good returns on investment that will benefit contributors and retirees. Trend shows quality returns, an indication that pensions account holders will have a lot to be happy about at the time of retirement. For instance, at the end of June 2019, AXA Mansard Pensions Limited has shown consistence in its performance through all four funds as it remains top 4 in all four funds with a year to date return of 6.54 percent in Fund 1, 6.44 percent in Fund 2, 6.97 percent in Fund 3, and 7.39 percent in Fund 4. Along with

AXA Mansard Pensions Limited, other fund administrators performing well include AIICO Pension Fund Management, PAL Pensions, Leadway Pensure PFA Limited, OAK Pensions Limited, Crusader Sterling Pensions Limited and Radix Pension Managers Limited. Pension funds are collective investment undertakings that manage employee savings and retirement. Their primary objective is to provide pensioners who have reached retirement age with income. Pension Funds Administrators are expected to open Retirement Savings Account (RSA) for employees, invest and manage pension fund assets, pay retirement benefits and account for all transactions relating to the pension funds managed by them. Cre-

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ating a pensions scheme earlier in life has proven to be an established means of reducing old-age poverty and reducing the difficulties faced by multi-generational households. Asides the 18% mandatory contributions from you and your employer, you can also voluntarily contribute to increase your greater chances of a fantastic retirement plan. Voluntary contributions refer to additional contributions (after the mandatory deductions) from your salary to your RSA where your regular pension contribution will not be sufficient to meet your personal retirement goals. The funds will be invested alongside the mandatory contributions in your RSA, thereby ensuring that your money works harder for you.

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geria. We are thrilled to partner with and support REGIC with capital, technical assistance and our international network in the agriculture insurance space, with the objective

to increase the resilience of small scale farmers to climate change“, says Ernesto Costa, senior vicepresident, Private Equity at BlueOrchard.

FBN General Insurance pays N902m claims in 2018

BN General Insurance Limited, a subsidiary of FBNInsurance Limited paid the sum of N902 million as claims in 2018 as against N861 million paid in 2017. Gbenga Shobo, chairman of the company who gave the figure at the company’s Annual General Meeting (AGM) held in Lagos recently, disclosed that the company’s cardinal focus among others is to pay claims promptly. The company’s Gross Premium Written (GPW) for the year rose to N4.63 billion, achieving a year-onyear (YoY) growth of 32 percent from the corresponding performance of N3.51 billion achieved in 2017. He said the company’s Profit Before Tax (PBT) also increased by 91 percent to N615.6 million from N322.8 million posted in the preceding year.

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During the period under review, the company grew its total assets by 31 percent from N7.24 billion in 2017 to N9.45 billion in 2018, realising a significant improvement in capital efficiency just as it nurture robust liquidity and solvency margin above the required benchmark. Also speaking at the AGM on the future outlook of the company, Bode Opadokun, managing director/CEO said, “while we anticipate an improved operating economy, one of our strategic initiative for the year 2019 includes the implementation of our value added service, claims alert service designed to provide a responsive service to all our esteemed comprehensive auto insurance policyholders who have been involved in an accident within the Lagos Metropolis where the service is currently active.”

Monday 22 July 2019

BUSINESS DAY

insurance today

In association with

E-mail: insurancetoday@businessdayonline.com

Recapitalisation for insurance companies at this time will backfire on the long run - Chilekezi Obinna Chilekezi is a consultant, researcher and publisher having worked in different areas of the insurance industry since1988. He is also an examiner on insurance to a quite number of bodies, and a visiting lecturer on insurance to two institutions within the West and Central Africa. In this interview with Modestus Anaesoronye reviews the insurance industry, pointing the way for greater market. Excerpt: The National Insurance Commission (NAICOM) recently increased the capital requirement of insurance companies, what is your take on this? et me begin by asking this question, can NAICOM do that, yes of course they have the legal backing to increase the capital base of an insurance company to N5 trillion if they like?. But the question is, should they do so at this time, taking into consideration the economic reality, visà-vis the gross premium income of the market using the Nigerian Insurers Association’s figure of N365 billion. And also the reality that in most advanced markets, you still have specialist companies with less than N1 billion as their capital base operating alongside side companies with over a trillion naira in dollar or pound sterling equivalent?. I will say that the idea is totally wrong and will back fire on the long run. How do you think insurance companies will be able to meet this new capital requirement? I can’t answer this, but as someone who had invested in the industry without any returns for such, the last thing I can do is to repeat same. But I cannot talk of other investors. Do you think mergers and acquisition will help the industry? It may be it, but it’s always better when it is voluntary than forced, of which it will have the same effect like a forced marriage of couple. Despite all the efforts to in-

crease insurance awareness, many Nigerians still do not believe in insurance, what can be done about this? The issue of awareness is a serious one. Most Nigerians do not know much about insurance, even the educated ones. I teach pension and insurance to HR managers who in some companies are in charge of the insurance of their organizations and you will be shocked as to their individual opinions on insurance. On the part of the industry, not much has been done to positively create this awareness. Let me give you an instance, it has been more than five years that WAEC started conducting exams on insurance as an SSS subject, what has any insurance institution done to encourage the effective studying of the subject in the secondary schools. Answer, none. What stops a company to adopt a school so as to encourage SSS students to take insurance as an option than office practice?. What we have is operators always want to advertise their products in trade journals, and just like a person talking to himself. Implementation of compulsory insurance in Nigeria has been difficult, what do you suggest? I did a study recently and I found that Nigeria has the largest number of compulsory insurances and what this would have entailed is that the Nigerian insurance industry should have been having the largest insurance penetration and density, but incidentally the opposite is the case. As my people

Obinna Chilekezi

will ask after a dog has been killed, why has it refused to die? I don’t know. Loss adjusting arm of the insurance industry is at the point of extinction, what can be done to rescue that area of the business? For the practitioners, I feel they should change their focus and start specializing in more complex aspects of their risk.. So there is

need for retraining of the practitioners in more complex claims areas if they are to survive in the near future. Looking at the syllabus of the Chartered Insurance Institute (CIIN) and given your exposure teaching insurance in Institutions outside the country, do you think the Institute is still in position to serve its purpose as a manpower source for the industry.

We have to be fair to the Institute, there are limitations to the areas they can train professionals as a professional body; so the main challenge is on the professional, how are we developing ourselves as financial practitioners and not just insurance people. The institute can offer some training courses to complement what the professional has learnt while writing the exams. Speak on any topical issue of your choice? I will say that the Insurance Act 2003 has become too obsolete as a law for the market. I don’t want to mention that of the Motor Vehicle (Third Party) Insurance Ordinance 1945 which has been the law guiding motor insurance in this country. I think we should be ashamed of ourselves as a nation, still having that law in our statute book guiding an important aspect of our life – transportation. Also on the issue of regulation of the insurance business in the country, there is need for total overhauling of the whole system starting from the Commission down to the laws. Come to think of it most countries including African countries like Kenya are taking principle based regulation based on Solvency I and the more advanced markets are based on Solvency II, and here we are still on compliance base, a very primitive way of regulating modern insurance business. Finally, I am optimistic that the Nigerian insurance industry has a lot of opportunity if the right reforms are carried out in the industry.

Adeyinka Adekoya, Wapic Insurance MD elected CIIN Council Member

deyinka Adekoya, managing director/CEO of Wapic Insurance Plc has been elected as a Council Member of the Chartered Insurance Institute of Nigeria (CIIN). The election and inauguration took place at the just concluded 2019 CIIN Annual General Meeting which held in Lagos. Prior to being elected as a Council Member, Adekoya was seconded to serve in two of the CIIN committees for Education and Accreditation respectively. She has served in both committees since becoming a CIIN Fellow, as well being part of

the committee the organized the recently held 2019 National Insurance Conference, an initiative of the Insurance Industry Consultative Council (IICC). Yinka Adekoya has served as Managing Director of Wapic Insurance Plc since November 1, 2015. Yinka is a fellow of the Chartered Insurance Institute of Nigeria (FCII) and an Associate of the Chartered Insurance Institute, London (ACII). Adekoya holds a B. Sc in Insurance and an MBA, both from the University of Lagos. She has over 25 years experience in the insurance

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industry, of which over 20 years has been at senior management levels. Prior to her appointment, Adekoya was general manager and head, Institutional Business Development at Cornerstone Insurance Plc. She was also the deputy general manager, Technical at Law Union & Rock Insurance of Nigeria Plc. She is Member of the Board Enterprise Risk Management and Governance Committee, Member of the Board Finance, Investment and General Purpose Committee, and Member of the Board Information Technology Committee of the Company.

Monday 22 July 2019

BUSINESS DAY

Live @ The Exchanges Market Statistics as at Friday 19 July 2019

Top Gainers/Losers as at Friday 19 July 2019 LOSERS

GAINERS Company

Closing

Change

N13.05

N12

-1.05

STANBIC

N38.5

N38

-0.5

FIDSON

N4.55

N4.1

-0.45

N6.4

0.4

UACN

N5.8

N5.4

-0.4

VALUE (N billion)

N14.4

0.4

N5.8

-0.2

MARKET CAP (N Trn)

Closing

Change

N18.35

N20.15

1.8

N58

N59

N127

N128

N6 N14

MTNN ACCESS FLOURMILL

Company

ASI (Points)

Opening

CCNN

DEALS (Numbers) VOLUME (Numbers)

27,919.50 2,966.00 274,206,008.00 2.844 13.606

Global market indicators FTSE 100 Index 7,508.70GBP +15.61+0.21%

Nikkei 225 21,466.99JPY +420.75+2.00%

S&P 500 Index 2,992.47USD -2.64-0.09%

Deutsche Boerse AG German Stock Index DAX 12,260.07EUR +32.22+0.26%

Generic 1st ‘DM’ Future 27,262.00USD +61.00+0.22%

Shanghai Stock Exchange Composite Index 2,924.20CNY +23.02+0.79%

Nigeria’s securities dealers caution investors as stocks lose N300bn in one week Stories by Iheanyi Nwachukwu

he Association of Securities Dealing Houses of Nigeria (ASHON) has cautioned embattled equity investors against panic sale of shares to avert avoidable losses. They believe that stock market would soon embark on bullish trend. This advice comes amid a loss of about N316billion recorded in the trading week ended Friday July 19. Despite the positive end to the review week of bearish trading, analysts foresee a negative performance at week open. The stock market declined by 2.27percent in the review trading week, while year-to-date (Ytd), the negative returns increased to 11.17percent. The Nigerian Stock Exchange (NSE) All Share Index (ASI) and market capitalisation decreased from a week-open high of 28,566.79 points and N13.922 trillion to 27,919.50 points and

N13.606trillion respectively in the review week. Amid this disappointing trend, securities dealers urged investors to take advantage of stockbrokers’ sound professional advice before taking investment decision. Patrick Ezeagu, ASHON’s Chairman who linked the on-going downward swing situation at the Bourse to unnecessary panic sale said many investors adopt herd instinct whereby they sell

off just because others are selling. Ezeagu noted that two investors may not necessarily have the same motive for sale or buy order, saying this is where the need for professional investment advice from stockbrokers become compelling. He stated that a trend analysis of corporate earnings in recent time indicates that many companies across sectors have posted higher earnings with good

returns but this has not significantly reflected in the upward movement of their share prices. Ezeagu explained that there was nothing unusual about this as the market generally reflects the trend in the economy, hence, investors buy into the future of these companies on the expectation of higher shareholder value. “Those who are selling off their shares right now are speculators and not real investors. Every stock

market needs speculators for liquidity but they can change investment decision in one second. Our Stock market is forward looking. Investors need not be nervous. They should consult professional stockbrokers for sound investment decision. There is no basis for panic sale of shares. Many companies have announced strong financial performance with prospects of increased future earnings.

L-R: Godwin Akpan, company secretary, director; Ejiro Nkenchor, director; Charles Onyenso, director; Regina Okonkwo, chairman; Chukuwa Nwachukwu, director; Elizabeth Nkem, director; benga Benson, managing director; Victor Noruwa, during the annual general meeting of Rehoboth Microfinance Bank in Lagos recently.

Fidson announces strategic partnership with Ohara

idson Healthcare Plc (Fidson), one of Nigeria’s leading pharmaceutical manufacturers has announced the execution of a strategic alliance with Ohara Pharmaceutical Company Limited (Ohara), a leading Japanese healthcare company. This alliance is a result of Fidson’s recent Rights Issue which saw Ohara’s shareholding in the company increased to 21.57percent. The strategic alliance is aimed at supporting Fidson in fulfilling its commitment to provide the Nigerian market with the latest healthcare products and services. Ohara, being a major player in the Asian pharmaceutical market, will bring cutting edge technology and innovation through technology transfer, expertise, and knowledge sharing to enhance Fidson’s excellence and ascendency in the Nigerian pharma space. The alliance holds promise as a significant growth driver for both companies, particularly as a major factor for the development of local pharmaceutical manufacturing in Nigeria. The significance of collaborations of this nature to the emerging Nigerian healthcare system is evidently enormous, given the rapid population growth, the healthcare state and the living standards of the larger population in the country.

Cadbury’s H1’19 scorecard impresses market

NIDF delivers over 55% total returns in 2 years

…stocks outperform NSEASI

he Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF) marked the second anniversary of its inception by delivering over 55percent total returns to its unitholders over the period. It also announced its eight consecutive quarterly distribution of N4.34 per unit for the second quarter (Q2) of 2019. With the Q2 quarterly distribution, the Fund has distributed a total sum of N4.67 billion in cash (N33.86/unit) to NIDF unitholders since inception. In the short period of two years since its inception, NIDF has emerged as the largest provider of long-term Naira financing for commer-

adbury Nigeria Plc has released its unaudited financial report for the half-year (H1) ended June 30, 2019. The company impressed the market and investors with record growth seen across its key financial indicators. The results shows revenue grew by 11percent to N19.45billion in H1’2019 from H1’2018 level of N17.55billion. Cadbury Nigeria Plc manufactures and sells branded fast moving consumer goods to the Nigerian market and exports in West Africa. Profit Before Tax (PBT) advanced by 326percent to N957.06million against

Loss Before Tax (LBT) of N423.76million in H1’2018. The company closed the review first-half of the year 2019 with record Profit After Tax (PAT) growth of 258percent to N669.93million compared with N423.76million Loss After Tax (LAT) in H1’18. The Company produces intermediate products, such as cocoa butter, liquor, cake and powder. It exports cocoa butter, cake and liquor to international customers, and cocoa powder locally. Cadbury Nigeria Plc operates through three segments: Refreshment Beverages, Confectionery and Intermediate Cocoa Products. The Refreshment Beverages segwww.businessday.ng

ment includes the manufacture and sale of Bournvita and Hot Chocolate. The Confectionery segment includes the manufacture and sale of Tom Tom and Buttermint. The Intermediate Cocoa Products segment includes the manufacture and sale of cocoa powder, cocoa butter, cocoa liquor and cocoa cake. The Refreshment Beverages’ brands include Cadbury Bournvita and Cadbury 3-in-1 Hot Chocolate. The Confectionery’s brands include Tomtom Classic, Tomtom Strawberry and Buttermint. The Intermediate Cocoa Products’ brands include Cocoa Powder and Cocoa Butter.

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cially viable infrastructure projects across Nigeria. Its current portfolio of N31billion (approximately $100 million) includes a dozen infrastructure loans with twenty underlying projects and businesses. These projects are in multiple sectors including power generation, energy infrastructure, transportation, telecom and social infrastructure, and spread across the country. Lack of availability of long-term funding in domestic currency has been the bane of infrastructure development across Africa, including Nigeria. Foreign currency financing, particularly debt financing, creates unsustainable @Businessdayng

mismatches between the currency of revenue and the currency of financing, leading to both higher costs to end-users and also macroeconomic risks for the country. NIDF has successfully demonstrated the strength of its model (mobilising domestic savings for funding infrastructure) and how generating solid financial returns can go hand-in-hand with positive development outcomes. For instance, in 2018, NIDF-funded projects achieved CO2 reduction of more than 500,000 tonnes and diverted nearly 10 million SCM (standard cubic meters) of flared natural gas to commercial use in the country.

Monday 22 July 2019

BUSINESS DAY

Start-Up Digest

In association with

Inside Evarest Nnaji’s entrepreneurship world ODINAKA ANUDU

varest Nnaji can best be described as a superpreneur—an entrepreneur with a superlative understanding of business. He is the managing director/ chief executive officer of Odengene Air Shuttle Services Limited (OAS Helicopters) Nigeria and chairman of Odengene Air Shuttle Inc. (USA), Odengene Group of Companies Limited, Electrostatic Laser World, and OAS Offshore Logistics. Born in 1962, Nnaji attended the University of Lagos (UNILAG) between 1998 and 2002, obtaining a degree in Political Science at graduation. As a businessman, he has singlehandedly steered OAS Helicopters from a startup in 2006 to a major player in Nigeria’s oil and gas helicopter aviation by 2018. He sees himself as an ardent believer in aviation industry and technology. He holds the United States’ license as a pilot amid other certifications. He became an aviator because of his unquenchable passion for flying. All through his life, Nnaji has always loved science, and aviation matches his passion for applying scientific solutions to everyday problems. “The industry is science-driven. I love science and it has universal application,” he tells Start-Up Digest. “Going to another country does not give you any iota of disadvantage as a pilot. Aviation brings the best out of you and opens you to the world. It is helpful and makes you see how far you can go in life,” he says. He believes that succeeding in the aviation industry requires passion and intellectual soundness. A number of businesspeople believe that the aviation industry is a cash cow. So they delve into the industry for the purpose of making quick cash. Nnaji says this is a wrong understanding of the industry and anyone who goes into it for quick cash could be disappointed. “I always tell people that aviation is not where anyone can go to make quick money,’ he says. “Those who went into aviation to make quick money never lasted. And this is not about Nigeria. If you look around the world, you will see how airlines are doing—including the ones owned by governments. It is a good business, but not a place to make quick money. People go to airports and see the number of passengers waiting to board and they use their calculators and do the maths. That is not true. The money is nothing when you turn it into dollars,” he explains. As a superpreneur, he is not one to set up a business without conducting feasibility studies. “There must be profitability if it must be a business,” he says. “To me, for a business to find my interest, it must have two characteristics. First, it must be a business I am passionate about, meaning that I must be happy to be in the business. Second, it must be worth my time. In other words, it should be able to pay for my time. These must be there for me to consider making investments,” he discloses. The oil and gas industry drives helicop-

Evarest Nnaji

ter business. This is because helicopters are used to fly a number of experts who do onshore activities. However, the industry is down due to exogenous factors. How is this trend affecting Nnaji’s helicopter business? “Yes, if oil goes down, things around aviation go down. This is so because as oil price goes down, investors will also slow down in making new explorations. They will scale down operations and will not go deep into the sea. As investors spend less time in the ocean, there will be fewer activities. What brings about boom in helicopters is when people are developing new wells,” he elucidates. “But in Nigeria, none of the sectors is performing well because everything in Nigeria banks on crude oil,” he says. “So, the industry is not doing exceptionally well, but it is nothing peculiar about helicopters. Things are down at the moment in all sectors.” Nnaji has different kinds of helicopters, including Airbus and Agusta. He explains that the choice of helicopter is determined by how much weight it can carry. “Can it fly three, four or five hours? If you intend to fly one hour into the sea, you have to fly one hour back. You should also have back-up hours in case you need to detour. Aircraft must have an endurance of three hours. And then, you have to consider the amount of load it will carry for the hour. If you are flying offshore, you ensure that everything you need will be provided by the aircraft. So, aircraft that will have the necessary things are configured differently and they are much more expensive,” he further explains. Are the rich still patronising helicopters? www.businessday.ng

The superpreneur says though economic activities are in downward spiral, need still drives demand. “If a company is worth N2 billion per annum and N 5 million per day and it has a need to fly to a certain point, it will pay N2 million as long as it can fly within a short time. If you make N5 million per day and spend N2 million and get to your destination within hours, why would you lose the N5m by flying a day or two days in a commercial aircraft, rather than chartered?” he asks. He says that VIP travel is not as great as it was 10 years ago when the economy was better, but adds that people still weigh costs and better options before making choices. “We provided an aircraft for a state governor who had three engagements and still returned at 6pm to attend to foreign investors. The economy isn’t doing well, but it will improve,” he says. He believes that every firm that makes profit deserves to pay its taxes promptly. However, he adds a caveat: Tax should be based on income. He states that aviation is much challenging as people tend to think that the amount heard in the industry is a signal of the amount of money in it. “But it is not always so. I don’t have any problem with the tax we pay in Nigeria. People should pay their taxes, but taxes should be based on income,” he says. A number of players in the aviation industry complain of high cost of operations. For Nnaji, this is real. One major cause of high operations cost is that Nigeria is remotely removed from places where equipment is produced. “Everything is imported. Even trainings are

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done overseas,” he says. “So, cost of operations in Nigeria will always be more. When people expect cost of flying to be cheaper, I disagree with them. Is there any equipment you import, pay tariffs and sell at a cheaper rate?” he asks. Developed countries have experts around and designers of the aircrafts who can easily visit from time to time. But this cannot easily happen in Nigeria. “You have to go to the embassy, and fly to other countries to get them. And you may not even have all of the people you want as some of them may have retired and would not like to leave their environments. To come to Africa may not be easy for them. We are far removed from them and we have less financial capacity to acquire their services. I am not even talking about cost of doing business in terms of buying diesel and security. Let us leave that out because every business is suffering that. “Most of the pieces of equipment we use are not manufactured in Nigeria. Then trainings are done abroad. And this is not about government but about the numbers. If you bring a simulator for one of the helicopters, would you have enough number of air planes that can patronise you and make you break even?” he asks, rhetorically. “If the aircraft is sold for $10 million, the simulator may be sold around $10m as well. A lot of huge maintenance cost is associated with it. Do you also have the personnel that will handle the simulators? If you do not have 50 aircrafts that will patronise the simulator, you can’t break even and you don’t have a business. No model of aircraft is up to 50 in the whole of West Africa. These are the things that rev up cost of activities. And in helicopter everything is much more. Regulatory authorities are aware you cannot fly the aircraft to France or South Africa. And you have to convince them you have the capability to maintain the aircraft. And when the regulators want to ensure you have the capability, they will not see one engineer but many of them,” he further elucidates. He says he does not joke with safety as the whole industry is built around it. If Nnaji is asked to shut down one of his businesses, which one would he close down? He says none, because all of them were founded on passion. “I can tell you that I have passion for the businesses I do. Businesses that command my time are worth my time. I also have to bring this fact home. There is always a downtime in business. If you have a business and you believe it, all you need is to scale down to the number you can handle when the downtime starts. Except if the business has no future, I can close it down. We cannot insist on sustaining certain businesses due to globalisation and technology. But all my businesses are good and I do not want to close any down,” he says. He is happy with all the regulatory agencies in the aviation industry, urging them to continue in what they do. He is also a philanthropist. Through his Odengene Foundation, he has granted scholarships to hundreds of indigent students. The foundation has a unique care programme for orphans and abandoned babies.

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Monday 15 July 2019

BUSINESS DAY

Start-Up Digest

How Louis Awode started fashion outfit with N15,000 Josephine Okojie

hen it comes to fashion, only few do it better that Louis Awode. He is the CEO and creative director of ClovisCasuals, a start-up unisex fashion label that operates in Lagos and its environs. Louis was inspired to establish ClovisCasuals when he discovered a niche in the Nigeria’s fashion industry. “I did a feasibility study and discovered that Nigeria and Africa at large did not have any recognised fashion brand such as Nike, Gucci, Adidas and Louis Vuitton like Americans and European countries,” he says, adding that this is why he went into the business. The political scientist-turnedentrepreneur tells Start-UpDigest that he started his business with N15,000 in 2016. The amount was spent on the purchase of a sewing machine and other accessories. Louis got the money from his first job immediately after graduation while waiting for his mandatory National Youth Service Corps.

Louis Awode

“My initial start-up capital was my first salary of N15, 000 earned as a fresh graduate while working with a secondary school as a librarian,” the young entrepreneur

says. “This was the first money I invested into the business and, thereafter, the little proceeds I got were ploughed back into the busi-

Awalade-Ologbenla: Innovative fashion designer Gbemi Faminu

degoke Awalade-Ologbenla, young and innovative fashion designer, is a graduate of Sociology from Crawford University. He is also the chief executive officer of St. Calypso Couture International, which deals in premium fashion, ready-to-wear collections, footwear production and general fashion merchandise. He started his business in 2008 during his 3rd year in the university and was inspired to go into the fashion world because of his love for designs. “Growing up with an industrious parent birthed my passion for fashion in 2008,” he says. “I grew up being conscious of my appearance and looks. This led me to start sketching my own designs, creating new looks and making money with my creativity,” he says.

Unlike most entrepreneurs, Awalade-Ologbenla started his business with zero capital, which goes to show that there are many businesses in the country that can be started with little or no money. Awalade-Ologbenla’s secret was that he so advertised himself that he got a major contract worth almost N300, 000. This gave him a big break and opened doors for larger contracts and more opportunities. He says that although running a business can be difficult, he has been able to record ample growth and even operates on a larger scale while fostering partnership deals with other enterprises. Because he runs his business on a large scale, he gets raw materials in large quantities from major markets in Lagos and sometimes outside the country such as Turkey and China. Ologbenla further says his company creates affordable outfits to suit clients’ tastes while being prompt

Adegoke Awalade-Ologbenla www.businessday.ng

both in delivery and time. These have allowed continuous patronage and generous referrals, he admits. The young entrepreneur reveals that since its establishment, the company has attained high-profit margins and an extended customer database. It has over 10 permanent workers and 15 ad hoc staff members. He plans to expand his business by having the biggest bespoke and ready-to-wear garment factory in Nigeria. He has an eye on 30 percent of the Nigerian population, he tells Start-Up Digest. Despite the love for fashion, the entrepreneur says he faces challenges relating to epileptic power supply, inadequate funding for business expansion, unfavourable exchange rate and the high tariffs. He urges the government to address issues around high duty and tariff charges and unfavorable forex. He points out that providing business grants and encouraging skills acquisitions will go a long way in supporting the growth of businesses. The entrepreneur attends trainings and workshops both digitally and physically as he believes there is a room for improvement. He believes that such trainings and certifications improve his business as he tries to deliver global values while running a local brand. Advising other entrepreneurs, he says, “There is no shortcut to success. You have to learn by the ropes, be accountable, smart, different and know when to quit and, above all, nothing is impossible.”

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ness,” he adds. He says the business has continued to grow steadily since starting as it can now fully run itself, adding that it now has increased client base. The business currently has two full-time and four part-time employees. The young entrepreneur says he sources his fabrics locally across markets in the country but plans are on-going to start sourcing from Ghana, China and Vietnam. Speaking on what ClovisCasuals has done differently to remain in business, he says the business has continued to invest in its employees through trainings, and has made customers satisfaction a top priority. “The fashion industry is highly competitive, no doubt, but at ClovisCasuals, our cutting edge is to create, recreate and learn,” he explains. Evaluating the Nigerian fashion industry, Louis says that the space is exciting and highly competitive, with plethora of opportunities for businesses that can do things innovatively and creatively. He points out that the business plans to establish a store in major

cities in the country in the long run, while mulling to build an e-commerce model of selling its products in the short term. Answering questions on the challenges limiting his business, Louis says infrastructural gaps have remained the major challenge facing his business. He urges governments at all levels to provide grant opportunities for start-ups with excellent business ideas as well make adequate investments in bridging the country’s infrastructural gaps. “Alleviating these myriads of challenges cannot be too stressed. Grants and easy loans should be made available to the youths wishing to go into entrepreneurship. Practical entrepreneurship should be included in our educational syllabus from primary to the university level for business prodigies to be birthed early in life,” he advises. “This is one of the tenets of building our economy, using China as a critical example,” he adds. On his advice to other entrepreneurs, he says, “Perseverance, creativity and consistency are the keys to winning a successful entrepreneurship race, with God on your side.”

SEEDi urges FG to create MSMEs development plan Josephine Okojie

he Sustainable Entrepreneurship and Economic Development Initiative (SEEDi) has called on the Federal Government to create an MSME development plan to drive economic growth. The organisation made the call in commemoration of the 2019 world’s MSME day. SEEDi noted that small businesses are faced with a myriad of challenges beyond access to finance and that the establishment of a development plan for MSMEs will help address issues of unavailability of non-financial services, high cost of doing business and multiple taxation among others. “We call on President Muhammadu Buhari to, without delay, task the Small and Medium Enterprises Development Agency (SMEDAN), the National Directorate of Employment (NDE), Development Finance Department of the Central Bank of Nigeria (DFD-CBN), the Federal Ministry of Industry, Trade and Investment (FMITI) and @Businessdayng

the Bank of Industry (BOI) to begin the process of producing an MSME development plan in Nigeria,” Celestine Okeke, lead partner, SEEDi, said. Okeke said that the MSMEs development plan being advocated should take into consideration the peculiarities of doing business for small business operators in each sector of the Nigerian economy, the challenges peculiar to each sector and, more importantly, how the challenges are to be surmounted. “While we acknowledge and appreciate that small businesses need finance to sustain and or scale up their enterprises, we want to restate that the fundamentals of starting, sustaining and scaling up small business enterprises transcend beyond mere access to finance. This fact came into the fore more prominently with our experience as a country with the YOUWIN award winners,” he said. “As we mark the 2019 MSMEs day, it is our hope that the present administration will take more interest in supporting them to thrive by improving the ecosystem in which they operate,” he said.

Monday 22 July 2019

BUSINESS DAY

real sector watch

Coscharis expands vehicle assembly operations amid economic woes … Auto Policy controversies

Odinaka Anudu

oscharis Group is showing confidence in the Nigerian economy, expanding vehicle assembly operations amid economic vicissitudes, Automotive Policy controversies and policy flip-flops that dog the Nigerian environment. Last Thursday, it sealed a partnership deal with a French automobile giant Groupe Renault, which will see it assemble two variants of Renault products— Logan and Duster—locally in the semi - knocked down form. “With the official announcement of this partnership, we shall be offering four variants of the Renault brand into the Nigerian market in the first instance. Two of the variants, Logan and Duster, will be assembled locally here in this plant in SKD (Semi - Knocked Down). As time goes on, both the Renault Kwid and Renault Oroch will be added to the Renault line,” Cosmas Maduka, president of Coscharis Group, said at the official announcement of the partnership in Lagos last Thursday. He said Coscharis Group would not rest on its oars as

it plans to introduce other Renault variants into the assembly line. He explained that it is in an effort to achieve this that the vehicle assembly segment of the group commits huge financial, technical and human resources to the partnership. “The fact that we have ventured into it headlong underpins the level of confidence and hope we have for the future of the Nigerian automotive industry,” he said He said this is to underscore the human capital opportunities that stand to be

delivered in terms of employment and the multiplier effect on the economic development of the country. He demanded governmental support in terms of enabling environment through basic infrastructure required to keep the manufacturing process on. Fabrice Cambolive, chairman, Groupe Renault, said the company offers Nigerian clients unique and original range perfectly adapted to the conditions of use of the country. “With a population of over

200 million, Nigeria is a strategic African country where Groupe Renault will extend its footprint. The Coscharis Group is a recognised player in car assembly and distribution. Thanks to their expertise and our products adapted to the local needs, we will be able to answer immediately to the customers’ demand in Nigeria,” Cambolive said. In October 2017, Coscharis Group unveiled a Ford assembly plant with a capacity to churn out 10,000 to 20,000 cars annually. The plant, which assem-

FAE eyes larger market share with premium envelopes Gbemi Faminu

unlayo Adebo Enterprises(FAE), o n e o f Nig e r i a’s largest paper and envelope producers, has launched new brands of envelopes and matching letterheads. The envelopes and letterheads are produced with security-centered watermark and are available in six different surfaces, including the laid surface, the laid extra ivory surface and the luxury grey surface. There are also the elite, the premium and the extra brands which come in brilliant white. Part of the newly launched product was the tamper-proof envelopes made with security watermark and tear-proof products. Addressing guests at the product launch, Layo Bakare-Okeowo, CEO of FAE Limited, said that having been present in the paper industry for 38 years, there was a need to disrupt the market

with a more improved product with more quality. She added that the envelope was a trailblazer in Africa’s paper industry and produced to suit clients’ tastes in quality, security, and color. She stated that the industry was faced with various challenges which the government could solve by creating an enabling environment, adding that poor infrastructure and weakness of the naira were challenges that must be addressed. “I would like to sensitise government at all levels to institutionalise the made-inNigeria project by patronising Nigerian manufacturers and also creating the enabling environment for their businesses to thrive,” he said. “This they can do by reviewing the Nigerian tax regime and investing in the power sector to improve power generation, transmission, and distribution to oil the growth engine of the economy.” In his goodwill message, www.businessday.ng

Mansur Ahmed, president of the Manufacturers Association of Nigeria (MAN), expressed his delight at the gigantic steps Okeowo took in the manufacturing space and charged other manufacturers to take a cue from it. He said that paper makers have only explored two percent of the industry, saying that there were 98 percent unexplored opportunities available to manufacturers in the space. “Manufacturing is beyond the creation of goods and services. Therefore, every manufacturer must continue to up their game regardless of the circumstances, as well as seek ways through which the things produced have so much quality that will satisfy the consumers.” He stressed the need to increase the capacity of the manufacturing sector and ensure that a strong economy is created, adding that beyond the Executive Order 3, which speaks of patron-

age, there should be more advocacy regarding the made-in -Nigeria products Nike Akande, immediate past president of Lagos Chamber of Commerce and Industry (LCCI) commended Okeowo for achieving feats in the manufacturing industry, saying that industrialisation was the key to development, employment generation and economic growth. She advised that Nigerian manufacturers to courageous in the face of various challenges they face. “We should support the manufacturers so they can compete in the global market and be relevant to economic growth and development,” Akande said. B a b a t u n d e Ru w a s e , president of the LCCI, Lagos Chamber of Commerce and Industry, commended Okeowo and FAE for their efforts in improving the manufacturing industry and the economy at large.

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bles Ford Ranger and other products, has created a number of jobs, triggering growth in the vehicle value chain. Nigeria’s Automotive Policy began in 2013 with a view to having a large number of vehicles assembly plants. Thirty-five percent levy and 35 percent duty were imposed on imported vehicles. Six years on, the dreams of most local assembly plant are yet to be realised as Nigeria imports more ‘accidented’ vehicles today than ever. Importers of damaged or ‘accidented’ vehicles officially enjoy a rebate of 30 percent. What this has done is to encourage the importation of rickety vehicles which make up 70 percent of imported cars today. The age of most imported used cars in Nigeria is 15 years, whereas that of Algeria, Angola, Chad, Mauritius and Seychelles is three, according to a research done by PwC. Also, there is yet no market for new vehicles. Officially, market for cars in the country was just 6,999 in 2017 as against 555,716 in South Africa; 181,001 in Egypt; 168,913 in Morocco, and 94,408 in Algeria. The National Automotive Design and Development Council (NADDC) has issued licenses to 54 vehicle com-

panies for local assembly. Industry experts estimate the capacity of these firms at 400,000 units per annum. The National Bureau of Statistics says Nigerians imported 105,189 units of vehicles in 2016 through the ports and raised the number to 181,404 (72.46 percent increase) in 2017. The capacity of 54 licensed asemblers is 410,000 units. PwC estimates that 410,000 cars were imported into Nigeria in 2014, out of which 74 percent are used. Passenger cars and commercial vehicles lead vehicle sales with a combined share of 61 percent. Corporate purchases account for the largest share of vehicle sales with 34 percent of the market, while individual purchases are a close second with 30 percent of the market. “If we want to develop a market for 54 companies that have got licenses with 410,000 capacity plants and we import a huge number of used vehicles, how are we going to support vehicles being assembled, since the ones assembled locally will be more expensive?” Bambo Adebowale, chairman, Auto and Allied Sector group of the Lagos Chamber of Commerce (LCCI), asked in a recent interview with BusinessDay.

Kwara to create export processing zone along Benin border SIKIRAT SHEHU, Ilorin

he Kwara State Government says it will create a viable inland trade and export processing zone along Kwara-Benin Republic border. The state governor Abdulrahman Abdulazaq, who stated this in Ilorin, said this would be done in collaboration with the Federal Government to boost economic activities at the corridor. “Our administration is ready to partner with the Nigeria Immigration Service and other relevant bodies to strengthen security in the state, particularly in the western borders with Benin Republic,” he said. Abdulrazaq, who spoke during a meeting with the Comptroller of Immigration Service, Kwara State Command, Edith Onyemenam, at the Government House, in Ilorin, vowed to provide critical infrastructure in Kwara @Businessdayng

North Senatorial District and other parts of the state with a view to promoting business activities and improving the living standard of the people of the area. He, however, sought the support of the Nigeria Immigration Service and other sister security agencies to tackle the challenge of porous borders and strengthen security in the state. Abdulrazaq thanked officers of the Service for their selfless service to the country, promising to support them in carrying out their mandates in the state. Speaking earlier, Onyemenam said the visit was to pay homage to the governor as the chief security officer of the state. She commended Abdulrazaq for bringing dynamism to governance in the state, assuring him that the Service would contribute to strengthening security in Kwara State through policing of the borders.

Monday 22 July 2019

BUSINESS DAY

real sector watch Analysis

Why improved manufacturing PMI signposts gradual economic recovery Gbemi Faminu

h e P u rc h a s i n g Managers Index (PMI) report released for the second quarter of 2019 recorded its highest points in five years and as a leading indicator for economic movement, it reveals a possible growth for the second-quarter GDP of the country’s economy. The manufacturing and non-manufacturing PMI, released by the Central Bank of Nigeria (CBN), is an indicator of how each sector fares in a month and is also a leading indicator of how the economy fares within that period. It is computed based on survey responses from sector leaders, indicating changes in the level of business activities in a month. The manufacturing and non-manufacturing PMI average for the second quarter of 2019 stood at 58.15 points, which is the highest in five years, according to BusinessDay findings. Furthermore, a trend was discovered which showed that the PMI mirrors the growth or drop in the country’s GDP. Following the trend from 2015 before the Nigerian economy experienced a recession, it showed that growth or a drop in the quarterly PMI reflected on the country’s quarterly GDP. In 2015, the Q2 average PMI was 51.15 points while the GDP growth was 2.35 percent. In 2016 when the economy experienced a recession, the PMI dropped below the benchmark of 50 points to 43.7 points and the GDP contracted to -1.49 percent. In 2017, the PMI gained momentum and stood at 52.05 points and it was followed by rise in GDP to 0.72 percent. In 2018, the PMI average was up 9.7 percent to 57.1 while GDP grew to 1.50 percent mirroring the behaviour of PMI. In reaction to this trend, the PMI, which recorded a marginal increase of two percent to 58.15 points, will most likely reflect a marginal growth on the country’s GDP for the second quarter of 2019. “We might see some improvement in GDP growth to mirror PMI marginal increase,” said Gbolahan Olo-

gunro, Research analyst at CSL stockbrokers, told BusinessDay. He said the growth would be marginal as ministries that should execute the capital expenditure of the 2019 budget have not been appointed ministers. “Most importantly, the ministry of power, works, and housing, the absence of the minister means that the permanent secretary does not have the authority to implement the CAPEX of these ministries,” Ologunro explained further. While the completion of the general election translated into an improved PMI index point against declining trend witnessed in the first quarter of the year 2019, this increase is marginal. “Manufacturers are still trying to get a clear sense of direction in terms of what government policy will be in terms of supporting the private sector to stimulate growth. This could be why we have the slight increase,” Ologunro added. While the economy has managed to pick up its activities following the general elections and its sentimental www.businessday.ng

effects on investors’ decisions being measured by the PMI, the delay in the passage and signing of the ministerial list, which is withholding the implementation of the 2019 budget, dampens the prospects for economic growth. Doyin Salami, chief executive officer of Kainos Edge Consulting, posited at a breakfast meeting in Lagos recently that 2019 would be tighter than 2018, considering its economic situation and happenings in the global environment. “Having cleared the air of uncertainties in the country’s political space, there will be need to negotiate the transitions that will occur despite the results of the elections, as there will be new personnel who may or may not introduce new policies,” he said. “Furthermore, the economy is in a fragile condition and will grow at a slow rate. It might possibly record a 2.5 percent growth this year,” Salami added. A breakdown of the PMI into the two comprising sectors revealed that the manufacturing PMI experienced a contraction in June which

marked the end of the Q2. It can be recalled that in April and May, the PMI stood at 57.7 and 57.8 respectively, while it contracted in June 2019 by 0.69 percent to 57.4 percent. While the non-manufacturing PMI had 58.7 and 58.9 in April and May respectively, it also contracted in June by 0.51 percent to 58.6 points. Amid sluggish economic recovery and political uncertainties which characterised the first half of 2019, Nigeria’s manufacturing sector has been able to sustain growth which is reflective on its PMI in the second quarter of the year, but momentum is waning. While the manufacturing PMI for the second quarter has recorded steady growth in the last five years, its growth rate has reduced significantly. In 2016, the PMI growth rate was -13.27 percent, in 2017 and 2018 growth rates were 19 percent and 9.02 percent respectively. In 2019, its growth rate was 1.41 percent. The growth is, therefore, regressive which significantly implies that all that glitters is not gold, as the sector is battling with various challenges

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stemming its growth. A report on Micro Small & Me d i u m E nt e r p r i s e s (MSMEs) released recently by the National Bureau of Statistics (NBS) showed that the number of medium scale enterprises dropped by 61 percent from 4,670 in 2013 to 1,793 in 2017 while the total MSMEs grew marginally by 12.1 percent. Further examination of the report shows that the smallscale enterprises consisted of majorly education and manufacturing medium enterprises and were majorly made up of manufacturers who covered 43 percent of medium enterprises. This means that manufacturers were the worst hit by economic viccititudes. The growth recorded rises majorly from the abundance of the medium-scale enterprises while they bear the brunt of the challenges in the business environment. The World Bank‘s Doing Business Index ranked Nigeria the 146th due to the constraining business environment. Seleem Adegunwa, chairman, MAN, Ogun State, said manufacturers in Nigeria face various challenges which make doing business difficult. He added that the success of any manufacturing outfit depends upon various factors which include good infrastructure, improved power supply, and an enabling regulatory environment. “If these issues are not checked by relevant government agencies, it could result in the collapse of more factories and businesses, as some firms have already shut down their operations and relocated to neighbouring countries,” he said. According to the Manufacturers CEOs Confidence Index (MCCI) conducted by the Manufacturers Association of Nigeria (MAN) in the first quarter of 2019, issues around foreign exchange, doubledigit interest rate, government capital implementation, multiple taxes, overregulation and raw materials were identified by chief executives of Nigerian firms as some of the challenges dragging the growth of the sector backwards. Nigeria has retained its double-digit monetary policy rate at 13.5 percent from a previous 14 percent, while commercial lenders give out loans @Businessdayng

at 20 to 35 percent interest rates with a 12 months tenor. Development banks like the Bank of Industry which give out loans at single-digit rates of about nine percent lack the required capital to keep up with its activities. Data from MAN shows that the lending rate to the manufacturing sector averaged 22.21 percent in 2018 and 22.84 percent in 2017. Manufacturers rely on gas, diesel and other alternative sources as power distribution companies’ failures pile up. According to a survey conducted by MAN, expenditure on alternative energy sources totalled N93.1 billion in 2018, eating deep into the finances of the producers. Manufacturers also battle with the high cost of production, which majorly stems from the weak naira against the dollar. Presently, $1 equals N360 in the parallel market, which is expensive especially for those who have to import their raw materials for production. This, in turn, affects the volume, and quality of the products produced. They complain that the gridlock in Apapa increases production cost, as they are often required to pay unnecessary demurrages due to delays of getting containers in and out of Apapa. The country’s porous borders are also contributory factors to the manufacturers’ headache as smuggling has become the order in the market. Nigerian consumers patronise mostly foreign products as they are perceived to have more quality and, in some cases, less expensive. In Nigeria, there are over 25 regulatory agencies that supervise business activities, some of which have similar duties under different bodies. While each agency tries to carry out its responsibilities, activities usually clash with others’, thereby creating confusion and problems for manufacturers. According to the World Bank’s report on global economic overview, “It is of paramount importance for emerging market and developing economies to rebuild policy buffers while laying a stronger foundation for future growth by boosting human capital, promoting trade integration, and addressing the challenges associated with informality”.

Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

BUSINESS DAY Harvard Business Review

MONDAYMORNING

In association with

When we’re reminded of death at work ZHENYU YUAN, LISA E. BARANIK AND ROBERT R. SINCLAIR

any occ u p a t i o n s involve exposure to mortality. Critical-care nurses and emergency medical technicians must take care of dying patients. Firefighters and police find themselves in danger when trying to save lives. There may be two divergent ways people process mortality cues. Those prone to “death anxiety” tend to experience aversive emotions such as fear and panic, whereas those who engage in “death reflection” focus on the ways they can find mean-

ing in their lives and enter into a more positive mindset. Our research has focused on understanding the consequences of these different responses at work. Dealing with death takes a toll on employee well-being and creates challenges for both businesses and society at

large. Employees facing mortality cues should not be left to suffer the negative consequences associated with death anxiety. Through another path — death reflection — they can be happier, more focused, more engaged and more productive. Organizations and managers can play an

important role: Acknowledge that dealing with death is stressful, and implement supportive human resources practices and policies. Newcomers and young people may be the most vulnerable to death anxiety because of their inexperience. Therefore, organizational onboarding should include

death-related educational modules that teach participants how to cope with the stress. In the recruitment process, realistic job previews should include honest descriptions of death-related experiences on the job. Systemic interventions, such as death-related training, should also be put into place to help people reduce death anxiety and promote death reflection. Employees themselves should be actively involved in the design and implementation of these interventions, so that they can confront their own feelings about death and find meaningful ways to develop a growth mindset around it. Managers can serve

as effective role models, using their own behavior to shape the ways their subordinates process mortality cues. When they avoid talking about death, employees follow suit and shy away from the topic. If they instead reflect on death and ways to find meaning, employees will be inspired to do the same and get more engaged in the pursuit of their calling.

(Zhenyu Yuan is an assistant professor at the University of Illinois at Chicago. Lisa E. Baranik is an assistant professor at the University at Albany, SUNY. Robert R. Sinclair is a professor at Clemson University.)

Investors reward companies that highlight digital initiatives SURAJ SRINIVASAN AND WILBUR CHEN

igital technologies have the potential to transform a wide range of businesses, especially in traditionally nontechnological sectors. Motivated by the breadth of these digital transformations, we’ve done research exploring how frequently they are occurring, what benefits they are creating and what impact they are having on financial performance. We’ve tried to answer three specific questions: First, how extensive is the adoption of digital technologies by nontech firms? We find that firms that are larger and younger, and that hold more cash and spend less on capital expenditures, are also more likely to

go digital. Companies with weaker performance are going digital sooner, perhaps as a possible response to competitive pressures. Second, what are the benefits of going digital? For one, investors seem to love it. Valuations of firms that go digital are 7% to 21% higher than those of peers.

Moreover, firms that go digital also receive higher valuations on their earnings. Their price-earnings ratio is 3% to 9% higher, and they receive 30% to 90% higher returns per dollar of incremental earnings than firms that don’t disclose digital activities. Third, how are compa-

nies faring as they adopt digital technologies? Surprisingly, we find little evidence of immediate improvement in financial performance. We find positive performance benefits only in terms of asset turnover (a measure of efficiency of use of assets), which increases by 3% to 9% over three years

relative to peers, following the disclosure of digital activities. However, we find no change in overall financial performance (measured by return on assets) and significant declines in operating margins and sales growth (lower by 14% to 42% and 10% to 30% respectively) when digital activities are disclosed. These limited benefits could be due to several factors. One, the gains from digital activity take a long time to bear fruit and firms have to bear the costs in the interim. Many successful tech firms that undertook large digital investments, like Amazon.com, waited many years to become profitable. Two, competitive forces may quickly erode the benefits of going digital. For instance, customers may ben-

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efit from better products but companies cannot sustain higher prices because of competition. Three, firms may not have the right management team to go digital. It’s imperative to pay attention to having senior managers with the right tech acumen. Investors are rewarding the early movers even if immediate financial-performance benefits remain elusive. The risky nature of the digital investments highlights the need for companies to keep capital markets better informed, and provide assurance that they have the right managers to execute the digital transformation.

(Suraj Srinivasan is a professor at Harvard Business School, where Wilbur Chen is a doctoral student.)

Monday 22 July 2019

Harvard Business Review

BUSINESS DAY

MONDAYMORNING

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Platforms and blockchain will transform logistics SANGEET PAUL CHOUDARY, MARSHALL W. VAN ALSTYNE AND GEOFFREY G. PARKER

ith increasing digitization, platformbased business models will connect new players, wash away inefficient old ones and harness the cloud. At least three factors are driving the industry move to platforms: New infrastructure and technology, richer and more visible logistics data and relentless pressure to reduce costs. Consider how global shipping giant Maersk and IBM have partnered to launch TradeLens, a blockchain-based platform for managing global shipments involving multiple stakeholders. Events across the shipping life cycle — credit checks, contract signing, arrival at port and payment — can be recorded publicly. On TradeLens, event data and document information are written on the blockchain, which creates a single source of truth that all can see. Enterprise cloud technologies are also increasing coordi-

nation across the supply chain. As more companies move their digital processes and workflows to the cloud, they can share data with one another more easily through application programming interfaces, or APIs, software that allows two applications to talk to each other. Using APIs, supply-chain events can be aggregated on central

platforms that receive data from participating firms’ distributed systems in real-time. Supply chain efficiency can be continually optimized. As more fleets, ports, warehouses, and containers become instrumented, the value of these platforms increases via network effects. Value grows in multiple ways. First, greater

availability and coordination of fleets, warehouses and containers leads to faster end-to-end shipment and better route optimization. Second, as different types of fleets and warehouses come on board, the scope of use cases that logistics platforms can handle also increases. As an expanding set of warehouses with different specifications

join a platform, the platform becomes more valuable to more parties. As the platform mediates more shipments, it learns which shipping life-cycle events and which actors create more delivery volatility and then uses this learning to hedge and buffer future operations. Finally, creating a platform-based market for idle assets such as transportation and storage capacity allows them to be time-sliced and rented at increasingly finegrained and coordinated intervals. Finally, decentralized lastmile delivery services are a growing industry that will interface with central logistics platforms and can be expected to do so even more as they become autonomous.

(Sangeet Paul Choudary is an entrepreneur-in-residence at INSEAD. Marshall W. Van Alstyne is a professor at Boston University School of Business. Geoffrey G. Parker is a professor at Dartmouth College.)

Actually, consumers do buy sustainable products Corporate leadership should no longer give brand managers a pass when they claim that there is no demand for sustainable products. And investors should support companies in making the investments needed for the pivot.

TENSIE WHELAN AND RANDI KRONTHAL-SACCO

or years, brand managers have groused that while consumers say they intend to buy sustainable products, in a store they don’t actually purchase them. NYU Stern’s Center for Sustainable Business just completed extensive research into U.S. consumers’ actual purchasing of consumer packaged goods, or CPG, using data contributed by IRI, and found that 50% of CPG growth from 2013 to 2018 came from sustainabilitymarketed products. Products with a sustainability claim on the packaging accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013. Products marketed as sustainable grew 5.6 times faster than those that were not.

(Tensie Whelan is a professor at NYU Stern School of Business and founding director of the NYU Stern Center for Sustainable Business, where Randi Kronthal-Sacco is a senior scholar.) What do these findings mean for corporate managers and investors? Consumers are voting with their dollars — against unsustainable brands. The legacy companies that will thrive are those that accept this shift and are willing to pivot, such as PepsiCo and

Unilever. CPGs that are not making the pivot will lose — Kraft Heinz, whose investors have encouraged a cost-cutting approach that is backfiring, is a case in point. Given the evidence that consumer tastes are changing, an attitude of “Why mess with a recipe that has worked well

over the last 40 years?” is the wrong one to take. Some of the necessary transformation can be accomplished by reinventing legacy products, as Unilever has shown with its “sustainable living” brands, now delivering 70% of its turnover growth.

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Monday 22 July 2019

BUSINESS DAY

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Buharinomics hurts NSE 30 profit

SHORT TAKES $210 million The interbank segment of the Nigerian foreign exchange market received a fresh boost of 210 million dollars from the Central Bank of Nigeria (CBN) on Tuesday, July 16. Small and Medium Enterprises (SMEs) window received the sum of 55 million dollars, while 55 million dollars were allocated to customers requiring foreign exchange for invisibles and $100 million to wholesale segment.

BALA AUGIE

resident Muhammadu Buhari inability to formulate policies needed to propel economic growth is taking a toll on the profit of the Nigerian big corporates. Analysts have turned more cautious on corporate earnings, as bottom line no longer supports valuation. Profit of Nigerian Stock Exchange (NSE) 30 firms- the lists of the most liquid firms by market value- was flat at N395.12 billion as at March 2019, this compares with a 25.15 percent jump in 2018-17, and 35.15 percent increase in 2017-16 periods. A breakdown of the figures shows consumer goods firms is responsible for the slow growth at the bottom lines as they continue to struggle with a weak consumer purchasing power, decrepit infrastructure, and multiple levies. The largest consumer goods firms saw combined profit dip by 26.60 percent to N59.95 billion in March 2019 from N81.68 billion as at March 2018; however, Neslte, Unilever, and Dangote Sugar buck the trend as they recorded an uptick at the bottom line. Combined profits of banks was up 15.26 percent to N249.33 billion as at March 2019, this compares to a 30.15 percent increase in 2018-17, and 40.25 percent uptick in 2017-16. The new regulatory measures put in place the central bank to improve lending to the real sector of the economy could undermine lenders’ future margins and undermine asset quality, as the precipitous drop in short term government securities marks the end of free money. The Apex Bank has mandated Deposit Money Banks (DMB) to

maintain a minimum Loan to Deposit ratio (LDR) of 60.0 percent by September 2019, which will be subject to quarterly review. In addition, lenders are to assign a weight of 150 peercent to loans to SMEs, retail, mortgage and consumer lending, when computing the LDRs. Analysts at Chapel Hill Denham Limited in a recent note to client said Zenith Bank and United Bank for Africa will be the worst hit as “UBA’s management disclosed that the bank will need to expand its loan book by N120bn, given that the LDR is at 54.7 percent after assigning the 150 percent weight to SME loans,” said analysts are Chapel Hill Denham. The investment house estimates that that Zenith will require additional

loans of N200 billion prior to September 2019 to meet the 60 percent minimum. Analysts are of the view that lack of policy direction on the part of fiscal authorities has hindered foreign investors from investing money in Naira assets. The All Share Index (ASI) fell below the 28000 psychological mark to settle at 277864.49 points. In addition, the rout at the local bourse appears to have worsened last week as Year to Date (YTD) loss widens to 11.30 percent. According to data released by the Nigerian Stock Exchange (NSE) on Domestic and FPI Report for the month of May, foreign investor participation in the equities market slumped to 35 percent of total trans-

actions from 52 percent recorded in April. Foreign inflows also declined by 9.3 percent to N37.9 billion ($105.3m) while outflows grew by 12.0 pecent to N39.40 billion ($109.4 million) when compared to the month of April. “While the Nigerian equities market is currently trading at a steep discount when compared to its peers in Emerging and Frontier markets given the ASI P/E of 6.91x vs. MSCI EM Index and MSCI FM Index P/E ratio of 13.01x and 12.36x respectively, we are not convinced of an imminent rebound in the stock market in the absence of bold policy pronouncements, particularly from the fiscal authorities to address the growth challenge,” said analysts at Chapel Hill Denham Limited.

… Oil firms now expected to underperform year on year on lower oil prices in 2019 IFEANYI JOHN

t was not too long ago when market analysts feared crude oil prices could drop below $20 for the first time since 1999 as global supply glut rose to a record high between 2015 and 2016. Today, what sounds like an overly bearish forecast was a near reality for oil producers around the world after crude oil prices had tumbled from as high as $114 per barrel in June 2016 to around $30 per barrel in January 2016, representing a decline of almost 74% at the depth of the price collapse. Major oil companies around the

P.E

world suffered billions in loses and Nigerian oil firms were not spared as the eight publicly listed energy companies in Nigeria suffered a combined loss of N39.18 billion in 2016. Two years later, dooms day prediction failed to materialize, oil prices rebounded sharply, and these 8 companies reported a combined profit after tax in 2017 and 2018 totalling up to N222.64 billion, marking one of the biggest turnarounds in the oil industry. The eight listed oil firms in the Oil and Gas sector include Seplat, Oando, Total, Conoil, Forte Oil, Eterna Oil, MRS Oil and 11 Plc. “The price collapse was truly

a big scare, many oil companies were forced to lay off workers to reduce their overheads as revenue declined rapidly between 2015 and 2016. The pain seems to be in the past now as profits have returned on the back of higher oil prices in the market today,” said Jeremiah Ejemeyovwi, an energy economist. “In 2016, it almost felt like things will never recover, many forecasted that the days of crude oil at $100 per barrel is over and $20-$30 per barrel may become the new normal but now with the benefit of hindsight we say they were maybe $40 below an accurate forecast,” Ejemeyovwi added. In 2017, average crude oil prices

had risen from $43 in 2016 to $54.09 in 2017, helping the big 8 move from a combined loss position of N39.18 billion in 2016 to N127.5 billion in 2017 as the industry benefited both from rising prices and government tax credits. The recovery continued the following year as the industry profit rose to N95.11 billion, helped by rising crude oil prices which had reached an average price of $72.66 but hurt by a decline in tax credits for industry players. While the effect of the rally in crude oil prices gives soothing relief to the squeezed profit mar-

Continues on page 41

57.4 points Manufacturing Purchasing Manager’s Index (PMI) in the month of June stood at 57.4 index points, indicating expansion in the manufacturing sector for the 27th consecutive month. Of the 14 subsectors surveyed, just 12 reported positive growth in the period.

$40.8 billion Portfolio inflows to emerging markets were $40.8 billion in June, the highest level in 5 months, driven by a strong recovery in Chinese equities. Equity and debt flows were $12.6 billion and $28.2 billion respectively.

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

BMI provides in-depth analysis and data on industries, companies, stocks, currencies, fixed income/credit, economics, regulation and factors that influence investor’s decision-making Continues on page 37 Email the BMI team patrick.atuanya@businessdayonline.com www.businessday.ng

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Monday 22 July 2019

BUSINESS DAY

MARKETS INTELLIGENCE FMDQ derivative markets to improve capital market efficiency Ifeanyi John

n an attempt to broaden the Nigerian financial ecosystem, all eyes are on FMDQ as the OTC exchange has proposed to roll out a derivatives market. Analysts say that the advent of this platform, which will help to hedge against systemic risk, would lead to a more efficient capital market. Derivatives are financial market products whose values are derived from one or more underlying assets or sets of assets, which can be bonds, stocks, commodities, precious metals, market indices, interest rates, etc. Obinna Uzoma, a Lagos-based economist explained that “With the creation of an all-encompassing derivatives market, inefficiencies in the capital markets would be exploited by investors seeking arbitrages. These inefficiencies would then be corrected as demand for free money would outweigh supply of opportuni-

ties and thus, lead to price converging with value.” As a strategic asset class, derivatives present a useful risk management tool required for surviving uncertainties in the financial markets. They play a vital role in the development and growth of an economy by supporting price discovery, competitiveness and market efficiency which

… Oil firms now expected to underperform year ... Continued from Page 40 gins of upstream energy firms, the downstream oil companies are left feeling the pain of the price recovery. At year end in 2016, indigenous oil producers, Seplat and Oando posted a combined loss of N70.77 billion compared to N31.59 billion in earnings for downstream operators who generally benefit from lower oil prices, helping to reduce to industry loss in 2016 to N39.18 billion. As energy prices recovered, Oil Energy & Production companies (E&P) profits for 2017 and 2018 rose in line with the increase in crude prices reaching a total of N222.64 billion at the end 2018 even as downstream profits declined by 17.59 percent annually from 31.59 billion in 2016 to N21.45 billion in 2018 on the back of higher oil prices. However, gradually declining from its 3 year high of $84 in October 2018, energy companies are once again becoming worried. At the end of the first quarter of the year, the average oil price had declined by 8.01 percent year on year from $70.86 to $65.18 which led to Nigerian oil companies on the stock exchange posting a combined profit of N16.96 in the first quarter of 2019, bringing annualized earn-

ings of these companies is at N67.8 billion which is almost N30 billion less than the FY earnings of 2018 Q2 results are expected be released in the coming weeks and some market analysts have forecasted that the 8 companies are set to post lower profits year on year as oil prices have declined by 8.26% from last year’s average price of $75.13 per barrel to $68.9 recorded in the second quarter of 2019. However, not all market analysts are worried that the price decline in the past few months should be a major cause of concern for oil investors. “The outlook on oil prices is considerably stable into the future and OPEC+ has maintained a body language that tells us they are ready to cut output in order to keep oil prices away from 2016 levels. This is a good thing for E&P companies as it opens up an opportunity to hedge oil prices over a considerable length of time. With a stable hedge, these companies can maintain profitability going into the future.” Obinna Uzoma, a Lagos-based economist explained to BusinessDay. Whether or not another storm sets in the oil sector, oil companies will be expected to fair better during the next bearish market as efficiency levels have significantly improved since the last price crash.

helps attract capital flows, reduce cost of capital and deepen the financial markets. A source close to FMDQ speculated that the time of completion of the derivatives market would likely be in the last quarter of 2019. The website of the OTC exchange explained that “having conducted a feasibility study towards the introduction of various

OTC derivative products, FMDQ has begun rolling out, key interest rate and currency derivatives into the Nigerian financial markets.” According to Head, Structured Products of FBN Capital, Michael Okon, “Existing financial securities coupled with derivatives can be used to address the needs of clients either for risk management, yield enhancements or funding purposes. He further stated, “Due to the absence of a robust regulatory and legal framework to accommodate the peculiarities of derivatives in Nigeria, a majority of the transactions are still bilateral. However, as the market evolves and we have more market participants, we should see increased liquidity and price discovery which will help develop the exchange traded market.” The Naira-settled OTC FX Futures is a proof that albeit a hard task, creation of a derivatives markets is well within the purview of FMDQ. It was introduced in 2016, with the Central Bank of Nigeria as the pioneer seller

of the OTC FX Futures contracts. The apex bank currently offers nonstandardized amounts for different tenors, from one month through to twelve months to Authorized Dealers, who in turn offer same to customers with trade-backed transactions or who trade same with other Authorised Dealers; settling on bespoke maturity dates. Naira-settled OTC FX Futures are non-deliverable Forwards (i.e. contracts where parties agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying US Dollar (notional amount) on the maturity/settlement date). Upon maturity, both parties are assumed to have transacted at the Spot FX market rate. OTC FX Futures contracts are cash-settled in Naira and the differential between the contract rate and the NAFEX (Nigerian Autonomous Foreign Exchange Fixing) rate on the maturity day determines the settlement amount, i.e. the gain/loss inherent in the contract.

Nigeria’s debt portfolio below threshold, but concerns on repayment threatens Israel Odubola

ith total debt less than a quarter of Nigeria’s economy size, Africa’s biggest oil producer can embark on further borrowing but it is a question of the country’s capacity to widen revenue base to meet obligations. The debt numbers of Nigeria leaves nothing to cheer for an economy grappling with revenue shortfall since the crash in global oil prices four years ago. Nigeria’s interest payment to revenue soared to 60 percent last year from 27 percent in 2014, according to figures by the International Monetary Fund (IMF), and has averaged 57 percent in the last 13 quarters. The Washington-based fund expects the ratio to hit 82 percent in the next three years, saying the country’s debt is unsustainable and might worsen if care is not taken. “The high debt service to revenue ratio tells us if we keep borrowing especially externally then we are doomed” said Yinka Ademuwagun, research analyst at Lagos-based investment firm, United Capital Plc said in emailed response. According to Ademuwagun, this means the economy would be short of required funds to expend on necessary capital expenditure to drive growth. Putting this in context, the amount spent on servicing is over half of the little receipt retained by federal government after disbursing funds to the 36 states as mandated by the country’s federal system, and it’s the pot from which debt repayment and other public spending must the made. But funds disbursed to the three tiers of government from federal allocation dipped to a five-quarter low of N1.93 trillion in three months

to March 2019, while cash used to settle domestic indebtedness spiked to N610 billion in first quarter this year compared to N223 billion in preceding quarter. The rising cost of servicing government debt in Nigeria has dampened foreign investors’ appetite to inject capital into the country according to a Financial Times Report, saying a number of them continued to be willing lenders despite being aware that their cash might not have been utilized efficiently. “The effectiveness of those huge cash raises a lot of concern” Olayinka Olohunlana, a Lagos-based economic analyst said in a telephone interview. “Little or almost nothing can show as output of previous loans” Olohunlana stated that instead for government to direct those cash to develop infrastructure or set up new industries to create jobs, or even bolster efforts to diversify the economy from heavy reliance on oil, Abuja is using loan to cover shortfall in budget. Nigeria’s total debt stock rocketed 107 percent to N24.95 trillion in first quarter of 2019 from N12.4 trillion five years earlier, and has jumped 27 percent since the exit

from recession in second quarter of 2017, without corresponding impact on economic expansion. Analysts say economic growth which has averaged a paltr y one percent over the last three years, has not felt the impact of increasing borrowing because the country lacks fiscal discipline that can tie borrowings to capital expenditure. “Ideally a large chunk of borrowings should finance capital projects, but because of the huge revenue gap and corrupt practices of political leaders, that’s not the case” Ademuwagun noted, positing that commercial loans are still used to fund recurrent expenditure and service debt. Nigeria has mostly used the Eurobond market to source external funds. The country sold a total $10.2 billion of bonds in the last two years, and raised N100 billion in an auction late-April that included a debut 30-year naira-denominated bond that was oversubscribed more than four times. About $357, 000 was used to service foreign debt in Africa’s biggest economy in the first three months of 2019, a 207 percent spike over $172, 000 in the preceding quarter.

Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

BUSINESS DAY

This is MONEY

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A guide to your Personal Finance

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How to raise a successor that will succeed in life The Solid Wealth Messenger

Grace Agada

olitical commentator Walter Lippmann once said, “The final test of a leader is that he leaves behind in others the conviction and will to carry on.” In other words, it is not enough for you to have succeeded in your life’s endeavors; if no one can do the same or greater things than what you have done, then you have not been successful in Raising up a successor. Why do you need a successor? The answer is simple: There is a future that is coming that you cannot personally participate in but in which your wealth will. This future will be managed by your children and great grandchildren. Having toiled for so many years to create your wealth, whose shoulder will you leave the burden of wealth on? If you have already prepared your children to thrive independent of you in this future, then they will thrive otherwise they will fail. The only thing that matter in this future is not your wealth but the success of your successors. Sustainable legacies that matter are connected with successful people. When you want to prepare a successful, independent, productive and competent successor that will preserve wealth and succeed in life, there is a price you must pay. This price, although difficult and scary, is inconsequential compared to the price of losing everything. As parents, we have

been conditioned to think that raising successful successors is the same thing as raising completely compliant and obedient children that look, behave and do the things we want them to do. If you want your children to fall apart and stumble in the future, only then should you employ this kind of parenting. Raising independent, self-reliant, and competent successors who would be great stewards of wealth requires a certain mindset, character, and attitude that is different from raising merely good and compliant children. In fact, most parents set succession goals that jeopardize their chances of raising a successor. They want obedient and compliant children that will do what they do, but they also want independent and self-reliant children that will find their own path in life. They want their children to become great stewards of wealth, but they are not willing to release control and empower their children with important roles and responsibilities that will help them grow into great stewards. They want their children to discover themselves and find their own destinies, but they cannot live in peace with a child who has chosen a different path in life. They want their children to be resilient, strong and able to overcome adversities, but they shield and protect their children from any kind of hardship. They want their children’s lives to be enriched by their inheritances, but they also want their children to create their own wealth and not become dependent on their inheritances. In most cases, parents say all the nice things they want to achieve with their children and their desire to preserve wealth but act in the exact opposite way, that conflict with their goals. At the end of the day, actions are the

Objectives • Solid wealth • Groomed Heirs • Undying legacy and Name • Rich relationships • Personal development • Healthcare Planning • Giving. www.businessday.ng

true test of one’s values. So the big question that we need to answer is this: Are we parenting the next generation of successors towards the wrong end? How exactly are we supposed to produce a generation of independent, confident and competent successors when we are not ready to step back, release control and pay the price? Only children who have been groomed to be independent leaders can thrive in a future where you cannot be present. In my quest to discover why parents allow these conflicting goals to jeopardize their wealth preservation goals, I found out that they are two kinds of parents a potential successor can have. The first type of parent is the follower’s parent and the second type of parent is the leader’s parent. The follower’s parent is the type of parent that derives their self-worth from having and maintaining followers. They like to be in charge and in control, and will use anything within their power to manipulate, control, cajole and intimidate their followers to comply with their bidding. Children of these kind of parents grow up to be dependent on their parents, Unprepared for the future, and neither warned or guided into their purpose in life. When a follower’s parent dies, it becomes extremely difficult for these children to step into their father or mother’s shoes. Even when they do, they stumble through life not having built the confidence to stand on their own two feet, challenge the status quo or be creative. The wealth of a follower’s parent almost always dies with him. The leader’s parent is different. He understands that wealth can-

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not be preserved without a price. He knows that the only way to raise a competent successor that will thrive independent of him is to first lead by example, influence through inspiration, and then step back to help his successor release their own inner power and succeed. The leader’s parent is by himself, a high-quality leader because having found his own purpose, he becomes is an inspiration not only to his children but to the world. It is this inspiration that draws his children and followers to him. A leader’s parent has no interest in maintaining followers, he trains, grooms, and transforms followers into leaders helping them find their own unique identity and path in life. When a leader’s parent dies, he has both blood and non-bloodrelated successors who will be honored to step into his shoes. This is the only kind of parent that can produce an independent, competent and self-reliant successors that will succeed. If you are asking yourself how you can raise competent and successful successors, there are four key steps to start implementing today. To get these four key things that distinguishes a Leaders parent from a Followers parent, text “Leader Parent to 08101080042 “The true purpose of parenting is not to create and maintain people who are just like you but to produce leaders who will find their own unique gift and place in the world.”

‘

The true purpose of parenting is not to create and maintain people who are just like you but to produce leaders who will find their own unique gift and place in the world.

Grace Agada is a Senior Wealth Advisor and Author with extensive experience in wealth creation, wealth preservation and wealth transfer. Email: info@createsolidwealth.com Tel: 08101860042 @Businessdayng

Monday 22 July 2019

BUSINESS DAY

cityfile Makinde promises turnaround of security architecture REMI FEYISIPO, Ibadan

yo State government says it is working to quickly turn around the security architecture of the southwest and reposition to attract foreign investments. The state governor, Seyi Makinde, who stated this, also hinted of plans to relaunch the state’s joint task force on security, ‘Operation Burst’, commanded by Oluyinka Soyele, a brigadier-general. The governor, spoke during a visit to the headquarters of the security outfit, in Ibadan, the state capital, saying that the re-launch will be done within his first 100 days in office so as to guarantee investors of a peaceful and conducive environment. Yoruba Collectives and others group, at the International Day of Justice we Demand for justice restructuring in Abuja.. “I appreciate the good Pic by Tunde Adeniyi. work you have been doing in this state. You have allowed our people to have

Four Enugu prison inmates receive degree certificates from NOUN REGIS ANUKWUOJI, Enugu report

our inmates of the Enugu Maximum Prison at the w e e k e n d re ceived their first degree certificates from the National Open University of Nigeria (NOUN) after their graduation from the programme. Controller of prisons, Enugu State command, Ndubuisi Ogbodo, speaking at the event, said the prison serves as a place for reformation of inmates and that NOUN Enugu prison study centre had produced many

graduates since inception in 2011. “This programme is playing a pivotal role to ensuring that inmates are reformed and rehabilitated. Some of the inmates who graduated f ro m t h e p ro g ra m m e were released recently during the visit of Presidential Committee on Prison Decongestion in Niger ia b e caus e the y were found to be fit to be reintegrated into the society,” he said. The vice chancellor of NOUN, Abdalla Uba Adamu, who was represented at the occasion by the dep-

uty vice chancellor, administration, Justuce Shokefun, said the university runs an open-door policy and enjoined those yet to enroll to do so as all the programmes are tuition-free. “What we are doing today is presentation of certificates because we have already held convocation ceremony for the graduates in March this year,” he explained. T h e d e s k o f f i c e r, NOUN Enugu prison study centre, Kevin Iloafonsi, gave the names of the graduates as; Chukwunonso Nomeh, MBA, Business Administra-

tion, Enugu State; Kevin Ibane, B.Sc Entrepreneurial Studies, Delta State; David Amaefuna, B . S c E nt re p re n e u r i a l Studies, Abia State, and Chukwuma Uche, B.Sc Peace and Conflict Resolution, Abia State. Iloafonsi said inmates of Enugu prison register for NECO examination every year, just as three of the inmates have finished their course work in Law and writing their project; six finished and submitted their project and awaiting their result; 15 in final year while 27 have so far gained fresh

Police arrest suspected murderer, cultist in Enugu

he police in Enugu said they h av e a r r e s t e d suspected murderer and cultist, Nnaem e ka A n i a ma l u , w h o has been disturbing the peace of coal camp axis of Enugu. Po l i c e pu b l i c re l a t i o n s o f f i c e r, E n u g u command, Ebere Amara i z u , w h o d i s c l o s e d t h i s, o n F r i d a y , s a i d that the anti-cult unit

of the command has recovered a locally-made double-barrel pistol from the 26-year “notorious suspect’’ arrested through intelligence information. “The suspect has been on police wanted list for the murder of one Obumneke Chinegbundu alias Obumneme of Colliery Avenue, Coal Camp, Enugu, on January 21, 2019. www.businessday.ng

“Since then, the suspect escaped and allegedly took refuge in military barracks in Onitsha, Anambra. From the barracks, he always come to Enugu for series of cult activities and armed robbery. The police spokesman said that the susp e c t w a s a r re s t e d i n a hotel he lodged in Enugu through intelligent information on

his movement and activities. Amaraizu added the Commissioner of Police in Enugu, Sulaiman Balarabe, had directed that full-scale investigation be conducted on t h e s u s p e c t ’s a l l e g e d nefarious activities. “The suspect will be charged to court as soon as investigation is over on his criminal activities,’’ he assured. NAN

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confidence in your outfit. I asked people to give me complaints about the outfit but they were neither here nor there. “This administration has four main pillars with agric value chain as a key aspect to promote foreign investment. But we will be very limited in our drive if people come here and they do not have a conducive atmosphere to do their business. Makinde said the outfit will be redesigned to ensure adequate security for the people, adding that nobody will invest in an atmosphere of insecurity. Th e g ove r n o r a l s o touched on the challenge of herdsmen/ farmers clashes, kidnapping, killings, saying all would be addressed. “We appreciate the fact that if we want to achieve all the other pillars we have mentioned, the security needs to be taken seriously. We have a lot of work to do as regards security.”

Navy nabs suspects with 92 drums of adulterated PMS in Ondo

he Nigerian Navy at the weekend paraded nine suspected illegal petroleum dealers arrested during their operation on the Igbokoda coastal-line in the Ilaje local government area of Ondo State. The suspects were arrested with 92 drums of illegally-refined and adulterated Petroleum Motor Spirit (PMS), which were presented as exhibits. The suspects include Mar velous Kalejaiye, C h u c kw u m a O y e y e m i , Olajide Omoseni, Ogunfeyinmi Oriade, Omotua Uyimigar. Kola Ogungbare, Wale Ogunfeyinmi, Ario Sama and Dayo Ojomo. Danjuma Ndanusa, the commanding officer, Nigerian Navy Forward Operation Base (FOB), Igbokoda, who paraded the suspects, reiterated the navy’s commitment to stem illegal business transactions on waterways. He said that criminal activities on waterways in the country, particularly in Ondo, would no longer succeed as his men were battle-ready and had taken up the fight against such criminalities with utmost priority. According to him, the activities of the Nigeria Navy, as enshrined in the law, is to make sure that the nation’s maritime domain is free of illegalities @Businessdayng

such as illegal oil bunkering, piracy and sea robbery. “Illegal bunkering, as you are aware, is not just inimical to the economy of the nation, but equally highly inimical to the wellbeing of our environment. “I warn criminal elements to stay clear of the coastal area and at the same time, law abiding citizens of the area should join hands in riddling it of acts of criminality,’’ he said. While handing over the suspects to the Nigeria Security and Civil Defence Corps (NSCDC) for onward prosecution, he urged governments at all levels to provide jobs for the youth to stem criminal activities. Diko Ibrahim, the area commander, NSCDC, Okitipupa command, commended the navy for its efforts in taming criminal activities on the waterways. He affirmed that the synergy between the two security agencies in curbing criminality on the waterways would yield more fruits in no distance time. He assured the navy that the suspects would be prosecuted, in accordance with the law. Meanwhile, some of the suspects who confessed to the crime, said it was their first involvement in the illegal business and blamed it on high rate of unemployment in the country.

Monday 22 July 2019

BUSINESS DAY

Monday 22 July 2019

BUSINESS DAY

news Weak economy slows uptake of micro pension Continued from page 1

traction. BusinessDay findings, from close interaction with operators, particularly the Pension Fund Administrators (PFAs) who are the natural sellers of the product, reveals an insignificant impact as the potential consumers were said to be more concerned with day-to-day survival and meeting basic needs. “You know micro pension is voluntary, so people want to first of all meet basic needs,” said one of the operators on condition of anonymity. “Even the formal sector that is compulsory, how many employers are complying?” Weak economic growth, rising unemployment, poor access to funding for business, declining standard of living among households and high inflation are among bottlenecks that have hindered appetite for savings, the industry operators said. “Micro pension is a mirage and the reason is not farfetched. The economy is not growing to attract interest to save,” a Pension Fund Custodian told BusinessDay. Nigeria’s gross domestic product advanced 2.0 percent year-on-year in the first quarter of 2019, easing from a 2.4 percent expansion in the previous period and below market expectations of 2.1 percent, mainly due to a steeper contraction in the country’s oil sector, according to data from the National Bureau of Statistics (NBS). Output increased at a softer pace for manufacturing (0.8 percent from 2.4 percent in Q4 2018); internal trade (0.8 percent from 1 percent), and information and communication (9.5 percent from 13.2 percent). Also, production fell further for public administration (-14.2 percent from -0.3 percent); financial and insurance (-7.6 percent from -1.8 percent), and mining and quarrying (-2.3 percent from -1.2 percent). Eguarekhide Longe, managing director/CEO, AIICO Pensions Limited, confirmed that uptake of the micro pensions scheme is still slow, saying it would take some time because awareness was critical for increased uptake. He also noted that a lot of investment was needed to create the needed understanding and appreciation of the scheme, saying that the pension commission (PenCom) was expectant. Paddy Ezeala, a former manager in the pension industry who spent an upward of a decade in the sector, said the micro pension scheme, which targets about 12 million accounts, would address to a great extent the gaps identified in the industry with

regard to market penetration. He said despite the “good intentions, great potential and, in fact, imperative of the scheme”, it would require sensitisation for the scheme to take off effectively. Informal sector players would need to understand the benefits before they can key into it. “There should be first of all a national campaign and sensitisation on the immense benefits of the scheme. Even a longer runway would be needed to maximise the potential of the scheme after commencement considering the current economic headwinds,” said Ezeala. Analysts argue that the nation’s pension industry will need to create the needed awareness and education to bring in an estimated 36.8 million population that are currently excluded from any form of financial services if it is to realise its 80 million informal sector access target. A 2018 financial inclusion report by Enhancing Financial Innovation and Access (EFInA) says that of the total adult population that is 18 years and above put at 99.6 million, 36.8 percent are financially excluded. The report says that significant gains have been made as at year-end 2018 in formal inclusion as excluded population declined by 4.8 percent to 36.6 million, from 40.1 million. Experts at EFInA note that out of the 40 percent financial inclusion target for pension industry in 2020, 8 percent has been achieved, showing huge potential that needs more education and enlightenment. At the launch of the micro pension scheme in Abuja, Buhari said the scheme targets the significant majority of Nigeria’s working population who incidentally operate in the informal sector. Aisha Dahir-Umar, acting directorgeneral of the National Pension Commission (PenCom), said with the formal launch and subsequent successful implementation, the micro pension plan was expected to significantly expand pension coverage to greater number of Nigerians and further generate additional long-term funds for Nigeria’s economic development. “The commission would collaborate with relevant stakeholders to sensitise and enlighten the target participants and members of the public on the features and benefits of the micro pension plan,” Dahir-Umar said. “The commission had extensively engaged all relevant stakeholders and obtained their inputs before the product was developed to suit their requirements.”

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

L-R: Friday Agwu, LPG coordinator, Vitol; Monday Adeoye, terminal manager, Navgas; Dayo Adeshina, programme manager, National LPG Expansion Plan, office of the vice president; Titilola Olaolu-Hassan, commercial manager, Navgas, and Oluwole Akinyosoye, zonal operation controller, DPR Lagos Zone, at the 3rd series of Navgas driving safety forward, tagged “Effective Handling of LPG” in Lagos. Pic by Olawale Amoo

Banks’ claim on states’ bonds rises 267% to N68.22bn in Q1 Continued from page 1

letin of the Central Bank of Nigeria (CBN) for the month of March 2019, under the commercial and non-interest banks’ statement, showed that banks’ loans and advances to state government fell for the first time since 2016. Credit to state government fell by 7.57 percent to N2.63 trillion in Q1 2019, from N2.85 trillion a year ago. The decline came after a 38 percent surge in N2.85 trillion in 2018 which is the highest in the latest five-year period. Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited, said more governments at all levels are looking to the

capital market to fund longterm projects, which is good for the economy. The implication, he said, is that banks can concentrate more on their intermediation functions meeting both the short-term and long-term needs of both individuals and corporates. It will also help to deepen the capital market. Bond is part of capital market financial instruments. States have depended on alternative financing arrangements to fund their year-on-year budget deficit since the re-emergence of the bond market in 2003. Some of the states that have issued bond for the past 10 years include Lagos (N107.5 billion) for series one and two; Imo (N18.5bn);

Kwa ra ( N 1 7 bn ) ; Nig e r (N6bn); Bayelsa (N50bn); Kaduna (N8.5bn); and Ebonyi (N16.5bn). “An increase in the amount of state bonds banks are holding makes sense given the decline of sovereign yields in the first quarter due to increased appetite of foreign investors,” Nnamdi Olisaeloka, a fixed income analyst at Zedcrest Capital, explained. “It is likely banks looking for yield pick-up have invested in state bonds which have higher yields,” he said. Meanwhile, a salary loan of about N338bn was disbursed to states for a 20-year tenor at 9 percent interest rate in 2015. BusinessDay gathered that some of the intervention funds to the states may have

been securitised. Securitisation is the conversion of an asset, especially a loan, into marketable securities, typically for the purpose of raising cash by selling them to other investors. In his five-year policy thrust, Godwin Emefiele, governor of the CBN, said the apex bank would work in developing a framework that will enable banks to securitise mortgage loans, which can then be sold in the capital markets. The report revealed that bank credit to the private sector grew by 0.27 percent to N40.8 trillion in Q1 2019, from N40.69 trillion in the corresponding period of 2018. The latest performance implies that credit to private sector has expanded by 12.9 percent since 2015.

on assessing the impact of some of the new policies that have been introduced. Cardinal Stone (Hold) Although global and domestic developments currently provide support for greater tilt towards easing, the MPC is likely to leave its policy parameters unchanged to observe the impact of the previous MPR cut and adjustments to SDF and DMBs’ LDR guidelines on the real sector before deciding on a next step, according to analysts at research firm Cardinal Stone. The research firm believes that the recent adjustments to SDF and LDR guidelines are unlikely to drive significant credit allocation to the real sector in isolation. However, the analysts think the MPC may prefer to support both initiatives through targeted interventions in key sectors such agriculture in the coming months.

PricewaterhouseCoopers (Hold) “We expect that the rate will be unchanged seeing that the rate of inflation slowed to 11.2 percent, lowest in 11 months.” Chapel Hill Denhem (Hold) “The MPC will hold rates. However, we expect them to effect a monetary policy tool to compliment the administrative tool that was implemented. As such, they will move the asymmetry corridor from +200/ -500 t0 +200/-600 so that what the CBN will be giving deposits money banks (DMBs) when they deposit money with them will be 7.5 percent lower than the 8.5 percent that it currently is.” Cowry Asset Ltd (Cut) “There is a strong possibility that they will reduce rates since they have focused on driving lending. Also, the slow increase in inflation gives the CBN a clear backing to reduce rates.”

Analysts see CBN holding key rate as MPC ... Continued from page 2

of banks to bring down nonperforming loans (NPL) to 9 percent by year-end 2019. In a bid to drive this roadmap, the CBN on July 5 sent a clear message to banks outlining two options: either they lend at least 60 percent of their deposits or pack more money as cash reserves with CBN and earn nothing. Since the announcement, the average share prices of Nigeria’s lenders have taken a beating with the banking index down 7.4 percent at close of trading, Friday. The apex bank also reduced by 73 percent, from N7.5 billion to N2 billion, the amount deposit money banks can place as standing deposit facility with the CBN to yield overnight interest. There are also indications that the CBN might cap the amount that banks can invest in securities, Busi-

nessDay has learnt. Below are the views of other analysts surveyed by BusinessDay on the direction the MPC is expected to go. CSL Stockbroking Securities (Hold) Analysts at CSL Stockbroking believes that the MPC would be cautious not to send a signal to the market that they are in a rate-cutting phase which might put pressure on the exchange rate by making foreign portfolio investors take out funds from money market instruments. Hence, they see the CBN adopting a wait-and-see approach while assessing the impact of those policies they have already implemented. Afrinvest (Hold) Analysts at Lagos-based Afrinvest say the MPC would hold rates while the CBN continues with other policies that will spur lending. Furthermore, they expect the MPC to focus more

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Monday 22 July 2019

BUSINESS DAY

news

PDP raises alarm over whereabouts of $1bn ECA withdrawal OWEDE AGBAJILEKE, Abuja

he Peoples Democratic Party (PDP) has demanded an explanation from President Muhammadu Buhari over the whereabouts of $1 billion withdrawn from the Excess Crude Account (ECA) by the present administration in 2017 for security purposes. The party said it raised the alarm after the National Security Adviser (NSA), Babagana Mongunu (retired) was reported to have denied the whereabouts of the money. A statement on Sunday by PDP National Publicity Secretary, Kola Ologbondiyan, accused the governing All Progressives Congress (APC) of diverting the funds meant for tackling insecurity in the last general election. This, it added, explains the worsening insecurity in most parts of the country. “This confession by the NSA, who coordinates the security architecture of the nation, directly places a huge burden on President Buhari’s doorsteps over reported stealing and diversion of funds meant for security, while insurgency, banditry, killings and kidnapping fester in the land under his watch. “The revelation by NSA further vindicates the PDP on our

initial alarm that the All Progressives Congress (APC)-led administration is overtly corrupt, deceptive and unreliable in the handling the affairs of our nation. “It further validates the stance of the PDP that agents of the Buhari Presidency and the APC were hiding under the guise of security to siphon the $1bn from the ECA. This, peharps, informed the desperation by the cabal to draw from the Account without recourse to statutory due process of appropriation by the National Assembly. “From Gen. Mongunu’s confession, Nigerians can further see why our nation is daily confronted with disturbing videos and reports of our fighting troops protesting their neglect and inadequate equipping, leading to their vulnerability in the fronts. “Now that the National Security Adviser has declared that he is not aware of the whereabouts of funds, the burden, straightaway, lies squarely on President Muhammadu Buhari to immediately address the nation on how the money was handled,” the statement reads. The party therefore called on President Buhari to allow for a system-wide investigation into the whereabouts of the money and other funds meant for security purposes under his watch.

Gunmen abduct 4 Turkish expatriates in Kwara SIKIRAT SHEHU, Ilorin

our Turkish nationals have been abducted in western Nigeria, local police have told the BBC. The four, who are construction workers, were kidnapped by gunmen at a bar in Kwara State on Saturday night. An operation to try to rescue them is under way. No group has said it carried out the abductions. Last week pirates attacked a cargo ship off the coast of Nigeria and kidnapped 10 Turkish sailors. Their fate remains unknown. Kidnapping for ransom is common in Nigeria, with foreigners and high-profile Nigerians frequently targeted. In April, a prominent politician and his daughter were abducted on a highway in Kaduna State. They were released after ransom was paid. In the same month two kidnappings targeted foreigners. In the Niger Delta region, gunmen kidnapped two senior Shell workers and killed their police guards. A British woman was shot dead in Kaduna when armed

men stormed a holiday resort. They killed one other person and kidnapped three during the attack. In January last year, two Americans and two Canadian citizens were abducted while travelling from the town of Kafanchan in Kaduna state to the capital Abuja. Two of their police escorts were killed. The four-kidnap victims were later freed unharmed in a joint military and police operation. Six man-armed gang had reportedly abducted four Turkish expatriates at a local drinking joint in Gbale village, Edu Local Government Area of Kwara State. The incidence according to sources occurred at about 10pm on Saturday night while the men were having fun at the local joint in Gbale village. The abducted men whose identities were later known as Yasin Colak (33), Senerapal (40), Ergun Yurdakul (35) and Seyit Keklik (25), respectively. It was gathered that the victims were said to be expatriates working with Instabul Concrete Limited, Gbale.

Edo Assembly crisis: APC asks Obaseki to obey Reps resolution James Kwen, Abuja

uling All Progressives Congress (APC) has called on the Edo State Governor Godwin Obaseki to obey the resolution of the House of Representatives and issue fresh proclamation for proper inauguration of the Edo State House of Assembly. Lanre Issa-Onilu, APC national publicity secretary, who stated this Sunday at a press conference in Abuja, lamented impunity had found its way into an APC government in Edo State.

A House Representatives ad hoc Committee last week urged Edo State Governor to issue a fresh proclamation within one week in line with Section 105(3) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) for a proper inauguration of the State’s 7th Assembly. Speaking on issue, the APC spokesperson insisted that the constitution had stipulated that House of Representatives had power to direct the Governor to do the right thing without which the National Assembly can take over the Edo State Assembly. www.businessday.ng

L-R: Andy Odeh, communications manager, Nigeria Liquefied Natural Gas (NLNG); Barth Nnaji; Nike Akande and Alfred Susu, The Nigeria Prize Advisory board members; Peter Ngene, winner of 2018 Nigeria Prize for Science; Eyono FatayiWilliams, GM, external relations, NLNG; Paul Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI); Muda Yusuf, DG, LCCI, and Sophia Horsfall, business manager/HR, NLNG, at the Interactive Session on Innovations in Electric Power in Lagos.

New CBN lending policy, a move in the right direction - LCCI ODINAKA ANUDU & MICHAEL ANI

… suggests ways to avert possible downside risks

he new lending policy by the Central Bank of Nigeria (CBN) for deposit money banks (DMB), which prescribes a minimum Loan to Deposit Ratio (LDR) of 60 percent, effective September 30, 2019, is a move in the right direction, the Lagos Chamber of Commerce and Industry (LCCI) says. According to the chamber, the policy move is “laudable” as it focuses on extending more lending facility to the real sector of the economy including the Small and Medium Scale Enterprises (SMEs); consumers; retailers and mortgagers, who have hitherto been starved of cash by banks due to the high yield environment. “We see this new lending policy as a timely policy intervention to normalise the credit markets, spur economic growth and broaden the interface between entrepreneurs and the banking system as banks will be obligated to be more tolerant of the entrepreneurs and be more creative in the creation of financial

assets,” LCCI said in a July 20 note signed by Muda Yusuf, director-general of the chamber. On July 5, 2019, the CBN sent a message to DMBs ordering them to lend a minimum of 60 percent of their total deposit as loans or pack the money in the vault of the apex bank as cash reserve and yield no interest. The directive came at a time banks had shut their tap of lending to the real sectors but channelled more cash into investing in government securities to get juicy returns, after a 2014 collapse in oil prices caused banks non-performing loan to balloon. The CBN also reduced by 73 percent from N7.5 billion to N2 billion, the amount in which banks can keep with the apex bank to yield overnight interest (SDF). The move was also to compel banks to lend more. The LCCI noted that the aforementioned policies by the CBN would impact positively on the economy in a number of ways including improving the quality of financial

intermediation by ensuring that the issue of funding gaps are addressed, and reduce the crowding out of private sector in the credit market. In addition to these, the chamber explained that the policies would assist in deepening the money market ; promote economic diversification in line with the Economic Recovery and Growth Plan [ERGP]; boost aggregate demand by increasing consumers purchasing power and cause an improvement of economic inclusion in the country as more SMEs and broader range of sectors would have better access to credit. Meanwhile, in order to address some of the possible downside risks with respect to loans asset quality arising from the new lending policy, the chamber proffered recommendations to the CBN and other fiscal authorities. According to LCCI, the CBN should strengthen the “collateral registry” to enhance the profiling of borrowers in the banking system as their character have been

identified as a major risk factor in lending in the Nigerian economy. The chamber also recommended the development of SME rating agencies to support credit assessment an evaluation in the SME space; promotion of the use of credit insurance; ensure better regulatory environment to reduce regulatory risk and uncertainty; address enabling business environment issues, particularly infrastructure deficit and quality, in order to improve productivity and reduce credit risk. Furthermore, the CBN should scale up corporate governance practices in the banking system to prevent insider abuse and compromise of credit assessment processes; strengthen credit guarantee framework to give comfort to the banks and lastly ensure there is alignment of the new policy with extant monetary policy actions especially with regards to Cash Reserve Ratio and the Liquidity Ratio which are currently at 22.5 percent and 30 percent, respectively.

NAMA splits Lagos airspace to reduce congestion, ensure efficiency IFEOMA OKEKE

n line with its commitment towardsenhancingthequality of air traffic services in Nigeria, the Nigerian Airspace Management Agency (NAMA) has successfullysplittheLagosSub-Flight Information Region (Sub-FIR) airspace into two sectors: Lagos West Area Control Centre on 120.9MHz radio frequency and Lagos East Area Control Centre on 127.3MHz frequency. The sectorisation, which took off at exactly 00.01 UTC on Thursday, July 18, 2019, was a culmination of a two-year strategic plan by the agency to achieve sectored operations in the Lagos sub-FIR owing to the then congested single radio frequency en route control operations. Speaking with stakeholders at the flag off of the facility, Fola Akinkuotu, managing director of NAMA, said although sectorisa-

tion of Lagos had eluded NAMA for over 16 years, it took the commitment and determination of staff to see to its actualisation. He said sectorising Lagos became imperative owing to the increasing volume of traffic and the attendant challenges posed to both pilots and air traffic controllers. He said in a bid to achieve this feat, the agency had put in place several measures to ensure its effective takeoff. He listed the measures to include the development of standard operating procedures (SOPs) and a test-run of the procedures at the Nigerian College of Aviation Technology (NCAT), Zaria; in-house training of needed manpower to boost capacity in the two sectors; enhancement of the required support facilities for ground-ground and air-ground communication. Other measures include update of the radar maps and da-

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tabase of the radar system; test run of the radar system and radio communication equipment; the issuance of an Aeronautical Information Publication (AIP) supplement on the 9th of May, 2019 to give airspace users 56 days notification as required by the International Civil Aviation Organization (ICAO) and Part 14 of the Nigerian Civil Aviation Regulations. Akinkuotu listed other milestones to include the signing of Letters of Agreement with adjacent FIRs like Accra, Douala, and Lome; the signing of letters of procedures between Lagos -Abuja and Lagos - Port Harcourt; development and publication of Nigerian enroute charts showing the delineation of the East and West airspace sectors and the conduct of safety assessment as well as a stakeholders’ forum. The immediate benefits of sectorisation according to the @Businessdayng

NAMA boss include reduction in congestion on the available en-route control radio frequency, reduction of flight delays; reduction in fuel consumption, reduction in CO2 emission, as well as increasingairtrafficmanagement (ATM) capacity. He said sectorising the Lagos AreaControlCentre(ACC)would bring about optimum utilization of the airspace by reducing controller-pilotworkload,thereby increasing efficiency and quality of service delivery as well as providing functional air navigation services that would meet international standards at no cost to the users. As part of the process, Akinkuotu revealed that two new procedural control flight progress boards with two controller workingpositionsfortheEastandWest sectorshavealsobeenprovidedto ensure proper ergonomics at the Lagos Area Control Centre.

Monday 22 July 2019

BUSINESS DAY

FEATURE

How Dangote Cement promo turns graduate applicant to exotic car owner in Ibadan SEGUN ADAMS

f she didn’t buy the Dangote cement bag herself to find the winning scratch card, she definitely would not believe that the Dangote Cement Bag of Goodies promo is real. Even after the confirmation by the company that she has won the star prize, she is yet to come to terms with the reality of being a proud owner of a brand new saloon car which in the general parlance is referred to as “tear rubber”. For Godwin Chimezie Success, a fresh graduate of English/Education from the Federal University, Gombe, Wednesday, July 17, 2019 will remain a day never to be forgotten. It was the day her life was turned around from that of an applicant to an exotic car owner, even to her own amazement, courtesy of Dangote Cement plc. Chimezie Success, who just emerged the star winner of Dangote Cement ‘Bag of Goodies’ National Consumer Promotion in the South West Zone, was publicly presented with her winning prize, a brand new GAC saloon car, at the Mingles Event Centre, Jericho, Ibadan, the Oyo State capital, in the presence of major distributors and retailers as well as some officials of Oyo state government. Chimezie’s winning is coming on the heels of a similar winning a week earlier in Abraka, Delta State, by a cement retailer, Benjamin Igherighe, who became the first consumer of Dangote Cement to win one of the 43 cars on offer. The star prize, according to Joseph Makoju, Group Managing Director of Dangote Cement, was just one out of the seven luxury cars earmarked for consumers in the South West region in the ongoing national promo. Makoju revealed that a total of 43 cars have been lined up for grabs nationally by lucky winners across the various geopolitical regions of Nigeria as the national promo continues until the end of the third quarter of the year. Other prizes include 24 tricycles, 24 motorcycles, 550 refrigerators, 400 television sets as well as a total of N200 million cash. Visibly emotional Chimezie Success, who was accompanied to the presentation ceremony by her husband, was short of words as the whole episode just seemed like a dream to her. However, by the time she managed to express her gratitude to Dangote Group for ‘this valued gift’ which she pledged to use for the purpose which it is meant ‘for the glory of God’, she was highly excited and could no longer keep

L-R: Chimezie Success Godwin, winner of star prize saloon car; Funmi Sanni, marketing director, Dangote Cement; Joseph Makoju, group managing director, Dangote Cement; Laide Raji, private principal secretary to the deputy governor/ representative, Oyo State deputy dovernor, and Adeyemi Fajobi, national sales director, Dangote Cement, during the Dangote Cement Bag of Goodies” consumer promotion star winner presentation in Ibadan, Oyo State.

the joy to herself. “I will first of all say a very big thank you to Dangote Cemnet Company. I did not take the promo very seriously initially as I thought it was a joke, not knowing that it is a reality. Dangote should endeavour to continue with this type of empowerment initiatives which, I believe, will go a long way in changing the fortunes of many Nigerians like me positively,” she said. Pressed to speak further, Chimezie Success explained that she bought 15 bags of Dangote Cement somewhere in Ibadan out of which she had discovered the winning scratch card from one of the bags. The young housewife and her husband had resolved to use the cement for the purpose of moulding some blocks to construct a demarcating fence as security round a plot of land they just acquired somewhere in Ejioku village in Ibadan, not knowing that the winning scratch card was divinely tucked inside one of the bags to transform the life of the family. Chimezie Success has a message for members of the public. She enjoined the populace to continue to take Dangote Cement by their words in all its ramifications. “They said it and we found it to be so, this is quite surprising, a car in a bag of Dangote cement, quite unbelievable,” she said. Oyo State Deputy Governor, Rauf Olaniyan, who spoke through Laide Raji at the event commended www.businessday.ng

Dangote Group for the noticeable connection between the company and the consumers submitting that Dangote Cement is fast becoming a global brand of first choice. The Deputy Governor congratulated the star winner in the same vein while urging her to be a good ambassador for Dangote. Makoju, the Group Managing Director, had earlier in his address paid glowing tributes to the supportive organisations notably the Nigerian Society of Engineers and the network of distributors across the country who he described as the foot soldiers and very important elements in the production chain. While maintaining that the con-

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We have made it so transparent that you don’t have to go through any raffle draw or the so called lucky dip associated with many other promotions in the country

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glomerate churned out 8 million bags of Dangote Cement on daily basis, Makoju remarked that it can only continue to keep its leading position in the market by upholding consumers’ loyalty through good service, sustained quality and affordability. Makoju said the company decided to run the biggest promo ever in the country as a way of contributing to the economic wellbeing of the consumers of its products given the prevailing economic situation. He said the promo is to reward valued consumers for their unflinching partnership in ensuring that our range of cement products remains today the first choice for construction purposes across the country and added that the consumer promotion gives opportunities for existing and new consumers to get a step ahead of their struggle for economic emancipation by winning any of the give-away items which has economic value. “We have made it so transparent that you don’t have to go through any raffle draw or the so called lucky dip associated with many other promotions in the country. For Dangote cement, you win instantly because what is revealed in the scratch card is what you win,” he stated. Explaining why the company launched such a promo, Makoju explained that Dangote Cement is the largest in Africa with the largest production capacity and therefore @Businessdayng

decided to reward the consumer in the biggest way ever experienced in the country. “Here in Dangote Cement, we adhere strictly to best global standards in producing our range of cement which makes them the best in the market. Our products – BlocMaster, 42.5R, 42.5N and Falcon – are all top-of-the-range brands developed to ensure that cement users have a choice on the type of product suitable for their projects. Much research and tests went into the development and production of these products as we are determined to offer consumers the best quality and experience either in building personal houses or in commercial construction works,” he said. Funmi Sanni, Dangote Cement’s marketing director, was obviously at home with the cement distributors and retailers who graced the occasion. She told the elated customers that Dangote Cement decided to roll out the billions of naira to empower the consumers because the production process is incomplete without consumers of the company’s products and the company would not remain in business without the consumers. “To grow our business, we must constantly create value in terms of quality product and service, competitive pricing and depositing in consumers’ emotional bank accounts in order to become their preferred choice of brand at the point of purchase,” she said. Sanni said as a business, the management of Dangote Cement recognises the importance of every member of its value chain – distributors, wholesalers, and retailers. “As such, we have invested in growing their businesses through various empowerment schemes,” she said. According to her, every promo bag of cement contains a scratch card carrying winning items carefully inserted in each promo bag. Consumers need to be educated to scratch gently so as not to invalidate their wining card. She disclosed that the promo cuts across all Dangote Cement’s brands which include 3X, Falcon and Blocmaster. Sanni explained that the consumer promo was in line with the mission of the company which is to touch the lives of the people by providing their basic needs, pointing out that the consumer promotion is another huge investment to help the customers improve their rate of sales and make more profit while at the same time improving the consumers’ quality of life.

Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

NEWS

SEC warns capital market operators Suicide: Public health experts call for increased mental health education against unethical practices IHEANYI NWACHUKWU

he newly inducted dealing members of the Nigerian Stock Exchange (NSE) have been warned to shun unethical practices. The warning by the Securities and Exchange Commission (SEC) on Sunday, July 21, also re-echoed that the Commission does not tolerate infractions. “Steps are taken to ensure that regulatory oversight is more effective; investor protection is advanced, while systemic risk is mitigated,” the SEC said. The inductees were also urged to abide by the highest standards expected in their profession. Speaking at the induction ceremony in Lagos, Mary Uduk, acting director-general of the SEC, also enjoined the newlyinducted dealing members to maintain the integrity of their profession and imbibe the culture of compliance to rules and regulations, as well as transparency, as they carry on their activities in the market. Uduk, who was represented by Stephen Falomo, zonal head, Lagos Office of the SEC, described as a welcome development the induction ceremony for the deserving freshly quali-

fied professionals who have, by their exemplary performance during their Automated Trading System (ATS) training at the NSE, secured their place in the stockbroking profession. “This ceremony marks the final point at which the inductees become fully fledged dealing members of the NSE, a position of great trust; because now you will be handling investments for individual and corporate investors and this you must do with utmost care and highest standards of integrity and ethical practice to forestall any breach of trust,” Uduk said. “You must also be determined to bring positive changes into the market as you launch your careers and challenge the status quo in the areas of capacity building and innovativeness, while bringing fresh and innovative ideas into product development, as well as efficiency in service delivery to the investors,” she said. Uduk said the use of ICT has been fully integrated into financial services and as such Financial Technology (Fintech) and Regulatory Technology (Regtech) are trending, having been embraced by both the operators and the investors as ways to further enhance the growth and expansion of busi-

ness in addition to regulatory and compliance issues. She, therefore, urged the newly inducted members to ensure that they all get a good grounding on the relevant technological advancement necessary to ensure that they can cope with the pace in today’s market, while staying ahead of perpetrators of cyber crimes, who may attempt to compromise the market. “Let me congratulate all inductees here today. Your qualification and admission to practice as members of the Stock Exchange is indeed a great achievement, which will equally be of benefit to the capital market as a whole. I therefore welcome you to the brokerage community on behalf of the SEC,” she said. “I wish to also acknowledge the roles of The Chartered Institute of Stockbrokers (CIS) and the NSE for their unyielding commitment to ensuring the continued growth of the market by producing young, dynamic and professional stockbrokers, who are admitted as Authorised Dealing Clerks. As you all know, continuous capacity building in our financial market is a very important part of the capital market development,” she added.

BDCs call for removal fuel, FX subsidies

Hope Moses-Ashike ureaux De Change (BDC) operators have called for elimination of fuel and foreign exchange subsidies in order to address structural defects in the Nigerian economy. This call was made through the Association of Bureaux De Change Operators of Nigeria (ABCON)initsQuarterEconomic Review report for the second quarter of the year (Q2’19), stressing that these subsidies represent structural defects in the nation’s economy. Speaking at the presentation of the report, Aminu Gwadabe, president of ABCON, said: “The subsidies are misapplications which have resulted into creation of economic rents in various dimensions, as well as maladjustments in sectoral business structures creating hyper unemployment rates which have triggered

unmanageable social unrest like kidnappings, terrorism, banditry, arm robberies and large scale cultism, etc. “Werecommendthatgovernment should consider the following: Policy of single exchange rate to completely remove foreign exchangeeconomicrentandsubsidy for a medium and long term adjustment of the economy from distortionsoccasionedbydecades of subsidy. We must observe that we have an inefficient structural system to track surreptitious flow of foreign exchange within the platforms notwithstanding that the morals to control are lacking.” Godwin Emefiele, governor, Central Bank of Nigeria (CBN), said in May 2019 that the foreign exchange had substantially converged at N360 per dollar at the Nigerian Autonomous Foreign Exchange (NAFEX) window and BDC segment of the market.

ANTHONIA OBOKOH

igeria’s public health experts have called for increased mental awareness and education to help reduce rising cases of depression and suicide in the country. They made the call while speaking across various platforms on recent suicide cases in Nigeria, suggesting actions to reduce the occurrences. Chinomso Egemba, a global health advocate working with Avon Medical practice, in his latest view titled ‘Protecting Nigerians from Dichlorvos, how about protecting mental health,’ identifies depression as a major cause of suicide. Egemba describes depression “as a medical condition, a psychological state of unhappiness or low morale, which lasts longer than several weeks. It may include ideation of selfinflicted injury or in extreme case, suicide.” According to Egemba, depression is usually caused by a decrease in the level of serotonin, a chemical in the brain, which serves as a contributor to feelings of wellbeing, and happiness in human. She therefore encourages an increased awareness and education from the government and the private sector. “We have to call on the bod-

ies responsible, which include the government, to increase the level of mental health awareness in Nigeria and set up toll-free lines and counselling centres across the nation so that people battling depression can call or visit for help” she advises. In her remarks on another health programme, another expert, Chioma Nwakanma, also a public health advocate and digital media strategist, at a recent interview on Eko FM, Lagos, says common health problems such as depression and anxiety affect one in four people and it may not be easy to notice. “Many people still find it very difficult to discuss issues of depression and mental health. That may mean that many people keep their feelings about having a mental health problem a secret, even from family and friends,” Nwakanma laments. However, as a means for recourse, Nwakanma calls for increased care from friends and family of susceptible persons who may be having depression or any other mental case. “These are times to support each other and help those who are not coping well to get the needed help. Family members must be deliberate in monitoring each other, to pick up unusual behaviour or attitude, which may be signs of depression and quickly call them out

“This head of a hydra of fuel subsidyissueshouldbeaddressed headlongbycriticallyreorganizing the sub sector including deregulation and decentralization of fuel importation to ensure competition which is necessary to guarantee fair price,” Gwadabe said. Stressing the need to tackle the challenge of youth and graduate unemployment, ABCON called for an extension of the National Youth Service Corp (NYSC) period from one year to two years, with provision to allow discharge after one year if employment was secured. The Association commended the Federal Government for signing the Africa continental Free Trade Area (ACFTA) agreement, but called for measures to enhance the competitiveness of local industries to maximise the benefits of the Agreement for the economy.

Cormart launches new PVC glue into Nigerian market

ormart Nigeria Limited, a chemical and food raw materials firm, recently launchedintotheNigerianmarket a new resin-based PVC adhesive glue for plumbers. The new adhesive, called VinkoGit, is a special glue used for joining PVC pipes, a key materialinplumbingandconstruction. VinkoGit, produced in Nigeria, is set to replace imported PVC glues in Nigeria, which are more commonplace. Cormart Nigeria is a member of the Tropical General Investments (TGI) Group, a global conglomerate with majority of its investments based in emerging markets. Since its inception in 1981, Cormart has been on the forefront of production, importation, stocking and distribution of

chemicalsandotherrawmaterials across the paint, confectionaries, cosmetics, pharmaceutical, and food and beverage industries. Johannes Flosbach, general manager of Cormart Nigeria, says the newly launched VinkoGit is an absolute premium product in its category, and it is of a higher quality than most of its imported counterparts. According to Flosbach, Cormart intends to increase local production of many of its product offerings in the Nigerian market. “We have a strategy to replace imported products with quality locally produced chemicals. We have a dedicated research and development (R&D) department that continuously seeks to improve the quality of products by introducing better alternatives www.businessday.ng

into the market,” said Flosbach. Diwakar Thiruvalam Jayachandran, the business unit head of Cormart’s adhesives department, opined that customers likethequalityofthenewadhesive and sales have already exceeded expectations. “We have partnered with the Plumbers Association of Nigeria and carried out trade sensitisationprogramsacrossNigeria, which have been very successful.” Withthenewproduct,Cormart is reiterating its commitment to continuous expansion of product lines to meet emerging market demands through backward integration of raw materials, with cutting edge and cost effective products and solutions. Cormart therefore represents the business interests of top multinational companies that are operational in Nigeria. https://www.facebook.com/businessdayng

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to medical attention. In all, more care should be given to people who are showing signs of emotional trauma or depression,” she states. Meanwhile, Tajudeen Abiola, a neuro-psychiatrist with the Federal Neuro-Psychiatric Hospital, Kaduna, while speaking on Liberty FM, Kaduna, calls for deliberate education and awareness programme to increase the alertness and level of understanding around what constitutes mental health issues. By this, friends and families may quickly identify the indicators and take the necessary steps, Abiola states. “Everyone in the community can help prevent suicide risk by learning about the warning signs and how best to respond effectively. It may not be to figure out if someone is at risk of suicide however, the warning signs may include: excessive worrying or fear, extreme mood changes, avoiding friends or social activities, changes in sleeping or eating habits, difficulty perceiving reality, changes in behaviour and personality, substance abuse and thinking or always talking about suicide,” Abiola says. It would be recalled that recently, there have been an increase in reports about suicide among young people in Nigeria, mostly occasioned by depression.

Monday 22 July 2019

BUSINESS DAY

news

PDP raises alarm over whereabouts of $1bn ECA withdrawal OWEDE AGBAJILEKE, Abuja

Gunmen abduct 4 Turkish expatriates in Kwara SIKIRAT SHEHU, Ilorin

Edo Assembly crisis: APC asks Obaseki to obey Reps resolution James Kwen, Abuja

New CBN lending policy, a move in the right direction - LCCI ODINAKA ANUDU & MICHAEL ANI

… suggests ways to avert possible downside risks

NAMA splits Lagos airspace to reduce congestion, ensure efficiency IFEOMA OKEKE

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Monday 22 July 2019

BUSINESS DAY

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Monday 22 July 2019

BUSINESS DAY

news FG says consulting with traditional rulers to improve security in states BUNMI BAILEY

he Federal Government has begun a series of consultations with leading traditional rulers in the country in its determination to develop and reinforce effective strategies towards addressing security concerns around the country. The government says it is working in collaboration with the states to significantly improve security in local communities while rearranging the security architecture nationwide. Vice President Yemi Osin-

bajo, who is leading the consultations on the direction of President Muhammadu Buhari, disclosed this in Ogun State at the take-off of what is expected to be wide consultations with key traditional rulers in the state and across the country, according to a statement by the Presidency via its official Twitter handle (@NGRPresident) on Sunday. “One of the things that Mr. President has spoken about is the role of traditional rulers in maintaining peace and security in their own locality. As you know, they are the closest to the

grassroots, to their communities,” Osinbajo said. “I’ve started here in Ogun. We‘re going to be in Osun on Tuesday. We‘re also going to go round and see several other traditional rulers. Primarily, they themselves want to participate. We’ve spoken at various times and they want to participate in improving the security architecture,” he said. Answering questions from reporters after separate meetings with the Akarigbo of Remoland and the Awujale of Ijebuland, both in Ogun State, Osinbajo noted that the con-

sultations would be done with traditional rulers across the country to ensure peace and security in their communities. “As you know, there are many significant concerns all over the country; and of course there are concerns also in the S/West. So, I’m here on the instruction of Mr. President to consult with the Kayibesi, Governor Dapo Abiodun and other stakeholders on what to do to beef up security,” Osinbajo said. “There are some who might want to cause instability and difficulties, but we are very confident that God helping us,

working together as a nation, we will be able to overcome all our problems and set our country on the path of peace and prosperity,” he said. After meeting the Awujale, Osinbajo said, “Of course, you know that the Kabiyesi is not just the traditional ruler, but also a very important part of the government. That’s why we are here to speak with him and to agree on a few modalities for beefing up security, ensuring that we are fully conscious of all that is going on around us, and just to be sure that peace and security

Nosak, LFTZDC sign MoU to procure 20,000h of land in Lekki free zone SEYI JOHN SALAU

s part of efforts to expand its business operations and increase contribution to the Gross Domestic Product (GDP), the management of Nosak Group recently signed a memorandum of understanding (MoU) with the Lekki Free Trade Zone Development Company (LFTZDC) to invest in the Free Zone Enterprise (FZE). Nosak Group, an indigenous Nigerian industrial conglomerate in leveraging its comparative advantage as a manufacturing company, will be procuring 20,000 hectares of land at the Lekki Free Trade Zone to strengthen the group’s production value chain. Toni Ogunbor, chairman of Nosak Group, says the signing of the MoU is to enable the business expand its investments to boost operations, create new jobs and develop infrastructure. “Our quest for continuous expansion is the driving force as we venture into procuring 20,000 hectares of land at the Lekki Free Trade Zone,” Ogunbor says, stating that the readily available market in the country contributes to the initiative for expansion into the free zone. However, the Nosak Group management pledges to comply with all registration procedures and relevant regulations within the Lekki Free Zone to ensure a hitch free process. Xigong Huang, managing director, LFTZDC, reiterates commitment to assist willing investors into the zone in securing necessary project approvals, saying, “We are particularly excited to have a Nosak Group establishing trade at the free zone. “This speaks volume as we are open to support the Group to develop their interest in setting up their business and we are confident that there is a ready market for the products to thrive as we look forward to also seeing the product exported to other countries.” Nosak Group is a diversified business conglomerate with interests in key sectors of the Nigerian economy. The group’s operations cut across agribusiness, financial service, manufacturing, real estate, and retail business with a network of local and international alliances. www.businessday.ng

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reigns here and across the country.” Osinbajo said the Federal Government, in collaboration with state governments, has taken significant steps to improve security, while there would be further consultations with the traditional rulers. He noted that Governor Abiodun was committed “to ensuring there is peace and security and that everyone who lives in all our neighbourhoods, localities and communities live in peace with each other and that we maintain a high level of security”.

Monday 22 July 2019

BUSINESS DAY

abujacitybusiness Comprehensive coverage of Nation’s capital

FCTA calls for prompt response to emergencies James Kwen, Abuja

he Federal Capital Ter r itor y Administration (FCTA) has called for prompt and improved response to emergency situations in the Federal Capital Territory (FCT), Abuja by the Federal and FCT Fire Services to ensure that lives and properties are saved during emergencies.

Chinyeaka Ohaa, FCTA Permanent Secretary who made the call in Abuja while receiving a delegation from the Federal and FCT Fire Services, said Abuja as an emerging top city in the world, requires the best services in terms of protecting lives and properties during emergency situations. Ohaa noted that emergencies were inevitably a part of life, and firemen should not restrict their ser vices to firefighting

alone but also be available during flooding and other such incidences. He called for collaboration and partnership between the Federal and FCT Fire Services, hence such synergy between both organisations will enhance the tackling of emergencies in the FCT. The Per manent S ecretary also disclosed that plans were underway to procure modern equipment for the FCT Fire Ser-

vice with the recent approval received from the Federal Executive Council in this regard. Liman Ibrahim-Alhaji, Federal Fire Service Comptroller General and leader of the delegation appreciated the FCT Administration for the enormous support and contributions to both the FCT and the Federal Fire Services, assuring the agencies would keep to their responsibility of handling fire emergencies. L-R, Josephine Lola Gbadamosi, director finance and account, Industrial Training Fund (ITF), Joseph Ari, DG ITF and Dickson Onuoha, director information technology ITF during a press briefing on the presentation of 2019 Skills Intervention Programmes in Abuja. picture by TUNDE ADENIYI.

Investment Tribunal orders firm to return Navy, stakeholders dialogue on over 3.7 units of shares to rightful owner operationalization of Anti Piracy Act Felix Omohomhion, Abuja

he Investment and Securities Tribunal sitting in Abuja has ordered Amyn Investment Ltd, Audu Hauwa and Securities and Exchange Commission (SEC) to return to one Philip Onwuzurumba, his 14 stocks, totalling over 3.7 million units of shares in different companies. The shares are domiciled with CONOIL (12,595 units); ET (3, 313 units); FIDELITY (500, 625 units); FCMB (204, 925 units); FORTE OIL 12,379 units); IBTC 100, 000 units). Others sre BAGCO (50, 000 units); OANDO (66, 282 units); UNILIVER (152, 008 units); UBA 528, 822 units); WAPCO (41, 071 units); CADBURY (134, 299 units); FIRST BANK (983, 029 units); and GUARANTY (846, 032 units) In a judgement delivered by a 4-man Tribunal presided over by the Chairman, Nosa Smart-Osemwenge, ordered that the shares should be transferred to the stockbroking firm of claimant’s choice within 180 days from the date of this judgment. The Tribunal orderd the 3rd

defendant (SEC) to monitor and ensure compliance with the orders of the Tribunal and also ordered the respondents in the case to pay the claimant N250,000 for demages. The claimant ; Onwuzurumba claimed that he had given to the 1st and 2nd defendants, Amyn Investment Ltd and Hauwa (Chief Executive Officer of the Company), his 11 stocks with a mandate to manage same for one year. According to him, part of the agreement between the parties was that at the end of the one year, the claimant’s stocks will be restored to its original position and same returned to him. The parties were said to have also agreed that the defendants would pay the claimant dividends and bonuses accrued to the stocks and to also pay him 10% of the value of the stocks as return on investment. He alleged that at the end of 2012/2013 investment year, the defendants paid him the 10% return on investment and dividends as agreed on 11 units of the shares, and the 11 stocks were allegedly rolled over with his consemt.

Stella Enenche, Abuja

erpetrators of sea robberies and other maritime crimes would no longer have a hiding place as the Nigerian Navy (NN) and other relevant stakeholders in the sector have charted the way forward on operationalization of the Anti piracy Act that has been signed into law. The stakeholders include, Nigerian Maritime Administration and Safety Agency(NIMASA), United Nations Office on Drugs and Crime, (UNODC) the Nigerian Police Force (NPF) Economic and Financial Crimes Commission (EFCC) Office of the Attorney General of the Federation and NGOs. The Act which stipulates laws of punishment for piracy and sea crimes including illegal oil bunkering, and other maritime crimes was assented to by President Muhammadu Buhari on June 24, 2019. The Suppression of Piracy and Other Maritime Offenses Act stipulates punishments and sanctions ranging from Life Imprisonment, to a

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fine of N50m and even forfeiture of assets, equipment and property depending on the gravity of the offence. Dick Tariworio, Navy Chief of Training and Operations and Chairman of the Committee noted that with the new act in place, perpetrators of sea robberies and other maritime crimes have no escape route. Tariworio said, “prior to this time, there was no statute or legal authority to diligently prosecute persons arrested for piracy and so many other maritime offenses. This act not spells out ideal sanctions because the crime of piracy has now been defined,” Shedding more light on the act, the Assistant Director, International and Comparative law Department, Ministry of Justice, Omotayo Oni, disclosed that a situation whereby maritime criminals including pirates were prosecuted for mere armed robbery no matter the magnitude of crime perpetrated has been addressed as appropriate punishment to deter maritime crime is now in place.

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Over N1trn generated from VAT in one year - OAGF Cynthia Egboboh, Abuja

otal Value Added Tax (VAT) realized and distributed to three tiers of government in 2018 was N1.076 trillion as against N972.348 billion realized the previous year, data released by the Office of the Accountant General of the Federation (OAGF) show. This comes as Nigeria distributed the sum of N8.496 trillion to its three tiers of government in 2018, some N1.807 trillion (27.01%) higher than the N6.689 trillion shared in 2017. This shared sum includes 13% derivation paid to oil producing states and cost of collection to all the revenue generating agencies. The statistics on the performance of the federal government finances and the OAGF was reeled out when the Head of Service of the federation, Winifred Ohio-Ita paid a peer review visit to the Accountant General of the Federation (AGF), Ahmed Idris and his team in Abuja. The numbers also show that the federal government saves over N45 monthly in interest on ways and means advances, a method through which the Central Bank of Nigeria lends to government to make up for its revenue shortfall. Also the government generated some N50bn revenue from funds mopped from commercial banks through its Treasury Single Account (TSA). Figures indicate TSA has enabled government aggregate over N10 trillion cash collection through

the scheme fully launched since 2015 to help government better manage its financial resources. As contained in a OAGF peer review document seen by BusinessDay, the federal government has so far enrolled some 235,858 of its civil servants under the Integrated Personnel and Payroll Information System (IPPIS) and saved N98.34 billion through the process as at June, 2019. Meanwhile, revenue and investment department of the OAGF was able to analyze and reconstruct operating statement of FGOEs which revealed that as at December 2017, over N1.656 trillion was outstanding against the various organization and successfully monitored government portfolio of investments in both local and external companies. The OAGF said it has successfully managed huge loan portfolio for the FGN and state governments, thereby keeping track of of the repayment obligation of their indebtedness. Also, working in ollaboration with the Central Bank of Nigeria, the OAGF has commenced the process of remitting monthly allocation to the three tiers of government online real time, to help curb delays experienced in the former manual system. At the meeting, the AGF Ahmed Idris called the peer review mechanism a panacea to inefficiency in service delivery across all the Ministries, Departments and Agencies, with a view to actualizing government policies and programme.

Insecurity: Aremu asks Buhari to sack Service Chiefs Sikirat Shehu, Ilorin

ssa Aremu, for mer Deputy President of the Nigeria Labour Congress(NLC) said inorder to solve problems of insecurity in Nigeria, President Muhammadu Buhari must sack all the service chiefs immediately because they are too old and they cannot perform. This, he said becomes necessary in order to reposition the country’s security system for a more efficiency as according to him, “insecurity in Nigeria today is frightening and very bad”. Aremu however advised former President Olusegun Obasanjo to remain a statesman and shun partisanship on issues affecting the corporate existence of the country. He gave this indications @Businessdayng

while speaking at an event he organised to mark the 10th Nelson Mandela Day in Ilorin with the theme, “Action Against Poverty”. The Labour Leader urged Buhari to constitute his cabinet and the prospective cabinet members should include youths, women and technocrats among others . Aremu noted that the delay in the constitution of the federal cabinet has created fears among the citizenry, saying that Nigerians are expecting a new brand of cabinet members that would support President Buhari in driving the nation to economic prosperity. Also speaking, Ntional Chairman of Labour Party, Abdulkadir Salam called on President Muhammadu Buhari to relieve all the service chiefs of their appointments with immediate effect.

Monday 22 July 2019

BUSINESS DAY

FINANCIAL TIMES

World Business Newspaper

ROBIN HARDING AND NOBUKO JUJI IN TOKYO

rime minister Shinzo Abe’s ruling coalition has won a clear majority in elections to Japan’s upper house in a sign of his enduring popularity after almost seven years in office. But according to early projections from television networks, it was too close to call whether parties in favour of revising Japan’s pacifist constitution will secure the two-thirds majority they need. Mr Abe said the public wanted constitutional reform. “We’ve won a majority in this election. At the minimum, that’s an instruction to ‘get on and debate it’, so I hope the debate in the Diet [on constitutional reform] will make progress,” he said. The result cements the status quo in Japanese politics, with Mr Abe’s government firmly in charge of both houses of parliament. He is now all but certain to go ahead with a rise in consumption tax from 8 to 10 per cent this autumn. It also showed the difficulty Japan’s divided opposition has in mounting a challenge at a moment when the economy is strong and the country is embroiled in a dispute with South Korea over wartime history, as well as difficult trade talks with the US. “It’s clear the ruling parties have won a majority,” said Akira Amari, a close ally of Mr Abe who ran the election campaign for his Liberal Democratic party. “Our next goal is to match the 56 seats we won

Shinzo Abe’s coalition secures victory in elections for Japan’s upper house Result cements political status quo but is close on whether to revise pacifist constitution

three years ago.” Half the members of Japan’s less powerful upper house are elected every three years. There were 124 seats up for grabs this year: 74 in single and multi-member con-

stituencies plus another 50 in a nationwide proportional representation vote. The ruling coalition has a two-thirds majority in the lower house, which it won in 2017. Projections from national broad-

caster NHK suggest the LDP will win about half of the seats up for election while its coalition partner, Komeito, will capture between 12 and 14. The Constitutional Democratic party, founded two years ago, con-

solidated its position as the main opposition force. It was on course to win between 16 and 22 seats, double its pre-election tally. Few seats changed hands in an election that never caught the public imagination, with turnout expected to be shown to have fallen below 50 per cent for the first time since 1995. With no defining policy issue or personality, the election was largely a referendum on Mr Abe’s government. Even if he scrapes a parliamentary majority for constitutional reform, the election offered little mandate for a big change. Mr Abe has proposed a reform that would keep the pacifist clause of the constitution but explicitly recognise the legality of Japan’s armed forces. A change needs a two-thirds majority in both houses of parliament and then a simple majority in a national referendum. “There’s no other party I could choose,” said 78-year-old Mitsuko Yamanaka, who cast her vote for Mr Abe and the LDP. “The important issue for me is social security, especially pensions.”

Latin America tested by lack of Hong Kong protesters target Chinese medium companies and middle class government office Region lags behind emerging market peers as economy burdened by ‘missing middle’ JUDE WEBBER IN MEXICO CITY AND FEDERICA COCCO IN LONDON

nce the world’s most prosperous emerging region, Latin America has fallen behind in recent years — due in part to its missing middle: a lack of medium-sized companies, and a shortage of middle-class consumers, according to recent research. Although emerging economies’ contribution to global growth has risen from 37 per cent in 1980 to 60 per cent this year, Latin America’s share of that performance has shrunk. From generating a third of emerging economies’ growth three decades ago, it now contributes just 12 per cent. Growth across the region averaged 2.8 per cent a year between 2000 and 2016, compared with the 4.8 per cent average growth rate of 56 other emerging economies, excluding China. One reason why Latin America is lagging behind is that the region lacks a solid tier of midsized companies able to create

productive jobs and a robust middle class of consumers whose spending and saving could propel demand and investment, according to a report by McKinsey Global Institute. Addressing these twin gaps could increase annual growth to 3.5 per cent by 2030, McKinsey estimated; that would boost Latin America’s gross domestic product by $1tn, an extra $1,000 a year per capita. “Smaller companies are not growing fast enough to become big,” said Alberto Chaia, a senior partner at McKinsey in Mexico City and a co-author of the report. And he warned that “demographics are changing. You cannot rely on demographics for growth any more”. When measured relative to their GDP, Argentina, Brazil, Chile and Mexico only have about half as many firms with revenues above $50m as 10 other leading emerging economies that McKinsey used as comparators — China, India, Indonesia, Malaysia, Philippines, Poland, Russia, South Africa, Thailand and Turkey. www.businessday.ng

Police fire tear gas and clash with demonstrators shouting ‘It’s the age of revolution’ NICOLLE LIU AND PRIMROSE RIORDAN IN HONG KONG

ong Kong’s protesters sought to escalate mass demonstrations against an extradition bill in the city on Sunday by targeting for the first time one of China’s main government offices in the territory. After marching for much of the afternoon through central Hong Kong, thousands of protesters gathered at the Liaison Office for Hong Kong, Beijing’s representative bureau. Demonstrators spray-painted over the lenses of security cameras in front of the building and one threw an egg that splattered on its glass facade. Others wrote graffiti on a wall including an insult against China, and defaced lettering on the building’s gate. The crowd then retreated towards Hong Kong’s central business district after busloads of riot police arrived at the scene. Late on Sunday, police fired multiple rounds of tear gas and clashed with protesters as they tried to clear a major road. The protesters threw umbrellas and

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stones and chanted: “Regain Hong Kong: It’s the age of revolution.” The targeting of a mainland Chinese institution is a new twist in almost two months of protests that have so far mainly focused on Hong Kong’s leader, chief executive Carrie Lam, and the city’s police force. Calvin, a 29-year-old who works in insurance and gave only his first name to protect his identity, said: “We think that there is an organiser behind all these [things]. The Hong Kong government might not be able to make decisions on its own. Behind the government is the liaison office. Therefore we want to put some pressure on it.” The protests against the extradition bill, which would allow suspects to be sent to mainland China to stand trial, have plunged the Asian financial centre into its biggest political crisis since the handover from British to Chinese rule in 1997. Ms Lam has suspended the legislation and declared it “dead” but that has not assuaged protesters’ concerns — the largely peaceful marches have continued to attract tens of thousands of Hong Kongers. @Businessdayng

In recent weeks, however, the tension has ratcheted up and occasionally descended into violence. Running battles in a luxury shopping mall last weekend saw 28 hospitalised and one officer lose part of a finger. Police said they had made 47 arrests. Organisers of Sunday’s protest had planned to march through central Hong Kong past government offices to finish outside the city’s court of appeal. The march comes a day after police said they had found explosives in a factory complex, as well anti-extradition bill posters and T-shirts bearing the name of the Hong Kong National Front, a proindependence group. The police said they had made three arrests in relation to the discovery of the explosives and were investigating alleged links to the group. Alex McWhirter, a senior bomb disposal officer, told reporters on Saturday that a “homemade laboratory” to manufacture high-end explosives had been discovered on Friday night, in what he called “the largest seizure we have come across in Hong Kong”.

Monday 22 July 2019

BUSINESS DAY

NATIONAL NEWS

UK warns Iran is on ‘dangerous path’ after tanker seizure Foreign secretary says Britain’s response will be ‘considered and robust’ JAMES BLITZ IN LONDON, NAJMEH BOZORGMEHR IN TEHRAN AND SIMEON KERR IN DUBAI

he UK has warned Iran that it risks taking a “dangerous path” after the Islamic republic seized a British-flagged tanker in the Strait of Hormuz and said Britain’s response would be “considered and robust”. On Saturday, Iran posted a video of Revolutionary Guards descending from a helicopter and taking over the Stena Impero as it passed through the vital waterway on Friday, sharply escalating tension in the Islamic republic’s stand-off with the west. The seizure of the tanker was in retaliation for Britain’s decision to impound an Iranian tanker off the coast of Gibraltar earlier this month after it was suspected of shipping oil to Syria in violation of EU sanctions. Penny Mordaunt, the defence secretary told Sky News the tanker was intercepted in Omani waters and described the incident as a hostile act. However Jeremy Hunt, the UK’s foreign minister made it clear that the UK was seeking to solve the crisis through diplomacy. “We are not looking at military options, we are looking at a diplomatic way to resolve the situation but we are very clear that it must be resolved,” Mr Hunt told Sky News after meetings of the government’s top crisis management body Cobra on Friday. In a sign that both sides were trying to find a diplomatic solution, the Iranian and British foreign ministers spoke by phone on Saturday. Mr Hunt said he had expressed extreme disappointment that having been assured a week a go that Iran wanted to de-escalate situation it had behaved in the opposite way. “This has 2 be about actions not words if we are to find a way through. British shipping must & will be protected,” he Tweeted. Iranian wires said the two sides called for legal solutions and the avoidance of any further escalation in tension. The EU said the seizure of two ships was of deep concern. “In an already tense situation, this development brings risks of further escalation and undermines ongoing work to find a way to resolve current tensions,” Maja Kocijancic, spokesperson for Foreign Affairs and Security Policy said. “We urge the immediate release of the remaining ship and its crew, and call for restraint to avoid further tensions. Freedom of navigation must be respected at all times.” Iranian officials were defiant saying it was the Islamic regime’s right under international law to retaliate against the UK and US for their “illegitimate economic war and seizure of oil tankers.” Iran’s Revolutionary Guards said Stena Impero had “failed to observe international maritime

rules and regulations”. “Reprisal is recognised in international law and is resorted to when another government commits a violation,” said Abbasali Kadkhodaei, spokesman of Iran’s Guardian Council, a constitutional watchdog. “The correct action by the government of Iran is to retaliate against illegitimate economic war and detention of oil tankers,” he said on Twitter. “This is one of the instances where this rule applies and is based on international law.” Mohammad Javad Zarif, Iran’s foreign minister, said “unlike the piracy of the Strait of Gibraltar our action in the Persian Gulf is to uphold international maritime rules”. “UK must cease being an accessory to #EconomicTerrorism of the US,” he added on Twitter. The UK has advised British shipping to stay out of the area “for an interim period,” a spokesperson said. Tension between the Islamic republic and the west has been mounting since the US pulled out of the 2015 nuclear deal and imposed crippling sanctions on Iran. The measures have pushed the republic’s economy into recession and thwarted its ability to export oil, with Iranian officials accusing the Trump administration of launching an “economic war.” Britain does not support the US sanctions on Iran and has been working with France and Germany to offer Iran economic relief in a bid to save the nuclear accord. But the shipping incidents have complicated its role. The tanker seizures came 24 hours after Washington claimed to have shot down an Iranian drone that ventured too close to an American warship in the Strait of Hormuz. Iran denied any of its drones had been destroyed, but the incident was a sign of how the rising tensions threaten to trigger a wider conflagration. Hours after the seizure of the vessels on Friday, the US announced the formation of “Operation Sentinel”, a multinational maritime effort “to increase surveillance of and security in key waterways in the Middle East to ensure freedom of navigation.” US Central Command said it aimed to ensure safe passage and de-escalate tensions in the Gulf, the Strait of Hormuz, the Gulf of Oman and the Bab el-Mandeb Strait off Yemen. The US and UK have accused Iran — which has repeatedly threatened to disrupt the flow of oil and petrochemicals through the Strait of Hormuz — of being behind sabotage attacks on six vessels off the coast of the United Arab Emirates in May and June. Washington and Riyadh have also blamed Iran-aligned Houthi rebels in Yemen for missile and drone attacks on Saudi Arabia. The Houthi previously targeted shipping in the Bab el-Mandeb, another vital shipping lane linking the Red Sea with the Gulf of Aden. www.businessday.ng

Philip Hammond confirms he will quit if Boris Johnson becomes PM Chancellor says he will refuse to serve a prime minister who accepts possibility of a no-deal Brexit JAMES BLITZ IN LONDON

hilip Hammond confirmed on Sunday that he will resign as chancellor if Boris Johnson becomes Britain’s prime minister, insisting he cannot work in a cabinet that accepts the possibility of a no-deal Brexit. Asked whether he expected to be sacked as chancellor if Mr Johnson wins the Conservative leadership contest on Tuesday, Mr Hammond told the BBC: “I’m sure I’m not going to be sacked because I’m going to resign before we get to that point. “I understand the conditions for serving in [Mr Johnson’s] government will include accepting a no-deal exit on the 31st of October — that is not something I could ever sign up to.” Throughout the Tory leadership contest, Mr Johnson, a leading Eurosceptic, has said that Britain will leave the EU on October 31, “deal or no deal”. This has prompted Mr Hammond and other cabinet ministers opposed to a no-deal Brexit to become increasingly vocal critics of the UK crashing out of the

EU without an agreement, fearing this is where a Johnson administration may well be heading. Mr Hammond played down the idea of voting against the next prime minister in a vote of confidence in the House of Commons in order to stop a no-deal Brexit. However, he added: “I am confident that parliament does have a way of preventing a nodeal exit on October 31 without parliamentary consent. I intend to work with others to ensure parliament uses its power to make sure that the new government can’t do that.” Mr Hammond’s comments came shortly after David Gauke, justice secretary, made a similar commitment to quit the cabinet if Mr Johnson succeeds Theresa May as prime minister. Mr Gauke is also opposed to the UK leaving the EU without an agreement. The declarations by both men raise the prospect of a powerful group of former ministers fighting against a no-deal Brexit in the Commons this autumn. Keir Starmer, the shadow Brexit secretary, said on Sunday that he would be reaching out to the newly resigned ministers in

the hope of building a cross-party alliance to prevent Mr Johnson from taking the UK out of the EU without an agreement. “After they have resigned this week, I will want to work with all those former ministers who, like me, want to ensure parliament can stop a disastrous and chaotic exit from the EU,” Sir Keir told the Observer. Mr Hammond and Mr Gauke made their statements despite a call from Amber Rudd, work and pensions secretary, for them to support Mr Johnson or face Labour winning a general election by Christmas. In 2016, Ms Rudd described Mr Johnson as “not the man you want driving you home at the end of the evening”. In recent years, she has also campaigned against a no-deal Brexit. However, on Sunday she described Mr Johnson as a “friend,” declaring that he was “ready for Number 10”. She has also come to accept his position that advocating a no-deal Brexit is necessary leverage in order to pressure the EU into making concessions that could lead to a revised Brexit agreement.

BA and Lufthansa suspend Cairo flights citing security The airlines would not say what prompted the abrupt moves JANINA CONBOYE IN LONDON

ritish Airways and Lufthansa suspended all flights to Cairo on Saturday, citing unspecified security concerns. “We constantly review our security arrangements at all our airports around the world and have suspended flights to Cairo for seven days as a precaution to allow for further assessment,” BA said in a statement. Neither the British airline or

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Germany’s Lufthansa would say what prompted the cancellations. “As safety is the number one priority of Lufthansa, the airline has temporarily suspended its flights to Cairo today as a precaution, while further assessment is being made,” a Lufthansa spokesperson said. Air France, which also offers flights to Cairo, did not immediately respond to a request for comment. The British Foreign Office updated its travel advice on Saturday with a reference to the British @Businessdayng

Airways suspension. The Foreign Office advice warns against all but essential travel to the area west of the Nile Valley and Nile Delta regions, and by air to and from the Egyptian resort of Sharm el-Sheikh, where a Russian passenger jet was bombed in 2015. It has not issued similar warnings against air travel to and from Cairo. “There’s a heightened risk of terrorism against aviation. Additional security measures are in place for flights departing from Egypt to the UK,” the British advice said.

Monday 22 July 2019

BUSINESS DAY

FINANCIAL TIMES

COMPANIES & MARKETS

@ FINANCIAL TIMES LIMITED

Will the ECB live up to investor expectations? Market Questions is the FT’s guide to the week ahead FT REPORTERS

hen Mario Draghi speaks on Thursday, the market will be hanging on his every word. Eurozone bond markets have staged a powerful rally since the European Central Bank chief indicated last month that a fresh round of easing measures is on the way to combat stubbornly low inflation and a flagging economy. Investors are betting heavily on interest-rate cuts — possibly as early as this week — and a revival of bond purchases, known as quantitative easing, later in the year. If a July rate cut fails to materialise, Mr Draghi’s forward guidance will be crucial: he is widely expected to add the words “or lower” to the ECB’s projection that rates will remain at their current level until next summer. Anything less could disappoint markets, according to Marchel Alexandrovich, senior European economist at Jefferies. “People have been trading on the assumption of more QE before year-end and maybe jumping a few steps ahead,” he said. Currency traders have also set a high bar for Mr Draghi, according to analysts at Nomura. “We think the euro will trade weakly into the ECB meeting, but

disappointment risk is relatively high and a knee-jerk rebound is possible in the short term,” they wrote. Even so, investors seem convinced the ECB will roll out the big guns later in the year. According to a survey by Bank of America Merrill Lynch, more than 60 per cent of fund managers expect more bond buying by the end of the year. That belief is likely to continue weighing on bond yields. “I don’t think Draghi will close the door to anything,” Mr Alexandrovich said. “Whatever happens at the July meeting, more easing is coming.” Tommy Stubbington Will economic data keep ‘trolling’ the Fed The US central bank has shifted in a decidedly more dovish direction over the past month, moving from signalling that interest rates are on hold to hinting heavily that the first rate cut in nearly a decade may be on the cards at its upcoming meeting. The problem is that the economic data has been challenging that view ever since the Fed’s shift. Last month’s employment data thumped economists’ forecasts when reported at the start of July. The core inflation rate then accelerated and last week US retail sales data were unexpectedly buoyant, indicating that the engines of the economy are still going strong.

Genoa bridge collapse probe: police seize government documents Move is part of inquiry into disaster last year that killed 43 people DONATO PAOLO MANCINI IN LONDON

taly’s financial police have seized documents from the country’s transportation ministry as part of the inquiry into the Genoa bridge collapse that killed 43 people last year, according to people familiar with the matter. Guardia di Finanza officials seized documents from the ministry on Tuesday last week, two of the people confirmed, as the nearby offices of Atlantia, the infrastructure company whose subsidiary operated the Morandi bridge, were being searched and its board meeting minutes of the past 10 years seized. Atlantia’s subsidiary Autostrade per l’Italia was in charge of the upkeep of the bridge, whose collapse sent cars falling to the ground from a height of 45 metres. Atlantia’s biggest shareholder is the Benetton family. The Financial Times reported last week that Atlantia had commissioned an internal report last year after the disaster on the company’s upkeep of the bridge during the 10 preceding years.

Among other things, the report found that “extraordinary” investigations of the bridge had taken place every year bar two between 2009 and 2017. People close to the board said the findings of the report were rushed through. Atlantia said the report found no safety issues or need for urgent intervention, and that it had always acted within its obligations and in accordance with the law. The company added that the findings of the report were presented in detail to the board and the risk control committee. It has not been made public. Police had seized all the documents that the ministry had requested from Autostrade after the collapse on August 14, said one person with direct knowledge of the probe. The documents relate to upkeep and maintenance of the bridge, including unscheduled maintenance. Some of the documents seized were in the Atlantia internal report, the person said, which Atlantia said had been made available to prosecutors. www.businessday.ng

Iran shows the west its readiness for retaliation Seizure of Stena Impero demonstrates Tehran’s desire not to be seen as weak NAJMEH BOZORGMEHR IN TEHRAN

Revolutionary Guards member shouted “Allahu akbar”, the euphoric religious slogan, as gunboats buzzed a British-flagged tanker and a naval helicopter dropped troops on to the vessel, replicating how the UK impounded an Iranian oil tanker earlier this month. Iran’s release of footage of the operation to commandeer the Stena Impero on Friday in the Strait of Hormuz demonstrated it had made good on its threat to retaliate for the Royal Navy’s seizure of the Grace 1 supertanker off the coast of Gibraltar. “Eye for eye and hand for hand is our Islamic ideology. An American eye or a European hand are not more valuable than an Iranian eye or hand,” said Mohammad-Sadegh Javadi-Hesar, a reformist politician. “Iran will not let the balance of power be disrupted in the region, which would equal our death. If

we let Britain treat us unjustly now, others will follow suit.” Iranian leaders say they are committed to diplomatic solutions and seek neither escalation of tensions nor war with the US or other western states. But while they say they will not initiate any attack, they insist any act of aggression will be reciprocated, even if it risks wider conflagration. The Islamic Republic claims Britain seized the Grace 1 at the behest of the US in response to the guards’ shooting down of an American drone, which the US said had put the country some minutes away from a military confrontation with its arch enemy. The UK denies the claim, warning that the seizure of the Stena Impero was hostile, put Iran on a “dangerous path” and that its response would be “considered and robust”. The UK has advised British shipping to stay out of the area for now.

Iran rejects British allegations that the Grace 1 was shipping oil to Syria in violation of EU sanctions. “That was a big lie by Britain. Was this the first tanker suspected of carrying oil in about one decade of war in Syria?” said Saeed Laylaz, a reformist analyst of Iran’s political economy. While Iran is open to acknowledging it acted in retaliation, it claims the Stena Impero violated international maritime regulations by causing pollution in the vital waterway, switching off tracking devices to avoid Iranian forces and colliding with a fishing boat. “Britain has a new Iran strategy and is so far the only country which has in practice got involved in helping the US aggression against Iran,” said Mr Laylaz. “We had no choice but to react and remind Britain that this is not 1953,” referring to the UK’s collaboration with the US in the overthrow of the government of Mohammad Mosaddegh.

US banks boosted by rise in credit card spending Second-quarter results show quickening growth in purchases ROBERT ARMSTRONG IN LONDON

S shoppers increased their credit card spending in the second quarter, giving a welcome boost to card issuers and adding to the debate about the financial health of consumers. Companies from JPMorgan Chase and Capital One to Synchrony Financial have reported growth in card spending in the three months to June that eclipsed figures for the first quarter. American Express chief executive Joseph Squeri said in a call with analysts last week that the spending was happening “[against] the backdrop of an economy that is growing at a

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steady if more modest pace relative to 2018”. Amex said spending by its card members was up 8 per cent from the second quarter of 2018, an acceleration from the year on year growth of 7 per cent in the first-quarter. Amex is the second-largest card issuer by purchase volume, according to the Nilson Report, after JPMorgan, which reported an acceleration in spending growth from 10 per cent in the first quarter to 11 per cent in the second. Of the major issuers that have reported results in the past week — a group that also includes Citigroup and Bank of America — all reported faster spending growth in the second quarter than in the first. Jennifer Piepszak, JPMor@Businessdayng

gan’s chief financial officer, was asked about the growth in card spending volume on the bank’s earnings call. “I would say that [the business is] firing on all cylinders. So [are] it’s brand, it’s people, it’s products. It does certainly help to have the backdrop of a healthy US consumer as well and, in fact, retail sales this morning looked strong. So we can expect that to continue,” she said. Retail sales figures in the US have been mixed this year, though they showed a fourth consecutive month of growth in June. Expanded use of credit cards could reflect consumer confidence or signal that consumers are having to borrow money to maintain spending levels.

Monday 22 July 2019

BUSINESS DAY

ANALYSIS

Federal Reserve sets sights on quarter-point rate cut

Chairman Powell treads cautiously in supporting US economy JAMES POLITI IN WASHINGTON

he Federal Reserve is settling on a cautious approach to monetary easing, with a 25 basis point cut in interest rates likely at its next policy meeting, as Jay Powell, the chairman, seeks to support the US economy without committing to much deeper stimulus. In recent weeks, public appearances by Fed officials have revealed a broad desire to move towards looser monetary policy to shield the US economy from risks to the outlook arising from trade tensions, weakness in global growth and persistent low inflation. But while Mr Powell appears to be steering the Fed towards a one-notch interest rate cut at the end of its next two-day gathering of top officials on July 31, there is far less of a consensus at the US central bank in favour of a more forceful 50bp rate reduction at this stage, according to a string of comments by Fed officials last week, as well as market expectations. James Bullard, the president of the St Louis Fed and a voting member of the policy-setting Federal Open Market Committee who is known for his dovish views, last week said he believed a 25bp reduction would be sufficient for now.

Another voting member of the FOMC, Charles Evans, the president of the Chicago Fed, spoke openly of possible benefits from a 50bp reduction in rates soon, but added that others may feel differently. On the other side of the argument, two voting members, Esther George, the president of the Kansas City Fed, and Eric Rosengren, the president of the Boston Fed, suggested there might not be a case for any immediate rate cuts and policymakers might want to wait for harder evidence of a downturn. One of the clearest signs that the middle ground among Fed officials is in favour of approving a more limited stimulus in July came after the New York Fed clarified that an ultra dovish speech from John Williams, its president, should not be seen as a guide to future policy. Mr Williams had said that it “pays to act quickly to lower rates at the first signs of economic distress”, sending market expectations of a 50bp cut soaring, but the New York Fed said he was just summarising his research going back 20 years. “We suspect the FOMC was uncomfortable with the market moving toward a 50bp cut and wanted to push the market back to a 25bp baseline,” Michelle Meyer, head of US economics at Bank of America Merrill Lynch, wrote in a note.

US retailers quicken exit from malls as online shopping bites Sears, Victoria’s Secret and Charlotte Russe among household names closing outlets ALISTAIR GRAY IN NEW YORK

etailers vacated US shopping centres at the fastest pace in at least nine years in the second quarter as the relentless rise of online shopping and collapse of debt-laden chains begin to hit the commercial property market. More than 7,400 store closures have been announced this year, with Sears, Victoria’s Secret and Charlotte Russe among a raft of household names to shut outlets in malls across the country. Robust consumer spending has supported better-performing chains, while landlords have found alternative uses for some vacant shopping centre sites, from storage spaces to hotels. Record low construction of new retail space has also helped so-called net absorption in malls, a measure of the difference between space that becomes available and is occupied, to rise in 16 of the past 22 quarters. However, in a sign the market could be starting to turn, net absorption dropped in the three months to the end of June by the most on property broker CBRE’s records going back to 2010. The red flag from the property market comes as investors

worry anew about the outlook for some of the country’s biggest bricks and mortar retailers. Concerns over mall stalwart JC Penney’s near-$4bn debt burden sent its shares down 17 per cent on Friday. The 117-year-old department store chain said it was taking external advice on how to strengthen its balance sheet but added it had not hired advisers to “prepare for an in-court restructuring or bankruptcy”. Within the past two weeks discount retailer Fred’s has warned it plans to close 129 outlets while fashion chain Charming Charlie filed for Chapter 11 bankruptcy protection. “We’ve been the busiest we’ve ever been in our history,” said Scott Carpenter, head of retail liquidation at Great American Group. Despite the wave of closures, overall vacancy rates in US retail remain low. Figures due to be published this week by CBRE show only 5.3 per cent of total space in malls was available for lease in the second quarter. The 3.3m sq ft decline in net mall absorption equates to a tiny fraction — an estimated 0.4 per cent — of the total stock. Anthony Buono, CBRE’s global president of retail, also cautioned against reading too much into one quarter. www.businessday.ng

Why the wheels fell off China’s tech boom Investors are shunning the country’s crowded IT scene. Some companies are now burning through cash to win market share LOUISE LUCAS IN HONG KONG

rom Xiamen to Shanghai mass graveyards of dirty bikes, all twisted frames and busted axles and handlebars, have become an unwanted emblem for hundreds of Chinese start-ups that once thrived on the back of easy money, hard graft and a light regulatory touch. When the idea took hold in 2015, the bike rental companies’ promise to attract China’s booming middle class pulled in billions of dollars from investors even if they often charged cyclists very little or in some cases nothing to use their services. Some, such as Mobike and Ofo, quickly expanded abroad. However, both have subsequently slashed their overseas presence. Ofo’s founder, Dai Wei, warned that it was teetering on the brink of bankruptcy, Wukong and Bluegogo have already folded. They have now come to symbolise much of what has gone wrong across a swath of Chinese tech companies, especially those built around the idea of the sharing economy. The companies in trouble range from food delivery and shopping websites to transport apps. “The transaction-oriented model is more or less done,” says Jason Ding, partner at Bain & Co consultancy in Beijing. “The bubble burst on the shared economy . . . It was pumped up by money on steroids. That’s all gone.” The Chinese tech sector has developed a broad range of businesses in the space of four to five years. In 2018 alone about 100 tech start-ups became “unicorns” worth more than $1bn according to research group Hurun. But the rapid expansion began to slow in the final quarter of last year. Capital is retreating or looking for deals in other regional markets, workers are rebelling and Beijing is flexing more regulatory muscle in the sector. Many

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of the tech businesses have found themselves with a fatal flaw of paying more to win customers than their customers bring in. “I think the whole of China is trying to find a new business model,” says one industry executive and investor. While the US frets about China’s rising tech prowess — a fear that has been a driving force behind the trade war and the efforts to choke off telecoms equipment company Huawei — the reality for many companies is less auspicious. Instead, the trade war has served to highlight the weaknesses of many companies. “Since the trade conflict these gaps [between China and US tech capabilities] have become more evident,” says Shirley Xie, who leads PwC’s China and Hong Kong consulting practice. “And tech companies absolutely get it.” For the last few years, there appeared to be a never-ending flow of capital into the sector. This allowed a company like Ant Financial to raise $10bn in a fundraising round last year that gave it a valuation of more than $150bn and spawned scores of so-called “PPT companies”, whose prospectuses were based on little more than a PowerPoint presentation, say investors. But investors have started to become squeamish. Aggregate deal value in the Chinese IT sector in the second quarter of 2019 was $2.2bn, compared with $26.4bn for the same period a year earlier, according to data provider Preqin. An evaporation of statebacked renminbi-denominated funds was followed by a more disciplined approach among US venture capital firms in response to the high valuations and questionable business models of some tech groups — with the blow cushioned only by bloated coffers at blue-chip firms, such as Sequoia and Hillhouse, which each raised $8bn last year. The impact really started to be felt in the first quarter. Inves@Businessdayng

tors were spooked after a series of fundraisings that valued the start-up below the valuation of its previous round and a year of torrid performance by the 30-odd tech start-ups that listed in 2018. According to one former banker and start-up executive: “Leverage has transferred from founders to investors.” Due diligence on prospective investments has significantly increased. Another banker-turnedstart-up executive recalls his fundraising last year: “People were calling us up saying, ‘we have $100m ready’. There was no due diligence.” Nisa Leung, a managing partner at Chinese venture capitalists Qiming which boasts a large portfolio of tech and biotech start-ups, says due diligence frequently only used to begin after submitting a term sheet. “The tide has changed,” she adds. “People are tough on terms, and spend much longer on due diligence.” This new-found rigour is translating into extended financing rounds and “value adjustment mechanisms” designed to protect investors from falling values — for example, by pledging extra issuance of shares to balance any drop in value. That marks a sea change. The first former banker and executive says: “The fact a sponsor who nine months ago was clawing to get into a deal is now insisting on value adjustment mechanisms . . . shows there’s no appetite among the global players for some of these companies.” Casualties of this new discipline include VIPKID, which employs native-English speaking teachers to teach children in China online and is struggling to raise funds, and Megvii, one of China’s biggest artificial intelligence companies. Megvii, which stole an early march in facial recognition, was deserted by earlier backers when it looked for more funds in May. Instead, it fell back on state-backed entities to provide the bulk of its $750m financing.

BD Money

Monday 22 July 2019

BUSINESS DAY

PERSONAL FINANCE

Investing

COVER STORY

MARKET

Paying your tax just got easier and faster

How investors can take position as Debt Office releases Q3 Bond issuance calendar

How to solve 10 biggest money problems people have (1)

CEOs whose banks deliver most return on shareholderâ&#x20AC;&#x2122;s equity

Ask the average Nigerian what his or her biggest problem is, and likely answers would revolve around money. Whether it is making more cash or spending it wisely money is such a big deal, and rightly so.

One of the most important profitability metrics is Return on Equity (ROE), which reveals how much profit a company earned in comparison to total amount of shareholder equity found on the balance sheet.

While concerns have been raised over the years by the NigeriaN tax payers on how tedious it is to pay taxes of different forms and the issues surrounding the multiplicity of tax collectors which has confused many...

The Debt management office (DMO) has released the calendar for 2019 third quarter FGN Bond issuance.

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@Businessdayng

Monday 22 July 2019

BUSINESS DAY

Personal Finance Paying your tax just got easier and faster DAVID IBIDAPO

hile concerns have been raised over the years by the NigeriaN tax payers on how tedious it is to pay taxes of different forms and the issues surrounding the multiplicity of tax collectors which has confused many, the recent efforts of the Joint Tax Board (JTB) in bringing to bear the array of challenges is quite commendable, as tax payment system becomes more efficient. The Nigeria Joint Tax Board on the 1st and 18th of July 2019 launched in Abuja and Lagos its new National tax payer’s identification number (TIN) registration system and consolidated national taxpayers’ database aimed at making convenient and transparent tax administration in Nigeria. To this end, both corporate and individual tax payers can at a click on their phones or laptops get printed their new TIN certificates and make payments directly to the Federal Inland Revenue Service (FIRS), also find the closest FIRS/LIRS offices to them; all just at the convenience of their homes. Features of the New TIN registration system You can generate TIN automatically for newly registered cooperate tax payers from CAC. Ability to verify TIN details and print TIN certificate using the TIN verification Portal Ability for tax officials and tax payers to initial TIN registration from the comfort of their home at their convenience A downloadable TIN mobile application available on Google play store and IOS 24/7 availability of the system all year round Ability to retrieve TIN via the use of JTB USSD Ability for tax payers to get their issues resolved faster by leveraging the help desk functionality

Ability to find the nearest tax office closet to you using the functionality provided in the TIN mobile application. Ability to print a TIN certificate How to access the portal? Tax payers are to visit http://tinverification.jtb.gov.ng or http://tin.jtb.gov.ng . Then you click on TIN verification. For Individual Tax payers, you will be requested for information like Date of Birth, National Identification Number (NIN) and Bank Verification Number (BVN). Whereas for corporate taxpayers, you will be required to provide your Corporate Affairs Commission (CAC) registered corporate number (RC. No) or phone number, date of incorporation. Why it is imperative to pay taxes It is a common saying that the life blood of the government is taxes. This depicts how important tax as a source of revenue is to the proper functioning of any government. While Nigerians have raised concerns over the failure of the federal government in providing basic amenities and facilities which will justify payment of taxes, in an ideal society taxes is a key

driver of civilization, especially in developed society. The year 2018 saw the Nigeria federal government record the highest tax revenue in history. The federal Inland Rev-

“

Nigerians have raised concerns over the failure of the federal government in providing basic amenities and facilities which will justify payment of taxes, in an ideal society taxes is a key driver of civilization, especially in developed society

enue led and headed by Tunde Fowler announced a total of N5.32 trillion in tax generated during the period. At this, Nigeria still records one of the lowest tax to GDP ratio in the world at about 6%, showing how largely dependent the Nigerian economy is to the very volatile oil market. For donkey years, Africa’s biggest oil producer has never met the revenue projection that it fixes in its budget even when oil prices—which it derives 85 percent of its foreign earnings from— traded at an average far exceeded what it bench marked in its budget. The shortfall between actual revenue receipt by the federal government and that projected got even more worsen when a global collapse in oil prices that happened in 2014 and an agitation by militant group sent oil production to as low as 1.2 million barrel which culminated in pushing the oil dependent nation to its first recession since 28 years. The new TIN registration system opens up a more transparent system and helps tax payers hold the federal government accountable for their taxes going forward.

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

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@Businessdayng

Monday 22 July 2019

BUSINESS DAY

Investing

How investors can take position as Debt Office releases Q3 Bond issuance calendar he Debt management office (DMO) has released the calendar for 2019 third quarter FGN Bond issuance. FGN Bond is a bond issued

bank account. Interestingly, you need not be rich to invest as anyone with as little as N5,000 can invest in the bond. Investing in FGN Bonds is a good way to save towards your House rents, marriage, special projects, and retirement, etc. How will the interest and principal be paid? The interest will be paid quarterly into

until maturity. If you need cash anytime during the duration of the bond, you can sell your bond in exchange for cash. However, the portion of the interest that you are not entitled to earn because you have sold will not accrue to you any longer. For example, if you buy July 24 and sell September 14, because you cannot wait until April 2023 to get your principal, you will only

In the secondary market, bond prices behave like stock and react to the forces of demand and supply. Supposing lending rates in the country suddenly rise to 16 percent. It means that the bond that earns you 13 percent is no longer attractive as the FG will only continue to pay the N130 for every N1,000 in Face value. Leveraging on technology to buy FGN

by the Nigerian government in exchange for cash at a given interest rate and a repayment period. It also states how payments of the principal and interest will be made. A Bond is a confirmation from a borrower that it borrowed money from a lender at a given interest rate and repayable over a period. They also include the minimum amount that can be subscribed to by the lender and in what multiples. Benefits investors stand to gain Investors in bonds earn an interest that will be paid quarterly directly into their

your bank accounts while the principal will be paid at maturity depending on what duration you subscribed to. Retail investors looking to invest in the FGN bond only need a minimum of N5,000 to invest. Subsequent investment over N5,000 will be in multiples of N1,000. Meaning that investors cannot invest N5,500. Itâ&#x20AC;&#x2122;s either N6,000 or N13,000 or N30,000. The maximum amount a single retail investor can invest in the FGN Bond is N50 million. What if I decide to sell before maturity? Investors need not hold on to the bond

be entitled to the interest earned between April 24 and July 14. Bonds have certain characteristics similar to stocks; their prices can often be higher or lower than their face value. Face value of a Nigerian bond is typically N1,000. So assume an investor bought FGN bond at N1m and at an interest rate of 13 percent per annum. It means that for every N1,000 of your investment, such an investor will earn N130 (also known as the coupon rate). So, if you decide to hold your N1m to maturity, you will earn N130,000 annually.

bonds. The penetration of internet and technology has caused several disruptions in the ecosystem. Fortunately, the fixed income market is not left out in this disruption. There are mobile applications that enable retail investors to buy FGN Bonds from the comfort of their phones and other mobile gadgets. The bond is safe and is backed by the full faith and credit of the FG. Government bonds hardly default, so you are nearly 100 percent sure that you will get your money back in full along with the interest.

OLUFIKAYO OWOEYE

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Monday 22 July 2019

BUSINESS DAY

Monday 22 July 2019

BUSINESS DAY

Cover Story

How to solve 10 biggest money problems people have (1) SEGUN ADAMS

sk the average Nigerian what his or her biggest problem is, and likely answers would revolve around money. Whether it is making more cash or spending it wisely money is such a big deal, and rightly so. Money problems are real and influence the decisions we make. It is quite normal for people to want more moneyafter all even some economist exempt money from the law of diminishing utility. The problem, however, is people erroneously think they need to earn more to afford things they ordinary should. Across different income class, gender, age and background, these are some of the money issues that keep people up late into the night and of course, how to address them Setting up a financial plan People find it difficult to take stock of their wealth and set up measures to achieving their long term financial tar-

However, parents can plan by setting aside a certain percentage of their income every month to fund schooling. The mistake many parents make is waiting until the beginning of a new school term or session before they start making arrangements for settling education bills. Alternatively certain Banks today have facilities and programs that can allow cash-strapped parents to settle immediate and pressing obligations, though people have divergent views on borrowing from banks. Parents can also set up investments and trust to sponsor their children’s education. Imagine buying safe securities and assets with yields above interest rate to train your 3-year-old daughter in an ivy-league institution when she turns 17. Plan ahead. Buying a Car These days the debate about a car as an asset or a liability is increasingly tilting in favour of owning an automobile. Even though they are relatively expensive-depending on income and brands-the necessity of owning an automobile has somewhat intensified.

gets involving detailed savings and investing strategy. Financial plans are important for securing one’s future and ensuring the sustainability of wealth. Even though setting up a financial plan is not a common practice, it is easier to achieve than most people assume. To set up a financial plan, ask yourself what your financial goals are. There are two types of financial goals, short and long-term. Short-term goals focus on using your money today, while long-term goals deal with saving and spending for at least five years. Once you have mapped out where you want to be financially from your present status, you should proceed to draw up a budget that allows you to utilize your resources effectively. Paying (Children’s) school fees Parents love their children and always want the best for them but paying school fees is one aspect of raising children many parents dread. Quality education costs a fortune and pooling resources to invest in the future of one’s child(ren) is a big money problem.

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Financial plans are important for securing one’s future and ensuring the sustainability of wealth. Even though setting up a financial plan is not a common practice, it is easier to achieve than most people assume

To own a car within a reasonable period is very realistic with effective planning. Asides saving to buy a car, there are platforms today that allow people to purchase quality vehicles at an affordable rate. For example Cars45. Instalments payment, swapping old for new vehicles are services available from dealers which you can take advantage of. Saving too little or none at all Putting money aside and seeing your resources grow can be exciting, but many people find it challenging. People often live from hands to mouth and it creates a big concern about their financial state. Discipline is what is lacking more often than not and a smart way to save might just be leveraging fintechs that allow one automate savings. These days there is an abundance of mobile applications that one can leverage to save and grow wealth. Alternatively, you could create an alternative account and issue a standing order to your bank to transfer a certain amount from your main or salary account every month.

Achieving financial independence post-retirement Israel Odubola

etirement comes with its own sort of worries. Even if one is paid pension, it’s not as much as one’s earlier income, even as most people get nervous wondering how they will survive after active years of service. It is possible for an individual to be financially independent post retirement contrary to the popular belief that an average retiree is a liability. Retirees have a lot of spare time, with some starting to feel less important and dependent. In actual sense, the free time at your disposal, if leveraged, is an opportunity for you to generate sufficient

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Remember you are just retiring from a job, not life. You still have a life ahead of you. Prioritize financial independence. You don’t need a son to take care of you in old age. These are some of the many opportunities that await you, seize them

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income to offset expenses. Here are few tips highlighting few things you can do to be self-reliant, without having to bank on others for survival. Work as a freelancer There is considerable demand for freelancers across sectors. Many websites provide freelancing jobs across sectors. For instance, you can become an online tutor or a virtual trainer. Content writing is also an option. Being a virtual assistant or an online advertiser, the opportunities are unlimited. All you need is some skills and a good internet connection. Freelancing jobs allows you to earn a steady income with a flexible work schedule. Provide training and consultation An English adage says ‘Age comes with wisdom’. You can as well use your wealth

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of knowledge to guide others. There are many young businesses looking for a consultant. Most organizations often seek to hire an experienced trainer to coach their employees. If you feel you have got this in you, then give it a trial. Monetize your talent Life after retirement gives leeway to finally do what you always loved doing. You can convert your hobby into an income source. Thankfully, we are in the jet-age when the internet is good platform to showcase your talent and earn cool cash. Cooking, singing, photography, or any great talent can earn money online. If you have a good sense of humour, create funny videos and monetize them online. If photography is your passion, there are a number of websites that will pay for

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your talent. Invest in mutual funds It is needless to work post-retirement to make ends meet. Since you’ve been working your entire life, you deserve to relax as one can still earn money without working. Investing in mutual funds is one good way to achieve this. Look out for mutual fund options. Carefully compare and contrast their benefits. There are 84 registered mutual funds in Nigeria across seven asset classes including fixed income, money market, real estate and equities. Since you would most likely have low tolerance for risk as elderly individual, money market funds is advisable given the fact that it offers safe return within a short time frame. This will help you earn steady passive www.businessday.ng

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income to enjoy life after retirement. Rental income If you already own more than one houses, rent it out. Else, use your retirement money to invest in real estate. Upon retirement, some companies pay gratuity and other benefits. You can invest that money sum to buy some property. You can buy residential or commercial property and rent it out. Commercial properties give you better returns than residential. Notwithstanding both offers steady rental income without sweat. Remember you are just retiring from a job, not life. You still have a life ahead of you. Prioritize financial independence. You don’t need a son to take care of you in old age. These are some of the many opportunities that await you, seize them.

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Monday 22 July 2019

BUSINESS DAY

Market

CEOs whose banks deliver most return on shareholder’s equity Israel Odubola & Segun Adams

ne of the most important profitability metrics is Return on Equity (ROE), which reveals how much profit a company earned in comparison to total amount of shareholder equity found on the balance sheet. ROE is a veritable financial health indicator for a firm because it compares it against peers and generally the higher the better. Some industries have a high ROE as they require little or no assets while others require large infrastructure before they generate profit. A business that has high return on equity is more likely capable to generate cash internally. For the most part, the higher a company’s figure is compared to its industry, the better. Simply put, the higher the ROE, the more easily, a company will able to raise money for growth. BusinessDay computed and compiled the return on equity for 12 Nigerian listed deposit money banks, by dividing their net profit by total equity as at March 31, 2019. From our computation, ROE for the banks covered average 4.5 percent. Below are top-five banks who deliver the most returns to owners’ fund in the first three months of 2019. Segun Agbaje, Guranty Trust Bank Plc (ROE: 7.86%) Nigeria’s most-capitalized lender, Guaranty Trust Bank returned about 8 percent to shareholders’ fund in the review period, the highest among the banks compiled. Implying that for every thousand naira of investors’ fund, the bank returned N80. The tier-one lender recorded an uptick of 11 percent in its profit to N49.3 billion, the second-biggest in the industry. Funds of shareholders entrusted with the lender grew 17 percent to N627 billion in the review period compared with N535 billion a year earlier. The activities of the bank are overseen by Segun Agbaje, the chief executive, who also doubles as director on Mastercard Advisory Board Middle East and Africa. Awards he has won as the Managing Director include Best Bank in Nigeria by Euromoney; African Bank of the Year by African Banker Award; Best Bank in Nigeria by World Finance United Kingdom among others. Yinka Sanni, Stanbic IBTC Holdings Plc (ROE: 7.28%) Stanbic IBTC Holdings Plc, parent to

Segun Agbaje

Yinka Sanni

Herbert Wigwe

Ebenezer Onyeagwu

Kennedy Uzoka

Stanbic IBTC Bank, returned 7.28 percent on shareholders’ fund in the first quarter of 2019, to emerge the second-best perform-

er in this regard. This connotes that the firm delivered 7 percent gain per naira of owners’ equity. A snapshot of its earnings score-cards showed that while profit dipped 18 percent to N19 billion in the review period, equity grew 35 percent to N263 billion. Yinka Sanni was appointed chief executive of the group January 19, 2017. He has also headed the banking and pension arm of the group before his current position. Herbert Wigwe, Access Bank Plc, (ROE: 7.14%) The country’s biggest lender by assets, Access Bank Plc, returned 7.14 percent to rank third on the list. The merger deal between the tier-one lender and the defunct Diamond bank was finalized in first quarter, in which the combined entity became Africa’s largest bank by retail base. This helped trigger the new entity’s profit by 86 percent to N41 billion in first quarter, while shareholders’ funds jumped to N576 billion from N454 billion a year before. Herbert Wigwe heads the bank as the chief executive officer, and also chairs Ac-

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A business that has high return on equity is more likely capable to generate cash internally. For the most part, the higher a company’s figure is compared to its industry, the better. Simply put, the higher the ROE, the more easily, a company will able to raise money for growth

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cess Bank UK Limited. Under Wigwe, Access Bank has won a number of awards. The lender won the Bank of the Year and CEO of the year at the BusinessDay Banking awards in Lagos. It won the Karlsruhe Sustainable Finance Award in 2016, 2017 and 2019. Ebenezer Onyeagwu, Zenith (ROE: 6.43%) One of Nigeria’s biggest lenders, Zenith returned 6.43 percent to shareholders in the first quarter of 2019. This means investors made N7 back from every N100 investment. Zenith grew its profit by 7 percent to 50.23 billion. Shareholders fund grew 6 percent to N780 billion in the review period compared with N735 billion a year earlier. Ebenezer Onyeagwu is new CEO of the tier one bank. He was appointed to take over from Peter Amangbo whose tenure expired in May 2019. Kennedy Uzoka, Group CEO, UBA Group (ROE: 5.28%) UBA returned 5.28 percent on shareholders’ fund in the first quarter of 2019. With its performance, the shareholders of the tier-one lender gained N5.28 on each hundred naira capital invested. UBA grew profit by 21 percent in the period to N28.67 billion from N23.74 billion, the company financials show. In the quarter, total equity was N543 billion, up from N537 billion recorded a year ago. Kennedy Uzoka Was appointed Executive Director in 2010 and GMD/CEO in 2016. He holds a BSc. in Mechanical Engineering from the University of Benin and an MBA from the University of Lagos. Uzoka has over two decades of experience covering Core Banking, Corporate Marketing Communications, Strategy, and Business Advisory Services.

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Monday 22 July 2019

BUSINESS DAY

Data

Federal government eurobond Yields on Eurobonds fell by 0.08 percentage points week on week from an average of 6.34 percent when the market closed last week to 6.26 percent as buying interest marginally improved in Nigeriaâ&#x20AC;&#x2122;s Sovereign Eurobonds.

Corporate eurobond Yields on corporate Eurobonds fell by 20 percent points on the back of a significant increase in FirstBank Eurobond. Average yield rose from 7.58 percent last week to 27.8 percent. www.businessday.ng

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Monday 22 July 2019

BUSINESS DAY

Equities Snapshot of the stock market last week

fter gaining 0.2 percent on Friday to record first gain in the week, the Nigeria Stock Exchange All-Share Index and Market Capitalization both depreciated by 2.27 percent to close the week at 27,919.50 and N13.607 trillion respectively. Similarly, all other indices finished lower. A total turnover of 1.086 billion shares worth N13.390 billion in 15,774 deals were traded this week by investors on the floor of the Exchange in contrast to a total of 988.491 million shares valued at N13.839 billion that exchanged hands last week in 16,414 deals. The Financial Services industry (measured by volume) led the activity chart with 829.468 million shares valued at N8.493 billion traded in 8,596 deals; thus contributing 76.41 percent and 63.42 percent to the total equity turnover volume and value respectively. The Information and Communications Technology Industry followed with 90.049 million shares worth N851.989 million in 658 deals. The third place was Conglomerates Industry with a turnover of 56.788 million shares worth N84.522 million in 731 deals. Trading in the Top Three Equities namely, FBN Holdings Plc, Guaranty Trust Bank plc and United Bank for Africa (UBA) Plc (measured by volume) accounted for 420.921 million shares worth N5.516 billion in 3,430 deals, contributing 38.77 percent and 41.19 percent to the total equity turnover volume and value respectively

Week Ahead Week Ahead(Monday, 22nd July – Friday, 26th July, 2019)

Chart of the week The rate of increase in price slowed down the most this year in June

Week Ahead (Monday, 8th April – Friday, 12th April, 2019) Commodity

Oil: Brent likely to trade between $65 and $67 per barrel in near term on the back of OPEC’s output cut extension to March 2020 coupled with the drawdown in the US shale stock prices. This will have positive impact on Nigeria’s external reserves and support CBN’s ability to defend the naira. Cocoa: Cocoa prices rose by 0.48% to $2503 MT supported by strong global demand. Going forward, we expect the agreement by China and Ivory Coast on minimum floor price to bolster prices. Fixed Income The Debt Management Office (DMO) will on behalf of the Federal Government offer for subscription by auction the following bonds worth N145 billion: · N40 billion -12.75% FGN APR 2023 (5yrs reopening). · N50 billion – 14.55% FGN APR 2029 (10yrs reopening). · N55 billion – 14.80% FGN APR 2049 (30yrs reopening). Auction will hold on Wednesday, July 24. Currency The naira is expected trade around N360 per dollar on the Investors & Exporters window owing to the sustained intervention of the Central Bank in the foreign exchange market and aggressive OMO intervention strategy. Event The Monetary Policy Committee of the Central Bank of Nigeria to hold its fourth meeting of the year between Monday and Tuesday, July 22nd and 23rd. Analysts expect policy rate to be retained at 13.5%. Data Release The Nigerian Bureau of Statistics will on Friday, July 26, release data on Daily Energy Generated and Sent Out for second quarter of 2019.

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Nigeria’s inflation rate rose at its slowest pace this year following decline in core inflation and moderation in food prices. The Consumer Price Index (CPI), which measures the general change in price levels of consumer goods and services purchased by households, rose by 11.22 percent on a year-on-year basis. Analysts say Nigeria’s stable exchange rate has provided support for the decline of inflation in Nigeria.

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Monday 22 July 2019

BUSINESS DAY

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Company IN FOCUS

BUSINESS DAY Monday 22 July 2019 www.businessday.ng

First Bank of Nigeria: A commitment to social impact OLUFIKAYO OWOEYE, OLUWASEGUN OLAKOYENIKAN, & SEGUN ADAMS

funding to grow their micromedium scale businesses. Speaking at the 125 widows’ endowment empow er ment programme in commemoration of FirstBank 125th Anniversary, Bashirat Odunewu, G rou p E xe c u t i ve, Int e r na tional Banking Group (ITBG), First Bank of Nigeria, said the Bank’s partnership with IWS was designed to further the empowerment of women, especially widows. Odunewu, who was represented at the event by the Business Development Manager (ITBG), First Bank of Nigeria Limited, Kunle Olorunfemi explained that as part of the Bank’s employee giving and volunteering programme, the week focused on a wide range of activities under the SPARK initiative, which include a partnership with IWS for the empowerment of widows, as well as visit and donations to orphanage/less privileged homes, Internally Displaced Persons (IDPs) and deepening the values of SPARK amongst school children. “The partnership with International Women Society is also in line with the Bank’s financial inclusion and women’s economic empowerment policy which promotes accessible and affordable financial products and services to disadvantaged groups with th e g oal of br i ngi ng thes e marginalized populations into the mainstream economy, improving their chances for resilient livelihoods and financial stability,” she said. Corporate social responsibilities (CSR) are becoming increasingly important in to day’s business w orld. Companies should not only care about their stakeholders’ interests but at the same time, place more emphasis on other

areas apart from solely profits making. Research has also proven that there is a competitive advantage for corporations that have a higher reputation and are more socially responsible in their CSR programs. Having a distinguished corporate social responsibility program is one way to enhance companies’ reputation and build a good image. According to the Reputation Institute, a United States reputation based-research and advisory company, over 70percent of people would spread positive words out to others when companies obtain higher than 80 points in their CSR.

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igeria’s premier a n d l ea d i ng f i nancial institution, First Bank of Nigeria has over the years contributed to all aspects of nation-building since its establishment in 1894. The tier-1 lender has consistently built relationships with its customers focusing on the fundamentals of good corporate governance, strong liquidity, optimised risk management, and leadership. As a responsible corporate entity, First Bank has scored many first and has shown that it is not only interested in doing business with its customers but continually putting customers’ needs first as well as enriching the lives of the communities where it does business. Among First Bank’s many f i r s t s i s t h e l au n c h o f t h e Bank’s Corporate Responsibility & Sustainability (CR&S). The initiative, which is now in its third edition has been widely received by Nigerians and is now part of the First Bank’s DNA Folake Ani-Mumuney, Group Head, Marketing and Corporate Communications, First Ba n k, n o te d that th e CR&S week is driven to amplify the Bank’s culture of “Employee Giving & Volunteering Programme” with a focus on reinforcing the values of the Bank’s SPARK (Start Performing Acts of Random Kindness), an initiative that focuses on creating and reinforcing a consciousness/mindset of showing compassion, empathy; as well as giving to others aimed at inspiring people to make a difference. According to Ani-Mumuney, the SPARK platform will empower people and create a positive ripple effect that expands and strengthen the Nigerian economy, noting that every act of kindness regardless of how little or in whatever form ignites a ripple effect that goes on without end. The 2019 edition themed Ripples of Kindness, Putting You First, was held across six geopolitical zones of the country and the Bank’s business locations in Ghana, Gambia, Guinea, Senegal, Sierra Leone, DR Congo, and The United Kingdom. As part of activities marking the 2019 edition, the Bank empowered 125 widows as identified by the International Women Society (IWS) vis-àvis their initiative for widows – Widows Trust Fund – with

Research has also proven that there is a competitive advantage for corporations that have a higher reputation and are more socially responsible in their CSR programs

No w o n d e r w h y s e v e ral multinational companies such as Microsoft have established a well-developed code of conduct; they also strive to achieve some social missions to do businesses ethically, minimize negative environmental impacts, raise public attention on certain issues, raise funds and donations, increase employees’ job satisfaction, and more. First Bank’s CR&S has impacted members of the society in several ways which include payment of medical bills and giving support to those having challenges with school fees. As part of activities marking this year CR&S week, the bank empowered 125 widows as identified by the International Women Society (IWS) vis-àvis their initiative for widows – Widows Trust Fund – with funding to grow their micromedium scale businesses. Baby Ijeoma is one of the beneficiaries of the SPARK initiative. She was in dire need of cardiac surgery to correct her congenital heart disease and forestall irreversible and lifethreatening complications. As a result, Ijeoma received more than N1.5 million from the bank’s start performing acts of random kindness. Besides this, a more touching story was that of Mary Pius, a mother of 5 who lost her husband some years ago a widow. Pius sells fruits to sustain her family and was unable to send her children to school since her husband was no longer alive to support her. Owing to this, her business re c e i v e d s o m e b o o s t w i t h N100,000 she got from the SPARK initiative, giving more financial supports to meet her obligations. The initiative also extended its quest to promoting values

to Ondo state where it supported Lawal Seun. The young boy’s mother was blind, and she was left with Seun and his three siblings after their father abandoned them some years ago. Seun now feels less of the negative impact of their father’s absence, thanks to the bank’s SPARK initiative which offere d him N150,000, enabling the boy to pay his school fees in secondary school. Over 10,000 victims of Sierra-L eone mudslide got $100,000 from SPARK crowdfunding effort ; it granted disaster relief support to over 600,000 Internally Displaced Persons who are victims of the North East and Benue flood. Furthermore, more than 22 charities and foundations including the Down Syndrome Foundation; Sickle Cell Foundation; National Association of the Blind; Nigeria Red Cross S ociety; Pacelli S chool for Blind and Partially Sighted; International Women Society; United Nations Global Compact, among others, have enjoyed the support and partnered with the initiative. No doubt, the bank’s commitment to providing opportunities for widows in areas of capacity building and access to start-up capital through partnerships with these local and international organizations portray the bank in a good light and boosting its perception for advancing social and economic impact at the global stage. FirstBank’s CR&S Week has also influenced the approach of other organisations towards their corporate responsibility. Not less than five of the biggest listed companies have taken similar steps to initiate CSR at the scale at which FirstBank has elevated its shared value campaign. As a trailblazer, First Bank has paved the way for other businesses to double down on the creation of social and environmental value in their immediate environment as more organisations are beginning to follow suit in dedicating a whole week to addressing issues affecting lives in their host communities. FirstBank was been named “Most Valuable Bank Brand in Nigeria” six times in a row (2011 – 2016) by the globally renowned “The Banker Magazine” of the Financial Times Group; “Best Retail Bank in Nigeria” for seven consecutive years (2011 – 2017) by the Asian Banker International Excellence in Retail Financial Ser vices Awards and “Best Bank in Nigeria” by Global Finance for 15 years.

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